<PAGE>
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 the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ADVANCED AERODYNAMICS AND STRUCTURES, 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)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11 (a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid: __________________________
2) Form, Schedule or Registration Statement No.: _______________
3) Filing Party: ___________________________________________
4) Date Filed: ____________________________________________
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 2, 2000
TO THE SHAREHOLDERS OF ADVANCED AERODYNAMICS & STRUCTURES, INC.:
You are cordially invited to attend the Annual Meeting of Shareholders
of Advanced Aerodynamics & Structures, Inc. ("AASI" or the "Company"), which
will be held in the Multi-Purpose Room, AASI Headquarters, 3205 Lakewood Blvd.,
Long Beach, California 90808, on Friday, June 2, 2000, at 10:00 a.m. Pacific
time, to consider and act upon the following matters:
1. The election of directors;
2. Ratification of the selection of Ernst & Young LLP to serve as
auditors of the Company for the fiscal year ending December 31,
2000;
3. The authorization and ratification of: (1) the issuance and sale
in private placements of up to 100,000 shares (the "Preferred
Shares") of the Company's Series A 5% Cumulative Convertible
Preferred Stock, par value $.0001 per share (the "Series A
Preferred Stock") and Common Stock Purchase Warrants to purchase
up to 2,145,000 shares of Common Stock ("Warrants"), (ii) the
issuance of that number of shares of the Company's Common Stock,
no par value ("Common Stock"), issuable upon conversion of the
Series A Preferred Stock being approved for issuance, based on the
conversion formula set forth in the Certificate of Determination
governing the Series A Preferred Stock, and (iii) the issuance of
the maximum number of shares of Common Stock issuable upon
exercise of the Warrants in accordance with their terms;
4. The ratification of an amendment to the Company's stock option
plans providing for the immediate vesting of the options of an
officer or director of the Company who has died while in office;
and
5. Such other business as may properly come before the Meeting or any
adjournments of the Meeting.
Only holders of record of Common Stock of the Company at the close of
business on May 1, 2000 will be entitled to notice of and to vote at the Annual
Meeting and any adjournments of the Annual Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD. YOU ARE INVITED TO ATTEND THE
MEETING IN PERSON, BUT WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. IF YOU DO
ATTEND THE MEETING, YOU MAY, IF YOU PREFER, REVOKE YOUR PROXY AND VOTE YOUR
SHARES IN PERSON.
By Order of the Board of Directors
Carl Chen, Ph.D.
Chairman of the Board,
President and Chief Executive Officer
3205 Lakewood Blvd.
Long Beach, California 90808
(562) 938-8618
May 5, 2000
<PAGE>
PROXY STATEMENT
ADVANCED AERODYNAMICS & STRUCTURES, INC.
3205 Lakewood Boulevard
Long Beach, California 90808
----------------
ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 2, 2000
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Advanced Aerodynamics & Structures,
Inc., a Delaware corporation (the Company) for use at the Annual Meeting of
Shareholders to be held in the Multi-Purpose Room, AASI Headquarters, 3205
Lakewood Blvd., Long Beach, California 90808, on Friday, June 2, 2000, at 10:00
a.m. Pacific time, and at any and all adjournments thereof (the Annual Meeting),
for the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. Accompanying this Proxy Statement is the Board of Directors' Proxy
for the Annual Meeting, which you may use to indicate your vote as to the
proposals described in this Proxy Statement.
All Proxies which are properly completed, signed and returned to the
Company prior to the Annual Meeting, and which have not been revoked, will be
voted in favor of the proposals described in this Proxy Statement unless
otherwise directed. A Shareholder may revoke his or her Proxy at any time before
it is voted either by filing with the Secretary of the Company, at its principal
executive offices, a written notice of revocation or a duly executed proxy
bearing a later date or by attending the Annual Meeting and expressing a desire
to vote his or her shares in person.
The close of business on May 1, 2000 has been fixed as the record date
for the determination of Shareholders entitled to notice of and to vote at the
Annual Meeting or any adjournment of the Annual Meeting. As of the record date,
the Company had outstanding: 6,999,676 shares of Class A Common Stock, par value
$.0001 per share; 1,900,324 shares of Class B Common Stock, par value $.0001 per
share; 4,000,000 shares of Class E-1 Common Stock, par value $.0001 per share;
4,000,000 shares of Class E-2 Common Stock, par value $.0001 per share; and
50,000 shares of Series A Preferred Stock. The Class A Common Stock, Class B
Common Stock, Class E-1 Common Stock and Class E-2 Common Stock are
substantially identical, except that the holders of Class A Common Stock have
the right to cast one vote, and the holders of Class B Common Stock, Class E-1
Common Stock, and Class E-2 Common Stock have the right to cast five votes, for
each share held of record on all matters submitted to a vote of the holders of
Common Stock, including the election of directors. The Class A Common Stock,
Class B Common Stock, Class E-1 Common Stock and Class E-2 Common Stock vote
together as a single class on all matters on which stockholders may vote,
including the election of directors, except when voting by class is required by
applicable law. The Series A Preferred Stock does not vote, except on matters
where a separate vote of the Series A Preferred Stock would be required by the
Delaware General Corporation Law. Subject to the preferential rights of the
holders of the Series A Preferred Stock, holders of the Class A Common Stock,
Class B Common Stock, Class E-1 Common Stock and Class E-2 Common Stock have
equal ratable rights to dividends from funds legally available therefor, when,
as and if declared by the Board of Directors and are entitled to share ratably,
as a single class, in all of the assets of the Company available for
distribution to the holders of shares of Common Stock upon the liquidation,
dissolution or winding up of the affairs of the Company. Except as described
herein, no preemptive, subscription, or conversion rights pertain to the Common
Stock and no redemption or sinking fund provisions exist for the benefit
thereof.
The Company's principal executive offices are located 3205 Lakewood
Blvd., Long Beach, California 90808. This Proxy Statement and the accompanying
proxy will be mailed to Shareholders on or about May 9, 2000.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
In accordance with the Certificate of Incorporation and Bylaws of the
Company, the Board of Directors consists of not less than three nor more than
seven members, the exact number to be determined by the Board of Directors. At
each annual meeting of the Shareholders of the Company, directors are elected
for a one year term. The Board of Directors is currently set at four members.
The Board of Directors proposes the election of the nominees named below.
Pursuant to the Certificate of Incorporation of the Company and
Delaware General Corporation Law, the Board of Directors by unanimous written
consent dated July 31,1997 amended the Bylaws of the Company to eliminate
cumulative voting. There is no cumulative voting for the election of directors.
Unless marked otherwise, proxies received will be voted FOR the
election of the each of the nominees named below, and the votes will be
distributed equally among the nominees. If any such person is unable or
unwilling to serve as a nominee for the office of director at the date of the
Annual Meeting or any postponement or adjournment thereof, the proxies may be
voted for a substitute nominee, designated by the proxy holders or by the
present Board of Directors to fill such vacancy. The Board of Directors has no
reason to believe that any such nominee will be unwilling or unable to serve if
elected a director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE ELECTION OF THE DIRECTORS NOMINATED HEREIN.
The Board of Directors proposes the election of the following nominees
as members of the Board of Directors:
Carl Chen, Ph.D.
C.M. Cheng
James A. Lovell
S.B. Lai, Ph.D.
If elected, the nominees are expected to serve until the 2001 Annual
Meeting of Shareholders.
Information with Respect to Each Nominee and Executive Officers.
The following table sets forth certain information with respect to each
nominee and executive officer of the Company as of March 31, 2000.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Carl Leei Chen, Ph.D. 54 Chairman of the Board,
President, Chief Executive
Officer, Director and Director
Nominee
C.M. Cheng 54 Consultant to the Company,
Director and Director Nominee
James A. Lovell 71 Director and Director Nominee
S.B. Lai, Ph.D. 49 Director and Director Nominee
</TABLE>
<PAGE>
Other Officers:
Gene Comfort 56 Executive Vice President and
General Manager
David M. Turner, CPA 64 Vice President Finance and
Administration, Chief Financial
Officer, and Secretary
Michael W. Lai 52 Vice President Engineering
Directors serve until the next annual meeting or until their successors
are elected or appointed. All officers are appointed by and serve at the
discretion of the Board of Directors, other than Dr. Chen, who has an employment
agreement with the Company. See Management - Employment Agreement. There are no
family relationships between any directors or officers of the Company.
Dr. Carl L. Chen is the founder of the Company and has been its
President and a director since the Company's incorporation in January 1990 and
the Chief Executive Officer of the Company since December 1994. From January
1992 to October 1995, Dr. Chen served as President, and since January 1992 has
been a minority stockholder, of Union China Investment and Development Group,
Inc. (Union China), a company located in Monterey Park, California, which was
formed to invest in commercial real estate. Union China confirmed a plan of
reorganization pursuant to Chapter 11 of the Federal bankruptcy laws in August
1995. The bankruptcy case for Union China was closed in May 1996 pursuant to a
Final Decree and Order Closing Case entered by the Bankruptcy Court for the
Central District of California. Since January 1992, Dr. Chen has served as the
President of California Aerospace Technology, Inc., a consulting company for the
satellite industry, located in Monterey Park, California. Dr. Chen was Chairman
of SIDA Corporation, a high technology trading company located in Monterey Park,
California, from 1989 to May 1996. Prior to founding the Company in 1990, Dr.
Chen was a Satellite System Engineering Manager at Hughes Space and
Communications, Inc. for 15 years. Dr. Chen has a Ph.D. in Engineering from the
California Institute of Technology and Masters Degrees in Control Engineering
and Aerospace Engineering from UCLA and West Virginia University, respectively.
Dr. Chen is a graduate of the Owner/President Management program at the Graduate
School of Business Administration of Harvard University.
C.M. Cheng is a consultant to the Company and has served as a director
of the Company since June 1996. Since April 1996, Mr. Cheng has been a Vice
President of Eurotai International, Ltd., a private company located in Taipei,
Taiwan, which distributes health food products. From 1984 to April 1996, Mr.
Cheng served as a Vice President, Director of the Office of the President, and
Manager of Corporate Planning with Taiwan Yeu Tyan Machinery, Mfg. Co. Ltd., a
public company located in Taipei, Taiwan, which manufactures automobiles and
heavy equipment. From 1980 to 1983, Mr. Cheng was an Associate Professor of
Economics and Management at Taiwan National Sun-Yet-Sen University. Mr. Cheng is
the director of Harpa Limited, a corporation organized under the laws of the
Cayman Islands (Harpa), a principal stockholder of the Company. See Certain
Relationships and Related Transactions and Principal Shareholders.
James A. Lovell Jr. is the former spacecraft commander of the Apollo 13
mission. He currently is the President of Lovell Communications, a business
devoted to disseminating information about the United States Space Program.
Prior to that he was Executive Vice President of Centel Corporation. Mr. Lovell
is a Fellow in the Society of Experimental Test Pilots and a member of the
Golden Eagles. He has been granted many honors and awards, including the
Presidential Medal for Freedom, the French Legion of Honor and the Congressional
Space Medal of Honor. In 1994 he and Jeff Kluger wrote Lost Moon, the story of
the Apollo 13 mission.
S. B. Lai has served as director of the Company since October 1997. Mr.
Lai is currently a Professor with the Graduate School of Business
Administration, National Chengchi University, Republic of China; the Secretary
General, Chinese Management Association, Republic of China; a third term
Republic of China National Assemblyman, Republic of China; and is Judge and
Committeeman of the National Quality Award. Over the past five years, Mr. Lai
has also served as a Director of the Ta-Yeh University, Republic of China;
Secretary General of the Chinese Management Association, Republic of China; and
is a consulting committeeman for the Ministry of
<PAGE>
Economic Affairs and the Ministry of Education Affairs of the Republic of China.
Mr. Lai received a BSME and MBA from National Cheng-Kung University and a MSISE
and Ph.D. from the University of Southern California.
Gene Comfort has been the Executive Vice President and General Manager
of the Company since September 1995. He served as a director of the Company from
May 1996 through March 2000. From July 1993 to September 1995, Mr. Comfort was
the Vice President-Marketing of the Company, and he was the Director of
Marketing of the Company from April 1991 to July 1993. Mr. Comfort has been
involved in the aircraft industry for over 25 years in a variety of marketing,
sales and management positions. Mr. Comfort is a single and multi engine rated
pilot.
David M. Turner, CPA joined the Company in January 1997. Prior to that,
from 1994, he served as the Chief Financial Officer of Taitron Incorporated, a
publicly held company that distributes discrete semiconductors. From 1991 to
1994, Mr. Turner was President and sole owner of Maynard Enterprises,
Incorporated, a privately held consulting business working primarily in the
health care industry. From 1988 to 1991, Mr. Turner was the Chief Financial
Officer and Corporate Vice President of Finance of the Greater Southeast
Management Company, a Washington D.C. company that operated an inner city health
care system, which included two hospitals, three nursing homes and several
subsidiary health care companies in the Mid Atlantic area. During the same
period, Mr. Turner was President and a Director of Greater Southeast Asset
Management Company, the asset-holding subsidiary of the Greater Southeast
Healthcare System. Mr. Turner received a Master of Business of Administration
from the University of Cincinnati.
Michael W. Lai joined the Company in May 1, 1998. Mr. Lai is in charge
of Engineering operations for the high performance JETCRUZER(TM) 500 single
engine propjet aircraft and the long range, STRATOCRUZER(TM) twin jet aircraft.
He brings a vast and extensive Aerospace, Engineering and Management background
to AASI as Director, President, General Manager and Design Engineer for major
aerospace corporations. Mr. Lai's impressive background includes; Design
Engineer for Volpar Inc., on 707, 727 and DC-9 aircraft, Airframe Designer for
Saunders Aircraft Corp., Ltd. Gimli Canada on ST-27 commuter aircraft and
Associate Engineer for Continental Airlines, on DC-9, DC-10 and Boeing 727
commercial aircraft. Mr. Lai is a FAA, FAR 23 and 25 Designated Engineering
Representative (DER) in Airframes, Structures, Systems and Equipment. He is a
licensed pilot and has a Masters in Systems Engineering from West Coast
University, Los Angeles, CA, a B.S. in Applied Mathematics (Engineering Option)
and an A.A. in Aircraft Maintenance Technology from Northrop institute of
Technology, Inglewood CA. Mr. Lai also holds FAA, A&P and Transport Canada,
Aircraft maintenance Licenses AML.
The Board of Directors held three meetings in 1999 and all Directors
were present at each meeting. The Board of Directors has a Compensation
Committee, which makes recommendations to the Board concerning salaries and
incentive compensation for officers and employees of the Company. The members of
the Compensation Committee are Messrs. Lai and Lovell. The Board of Directors
also has an Audit Committee which reviews the results and scope of the audit and
other accounting related matters. The members of the Audit Committee are
currently Messrs. Lai and Lovell. Both committees held three meetings during
1999.
The Company has agreed to nominate a designee of the Underwriter of its
recent public offering who is reasonably acceptable to the Company for election
to the Company's Board of Directors, if so requested by the Underwriter, for a
period of five years from December 6, 1996.
MANAGEMENT
EXECUTIVE COMPENSATION
The following tables set forth certain information as to the Company's
Chief Executive Officer and each of the Company's four most highly compensated
executive officers whose total annual salary and bonus for the fiscal year
ending December 31, 1999 exceeded $100,000:
<PAGE>
SUMMARY COMPENSATION TABLE
Annual Compensation/(1)/
<TABLE>
<CAPTION>
Other
Name and Principal Position Year Salary Bonus Compensation
<S> <C> <C> <C> <C>
Carl L. Chen, Ph.D. 1999 $191,000 $0 $39,248/(2)/
Chairman and Chief Executive 1998 $200,000 $0 $39,248/(2)/
Officer 1997 $200,000 $0 $39,248/(2)/
Gene Comfort 1999 $143,000 $0 $ 0
Executive Vice President 1998 $160,961 $0 $ 0
1997 $150,000 $0 $ 0
</TABLE>
(1) The compensation described in this table does not include medical
insurance, retirement benefits and other benefits which are available
generally to all employees of the Company and certain perquisites and other
personal benefits, the value of which did not exceed the lesser of $50,000
or 10% of the executive officer's compensation in the table.
(2) Represents premium for life insurance paid by the Company on behalf of Dr.
Chen.
OPTION GRANTS IN LAST FISCAL YEAR
NONE
EMPLOYMENT AGREEMENT
The Company entered into an eight-year employment agreement (the Chen
Employment Agreement) with Dr. Carl Chen, the Company's, Chairman, Chief
Executive Officer and President, commencing in May 1996. The Chen Employment
Agreement provides that, in consideration for Dr. Chen's services, he is to be
paid an annual salary of $200,000. He will receive increases in salary and
bonuses as deemed appropriate by the Board of Directors. The Company will
maintain life insurance coverage on Dr. Chen, and Dr. Chen may name the
beneficiary of such policy. The Chen Employment Agreement also provides that he
will not compete with the Company during the term of the Agreement and for
eighteen months thereafter and that, if Dr. Chen's employment is terminated by
the Company without cause (as defined therein), he will receive up to eighteen
months' salary as severance, payable monthly commencing on the thirtieth day
following such termination without cause.
<PAGE>
COMPENSATION OF DIRECTORS
Non-employee directors receive $2,000 for each Board of Directors
meeting attended. The Company pays all out-of-pocket expenses of attendance.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of March 31, 2000 by (i)
each person who is known by the Company to own beneficially more than 5% of any
class of the Company's outstanding voting securities, (ii) each of the Company's
directors and executive officers, and (iii) all officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
Common Stock
Name and Address of Beneficially Percent of
Title of Class Beneficial Owner/(1)/ Owned/(2)/ Ownership
<S> <C> <C> <C>
Class A Common Stock Dr. Carl L. Chen/(3)/ 75,000 .1.05%
Class B Common Stock 826,751 43.5%
Class E-1 Common Stock 1,653,503 41.34%
Class E-2 Common Stock 1,653,503 41.34%
Class A Common Stock Gene Comfort/(4)/ 24,400 .34%
Class B Common Stock 60,001 3.15%
Class E-1 Common Stock 120,000 3.00%
Class E-2 Common Stock 120,000 3.00%
Class A Common Stock C.M. Cheng/(4)//(5)/ 24,000 .34%
Class B Common Stock 1,013,572 53.33%
Class E-1 Common Stock 2,027,144 50.67%
Class E-2 Common Stock 2,027,144 50.67%
Class A Common Stock James A. Lovell Jr./(4)/ 20,000 .3%
Class A Common Stock S.B. Lai, Ph.D./(8)/ 14,000 .2%
Class A Common Stock David Turner/(9)/ 18,100 .2%
Class A Common Stock All executive officers 155,700 2.0%
Class B Common Stock and directors as a 1,900,324 100%
Class E-1 Common Stock group (6 persons) 3,800,647 95.02%
Class E-2 Common Stock 3,800,647 95.02%
Class B Common Stock Harpa Limited/(7)/ 1,013,572 53.33%
Class E-1 Common Stock 2,027,144 50.67%
Class E-2 Common Stock 2,027,144 50.67%
Class B Common Stock Shih Jen Yeh/(7)/ 1,013,572 53.33%
Class E-1 Common Stock 2,027,144 50.67%
Class E-2 Common Stock 2,027,144 50.67%
Class B Common Stock Chyao Chi Yeh/(7)/ 1,013,572 53.33%
Class E-1 Common Stock 2,027,144 50.67%
Class E-2 Common Stock 2,027,144 50.67%
Class A Common Stock Fidelity Management 487,500 8.80%
Research Company/(10)/
---------------------
</TABLE>
<PAGE>
(1) Except as otherwise indicated, the address of each principal stockholder is
c/o the Company at 3205 Lakewood Blvd., Long Beach, California 90808. The
Company believes that all persons named have sole voting power and sole
investment power, subject to community property laws where applicable.
(2) The Common Stock of the Company is divided into four classes. Each share of
Class B Common Stock, Class E-1 Common Stock and Class E-2 Common Stock is
entitled to five votes per share, and Class A Common Stock is entitled to
one vote per share. The shares of Class E Common Stock are subject to
redemption by the Company if the Company does not achieve certain income or
market price levels.
(3) Includes 200,000 shares of Class E-2 Common Stock held by Julie C. Chen, as
trustee of the Eric F. Chen Trust under Declaration of Trust dated August
31, 1996, for the benefit of Eric F. Chen, Dr. Chen's son. Julie Chen is
Dr. Chen's sister-in-law. Dr. Chen disclaims beneficial ownership of the
200,000 shares held by the Trust for the benefit of his son. Excludes
25,000 shares of Class A Common Stock issuable upon the exercise of options
not exercisable within 60 days and includes options for 75,000 shares of
Class A Common Stock which are currently exercisable.
(4) Excludes 15,000 shares of Class A Common Stock issuable upon the exercise
of options which are not exercisable within 60 days and includes options
for 20,000 shares of Class A Common Stock which are currently exercisable.
(5) Includes 5,217,860 shares of Common Stock held by Harpa Limited, a Cayman
Island corporation (Harpa). C.M. Cheng is a director of Harpa and has sole
voting and investment control over the shares of Common Stock held by Harpa
and thus may be deemed to beneficially own such shares. Mr. Cheng disclaims
beneficial ownership of such shares. The address of Harpa is c/o Coutts Co.
(Cayman) Ltd., Coutts House, P.O. Box 707, West Bay Road, Grand Cayman,
Cayman Islands.
(6) Common Stock beneficially owned is Class A Common Stock, which was
contained in 15,000 Units purchased by Mr. Gorlin in March and April 1997.
Excludes 20,000 shares of Class A Common Stock issuable upon the exercise
of options not exercisable within 60 days and includes options for 10,000
shares of Class A Common Stock issuable upon the exercise of options which
are currently exercisable.
(7) The voting stock of Harpa is currently held equally by Shih Jen Yeh and
Chyao Chi Yeh, who are children of Song Gen Yeh, the former Chairman and
principal stockholder of the Company. See Certain Transactions. The address
of Mr. Shih Jen Yeh and Mr. Chyao Chi Yeh is 14th Floor, No. 55, Section 2,
Chung-Cheng Road, Shih-Lin District, Taipei, Taiwan.
(8) Excludes 20,000 shares of Class A Common Stock issuable upon the exercise
of options which are not exercisable within 60 days and includes options
for 10,000 shares of Class A Common Stock issuable upon the exercise of
options which are currently exercisable.
(9) Excludes 12,000 shares of Class A Common Stock issuable upon the exercise
of options which are not exercisable within 60 days and includes 18,000
shares of Class A Common Stock issuable upon the exercise of options.
(10) The address for Fidelity Management Research Company is 82 Devonshire
Street, Boston, Massachusetts 02109.
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
All Form 3 and Form 4 reports required to be filed pursuant to Rule
16(a) of the Securities Exchange Act of 1934, as amended during fiscal 1999 had
been filed, and the Company is not aware of any failures to file a required
form.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From January 1990 through December 1993, Mr. Song Gen Yeh, who was at
that time a principal stockholder and director of the Company, advanced funds to
the Company in the aggregate amount of $10,478,000. In December 1993, the
Company entered into an agreement with Mr. Yeh to repay such advances through
the issuance of 584,074 shares of Class B Common Stock, 1,168,148 shares of
Class E-1 Common Stock, and 1,168,148 shares of Class E-2 Common Stock of the
Company. Such shares were issued to Mr. Yeh in June 1996. From 1994 through
1995, Mr. Yeh provided additional advances to the Company aggregating $250,000.
In June 1996, such advances were repaid by the Company through the issuance of
13,937 shares of Class B Common Stock, 27,873 shares of Class E-1 Common Stock,
and 27,873 shares of Class E-2 Common Stock. Such shares were subsequently
transferred to Harpa Limited (Harpa), a Cayman Islands corporation the voting
stock of which is controlled by two of Mr. Yeh's children. C.M. Cheng, a
director of the Company, is the Director of Harpa and, as such, has the power to
vote the shares of the Company's Common Stock held by Harpa. See Principal
Stockholders.
In January 1990, the Company entered into a five-year agreement (the
Management Agreement) with SIDA Corporation (SIDA). Dr. Carl L. Chen, the
Chairman, Chief Executive Officer and President of the Company, was, at that
time, a principal stockholder of SIDA, and the other two stockholders of SIDA
were also, at that time, stockholders of the Company. The Management Agreement
provided for annual payments to SIDA of $140,000 for management services
consisting essentially of those customarily performed by the President of a
company. The SIDA agreement expired by its terms in January 1995. As of June 30,
1996, SIDA was owed $259,000 of unpaid management fees. This amount, together
with accrued interest of $64,000 through August 30, 1996, was paid from the
proceeds of a Bridge Financing in September 1996. In October 1993 and February
1994, the Company obtained loans from SIDA in the aggregate principal amount of
$110,000, bearing interest at 12%. These loans, together with accrued interest
of $31,000, were repaid from the proceeds of the Bridge Financing in September
1996.
In February and July 1994, the Company received loans in an aggregate
principal amount of $565,000, bearing interest at a rate of 12%, from four
individuals who were at the time not affiliated with the Company. One of such
persons, C.M. Cheng, became a director of the Company in June 1996. These loans,
together with accrued interest of $161,000, were repaid with the proceeds of the
Bridge Financing in September 1996.
In December 1994, the Company entered into a New Management Agreement
(the New Management Agreement) with Dr. Chen which took effect in January 1995.
Pursuant to the New Management Agreement, Dr. Chen agreed to serve as the
Company's President and Chief Executive Officer. The New Management Agreement
had a term of 10 years and provided that Dr. Chen was to receive a signing bonus
of 139,365 shares of Class B Common Stock, 278,730 shares of Class E-1 Common
Stock, and 278,730 shares of Class E-2 Common Stock, an annual salary of
$350,000, and additional annual compensation payable in 147,727 shares of Class
B Common Stock, 295,454 shares of Class E-1 Common Stock, and 295,454 shares of
Class E-2 Common Stock. In May 1996, Dr. Chen agreed to terminate the New
Management Agreement. Pursuant to the New Management Agreement and in connection
with its termination, the Company issued a total of 577,823 shares of Class B
Common Stock, 1,155,647 shares of Class E-1 Common Stock, and 1,155,647 shares
of Class E-2 Common Stock to Dr. Chen. At June 30, 1996, $144,000 remained
accrued and unpaid under the New Management Agreement. This amount was paid to
Dr. Chen with the proceeds of the Bridge Financing in September 1996.
In May 1996 the Company entered into an Employment Agreement with Dr.
Chen pursuant to which he agreed to serve as its Chairman, Chief Executive
Officer and President. See Management Employment Agreement. As of August 31,
1996, compensation of $69,000 was accrued and unpaid under this Agreement. This
amount was paid from the proceeds of the Bridge Financing in September 1996.
From September 1995 through August 1996, Dr. Chen made loans bearing interest at
a rate of 12% to the Company in the aggregate principal amount of $562,000. In
May 1996, Dr. Chen agreed to convert $336,000 of these loans into 187,118 shares
of Class B Common Stock, 374,236 shares of Class E-1 Common Stock, and 374,236
shares of Class E-2 Common Stock. The
<PAGE>
remaining $226,000 principal amount of these loans, together with $36,000 of
accrued interest, was repaid with the proceeds of the Bridge Financing in
September 1996.
In 1994 and 1995, the Company obtained loans from General Bank in the
aggregate principal amount of $900,000. This loan bore interest at the prime
rate plus 1.5% and had a maturity date of October 1996. Repayment of the loan
was guaranteed by the Small Business Administration, the California Export
Finance Office and Dr. Chen and was secured by substantially all the assets of
the Company. The total outstanding balance of the loan of approximately $915,000
(including accrued interest) was repaid from the proceeds of the Bridge by them
and will reimburse such persons for their reasonable charges and expenses in
connection therewith.
PROPOSAL 2
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has authorized the firm of Ernst & Young LLP,
independent public accountants, to serve as auditors for the fiscal year ending
December 31, 2000. A representative of Ernst & Young LLP will be present at the
Annual Meeting and will have the opportunity to make a statement if he or she
desires to do so. Further, the representative of Ernst & Young LLP will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE RATIFICATION OF THE SELECTION OF ERNST AND YOUNG AS THE AUDITORS OF THE
COMPANY.
PROPOSAL 3
APPROVAL OF ISSUANCE AND SALE OF
SERIES A PREFERRED STOCK,
WARRANTS TO PURCHASE COMMON STOCK,
COMMON STOCK ISSUABLE UPON CONVERSION OF PREFERRED STOCK, AND
COMMON STOCK ISSUABLE UPON EXERCISE OF WARRANTS
On March 6, 2000, the Company completed the sale by private placement
to thirteen investors of a total of 50,000 shares of Series A Preferred Stock
for a purchase price of $100 per share and issued warrants to purchase a total
of 598,000 shares of Common Stock (subject to adjustment for stock dividends,
combinations or splits with respect to the underlying Common Stock). The Company
issued an additional 487,000 warrants as commissions for this placement, along
with the payment of $425,000 in cash. The 50,000 shares of Series A Preferred
Stock and 1,085,000 warrants so issued are referred to collectively as the
"Initial Shares" and the "Initial Warrants", respectively. The Company used the
proceeds from the offering of the Initial Shares and Initial Warrants to fund
general working capital requirements.
Each share of Series A Preferred Stock is convertible, in whole or in
part, into a number of shares of Common Stock equal to $100 per share (as
adjusted for any stock dividends, combinations or splits with respect to such
shares) (the "Stated Value"), plus accrued and unpaid dividends, divided by the
Conversion Price, as defined below. The Initial Warrants are currently
exercisable at prices ranging from $3.87 per share to $5.16 per share and expire
on March 6, 2003.
On March 6, 2000, the Company also obtained commitments from the
purchasers of the Series A Preferred Stock to purchase up to an additional
50,000 shares of Series A Preferred Stock at the price of $100 per share in two
separate tranches of 20,000 shares (said 20,000 shares, the "First Put Shares")
and 30,000 shares (said 30,000 shares, the "Second Put Shares") respectively
(collectively the "Put Shares"). The Company must exercise its right to sell the
Put Shares during the fifteen business days following the effective date of the
Registration Statement with regard to the Common Stock underlying the Series A
Preferred Stock (the "Put Exercise Period"). If the Company does not fully
exercise its right to sell the Put Shares, each individual Preferred Stockholder
may elect to purchase its full allotment of Put Shares, which election must
occur during the seven business day following the expiration of the Put Exercise
Period. Upon the purchase of the First Put Shares, the purchasers will also
receive warrants to purchase a total of 239,200 shares of Common Stock (subject
to adjustment for stock dividends, combinations or splits with respect to the
underlying Common Stock) at a price equal to an average of 122.5% of the closing
bid price
<PAGE>
of the Common Stock on the day the Company gives notice to the purchasers of its
intention to exercise its right (the "Put") to require the purchasers to
purchase the Put Shares (said 239,200 warrants together with 194,800 warrants
issuable as commissions, the "First Put Warrants"). Upon the purchase of the
Second Put Shares, the purchasers will also receive warrants to purchase a total
of 358,800 shares of Common Stock (subject to adjustment for stock dividends,
combinations or splits with respect to the underlying Common Stock) at a price
equal to the price of the First Put Warrants (said 358,800 warrants, together
with 292,200 warrants issuable as commissions, the "Second Put Warrants"). The
First Put Warrants and Second Put Warrants are exercisable immediately upon
their issue, and expire five years thereafter. Other than with respect to
exercise price and expiration date, the terms of the First Put Warrants and the
Second Put Warrants are identical to the terms of the Initial Warrants. Upon
issuance of the First Put Shares the Company shall pay, in addition to the First
Put Warrants referenced above, cash commissions in the amount of $180,000. Upon
issuance of the Second Put Shares the Company shall pay, in addition to the
358,800 Second Put Warrants referenced above, cash commissions in the amount of
$270,000. If the average closing bid price of the Company's Class A Common Stock
during the three trading days immediately prior to March 6, 2001 is not at least
equal to 200% of the average closing bid price of the Company's Class A Common
Stock during the three trading days immediately prior to March 6, 2000, then the
holders of the Preferred Stock will receive a supplemental issue of Preferred
Stock equal to 10% of the previously issued Preferred Stock.
The Company intends to use the proceeds from the sale of the Put Shares
and Second Put Shares to fund general working capital requirements and the
expansion of its business operations.
The Company's right to exercise the First Put is contingent upon
satisfaction of the following conditions:
- the receipt of shareholder approval (as more fully discussed
below under "Reason for Shareholder Approval");
- that the Company continue to be a fully reporting public
company; no material adverse change in the Company's business;
- no Event of Default with respect to the Series A Preferred
Stock; the Company's ongoing compliance with Nasdaq National
Market listing requirements;
- the execution and delivery by the Company and the subscribers
of appropriate documents evidencing the transaction
substantially in the form previously agreed upon;
- the effectiveness of a registration statement covering the
shares issuable upon conversion of the Initial Shares and Put
Shares; and
- the satisfactory completion of a fuselage pressurization test
of the Company's JETCRUZER(TM) 500.
The Company's right to sell the Second Put shares is contingent upon
satisfaction of all the foregoing conditions, as well as the additional
condition that the Common Stock be trading at a price at least equal to 150% of
its price on the initial closing date. The Company may not exercise its Put
rights with regard to a Preferred Stock shareholder, if the Put would result in
that shareholder being deemed to be the beneficial owner of more than 9.9% of
the outstanding Common Stock of the Company.
REASON FOR SHAREHOLDER APPROVAL
Pursuant to the terms of the Subscription Agreement governing the sale
and issuance of the Initial Shares, the First Put Shares and the Second Put
Shares (collectively, the "Preferred Shares") and the Initial Warrants, the
First Put Warrants and the Second Put Warrants (collectively, the "Warrants"),
the Company covenanted to obtain shareholder approval of the issuance of shares
of Common Stock in excess of 19.9% of the outstanding Common Stock upon
conversion of the Preferred Shares and exercise of the Warrants (the
"Approval"). Until the Company obtains the Approval, the issuance of shares of
Common Stock upon conversion of the Preferred Shares and exercise of the
Warrants, collectively, in excess of 19.9% of the outstanding Common Stock would
violate rules promulgated by Nasdaq ("Rule 4310(c)(25)(H)"). Until such approval
is obtained, the maximum number of shares of Common Stock which can be issued on
conversion of the Series A Preferred Stock and exercise of the Warrants is
3,363,100,
<PAGE>
which represents 19.9% of the number of shares of the Common Stock outstanding
as of March 6, 2000, the date of the issuance of the Initial Shares and the
Initial Warrants.
Rule 4310(c)(25)(H) requires shareholder approval for the issuance of
shares of Common Stock in a transaction involving the sale or issuance by a
company of common stock, or securities convertible into 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
stock.
The Company's right to exercise the Put is contingent upon obtaining
shareholder approval by June 5, 2000. The Company will use the $5 million of
proceeds which it expects to receive from the sale of the First Put Shares and
the Second Put Shares for general business purposes and the expansion of its
manufacturing operations. The Company has determined that the sale of the First
Put Shares and the Second Put Shares is the most expedient method by which the
Company can raise capital for these purposes, as compared to other sources of
debt and equity financing.
Given the current absence of other sources of equity financing on terms
as favorable as the Series A Preferred Stock, the Company is presently relying
on the $5 million which it has already received from the sale of the Initial
Shares and the additional $5 million which it expects to receive from the sale
of the First Put Shares and the Second Put Shares, respectively, in order to
meet its anticipated working capital needs. If the Approval is not obtained by
June 30, 2000, the Company will not be able to exercise the First Put or the
Second Put, thereby losing the opportunity to obtain this additional $1.5
million. Therefore, failure to obtain the Approval will delay expansion of the
Company's manufacturing operations indefinitely until such time as the Company
is able to secure other debt or equity financing on satisfactory terms.
In addition, if the Company fails to obtain the Approval by June 5,
2000, the holders of Series A Preferred Stock would have the option to require
the Company to redeem their currently outstanding shares. It is unlikely that
Advanced Aerodynamics & Structures, Inc. would have sufficient cash to redeem
the Series A Preferred Stock if required to do so. In light of the foregoing,
the failure to obtain the Approval could deplete all of the Company's available
cash and thus materially impair the ability of the Company to continue to
operate its business.
The following is a summary of the terms and conditions of the
Certificate of Designation for the Series A Preferred Stock and the Initial
Warrants terms and conditions.
DIVIDENDS
The holders of the Series A Preferred Stock are entitled to receive
dividends on a quarterly basis, at the rate of 5% simple interest per annum on
the Stated Value per share, when, as and if declared by the Company. The
dividends are payable, at the option of the Company, either in cash or
additional shares of Series A Preferred Stock at the rate of one share of Series
A Preferred Stock for each $100 of such dividend not paid in cash. Dividends may
be paid at the Company's option with Series A Preferred Stock only if the Common
Stock deliverable upon conversion of such Series A Preferred Stock has been
included for public resale in an effective registration statement filed with the
Securities and Exchange Commission; otherwise the dividend will be paid in cash.
The dividends on the Series A Preferred Stock are cumulative and shall be paid
or declared and set aside for payment prior to any payment or declaration of
dividends on, or purchase or redemption of, any Common Stock or any other class
of preferred stock of the Company.
CONVERSION
Subject to the restrictions discussed below, any holder of Series A
Preferred Stock has the right at any time to convert, in whole or in part,
shares of Series A Preferred Stock into a number of shares of Common Stock equal
to $100 per share plus accrued and unpaid dividends on such share divided by the
Conversion Price. The Conversion Price means the lesser of (i) 100% of the
average closing bid prices of the Company's Common Stock for the three trading
days immediately preceding the date of the initial issuance of the shares of
Series A Preferred Stock; or (ii) at 90% of the average of the eight lowest
Closing Bid Prices for the 180 days immediately preceding the conversion of the
respective shares of Series A Preferred Stock. Therefore, there is a possibility
that the Series A Preferred
<PAGE>
Stock may convert to Common Stock at a rate which is below the prevailing market
price of the Common Stock at the time of the conversion.
The exact number of shares of Common Stock into which currently
outstanding Series A Preferred Stock may ultimately be convertible will vary
over time as the result of ongoing changes in the trading price of the Company's
Common Stock. Decreases in the trading price of the Company's Common Stock will
cause an increase in the number of shares of Common Stock issuable upon
conversion. The maximum number of shares of Common Stock issuable upon
conversion of the Series A Preferred Stock, together with the shares issuable
upon exercise of the Warrants, cannot exceed 3,363,100 under Nasdaq Rule
4310(c)(25)(H) prior to the receipt of the Approval. This number of shares
represents 19.9% of the Company's outstanding Common Stock as of the date the
Initial Shares and the Initial Warrants were issued. However, after the Approval
is obtained, there will be no cap on the number of common shares into which the
shares of Series A Preferred Stock can be converted. Therefore, after the
Approval is obtained, it is possible that significant additional dilution of
existing shareholders' interests may occur. The following consequences could
result:
- If the market price of the Company's Common Stock declines,
thereby proportionately increasing the number of shares of
Common Stock issuable upon conversion of the Series A
Preferred Stock, an increasing downward pressure on the market
price of the Common Stock might result (sometimes referred to
as a downward "spiral" effect).
- The dilution caused by conversion of Series A Preferred Stock
and sale of the underlying shares could also cause downward
pressure on the market price of the Common Stock.
- Once downward pressure is placed on the market price of the
Company's stock, this pressure could encourage short sales by
holders of Series A Preferred Stock and others, thus placing
further downward pressure on the price of the Common Stock.
- The conversion of Series A Preferred Stock would dilute the
book value and earnings per share of Common Stock held by
existing shareholders of Advanced Aerodynamics & Structures,
Inc.
In the event the Company declares any dividend or distribution on its
Common Stock, or splits, combines or reclassifies its Common Stock, then the
Conversion Price will be proportionately adjusted so that each holder of Series
A Preferred Stock will be entitled to receive the same number of shares of
Common Stock upon conversion of the Series A Preferred Stock as though such
conversion occurred prior to the event requiring the adjustment. Similarly, if
the Company merges with another entity or sells substantially all of its assets,
the holders of the Series A Preferred Stock shall be entitled to convert each
share of Series A Preferred Stock into the consideration (whether it consists of
stock, other securities and/or property) which that holder would have been
entitled to receive had such holder converted its holdings of Series A Preferred
Stock to Common Stock immediately prior to such merger or asset sale. The
Conversion Price will also be adjusted pursuant to formula (thereby entitling
the holders of the Series A Preferred Stock to receive additional shares of
Common Stock upon conversion) in the event the Company makes certain additional
issuances of Common Stock.
REDEMPTION
From and after the effective date of a Registration Statement relating
to the underlying shares, upon receiving a Notice of Conversion with a
conversion price less than the Stated Value, the Series A Preferred Stock which
is the subject of the Conversion Notice is redeemable at the option of the
Company at a price equal to 125% of Stated Value plus accrued and unpaid
dividends.
The Company is required to redeem Series A Preferred Stock after the
occurrence of certain triggering events, including, among other things:
- Failure of the Company to pay dividends when required;
<PAGE>
- Material breaches of the Company's agreements with purchasers
of Series A Preferred Stock, including failure to register the
Common Stock issuable upon conversion of Series A Preferred
Stock and failure to maintain the effectiveness of any such
registration;
- Failure to maintain a Nasdaq National Market listing for the
Company's Common Stock; and
- Failure to deliver Common Stock certificates in a timely
fashion after the conversion of Series A Preferred Stock.
LIQUIDATION RIGHTS
Upon a voluntary or involuntary dissolution, liquidation or winding-up
of the Company, the holders of Series A Preferred Stock shall be entitled to
receive, before any payment or distribution shall be made on any Common Stock or
any other class of preferred stock of the Company, out of the assets of the
Company available for distribution to such holders, the Stated Value per share
of Series A Preferred Stock and all accrued and unpaid dividends to and
including the date of payment to any such holder. In the event the assets of the
Company available for distribution to the holders of Series A Preferred Stock
are insufficient to permit payment in full of all amounts owing to the Series A
holders, then all of such assets shall be distributed proportionately among the
holders of the Series A Preferred Stock to the exclusion of the holders of
Common Stock or any other class of preferred stock of the Company.
The Board of Directors has unanimously approved, and recommends that
the shareholders authorize and ratify: (i) the issuance of the Preferred Shares
and the Warrants, (ii) the issuance of that number of shares of the Company's
Common Stock issuable upon conversion of the Series A Preferred Stock approved
for issuance hereby, (iii) the issuance of the maximum number of shares of
Common Stock issuable upon exercise of the Warrants in accordance with the terms
thereof, and (iv) the issuance of Series A Preferred Stock as a dividend upon
Series A Preferred Stock approved for issuance hereby in accordance with the
terms of the Certificate of Determination governing the Series A Preferred
Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 3
PROPOSAL 4
RATIFICATION OF AMENDMENT OF STOCK OPTION PLANS
At its meeting on April 3, 2000, the Company's Board of Directors
amended the Company's stock option plans to provide that, upon the death of an
officer or a director of the Company while in office, that all unvested options
held by that officer or director immediately vest and become exercisable. The
Board believes this change will be helpful in hiring or retaining experienced
senior personnel. Applicable tax law requires that this change be approved by
the shareholders of the Company within twelve months of its adoption by the
Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 4
OTHER MATTERS
<PAGE>
The Board of Directors does not know of any other matters which may
come before the Annual Meeting. However, if any other matter shall properly come
before the Annual Meeting, the proxy holders named in the proxy accompanying
this statement will have discretionary authority to vote all proxies in
accordance with their best judgment.
SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal at the Company's 2001
Annual Meeting of Shareholders must deliver the proposal to the Company no later
than December 31, 2000 and must otherwise comply with Rule 14a-8 under the
Securities Exchange Act of 1934 in order to have the proposal included in the
proxy materials for that meeting. Any shareholder proposal submitted other than
for inclusion in the Company's proxy materials for that meeting must be
delivered to the Company no later than December 31, 2000 or such proposal will
be considered untimely. If a shareholder proposal is received after December 31,
2000, the Company may vote in its discretion as to that proposal all of the
shares for which it has received proxies for the 2001 Annual Meeting of
Shareholders.
<PAGE>
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report for the fiscal year ended December 31, 1999
is being mailed to Shareholders along with this Proxy Statement. The Annual
Report is not to be considered part of the soliciting material.
Long Beach, California By Order of the Board of Directors
May 5, 2000
[Form of Proxy]
ADVANCED AERODYNAMICS AND STRUCTURES, INC.
3205 LAKEWOOD BLVD.
LONG BEACH, CALIFORNIA 90808
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, as owner of ________ shares of Common Stock of
Advanced Aerodynamics and Structures, Inc., a Delaware corporation (the
"Company"), hereby acknowledges receipt of the Proxy Statement and the notice of
the shareholders meeting to be held on June 2, 2000, at 10:00 a.m. local time,
at 3205 Lakewood Blvd., Long Beach, CA 92808, and hereby further revokes all
previous proxies and appoints Dr. Carl Chen or David Turner, or either of them,
as proxy of the undersigned at said meeting and any adjournments thereof with
the same effect as if the undersigned were present and voting the shares.
(1) For the election of the following persons as directors of the Company to
serve until the next annual meeting of shareholders or until their
respective successors shall have been elected and qualified:
Carl Chen, Ph.D., C.M. Cheng,
James A. Lovell, S.B. Lai, Ph.D.
[ ] AUTHORITY GRANTED to [ ] AUTHORITY WITHHELD to vote
vote for nominees listed for all nominees listed
above, except as indicated above.
to the contrary below.
(INSTRUCTION: TO VOTE AGAINST ANY NOMINEE, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
----------------------------------------
(2) The approval and adoption of a resolution appointing Ernst & Young LLP as
the Company's independent certified public accountants for fiscal year
2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) The authorization and ratification of: (i) the issuance and sale in
private placements of up to 100,090 shares (the "Preferred Shares") of
the Company's Series A Preferred Stock and Common Stock Purchase Warrants
to purchase up to 2,145,000 shares of Common Stock ("Warrants"), (ii) the
issuance of that number of shares of Common Stock, issuable upon
conversion of the Series A Preferred Stock being approved for issuance,
(iii) the issuance of the maximum number of shares of Common Stock
issuable upon exercise of the Warrants in accordance with their terms;
and (iv) the issuance of Series A Preferred Stock, in accordance with the
terms of the Certificate of Designation governing the Series A Preferred
Stock, as a Dividend upon all shares of Series A Preferred Stock being
approved for issuance.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
(4) The ratification of the amendment of the Company's stock option plans
to provide for the immediate vesting of options held by an officer or
director who has died while in office.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) In their discretion upon such other matters as may properly come before
the meeting and any adjournments thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS YOU HAVE INDICATED ABOVE.
IF NO INDICATION HAS BEEN MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED FOR THE ABOVE NOMINEES AND IN FAVOR OF SUCH PROPOSALS, AND AS SAID PROXY
DEEMS ADVISABLE ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Dated: __________________, 2000
Sign exactly as your name appears
on your share certificate. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full title.
If more than one trustee, all
should sign. All joint owners
should sign. If a corporation,
sign in full corporation name by
president or other authorized
officer. If a partnership, sign in
partnership name by authorized
person. Persons signing in a
fiduciary capacity should indicate
their full title in such capacity.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
