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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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:
[ ] Preliminary Proxy
[ ] 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
Lunn Industries, Inc.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] 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:
_______________________________________
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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:
_______________________________________
[X] 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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LUNN INDUSTRIES, INC.
1 Garvies Point Road
Glen Cove, New York 11542-2828
NOTICE OF 1996 ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders
of Lunn Industries, Inc., a Delaware corporation (the "Corporation" or the
"Company"), will be held at Lunn Industries, Inc. 1 Garvies Point Road, Glen
Cove, New York, on Friday, September 27, 1996 at 10:15 A.M. local time for the
following purposes, all of which are more completely set forth in the
accompanying Proxy Statement:
(1) To approve the various amendments to the Corporation's
Certificate of Incorporation as set forth in this Definitive
Proxy Statement.
(2) To approve an increase in the total number of shares of all
classes of stock that the Corporation shall have authority to
issue to 31 million shares, of which 1 million shares shall be
Preferred Stock, having a par value of $.01 per share
("Preferred Stock"), and 30 million shall be Common Stock,
having a par value of $.01 per share ("Common Stock").
(3) To elect five persons as Directors to hold office until their
respective terms expire or until their respective successors
are elected and qualified;
(4) To approve an amendment to the Corporation's 1994 Stock
Incentive Plan.
(5) To ratify the selection by the Board of Directors of Coopers &
Lybrand LLP. as the independent accountants to audit the
Corporation's financial statements for 1996.
(6) To transact such other business as may properly come before
the meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on
August 16, 1996, as the record date for the determination of shareholders
entitled to receive notice of and to vote at the Annual Meeting or any
adjournment thereof.
BY ORDER OF THE BOARD
OF DIRECTORS
Lawrence Schwartz
Vice President, Treasurer and Secretary
August 26, 1996
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YOUR VOTE IS IMPORTANT
YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR SHARES
MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND IN ORDER THAT THE PRESENCE OF A
QUORUM MAY BE ASSURED. THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO
VOTE IN PERSON IN THE EVENT YOU ATTEND THE MEETING.
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LUNN INDUSTRIES, INC.
1 Garvies Point Road
Glen Cove, New York 11542-2828
This Proxy Statement, expected to be mailed on or about August
26, 1996, is furnished in connection with the solicitation by the Board of
Directors of Lunn Industries, Inc. (the "Corporation") of Proxies for use at the
Annual Meeting of Shareholders to be held on September 27, 1996 at 10:15 A.M.,
at Lunn Industries, Inc., 1 Garvies Point Road, Glen Cove, New York, and at any
aset para ind 19 djournment thereof, for the purposes set forth in the Notice of
Annual Meeting.
Only the holders of the Corporation's common stock of record
at the close of business on August 16, 1996 will be entitled to notice of and to
vote at the Annual Meeting. As of August 2, 1996, there were outstanding
11,391,859 shares of the Corporation's common stock. Each share of common stock
is entitled to one (1) vote on each matter to be voted on, and a majority of the
shares entitled to vote, represented in person or by Proxy, is required to
constitute a quorum for the transaction of business.
Each of the matters to be voted on at the Annual Meeting
requires the affirmative vote of the holders of a majority of the issued and
outstanding shares of the Corporation's common stock represented and voting at
the meeting. The five nominees receiving a plurality of the votes cast for
election of directors of the Corporation will be elected as directors of the
Corporation.
A Shareholder who gives a proxy may revoke it at any time
before it is voted by giving written notice of the termination thereof to the
Secretary of the Corporation, by filing with the Corporation a later dated proxy
in proper form or by attending the annual meeting, revoking his or her proxy and
voting his or her shares in person. All valid proxies delivered pursuant to
this solicitation of proxies, if received in time and not revoked, will be
voted. If no specifications are given by the Shareholder executing the proxy
card, valid proxies will be voted to elect the seven persons nominated for
election to the Board of Directors listed on the accompanying proxy card, and
upon such other matters as may properly come before the meeting or any
adjournment thereof.
The Corporation's 1995 Annual Report to Shareholders, which is
being mailed concurrently to the Shareholders of the Corporation, does not form
any part of the proxy solicitation material.
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The Board of Directors recommends a vote FOR each of the
Proposals discussed in this Proxy Statement and FOR each of
the persons nominated to be elected directors of the Corporation.
PROPOSAL 1
Amendment to the Corporation's Certificate of Incorporation
Introduction
The Board of Directors, with the assistance of outside counsel, has
reviewed the Corporation's Certificate of Incorporation to determine whether it
fully protected the rights of minority shareholders. It was the Board's
conclusion, that the present Certificate of Incorporation did not properly
protect those minority rights. The Board has approved the amendments to the
sections of the Certificate of Incorporation as set forth below. Upon
shareholder approval, the Board will authorize the Corporation's counsel to file
a Restated Certificate of Incorporation reflecting the amendments voted upon and
approved by the shareholders at this Annual Meeting.
Classification and Removal of Directors
Presently, one shareholder, owning a majority of the voting common
stock of the Corporation, may replace all of the members of the Board of
Directors at the next annual shareholders meeting, thereby providing the
minority shareholders no representation on the Board. The Board of Directors
believes that this ability to change the entire membership of the board is too
precipitous and not in the best interests of the shareholders. The Board of
Directors has approved a revision to Article VII of the Corporation's
Certificate of Incorporation whereby three classes of Directors are established,
Class I, Class II and Class II, each serving for an initial term that shall
expire at the 1997, 1998, and 1999 annual shareholders meeting, respectively.
Thereafter, the successors to the class of directors whose term expires at the
meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election. [See Exhibit A]
Additionally, members of the Board of Directors may be removed by a
majority of the voting common stock of the Corporation, without cause. The
Board believes that a director, properly elected by the shareholders of the
Corporation, should not be removed from office, except for cause. This will
promote stability to the Board and protect the rights of all the shareholders.
Therefore, the Board of Directors has approved a revision to Articles VII and
IX, and a new Article XIV of the Corporation's Certificate of Incorporation
whereby a director may be removed for cause at an annual or special meeting of
the Board of Directors by not less than two-thirds of the then outstanding
shares of stock of the
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Corporation entitled to vote generally in the election of directors, voting
together as a single class. [See Exhibit A]
The new Article XIV limits shareholder action with written consent in
lieu of an annual or special meeting, unless such consent is unanimous. The
Board believes this will permit all shareholders the opportunity to properly
review and consider those proposals that may come forward and require
shareholder consent. [See Exhibit A]
PROPOSAL 2
Amendment to the Corporation's Certificate of Incorporation to Increase
Authorized Stock
The Corporation presently has authorized for issuance 20 million common
stock shares. On August 2, 1996, the Corporation had 11,391,859 shares issued
and outstanding. The Corporation has granted warrants and options, and issued a
convertible note accounting for a total of approximately 3.4 million shares.
Additionally, the 1994 Stock Incentive Plan (the "Plan") requires 700,000 shares
be reserved for the Plan, however, the proposed amendment to the Plan, made in
this Proxy Statement, would require a total of 1.5 million shares to be reserved
for the Plan. Therefore, the Board has recommended that the Corporation be
authorized to issue a total of 30 million common stock shares. [See Exhibit B]
Additionally the Certificate of Incorporation does not authorize the
Board to issue preferred stock should the need arise for additional fund raising
or acquisition activities. Therefore, the Board of Directors has proposed that
the Corporation be authorized to issue 1 million shares of preferred stock.
[See Exhibit B]
ELECTION OF DIRECTORS
Five persons have been nominated as Directors of the Corporation. All
of the nominees are currently Directors of the Corporation. The nominees to the
Board have been divided into three classes of Directors. Class I, Class II and
Class III, each serving for an initial term that shall expire at the 1997, 1998,
and 1999 annual shareholders meeting, respectively, or until the election and
qualification of his successor.
Nominees:
Class I: Warren Haber
John Simon
Class II: William Lewis
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John Menzel
Class III Alan Baldwin
In the unlikely event any of the nominees should, for some reason
(presently unknown), fail to stand for election, the persons designated as
proxies on the accompanying proxy card will vote for substitute nominees.
Additionally, should Proposal I not be approved by the shareholders at this
Annual Meeting, then the nominees will all stand for re-election as one class of
directors for a term of one year or until the election and qualification of his
successor.
The names of the five nominees, the age and principal occupation of
each and the period during which each has served as a Director of the
Corporation are set forth below:
Five Nominees to the Board of Directors:
Name and Five Year Business Experience Age
Class I
Warren H. Haber 55
For more than 20 years, Chairman of the Board and Chief Executive
Officer of Founders Equity, Inc., Founders Management Services, Inc.,
and affiliates (collectively, "Founders") all private investment
concerns engaged in identifying businesses for acquisition by
companies in which the principal stockholders of Founders have a
substantial equity interest and managing such businesses for such
principal stockholders' accounts. Since 1983, Chairman of the Board
of Batteries Batteries, Inc. Since 1993, Chairman of the Board and
Chief Executive Officer of HealthRite, Inc., a distributor and
producer of vitamins, natural nutritional and dietary supplements,
herbal based products, and weight-loss products. From 1986 through
December 1992, Chairman of the Board and Chief Executive Officer of
International Power Machines. He served as a Director until February
1995. Director of Realty Information Group, LP, a privately held
commercial real estate information provider. Mr. Haber has served as
an officer and a director of Founders Property, Inc. a private real
estate investment concern. Mr. Haber was originally elected a
director of the Company in 1994.
John Simon 53
Executive Vice President and Managing Director of Allen & Company,
Incorporated, for more than five years. Director of Immune Response
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Corporation, Tcell Sciences, Inc., and Neurogen Corporation. Mr.
Simon was originally elected a director in 1993.
Class II
William R. Lewis 54
Financial consultant offering services to multiple corporate clients
since 1994. Chief Financial Officer of Air & Water Technologies
Corporation in 1994. Chief Financial Officer of Jenny Craig, Inc. in
1994. Executive Vice-President, Chief Financial Officer and Director
of Nutri/System, Inc from 1991-1993. Subsequent to Mr. Lewis leaving,
Nutri/System, Inc. filed for protection from creditors under Chapter
11 of the U.S. Bankruptcy Code in 1993. Executive Vice President,
chief administrative and financial officer of Simplicity Holdings,
Inc. from 1988-1991.
John F. Menzel 53
Chairman and majority shareholder of Fiberglass Industries, Inc., a
manufacturer of fiberglass products for the marine, sporting goods and
chemical tank industries from before 1989 to the present. Mr. Menzel
was originally elected a director in 1994.
Class III
Alan W. Baldwin 59
Chairman of the Board and Chief Executive Officer of the Corporation
since March 1994. Vice President of the Corporation from December
1993 to March 1994. Independent consultant, January 1990 to March
1994. President and CEO of Hytek Microsystems, a manufacturer of
hybrid electronic circuits, from September 1989 to December 1990. Mr.
Baldwin was originally elected a director in 1993.
Other Directors and Executive Officers:
Samuel J. Dastin 65
Director of Advanced Products, Northrop-Grumman Corporation. Retired
July 1995, after thirty year career in advanced composite materials,
structures and manufacturing. Selected a Fellow by both the Society of
Advanced Material Processing Engineers (SAMPE) and the Society of
Manufacturing Engineers (SME) for his comprehensive work in advanced
composites and reinforced plastics. Mr. Dastin was originally elected
a director in 1995,
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but will not stand for re-election in 1996.
Charles. W. Russell 59
President of F.C. Funding, Inc., a private investment firm, for more
than five years. Executive Vice President, COO and a Director of
Fallek Chemical Group, an international chemical marketing concern,
from before 1989 to 1990. Mr. Russell was originally elected a
director in 1989, but will not stand for re-election in 1996.
Lawrence Schwartz 61
Secretary of the Company since 1994. Vice President, Chief Financial
Officer, Treasurer and Assistant Secretary and Controller of the
Company, since 1990.
Edward Kiley 46
Vice President and General Manager of Alcore, Inc., a wholly owned
subsidiary of the Company, since November 1993. Vice President and
General Manager of the Company from January 1993 through October 1993.
Director of Sales and Marketing of Hexcel Corporation from April 1978
through December 1992.
Gordon J. Bockner 54
President of Business Development Associates, Inc., international and
domestic consultants to companies organizing and implementing
technology transfer, or technology acquisition programs, in the
plastics and packaging industries for more than five years. Mr.
Bockner was originally elected a director in 1988, but did not stand
for re-election in 1995.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors has the responsibility to serve as the
representative of the Shareholders. The Board establishes broad corporate
policies and oversees the overall performance of the Corporation. However, the
Board is not involved in day-to-day operating details. Members of the Board are
kept informed of the Corporation's business activities through discussion with
the Chief Executive Officer, by reviewing analyses and reports sent to them by
management and by participating in board meetings.
During 1995 there were six meetings of the Board of Directors, and all
directors attended more than 75% of the Board of Directors' meetings, except
for Gordon J. Bockner, who attended only two of the four meetings held during
his tenure as a director in 1995. Directors who are not employees of the
Corporation receive $500.00 for each
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meeting of the Board attended.
The Company has standing Executive, Compensation and Stock Option and
Audit Committees.
The Executive Committee consists of Alan Baldwin, Samuel Dastin,
Warren Haber, John Menzel, and John Simon. The Executive Committee met on three
occasions in 1995.
The Compensation and Stock Option Committee consists of four
non-employee directors: Samuel Dastin, John Menzel, Charles Russell, and John
Simon. The Compensation and Stock Option Committee met on three occasions in
1995. The committee has the power to grant options and stock awards under the
Company's 1994 Incentive Stock Plan, and to negotiate salaries and employment
contracts for key employees of the Company.
The Audit Committee consists of Warren Haber, William Lewis, Charles
Russell and John Simon. The Audit Committee met on two occasions in 1995. The
committee has the responsibility of recommending the firm chosen as independent
auditors, overseeing and reviewing audit results, and monitoring the
effectiveness of internal audit functions. The Audit Committee has recommended
the selection of Coopers & Lybrand, LLP. as independent auditors for the fiscal
year ending December 31, 1996.
Compliance with Section 16(a) of the Exchange Act
Alan W. Baldwin Untimely filing of Form 4 upon the grant of stock options in
June 1994. Filing has been made on Form 5.
Warren H. Haber Untimely filing of Form 5 for stock option grant in June 1994.
Required filing has been completed and filed.
John F. Menzel Untimely filing of Form 5 for stock option grants in June 1994
and September 1995. Required filings have been completed and filed.
Charles. W. Russell Untimely filing of Form 5 for stock option grants in June
1994 and September 1995. Required filings have been completed and filed.
John Simon Untimely filing of Form 5 for stock option grants in June 1994 and
September 1995. Required filings have been completed and filed.
Samuel J. Dastin Untimely filing of Form 5 for stock option grant in September
1995. Required filing has been completed and filed.
Lawrence Schwartz Untimely filing of Form 4 upon the grant of stock option in
December
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1994. Filing has been completed on Form 5 and filed.
Executive Compensation
Summary Compensation Table
Annual Compensation
(a) (b) (c) (d)
Name
and
Principal Other
Position Year Salary($) Compensation($)
Alan W. Baldwin(3) 1995 $150,000 $0
Chairman 1994 $127,257 $4,616 (1)
of the Board 1993 $0 $0
of Directors
and Chief Executive
Officer
Edward Kiley(3) 1995 $98,389 $7,500 (2)
Vice President 1994 $94,799 $0
and General 1993 $92,428 $0
Manager
__________________________
(1) Paid as consultant fee earned in 1993, paid in 1994 to
a corporation controlled by Mr. Baldwin.
(2) Paid in restricted stock in exchange for a 10 percent wage
concession. Stock valued at fair market value at time wage
concession was implemented.
(3) No other form of compensation was paid the executive except as
set forth above.
Options/SAR Grants Table
No options were granted to the Executive Officers of the Company
during the fiscal year ended December 31, 1995.
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Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
At FY-End (#) FY-End ($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized Unexercisable Unexercisable
($)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alan W. Baldwin None None 150,000/50,000 $51,000/$17,000
Edward Kiley None None 8,333/16,667 $3,667/$7,333
</TABLE>
Long-Term Incentive Plan Awards Table
The Company paid no long term compensation to the Executive Officers
during the fiscal year ended December 31, 1995.
Compensation of Directors
Directors who are not employees of the Company earn a fee of $500 for
each meeting of the Board of Directors that is attended. Additionally,
non-employee Directors receive a grant immediately following the Company's
Annual Shareholder Meeting under the Company's 1994 Stock Incentive Plan for
the right to purchase 5,000 shares of the Company's common stock. Such grant
shall be at the fair market value of the common stock at the time of grant.
Employment contracts and termination of employment and change in control
arrangements.
In November, 1994, the Company entered into an employment contract
commencing on March 14, 1994 with Alan W. Baldwin to serve as Chairman of the
Board and Chief Executive Officer of the Company, for an initial term of one
year, with automatic renewals for additional one year terms, at an annual
salary of $150,000. The contract provides for increases on an annual basis
upon review by the Board of Directors or the Compensation Committee.
Additionally, an incentive compensation program will be implemented on an
annual basis by the Board of Directors. The Company will provide Mr. Baldwin
the normal employee benefits provided to other employees, in addition to a
company car.
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Additionally, the Company is obligated to pay Mr. Baldwin a one time relocation
expense of $56,000. The contract provides for a grant to Mr. Baldwin of a non-
statutory stock option for 200,000 shares exercisable at $.60 per share.
On April 30, 1996, the Board of Director's Compensation Committee
approved the following revisions to Mr. Baldwin's compensation: (a) A 1995
bonus award of $40,000; (b) An incentive stock option grant of 100,000 common
stock shares; (c) Reimbursement of 1995 insurance premiums paid by Mr. Baldwin
for his individual life insurance policy.
Additionally, 1996 compensation for Mr. Baldwin was established as
follows: (a) Salary to remain at $150,000; (b) 1996 bonus award based upon the
Company meeting the following financial goals:
A. Sales of $17 million, operating profit of $1.2 million and
year-end backlog exceeding $12 million.
(i) A bonus of 50 percent of annual salary.
(ii) Incentive stock option grant of 200,000 shares granted
on February 26, 1996, with 100,000 shares being exercisable
upon meeting the financial goals above, the remaining 100,000
shares being exercisable twelve months thereafter.
(iii) Modify the employment agreement to provide for a change
in control provision.
B. The incentives for meeting 75 percent of the goals listed
above would be: (i) A bonus of 25 percent of annual salary.
(ii) Incentive stock option grant of 100,000 shares granted
on February 26, 1996, with 50,000 shares being exercisable
upon meeting the financial goals above, the remaining 50,000
shares being exercisable twelve months thereafter.
Security Ownership of Certain Beneficial Owners and Management.
(a) Security ownership of certain beneficial owners.
________________________________________________________________________________
(1) (2) (3) (4)
Title of Class Name and Amount and Percent
of Class(1)
Address Nature of
Beneficial Beneficial
Owner Owner
________________________________________________________________________________
Common Stock S. Daniel Abraham 900,000 6.34
777 South Flagler Boulevard
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West Tower
West Palm Beach, FL. 33401
Common Stock Allen & Company 900,000(2) 6.34
711 Fifth Avenue
New York, New York 10022
Common Stock Grange Nominees Limited 760,000 5.35
P.O. Box 116
Commerce House
Les Banques
St Peter Port, Guernsey
GWY1 3EZ
Common Stock Cooke & Cie, S.A. 2,557,000 (3) 18.00
7 Rue des Alps
Geneva 1, Switzerland
_____________________________
(1) Percentage is based upon a 14,204,355 shares as of August 2, 1996,
comprised of outstanding shares, options, warrants and a convertible
note that are exercisable within sixty days of this date, totaling
11,391,859, 315,833, 1,596,663, and 900,000 shares, respectively.
(2) Does not include beneficial ownership of John Simon who is a Managing
Director of Allen & Co., Inc.("Allen"). Allen disclaims beneficial
ownership of Mr. Simon's shares.
(3) Includes a convertible note that may be converted into 900,000 shares
of common stock at the option of the holder.
(b) Security ownership of management.
________________________________________________________________________________
(1) (2) (3) (4)
Title of Class Name and Amount and Percent
Address Nature of of Class
Beneficial Beneficial (8)
Owner Owner
________________________________________________________________________________
Common Stock Alan W. Baldwin 252,500 (1) 1.78
c/o Lunn Industries
1 Garvies Point Road
Glen Cove, NY. 11542
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Common Stock Warren Haber 90,000 (2)(3) .63
c/o Founders Equity
200 Madison Avenue
New York, NY. 10016
Common Stock John F. Menzel 10,000 (2)(3) .07
c/o Fiber Glass
Industries, Inc.
RD #5 Edison Street
Amsterdam, NY. 12010
Common Stock Charles W. Russell 170,077(2)(3)(4)(5) 1.20
c/o F.C. Funding
770 Lexington Avenue
New York, NY. 10021
Common Stock John Simon 10,000 (2)(3)(7) .08
c/o Allen & Co.
711 Fifth Avenue
New York, NY. 10022
Common Stock Samuel Dastin 5,000(3) .04
c/o Dastin Associates
Company, Inc.
62 Wellesley Lane
Hicksville, NY. 11801
Common Stock William R. Lewis 5,000(3) .04
636 Black Rock Road
Bryn Mawr, PA. 19010
Common Stock Edward Kiley 27,833(6) .20
c/o Alcore, Inc.
1324 Brass Mill Road
Belcamp, MD. 21017
Common Stock Gordon J. Bockner 25,000 (2)(3)(4)(5) .18
c/o Business Development
Associates
1 Landmark Square
Stamford, CT. 06901
Common Stock Directors and Executive 570,410 4.02
Officers as a group
(8 persons)
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____________________________
(1) Includes option to purchase 150,000 shares at $.60 which expires on
June 9, 2004, and an option to purchase 50,000 shares at $.875 which
expires on November 30, 2005.
(2) Includes options to purchase 5,000 shares at $.625 which expires on
June 8, 2004.
(3) Includes options to purchase 5,000 shares at $.1.50 which expires on
September 28, 2005.
(4) Includes warrants to purchase 10,000 shares at $1.50 which expires on
June 16, 1999.
(5) Includes warrants to purchase 10,000 shares at $4.37 which expires on
May 13, 2003.
(6) Includes options to purchase 8,333 shares at $.50 which expires on
December 21, 1999.
(7) Does not include beneficial ownership of Allen, where John Simon is a
Managing Director. Allen disclaims beneficial ownership of Mr.
Simon's ownership.
(8) Percentage is based upon a 14,204,355 shares as of August 2, 1996,
comprised of outstanding shares, options, warrants and a convertible
note that are exercisable within sixty days of this date, totaling
11,391,859, 315,833, 1,596,663, and 900,000 shares, respectively.
Certain Relationships and Related Transactions.
(a) Alan W. Baldwin.
[See Executive Compensation, Employment contracts and termination of
employment and change in control arrangement.]
(b) Cook & Cie, S.A..
The Company borrowed $360,000 from Cook & Cie, S.A. payable in
January, 1997 plus interest at 10% per annum payable in common stock. This
note is convertible to the common stock of the Company, at the option of the
holder at anytime during the term of the note, at the conversion rate of one
share for each $.40 of principal converted.
(c) Private Placement
On March 21, 1996, the Company sold 3.5 million shares of common stock
at $.40 per share in a private placement, under Regulation D of the regulations
promulgated under the Securities Exchange Act of 1934 (the "Exchange Act").
The following beneficial owners listed in Item 11 purchased shares in the
private placement:
S. Daniel Abraham 900,000 shares
Allen & Company, Inc. 900,000 (1)
Cook & Cie, S.A. 840,000
Grange Nominees Limited 460,000
_________________________
(1) John Simon, Director of the Company, is a Managing Director of Allen &
Company, Inc.
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PROPOSAL 4
Amendment to the 1994 Stock Incentive Plan
The 1994 Stock Incentive Plan (the "Plan") was approved by the
shareholders at the 1994 Annual Shareholders Meeting. The Plan provides for
the grant of options and stock awards of up to 700 thousand shares of common
stock of the Corporation. To date, the number of shares reserved under this
Plan have been fully utilized. Therefore, the Board of Directors has submitted
this proposal to increase the number of shares authorized for this Plan to a
total of 1.5 millions shares, an 800 thousand share increase. [See Exhibit C]
Additionally, the Corporation finds that from time to time, it would
like to grant options or stock awards to non-employee consultants and/or
advisors. Presently, the Plan limits grants or awards to be made solely to
employees and directors of the Corporation. The Board of Directors has
proposed that the eligibility requirements of the Plan be broadened to include
employees, officers, directors, consultants and advisors to the Corporation.
[See Exhibit C]
PROPOSAL 5
Ratification of Appointment of Independent Auditors
The Board of Directors has selected Coopers & Lybrand LLP.,
independent certified public accountants, as the auditors for the 1996 fiscal
year. Coopers & Lybrand LLP. is the accounting firm which examined and
reported on the Corporation's financial statements for the fiscal years ended
December 31, 1994 and 1995. The Corporation has been advised by Coopers &
Lybrand LLP. that neither the firm nor any of its associates has any material
relationship with the Corporation or any of its subsidiaries. In accordance
with a resolution of the Board of Directors, such selection is being presented
to the shareholders for ratification at the Annual Meeting. If the foregoing
proposal is not approved by a majority vote of the shareholders present, in
person or by proxy, at the Annual Meeting or if prior to the Annual Meeting,
Coopers & Lybrand LLP. shall decline to serve, then the Board of Directors will
designate another firm to audit the financial statements of the Corporation for
1996 fiscal year, whose continued employment thereafter will be subject to
ratification by the shareholders.
It is not expected that a representative of Coopers & Lybrand LLP will
be present at the Annual Meeting.
PROPOSALS OF SHAREHOLDERS
Proposals of any shareholders of the Corporation which are to be
presented at
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the Corporation's 1996 Annual Meeting of Shareholders which such shareholder
wishes to be included in the Corporation's Proxy Statement and form of proxy
relating to such Annual Meeting, must be received by the Corporation no later
than December 1, 1996. The next Annual Meeting of Shareholders is anticipated
to be held on June 7, 1997.
OTHER BUSINESS
The Annual Meeting is called for the purposes set forth in the Notice
of 1996 Annual Meeting of Shareholders. The Board of Directors does not intend
to present, and knows of no one who intends to present, any matter for action
by shareholders at such meeting other than the matters referred to in that
Notice. However, the enclosed Proxy covers discretionary authority with
respect to the transaction of any other business that may properly come before
the meeting, and it is the intention of the persons named in the enclosed Proxy
to vote such Proxy in accordance with their judgement on such matter.
The solicitation of this Proxy is being made on behalf of the Board of
Directors of the Corporation and will be made only by mail, except that, if
necessary, officers of the Corporation, without additional compensation,
therefor, may make solicitations in person, by telephone, or by telegraph. The
total cost of solicitations of Proxies will be borne by the Corporation.
Please fill in, sign and date the enclosed Proxy and return it in the
accompanying addressed envelope which requires no further postage if mailed in
the United States. If you attend the Annual Meeting and wish to vote your
shares in person, you may do so. Your cooperation in giving this matter your
prompt attention is appreciated.
Lawrence Schwartz
Vice President, Treasurer and Secretary
Lunn Industries, Inc.
1 Garvies Point Road
Glen Cove, New York 11542
August 26, 1996
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Exhibit A
(a) To delete the present Article VII and to substitute the following in its
place:
ARTICLE VII
A. Classification.
Except as may be provided in a certificate of designations relating to
the rights of the holders of any class or series of Preferred Stock, voting
separately by class or series, to elect additional directors under specified
circumstances, the number of directors of the Corporation shall be as fixed
from time to time by or pursuant to the By-laws of the Corporation. The
directors, other than those who may be elected by the holders of any class or
series of Preferred Stock voting separately by class or series, shall be
classified, with respect to the time for which they severally hold office, into
three classes, Class I, Class II and Class III, which shall be as nearly equal
in number as possible. Each initial director in Class I shall hold office for
a term expiring at the 1997 annual meeting of stockholders, each initial
director in Class II shall hold office initially for a term expiring at the
1998 annual meeting of stockholders, and each initial director in Class III
shall hold office for a term expiring at the 1999 annual meeting of
stockholders. Notwithstanding the foregoing provisions of Section A, each
director shall serve until such director's successor is duly elected and
qualified or until such director's earlier death, resignation or removal. At
each annual meeting of stockholders, the successors to the class of directors
whose term expires at the meeting shall be elected to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election but in any event until any such director's successor
has been duly elected and qualified or until any such director's earlier death,
resignation or removal.
B. Removal.
(1) Except as may be provided in a certificate of designations
relating to the rights of the holders of any class or series of Preferred
Stock, voting separately by class or series, to elect directors under specified
circumstances, any director or directors may be removed from office at any
time, but only for cause (as defined in Section B(2) hereof) and only by the
affirmative vote, at an annual meeting of the stockholders or a special meeting
of the stockholders called for such a purpose, of not less than two thirds of
the total number of votes of the then outstanding shares of stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, and, in the case of a removal proposed at a special
meeting, only if notice of the proposal was contained in the notice of the
meeting. The person proposing the removal of a director shall provide written
notice to the director of the proposal and of the facts alleged to constitute
cause for the removal. In the event that the shareholders are provided with at
least 40 days' notice of the meeting, the written notice to the director shall
be delivered at
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least 30 days before the meeting. In the event that the shareholders are
provided with less than 40 days' notice of the meeting, the written notice to
the director shall be delivered no later than 10 days after the shareholders
are provided with written notice of the meeting. Any vacancy in the Board of
Directors resulting from any such removal or otherwise shall be filled only by
vote of a majority of the directors then in office, although less than a
quorum, and any director so chosen shall hold office until the next election of
the class for which such director shall have been chosen and until such
director's successor shall be elected and qualified or until such director's
earlier death, resignation or removal.
(2) For purposes of this Section B(2), "cause" shall mean (i)
conduct as a director of the Corporation or any subsidiary involving dishonesty
of a material nature; (ii) willful conduct by the director that is demonstrably
and materially injurious to the Corporation, monetarily or otherwise; or (iii)
conduct by the director that results in a felony conviction, including a
conviction resulting from a plea of nolo contendere. No act, or failure to
act, on the director's part shall be deemed "willful" unless done, or omitted
to be done, by the director not in good faith and without reasonable belief
that the director's action or omission was in the best interest of the
Corporation.
C. Change of Authorized Number.
In the event of any increase or decrease in the authorized number of
directors, the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to maintain such classes as nearly equal as
possible. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
(b) To add a new Article XIV which shall read as follows:
ARTICLE XIV
Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
stockholders, and may not be effected by any consent in writing by such
stockholder, unless such consent is unanimous.
(c) To add a second sentence to Article IX which shall read as follows:
In order for the stockholders of the Corporation to exercise their power to
alter or repeal any By-law made by the Board of Directors, the action must be
approved by the holders of at least two thirds of the issued and outstanding
shares of the Corporation's common stock.
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Exhibit B
(a) To delete the present Article IV and to substitute the following in its
place:
ARTICLE IV
A. Authorized Shares.
The total number of shares of all classes of stock that the
Corporation shall have the authority to issue is 31,000,0000 shares, of which
1,000,000 shares shall be Preferred Stock, having a par value of $0.01 per
share ("Preferred Stock"), and 30,000,000 shall be Common Stock, having a par
value of $0.01 per share ("Common Stock"). The Board of Directors is expressly
authorized to provide for the classification and reclassification of any
unissued shares of Preferred Stock or Common Stock and issuance thereof in one
or more classes or series without the approval of the stockholders of the
Corporation.
B. Common Stock.
(1) Relative Rights.
The Common Stock shall be subject to all of the rights, privileges,
preferences and priorities of the Preferred Stock as set forth in the
certificate or certificates of designation filed to establish the respective
series of Preferred Stock. Each share of Common Stock shall have the same
relative rights as and be identical in all respects to all the other shares of
Common Stock.
(2) Voting Rights.
Each holder of shares of Common Stock shall be entitled to attend all
special and annual meetings of the stockholders of the Corporation and, share
for share and without regard to class, together with the holders of all other
classes of stock entitled to attend such meetings and to vote (except any class
or series of stock having special voting rights), to cast one vote for each
outstanding share of Common Stock so held upon any matter or thing (including,
without limitation, the election of one or more directors) properly considered
and acted upon by the stockholders, except as otherwise provided in this
Certificate of Incorporation or by applicable law.
(3) Dividends.
Whenever there shall have been paid or declared and set aside for payment,
to the holders of shares of any class of stock having preference over the
Common Stock as to the payment of dividends, the full amount of dividends and
of sinking fund or retirement payments, if any, to which such holders are
respectively entitled in preference to the Common Stock, then the holders of
record of the Common Stock and any class or series
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of stock entitled to participate therewith as to dividends, shall be entitled
to receive dividends, when, as, and if declared by the Board of Directors, out
of any assets legally available for the payment of dividends thereon.
(4) Dissolution, Liquidation, Winding Up.
In the event of any dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, the holders of record of the
Common Stock then outstanding, and all holders of any class or series of stock
entitled to participate therewith in whole or in part, as to distribution of
assets, shall become entitled to participate in the distribution of any assets
of the Corporation remaining after the Corporation shall have paid, or set
aside for payment, to the holders of any class of stock having preference over
the Common Stock in the event of dissolution, liquidation or winding up, the
full preferential amounts (if any) to which they are entitled, and shall have
paid or provided for payment of all debts and liabilities of the Corporation.
C. Preferred Stock.
(1) Issuance, Designations, Powers, Etc.
The Board of Directors expressly is authorized, subject to limitations
prescribed by the Delaware General Corporation Law and the provisions of this
Certificate of Incorporation, to provide, by resolution and by filing a
certificate of designations pursuant to the Delaware General Corporation Law,
for the issuance from time to time of the shares of Preferred Stock in one or
more series, to establish from time to time the number of shares to be included
in each series, and to fix the designation, powers, preferences and other
rights of the shares of each such series and to fix the qualifications,
limitations and restrictions thereon, including, but without limiting the
generality of the foregoing, the following:
(a) the number of shares constituting that series and the
distinctive designation of that series;
(b) the dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of that
series;
(c) whether that series shall have voting rights, in addition to
voting rights provided by law, and, if so, the terms of such voting rights;
(d) whether that series shall have conversion privileges, and, if
so, the terms and conditions of such conversion, including provisions for
adjustment of the conversion rate in such events as the Board of Directors
shall determine;
(e) whether or not the shares of that series shall be redeemable,
and, if so,
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the terms and conditions of such redemption, including the dates upon or after
which they shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at different
redemption dates;
(f) whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;
(g) the rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of shares
of that series; and
(h) any other relative powers, preferences and rights of that
series, and qualifications, limitations or restrictions on that series.
(2) Dissolution, Liquidation, Winding Up.
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of Preferred Stock
of each series shall be entitled to receive only such amount or amounts as
shall have been fixed by the certificate of designations or by the resolution
or resolutions of the Board of Directors providing for the issuance of such
series.
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Exhibit C
(a) To delete the present Article 4 and to substitute the following in its
place:
4. STOCK SUBJECT TO PLAN
The total number of shares of Stock reserved and available for
distribution under this Plan shall be 1.5 million. Such shares may consist, in
whole or in part, of authorized and unissued shares or treasury shares. If any
shares of Stock that have been optioned cease to be subject to option or if any
shares subject to any Restricted Stock or Deferred Stock award granted
hereunder are forfeited or such award otherwise terminates, those shares shall
again be available for distribution in connection with future awards under this
Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, a substitution or adjustment shall be made in the
aggregate number of shares reserved for issuance under this Plan, in the number
and option price of shares subject to outstanding Stock Options and Director
Stock Options granted under this Plan, and in the number of shares subject to
Restricted Stock or Deferred Stock awards granted under this Plan, in such
manner as may be determined to be appropriate by the Committee, in its sole
discretion, provided that the number of shares subject to any award shall
always be a whole number.
(b) To delete the present Article 5 and to substitute the following in its
place:
5. ELIGIBILITY
5.1 Employees of the Company or its subsidiaries (but excluding
members of the Committee and any person who serves only as a director) who are
responsible for or contribute to the management, growth, and/or profitability
of the business of the Company or its Subsidiaries, are eligible to be granted
Stock Options, Restricted Stock or Deferred Stock awards. The term "employee"
is defined as any employee, employee-director, officer, consultant, or advisor,
provided that bona fide services shall be rendered by consultants or advisors
and such services must not be in connection with the offer or sale of
securities in a capital-raising transaction.
5.2 Directors of the Company (other than directors who are also
officers or employees of the Company or its Subsidiaries) are eligible to be
granted Director Stock Options pursuant to Section 7 of the Plan.
5.3 The optionees and participants under this Plan shall be selected
from time
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to time by the Committee, in its sole discretion, from among those eligible,
and the Committee shall determine, in its sole discretion, the number of shares
covered by each award or grant to an optionee or participant.
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