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
(Amendment No. 2)
Filed by the Registrant /x/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/x/ Preliminary Proxy Statement
/_/ Definitive Proxy Statement / / Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(c) (2))
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
LARCAN-TTC 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):
/_/ No fee required.
/x/ Fee computed on table below per Exchange Act Rule 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
11,543,934, which number represents all of the shares of the Common Stock
of Larcan-TTC Inc.
_____________________________________________________________________________
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):
$0.0625, which equals the average of the closing bid and ask prices
for the Common Stock in its principal trading market for the 30 trading
days immediately prior to the Merger.
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
$155,671.19*
_____________________________________________________________________________
5) Total fee paid:
$31.13
_____________________________________________________________________________
[ ] Fee paid previously with preliminary materials:
_____________________________________________________________________________
/x/ Check box if any part of the fee is offset as provided by
Exchange 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.: Schedule 13E-3
___________________________
3) Filing party: Larcan-TTC Inc. and Larcan Inc.
___________________________________________________________
4) Date filed: October 15, 1997
_____________________________________________________________
___________
* For purposes of calculation of fee only, this amount is based on (i)
2,490,739 (the number of shares of Common Stock of LARCAN-TTC Inc.
outstanding as of October 27, 1997 ("Common Stock") and not held by
Larcan multiplied by $0.0625, the cash consideration per share, which
product has been multiplied by 1/50th of one percent.
<PAGE>
LARCAN-TTC INC.
650 South Taylor Avenue
Louisville, Colorado 80027
Dear Stockholder:
You are cordially invited to attend a Special Meeting of the
stockholders of Larcan-TTC Inc. (the "Company") to be held at the
Company's offices located at 650 South Taylor Avenue, Louisville,
Colorado 80027 on March 10, 1998, at 10:00 a.m., local time.
At the meeting you will be asked to consider and vote on an
Agreement and Plan of Merger by and among the Company, Larcan Inc.
("Larcan"), and Larcan Sub, Inc., a wholly-owned subsidiary of
Larcan. The Agreement and Plan of Merger generally provides for a
taxable exchange in which you will receive $0.0625 for each share of
the common stock of the Company held by you.
The Notice of Special Meeting of Stockholders and the Proxy
Statement accompanying this letter more fully describe the matters to
be considered at the Special Meeting. We urge you to read the
enclosed materials carefully.
YOUR BOARD OF DIRECTORS HAS APPROVED THE AGREEMENT AND PLAN OF
MERGER AND RECOMMENDS A VOTE "FOR" THE AGREEMENT AND PLAN OF MERGER.
Approval of the Agreement and Plan of Merger requires the
affirmative vote of the holders of a majority of the outstanding
shares of the Company's common stock entitled to vote thereon.
LARCAN HAS SUFFICIENT VOTES TO APPROVE THE MERGER WITHOUT THE
VOTE OF ANY OTHER STOCKHOLDER. APPROVAL OF THE MERGER IS NOT
CONDITIONED ON APPROVAL BY A MAJORITY OF THE UNAFFILIATED
STOCKHOLDERS.
Whether or not you plan to attend the Special Meeting, we urge
you to sign, date and return the enclosed proxy card in the envelope
provided so that as many shares as possible may be represented at the
meeting. The vote of each stockholder is important and your
cooperation in returning your executed proxy card will be
appreciated. Should you desire to attend the meeting and vote in
person, you may do so even though you have previously returned your
proxy card.
Thank you.
Sincerely,
Paul A. Dickie
Chairman of the Board
<PAGE>
LARCAN-TTC INC.
650 South Taylor Avenue
Louisville, Colorado 80027
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On March 10, 1998
Notice is hereby given that a special meeting of the
stockholders of Larcan-TTC Inc. ("Company" or "LTTC") will be held on
Tuesday, March 10, 1998, at 10:00 a.m., local time, at the Company's
offices, located at 650 South Taylor Avenue, Louisville, Colorado
80027, for the following purposes:
(1) To consider and vote upon the approval of an Agreement and
Plan of Merger ("Merger Agreement") among the Company,
Larcan Inc., a Canadian corporation ("Larcan"), and Larcan
Sub, Inc., a Delaware corporation and wholly-owned
subsidiary of Larcan ("LSI"), pursuant to which (i) LSI
will be merged with and into the Company ("Merger"); (ii)
each outstanding share of common stock of LSI will be
converted into the right to receive one share of common
stock of the Company, par value $.04 per share ("Common
Stock"), (iii) each outstanding share of Common Stock of
the Company (other than those owned by Larcan and those for
which appraisal rights have been perfected in accordance
with the General Corporation Law of the State of Delaware)
shall be cancelled in exchange for $0.0625 (the "Merger
Consideration"), (iv) each outstanding share of Common
Stock of the Company that is owned by Larcan shall be
cancelled without any consideration therefor, and (v) the
Company's Certificate of Incorporation and By-Laws will be
the Certificate of Incorporation and By-Laws of the
surviving corporation; and
(2) To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
<PAGE>
Only stockholders of record at the close of business on February
10, 1998 are entitled to notice of and to vote at the meeting or any
adjournment or adjournments thereof.
By Order of the Board of Directors
CORPORATE SECRETARY
Louisville, Colorado
February 12, 1998
IT IS DESIRABLE THAT AS MANY STOCKHOLDERS AS POSSIBLE BE
REPRESENTED AT THE MEETING AND, THEREFORE, WHETHER OR NOT YOU ARE
ABLE TO BE PRESENT IN PERSON OR OTHERWISE REPRESENTED AT THE MEETING,
YOU ARE REQUESTED TO SIGN AND RETURN THE ENCLOSED PROXY, SO THAT YOUR
SHARES WILL BE REPRESENTED.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE APPROVAL OF THE MERGER AGREEMENT.
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
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<PAGE>
LARCAN-TTC INC.
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Larcan-TTC Inc., a Delaware
corporation ("LTTC" or the "Company"), of proxies for use at a
special meeting of stockholders to be held at 10:00 a.m., local time,
on Tuesday, March 10, 1998, at 650 South Taylor Avenue, Louisville,
Colorado 80027, and at any postponements or adjournments thereof (the
"Special Meeting"), for the purpose described below. This Proxy
Statement is first being mailed to stockholders of the Company on or
about February 12, 1998.
At the Special Meeting, the stockholders of LTTC will be asked
to consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated July 17, 1997 (the "Merger
Agreement"), by and among the Company, Larcan Inc., a Canadian
corporation ("Larcan"), and Larcan Sub, Inc., a recently-formed
Delaware corporation and a wholly-owned subsidiary of Larcan ("LSI").
The Merger Agreement provides for the merger (the "Merger") of
LSI with and into the Company with the Company being the surviving
corporation (the "Surviving Corporation"). At the effective time of
the Merger, each share of the common stock, $.04 par value per share
("Common Stock") of the Company outstanding immediately prior thereto
(other than those owned by Larcan and those for which appraisal
rights have been perfected in accordance with the General Corporation
Law of the State of Delaware ("DGCL")) will be converted into the
right to receive $0.0625 in cash, without interest (the "Merger
Consideration"). Larcan negotiated the Merger Consideration with the
Company's two largest stockholders after Larcan. Larcan based the
Merger Consideration, in part, on the limited reported market
activity in the Company's Common Stock preceding May 28, 1997. For a
more complete description of the Merger Agreement and the Merger, see
"THE MERGER AGREEMENT."
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF SUCH TRANSACTION FOR THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY ...............................................1
The Special Meeting.................................1
The Merger..........................................1
Vote Required.......................................2
The Effective Time of the Merger....................3
Purpose and Reason for the Merger...................3
Fairness of the Merger..............................3
Federal Tax Consequences............................3
Financing the Merger................................3
Conduct of Business After the Merger................4
Appraisal Rights....................................4
SPECIAL MEETING..........................................5
Proposal to be Considered at the Special Meeting....5
Record Date; Voting Rights..........................5
Voting and Revocation of Proxies....................6
Appraisal Rights....................................6
Solicitation of Proxies.............................7
SPECIAL FACTORS..........................................7
Background..........................................7
Interests of Mr. Freeman and Dr. St. Clair
in the Merger....................................12
Recommendations of the Company's Board
of Directors; Fairness of the Merger.............13
Recommendations of Larcan as to the Fairness
of the Merger....................................16
Purpose and Effects of and Alternatives to
the Merger.......................................18
Conduct of Business of the Company After
the Merger.......................................20
Certain Federal Income Tax Consequences............20
Accounting Treatment ..............................21
Financing of Merger Consideration..................21
THE MERGER AGREEMENT....................................22
General............................................22
Effective Time of the Merger.......................22
Merger Consideration...............................22
Conditions to Closing..............................23
Termination or Amendment of Merger Agreement.......24
Voting Requirements................................24
APPRAISAL RIGHTS........................................25
INFORMATION REGARDING LTTC AND LARCAN ..................29
LTTC ..............................................29
Major Products and Markets....................29
Marketing.....................................32
Competition...................................34
Product Development...........................34
<PAGE>
Single Suppliers..............................35
Customers.....................................35
Employees.....................................35
Properties....................................35
Legal Proceedings.............................36
Larcan and LSI.....................................36
MARKET PRICES FOR THE COMMON STOCK......................37
Principal Holders of Securities....................38
Security Ownership of Management...................39
INDEPENDENT ACCOUNTANTS.................................40
MISCELLANEOUS...........................................40
AVAILABLE INFORMATION...................................40
ANNEX A: Agreement and Plan of Merger.................A-1
ANNEX B: Directors and Executive Officers
of LTTC, Larcan, LSI and
the Surviving Corporation....................B-1
ANNEX C: Section 262 of the DGCL......................C-1
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<PAGE>
SUMMARY
The following is a summary of certain information contained in
this Proxy Statement. This summary is not intended to be a complete
statement of all material features of the Merger and is qualified in
its entirety by reference to the more detailed information appearing
elsewhere in this Proxy Statement and the Annexes hereto. Terms used
but not defined in this Summary have the meanings ascribed to them
elsewhere in this Proxy Statement. Stockholders are urged to read
this Proxy Statement and the Annexes hereto in their entirety.
The Special Meeting
A special meeting of the stockholders of Larcan-TTC Inc. (the
"Company" or "LTTC") will be held at 10:00 a.m., local time, on March
10, 1998 at the Company's offices located at 650 South Taylor Avenue,
Louisville, Colorado 80027. At the Special Meeting, the stockholders
of the Company will be asked to consider and vote upon a proposal to
approve and adopt an Agreement and Plan of Merger, dated July 17,
1997, by and among the Company, Larcan Inc. ("Larcan") and Larcan
Sub, Inc., a wholly-owned subsidiary of Larcan ("LSI"). A copy of the
Merger Agreement is attached to this Proxy Statement as Annex A.
The Company is a Delaware corporation with its principal
executive offices located at 650 South Taylor Avenue, Louisville,
Colorado 80027, telephone: (303) 665-8000. Larcan is a corporation
organized under the laws of Canada, the principal executive offices
of which are located at 228 Ambassador Drive, Mississauga, Ontario,
Canada L5T 2J2, telephone: (905) 564-9222.
The Merger
The Merger Agreement provides that, upon approval of the Merger
Agreement by the stockholders of the Company and satisfaction of
certain other conditions, the Company will be merged with LSI, and
will be the surviving corporation ("Surviving Corporation" shall
hereinafter mean LTTC from and after the effective time of the
Merger.) As a result of the Merger, each outstanding share of the
Company's common stock, $.04 par value per share ("Common Stock"),
(other than those that are owned by Larcan and those for which
appraisal rights have been perfected in accordance with the Delaware
General Corporation Law ("DGCL")) will be converted into the right to
receive $0.0625 in cash, without interest ("Merger Consideration").
See "SPECIAL MEETING--Proposal to be
<PAGE>
Considered at the Special Meeting," "The MERGER AGREEMENT--General,"
"THE MERGER AGREEMENT--Effective Time of the Merger," and "THE MERGER
AGREEMENT--Merger Consideration."
As soon as practical after the Merger, Larcan will cause to be
mailed to the Company's stockholders' instructions regarding the
surrender of their certificates, together with a letter of
transmittal for that purpose. The Merger Consideration will be
distributed to each stockholder of the Company upon the surrender by
such stockholder of the certificate or certificates which prior to
the Merger represented shares of the Common Stock accompanied by a
duly executed letter of transmittal and such other document as may be
required thereby. After the Merger, each outstanding certificate
which prior thereto represented shares of the Common Stock (other
than those shares owned by Larcan and those shares for which
appraisal rights have been perfected in accordance with Section 262
of the DGCL) will be deemed to represent only the right to receive
the Merger Consideration. See "THE MERGER AGREEMENT--Merger
Consideration" and "APPRAISAL RIGHTS."
Vote Required
The affirmative vote of a majority of the shares of the Common
Stock outstanding on February 10, 1998 is required for approval and
adoption of the Merger Agreement. Abstentions and broker non-votes
will have the effect of a vote against the Merger. See "SPECIAL
MEETING--Record Date; Voting Rights" and "THE MERGER
AGREEMENT--Voting Requirements."
Larcan holds 9,053,195 shares of Common Stock, representing
approximately 78.42% of the outstanding shares of the Company, and
intends to vote such shares in favor of the approval and adoption of
the Merger Agreement. Mr. Dirk B. Freeman and Dr. Byron W. St. Clair
each holds 905,803 and 517,378 shares, respectively, of Common Stock,
representing approximately 7.85% and 4.48%, respectively, of the
outstanding shares of the Company. Each of Mr. Freeman and Dr. St.
Clair has agreed to vote all of his shares of the Common Stock in
favor of the approval and adoption of the Merger Agreement.
Approval of the Merger is not conditioned on approval by a
majority of the unaffiliated stockholders. Accordingly, the shares of
Common Stock held by Larcan are sufficient to constitute a quorum for
transacting business at the Special Meeting and approve the Merger
Agreement without the vote of other stockholders.
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<PAGE>
Effective Time of the Merger
The Merger will become effective upon the filing of a
Certificate of Merger with the Office of the Secretary of State of
the State of Delaware. It is anticipated that the filing will be made
promptly following the Special Meeting, assuming that the conditions
to closing have been satisfied or, if permissible, waived. See "THE
MERGER AGREEMENT--Effective Time of the Merger" and "--Conditions to
Closing."
Purpose and Reason for the Merger
The purpose of the Merger is to effect the acquisition by Larcan
of the entire equity interest in the Company. See "THE
MERGER--Purpose and Effects of and Alternatives to the Merger."
Fairness of the Merger
The Company believes that the Merger is fair to unaffiliated
holders of the Common Stock. Larcan believes that the Merger is fair
to unaffiliated holders of the Common Stock based principally upon
the procedures utilized by the Company and Larcan in negotiating the
Merger Consideration.
Federal Tax Consequences
The receipt of the Merger Consideration pursuant to the Merger
will be a taxable transaction for the holders of the Common Stock for
federal income tax purposes and may result in taxation to such
holders under applicable state, local and foreign or other tax laws.
The gain or loss on the transaction will be a capital gain or loss if
the stock is a capital asset in the hands of the stockholders. See
"THE MERGER--Certain Federal Income Tax Consequences."
EACH STOCKHOLDER IS URGED TO CONSULT SUCH STOCKHOLDER'S OWN TAX
ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH
STOCKHOLDER OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
Financing the Merger
The closing of the Merger is not conditioned on the receipt of
financing. The total Merger Consideration of approximately
$155,671.19 will be paid from Larcan's working capital.
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<PAGE>
Conduct of Business After the Merger
The Company will survive the Merger as a direct wholly-owned
subsidiary of Larcan and will continue to hold and own all of its
properties and assets. It is contemplated that after the Merger,
Larcan will continue to operate the Company as a wholly-owned
subsidiary. Larcan intends to achieve operating efficiencies by
consolidating the overhead of Larcan and the Company. See "THE
MERGER--Conduct of Business of the Company After the Merger."
Appraisal Rights
Pursuant to Section 262 of the DGCL ("Section 262"), a
stockholder has the right to seek appraisal of such holder's shares
and to be paid the "fair value" thereof in cash if the Merger is
consummated and the holder strictly complies with the procedures set
forth in Section 262. Failure to comply strictly with such procedures
will result in a loss of such appraisal rights. Unless otherwise
determined by a Court of Chancery in Delaware in an appraisal
proceeding, under Section 262 a stockholder will be responsible for
the legal and related costs associated with asserting appraisal
rights. The aggregate Merger Consideration payable to stockholders
other than Mr. Freeman and Dr. St. Clair is approximately $66,722. A
copy of Section 262 is attached to this Proxy Statement as Annex C.
See "SPECIAL MEETING--Record Date; Voting Rights" and "APPRAISAL
RIGHTS" below.
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<PAGE>
SPECIAL MEETING
Proposal to be Considered at the Special Meeting
At the Special Meeting, the stockholders of LTTC will be asked
to consider and vote upon a proposal to approve and adopt the Merger
Agreement by and among the Company, Larcan, and LSI.
The Merger Agreement provides for the Merger with LTTC being the
Surviving Corporation and becoming a wholly-owned subsidiary of
Larcan.
At the Effective Time, (a) each share of the Common Stock
outstanding immediately prior to the Effective Time (other than
shares owned by Larcan or for which appraisal rights have been
perfected in accordance with the DGCL) will be converted into the
right to receive the Merger Consideration, (b) each share of the
Common Stock held in the Treasury of LTTC at the Effective Time, if
any, will be cancelled and retired and cease to exist (and no
consideration will be paid with respect thereto), (c) each share of
the Common Stock held by Larcan at the Effective Time will be
cancelled and retired and cease to exist (and no consideration will
be paid with respect thereto), and (d) each share of the common stock
of LSI will be converted into one share of the Common Stock of the
Surviving Corporation. A copy of the Merger Agreement is attached to
this Proxy Statement as Annex A.
Record Date; Voting Rights
Only stockholders of record at the close of business on February
10, 1998 will be entitled to vote at the Special Meeting. On February
10, 1998, there were __________ outstanding shares of Common Stock,
each of which is entitled to one vote. The presence in person or by
proxy at the Special Meeting of the holders of a majority of the
shares of Common Stock will constitute a quorum for the transaction
of business.
With respect to the Merger Agreement, approval will require the
affirmative vote of a majority of the issued and outstanding shares
of Common Stock. Shares of Common Stock represented at the Special
Meeting that are not voted and abstentions will have the effect of
votes cast against approval of the Merger Agreement.
Brokers who hold shares in street name for customers who are the
beneficial owners do not have the authority to vote on a merger
without specific instruction from their customers. Such broker
non-votes (arising from the lack of instruction
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<PAGE>
from beneficial owners) will not be included in the vote total on the
proposal and thus will have the effect of votes cast against the
Merger Agreement.
Larcan holds shares of Common Stock representing approximately
78.42% of the shares of Common Stock entitled to vote on the adoption
of the Merger Agreement and intends to vote such shares in favor of
the Merger Agreement. Mr. Dirk B. Freeman and Dr. Byron W. St. Clair,
directors of the Company, each holds shares of Common Stock
representing approximately 7.85% and 4.48%, respectively. Each of Mr.
Freeman and Dr. St. Clair also has agreed to vote all of their shares
of the Common Stock in favor of the approval and adoption of the
Merger Agreement.
Approval of the Merger is not conditioned on approval by a vote
of the unaffiliated stockholders. Accordingly, the shares of Common
Stock held by Larcan will constitute a quorum for the transaction of
business at the Special Meeting and will be sufficient to approve the
Merger Agreement without the vote of other stockholders.
Voting and Revocation of Proxies
If the enclosed form of proxy is properly executed and returned
to the Company in time to be voted at the Special Meeting, the shares
represented thereby will be voted in accordance with the instructions
marked thereon. Executed but unmarked proxies will be voted "FOR"
approval of the Merger Agreement. If any other matters are properly
brought before the Special Meeting, the persons named in the
accompanying proxy will vote the shares represented by the proxies on
such matters as determined by a majority of the Board of Directors.
Any proxy may be revoked at any time before it is exercised by
giving written notice of such revocation or delivering a later dated
proxy to the Corporate Secretary of the Company prior to the meeting,
or by the vote of the stockholder in person at the meeting.
Appraisal Rights
Holders who do not vote in favor of, or who abstain from voting
on, the Merger Agreement and who comply with the provisions of
Section 262 have the right to be paid in cash the "fair value" of
their shares of the Common Stock. A copy of Section 262 is attached
as Annex C to this Proxy Statement. A stockholder contemplating the
exercise of the appraisal rights provided by Section 262 should
carefully review that Section, including without limitation the
procedural steps required to perfect those rights. A summary
description of
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<PAGE>
those rights is provided under "APPRAISAL RIGHTS" below. A
stockholder who fails to comply strictly with the requirements under
Section 262 will lose such appraisal rights and will be entitled to
the Merger Consideration for the shares of the Common Stock held by
such stockholders.
Solicitation of Proxies
The Company has retained GEMISYS, Inc. at an estimated cost of
$2,100 plus reimbursement of expenses to assist in the solicitation
of proxies. The cost of soliciting proxies in the form enclosed
herewith will be borne by the Company. In addition to the
solicitation of proxies by mail, the Company, through its directors,
officers and regular employees, may also solicit proxies personally
or by telephone. The Company also will request persons, firms and
corporations holding shares in their names or in the name of their
nominees, which are beneficially owned by others, to send proxy
material to and obtain proxies from the beneficial owners and will
reimburse the holders for their reasonable expenses in so doing.
SPECIAL FACTORS
Background of the Merger
In early 1993, Larcan, an international manufacturer of VHF
transmitters, received a request from a major customer for a solid
state UHF transmitter. Although Larcan was engaged in the development
of such a product, at that time it did not have a transmitter that
would satisfy its customer's needs. The customer stipulated that the
transmitter had to be placed "on air" by a date in advance of the
date that Larcan anticipated its own UHF product would be available.
To meet its customer's needs, Larcan sought to acquire a UHF
transmitter that could be used by the customer on an interim basis
pending completion and delivery of Larcan's own product. Larcan
approached Technology Television Corporation ("TTC") for the product.
During the course of purchasing the UHF transmitter, Larcan
identified a potential for synergy between Larcan and TTC based on
their respective product lines. Major products of each company were
viewed as complementary rather than competitive, including the TTC
UHF transmitter acquired by Larcan and the solid state UHF
transmitter being developed by Larcan, each of which was targeted for
a different segment of the transmitter market.
Larcan viewed TTC as a strategic investment opportunity through
which Larcan could strengthen its position in both the domestic and
international markets. Larcan also believed that an association with
TTC could lead to a reduction in the combined research and
development expenditures of both
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<PAGE>
companies and an opportunity to sell TTC products to existing
Larcan customers.
On October 1, 1993, Larcan, TTC and certain of TTC's
stockholders entered into a stock purchase agreement (the "Purchase
Agreement") pursuant to which Larcan purchased an aggregate of
4,053,195 shares of Common Stock, representing approximately 61.9% of
TTC's then outstanding shares, for $.275 per share. Pursuant to the
terms of the Purchase Agreement, Larcan also exercised its right to
designate a majority of the members of TTC's Board of Directors. In
February 1994, TTC's stockholders approved a change of the name of
TTC to "Larcan-TTC Inc." See "INFORMATION REGARDING LTTC AND
LARCAN--LTTC."
After investing in the Company and changing the Company's
corporate name to Larcan-TTC Inc., Larcan concluded that it would be
required to provide more support to the Company and its business than
originally anticipated. The trade name "Larcan" is associated with
premium quality product lines serving the primary full service
broadcast market. In order to meet customers' needs and improve
customers' perception of the Company, Larcan found it necessary to
advance funds to the Company and to provide engineering and other
support for the Company's product lines.
Since 1993, the Company has experienced net losses for each
fiscal year. Such losses have increased from a net loss of $1,200,000
for the fiscal year ended June 30, 1993 to a net loss of $2,353,000
for the fiscal year ended June 30, 1997 (including adjustments for
interest accrued on advances made to the Company by Larcan, as
described below). In addition, the Company's net working capital
deficiency has increased from $409,000 at June 30, 1993 to $6,099,000
at June 30, 1997.
Larcan has been the principal source of funds for the Company to
finance inventory purchases and its working capital deficit. In the
fiscal year ended June 30, 1997, Larcan advanced a total of
$2,700,000 to the Company. At June 30, 1997, the Company's advances
from Larcan totalled $6,500,000, exclusive of interest. Pursuant to
the terms of a promissory note delivered pursuant to a loan agreement
between Larcan and the Company, all advances made by Larcan to the
Company became payable on demand as of August 1, 1997.
A portion of Larcan's advances since 1993 have been offset by
purchases of the Company's common and preferred stock. In June 1995,
Larcan agreed to purchase an additional 5,000,000 shares of Common
Stock for $500,000 and 500,000 shares of 5% cumulative, convertible
preferred stock (the "Preferred Stock") for $500,000. Each share of
Preferred
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<PAGE>
Stock, together with accumulated dividends, is convertible at any
time into shares of Common Stock at a price of $0.10 per share.
Payment received by the Company from Larcan for the additional shares
of Common Stock and the shares of Preferred Stock was applied to
satisfy a portion of the Company's indebtedness to Larcan which had
arisen through prior advances made by Larcan. The issuance of such
shares of Common Stock and Preferred Stock was approved by the
Company's stockholders. As a result of those purchases, Larcan's
beneficial ownership in the Company increased from approximately
61.9% to approximately 78.4%. The 500,000 shares of Preferred Stock,
if converted, would result in an increase to Larcan's holdings of
Common Stock to 14,053,195 and an increase in the total number of
Common Stock issued to 16,543,934. Thus, on a diluted basis, Larcan
would be entitled to vote 85.49% of the Common Stock in favor of the
Merger.
Except for the purchase of the Common and Preferred Stock in
June 1995 described above, during the last two preceding fiscal years
Larcan did not have any contracts, negotiations or transactions with
the Company or any other party with respect to an acquisition of
securities of the Company or a sale or other transfer of assets of
the Company.
Prior to the adoption of industry-wide high definition
television ("HDTV") broadcasting standards in 1997, the Company had
been working on the development of an analog high power UHF
transmitter that would become HDTV compatible through the
substitution of a digital modulator available from outside sources.
After the adoption of an industry standard for HDTV and the Federal
Communication Commission's establishment of a DTV implementation
schedule, however, the Company concluded that performance of its
analog transmitter would not meet the anticipated industry needs.
In early 1997, after receiving and reviewing Consolidated
Financial Statements for its fiscal year ended December 31, 1996 and,
noting the impact of underperformance by the Company in the latter
part of that year, Larcan began to reconsider its investment. Larcan
was concerned that the Company's weak financial condition and the
modest level of technology attained to date would preclude
realization of a product that would adequately meet the requirements
of the emerging Digital Television ("DTV") market. Also, Larcan was
concerned that in fiscal 1997 unexpected costs relating to the
development of a transmitter of another type had delayed the
introduction of that transmitter beyond the date forecasted, with an
adverse effect on the Company's financial condition.
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<PAGE>
On May 1, 1997 Larcan's Board of Directors concluded that a
major decision would have to be made quickly with respect to the
Company. Representatives from Larcan's engineering, finance,
manufacturing, and sales departments, each of whom had been closely
involved with the Company in preceding months, were assigned to
evaluate the engineering, financial, manufacturing, and sales aspects
of the Company's operations and to assess the Company's future
prospects.
On or about May 10, 1997, Mr. James D. Adamson, President of
Larcan, contacted Mr. Freeman and Dr. St. Clair, the Company's two
independent directors, and asked if they would attend a meeting of
the Company's Board of Directors to be held on May 28, 1997 at
Larcan's headquarters. At that meeting, Larcan's management reported
on its evaluation of the Company's operations. Larcan's management
noted that the Company had been unsuccessful in trying to compete in
the high power UHF transmitter market because of the costs associated
with manufacturing the Company's products. The Company also had
failed to develop and introduce a new low power UHF transmitter to
replace its aging product line. Efforts to reduce costs associated
with the Company's current product line also had been unsuccessful.
In light of the foregoing, Larcan's management informed Mr. Freeman
and Dr. St. Clair and other members of the Board of Directors that
all of the Company's operations, except financial reporting, were
viewed as unsatisfactory to Larcan. At the meeting, the Board of
Directors also discussed the possibility of Larcan's acquiring the
Company's remaining shares of Common Stock.
In an informal meeting following the Board of Directors meeting,
Mr. Freeman and Dr. St. Clair were informed approached by Mr. Adamson
and informed that Larcan had determined that it could not justify
funding the Company indefinitely under existing circumstances. The
parties then discussed options available to the Company, specifically
seeking additional capital from a source other than Larcan, scaling
down operations, filing for bankruptcy or joining in a merger with
Larcan through which Larcan would acquire the entire equity interest
in the Company. It was agreed that, in its current financial
condition, the Company would be unable to raise new capital on in its
own and that without additional capital, scaling down operations
would achieve no purpose. Without further advances by Larcan, the
Company would have to cease operations and seek formal bankruptcy
protection. A merger with another competitor was not viewed as a
viable alternative because of the financial condition of the Company
and lack of attractive assets.
In light of the foregoing, Mr. Freeman, Dr. St. Clair and
Mr. Adamson agreed that a merger with Larcan appeared to be
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the most beneficial to the Company's stockholders. Mr. Adamson
asked Mr. Freeman and Dr. St. Clair, as the Company's two independent
directors and next largest stockholders, to propose a per share price
at which Larcan could purchase the remaining equity interest in the
Company. Mr. Freeman and Dr. St. Clair then met separately to
consider Larcan's proposal.
Larcan believed that if it could agree to an acceptable share
price for the Freeman-St. Clair equity interest in the Company,
negotiated on an arm's length basis, Mr. Freeman and Dr. St. Clair
would be representing the interests of all of the Company's minority
stockholders. Larcan was aware that the Board of Directors of the
Company had not formally appointed Mr. Freeman and Dr. St. Clair to
act as an independent committee of the Board to negotiate the terms
of the Merger or the Merger Consideration, or evaluate the fairness
of the Merger Consideration to the minority stockholders, but
believed that Mr. Freeman and Dr. St. Clair, in representing their
personal interests as stockholders, would serve indirectly to
establish a benchmark price for Merger Consideration that would be
acceptable, and thus fair, to other stockholders of the Company.
Later in the day on May 28, 1997, Mr. Freeman and Dr. St. Clair
contacted Mr. Adamson and advised the remaining members of the Board
of Directors that each believed, under the circumstances, that a
merger with Larcan would be in the best interests of the
stockholders. They also stated that they would support a merger at a
price of $.0625 per share, a price equal to recent sales prices for
the Common Stock in the open market. Each of Mr. Freeman, Dr. St.
Clair and Larcan was aware of the limited trading market for the
Common Stock and had reviewed the trading history for the Common
Stock in proposing the merger consideration. Following these
discussions the Board of Directors unanimously authorized the
preparation of the merger documents for formal consideration at a
future meeting.
Except as described herein, there were no proposals or
counterproposals from Mr. Freeman and Dr. St. Clair on the one hand,
and Mr. Adamson and Larcan on the other, with respect to the Merger
Consideration or the terms of the Agreement. In addition, for the
reasons set forth above, no efforts were made by the Company to
investigate the possibility of the Company's raising additional
capital, seeking a merger with a third party, or filing for
bankruptcy. The Board of Directors' consideration of such
alternatives occurred only in the context of its meeting held on July
17, 1997 as described below. Moreover, neither Mr. Freeman, Dr. St.
Clair, nor any third party furnished any written or oral report,
opinion or appraisal to the Board of Directors of the Company
concerning
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<PAGE>
the Merger or the Merger Consideration or the fairness of the Merger
to the Company or its stockholders. Neither Mr. Freeman nor Dr. St.
Clair has professional experience in valuing businesses or securities
nor has made any recommendation, in his capacity as a stockholder,
regarding the fairness of the Merger or the Merger Consideration.
Instead, Mr. Freeman and Dr. St. Clair proposed a price, as
stockholders, at which each would be willing to sell his entire
holdings of Common Stock.
There are no arrangements, agreements, or understandings with
respect to Mr. Freeman's and Dr. St. Clair's continued employment or
role in the Company or Larcan following the Merger, except that Dr.
St. Clair, who has been providing limited services to the Company as
a consultant under a contract made in 1996, will continue to render
such services until the contract expires on February 28, 1998.
The Board of Directors of the Company met on July 17, 1997 to
review and approve the execution of the Merger Agreement in the form
attached hereto as Annex A. Consideration of the Merger Agreement was
delayed until that time because of the need to coordinate the
directors' schedules for a meeting and as a result of the unexpected
illness of the Company's president in June 1997. Except for Mr.
Freeman's and Dr. St. Clair's proposal of the Merger Consideration
and Larcan's acceptance of that initial proposal, there were no
negotiations with respect to the terms of the Merger Consideration or
the Merger Agreement. Prior to the meeting, Mr. Freeman and Dr. St.
Clair had access to the Company's outside legal counsel who had
reviewed the Merger Agreement, such counsel also attended the Board
of Directors' meeting.
Interests of Mr. Freeman and Dr. St. Clair in the Merger
Neither Mr. Freeman nor Dr. St. Clair have any agreements or
understandings with Larcan regarding employment or any other role
with the Company or Larcan following the Merger, except that Dr. St.
Clair will continue to provide consulting services through February
1998.
In the Merger, each of Mr. Freeman and Dr. St. Clair will
receive the same per share Merger Consideration as all other
stockholders, representing total consideration of approximately
$56,613 and $32,337, respectively. As long as Mr. Freeman and Dr. St.
Clair are directors of the Company, they could be deemed to hold
"control shares" that are subject to the volume and manner of sale
requirements of Rule 144. Accordingly, sales by each of them of
Common Stock in the open market generally would be limited to 1% of
the outstanding
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<PAGE>
shares of Common Stock in any three month period. Accordingly, the
aggregate amounts that Mr. Freeman and Dr. St. Clair will receive in
the Merger might exceed the amounts that each would receive if he
otherwise attempted to liquidate his holdings over time in the open
market. For the reasons discussed below, however, the Board of
Directors did not believe that there were significant differences in
the interests of Mr. Freeman and Dr. St. Clair and the Company's
other stockholders.
Recommendations of the Company's Board of Directors;
Fairness of the Merger
At a special meeting of the Board of Directors held on July 17,
1997 the Board unanimously determined that the Merger is fair to and
in the best interests of the Company and its stockholders and
recommended that the stockholders approve and adopt the Merger
Agreement. In reaching its determination, the Board consulted with
the Company's management, as well as its legal advisors, and
considered a number of factors, including all those material to its
decision as discussed below.
In evaluating the fairness of the Merger, the Board of Directors
gave particular consideration to Mr. Freeman's and Dr. St. Clair's
roles in connection with the Merger. Although Mr. Freeman and Dr. St.
Clair were not formally appointed as a special committee of the
Board, Mr. Freeman and Dr. St. Clair are independent directors who,
after Larcan, are the two largest holders of the Common Stock. In
addition, Dr. St. Clair is a founder of the Company, and Mr. Freeman
has been associated with the Company since 1987. Accordingly, each of
these stockholders has a comprehensive knowledge of the Company's
business and operations.
Larcan negotiated the Merger Consideration on an arms length
basis with Mr. Freeman and Dr. St. Clair as the principal
stockholders of the Company. Mr. Freeman, Dr. St. Clair and the
Company had access to independent legal advisors in those
negotiations. The Board of Directors recognized that the lump sum
payment that Mr. Freeman and Dr. St. Clair would receive as a result
of the Merger might exceed the amount each might otherwise receive as
a result of sales of substantial blocks of Common Stock in the open
market. The Board of Directors did not believe, however, that this
factor undermined Mr. Freeman's and Dr. St. Clair's personal interest
in obtaining the best price for their holdings. In this regard, the
Board of Directors believed that the illiquid market for shares of
Common Stock restricted the ability of all stockholders to dispose of
Common Stock in the market.
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<PAGE>
Accordingly, the Board concluded, by consensus at the meeting, that
there were no significant differences between Mr. Freeman and Dr. St.
Clair on the one hand, and unaffiliated stockholders on the other, in
seeking to maximize the Merger Consideration, and thus Mr. Freeman
and Dr. St. Clair adequately represented the interests of all of the
stockholders in an arms length negotiation of a fair price for the
Merger Consideration.
The Board of Directors also evaluated the impact on the Company
of not approving the Merger. The Board of Directors first considered
the financial and other problems facing the Company since 1993. The
Board of Directors concluded that the net losses and working capital
deficits likely would continue for the foreseeable future. Moreover,
without Larcan's continued financial support, the Company's
independent accountants advised the Company that its report on the
Company's financial statements would be qualified with respect to the
Company's ability to continue as a going concern. In the absence of
the Merger, the Board of Directors believed that it was unlikely that
Larcan or any other investor would continue to infuse capital into
the Company. Accordingly, the Board of Directors concluded that,
absent the Merger, the Company would cease operating and a
dissolution or liquidation would occur in the near future. Although
the Board of Directors did not formally evaluate the value of the
Company upon such a dissolution and liquidation, it believed that,
after repayment of the Company's current liabilities at June 30, 1997
of approximately $8.6 million, which exceeded total assets of $2.7
million, no proceeds would be available for distribution to holders
of Common Stock. In effect, the Board of Directors concluded that the
receipt by stockholders of the Merger Consideration would be
preferable to not receiving any consideration for their shares of
Common Stock.
The Board of Directors also viewed as favorable in its
deliberations the availability of appraisal rights to stockholders
under Section 262 of the DGCL. Any stockholder who believes that the
Merger Consideration is inadequate will, by strictly complying with
Section 262, be able to have the fair value of his or her shares of
Common Stock judicially determined. Although a stockholder seeking to
exercise such rights will bear the fees and expenses associated with
asserting such rights under Section 262, the Court of Chancery may
allocate such fees and expenses in appropriate circumstances.
Accordingly, the Board did not believe that the fees and expenses
associated with asserting appraisal rights in any way undercut the
availability or value of those statutory rights to stockholders.
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<PAGE>
The Board of Directors considered as a negative factor in its
deliberations the fact that the Merger would be approved
notwithstanding a potential negative vote of a majority of the
Company's unaffiliated stockholders. The Board of Directors
concluded, however, that this negative factor was offset by the
consequences to stockholders of bankruptcy and the availability of
appraisal rights as described above.
The Board of Directors was aware that the Merger Consideration
did not represent a premium to the reported market prices for a share
of the Common Stock. The Board of Directors noted, however, that
there is no meaningful trading market for the Common Stock and thus
did not give weight to the limited open market sales of Common Stock
at a price equal to the Merger Consideration. Although the Common
Stock is eligible for trading in the over-the-counter market, at the
time of the Board of Directors' recommendation, there were no
reported trades following Larcan's May 28, 1997 agreement with Mr.
Freeman and Dr. St. Clair in excess of the Merger Consideration.
Accordingly, the Board of Directors concluded that the Merger
Consideration, which was determined as a result of arms length
negotiations between Larcan, on the one hand, and Mr. Freeman and Dr.
St. Clair on the other hand, more accurately reflected the value of a
share of Common Stock at the current time. The Board also determined
that Mr. Freeman and Dr. St. Clair fairly represented the interests
of all of the holders of the Common Stock and that, the absence of
such a premium notwithstanding, the Merger was fair and in the best
interests of the Company's stockholders.
In connection with the Merger, the Company did not retain a
financial advisor to evaluate and render an opinion with respect to
the fairness of the Merger Consideration from a financial point of
view. The Board of Directors believed that the fees of such an
advisor would be disproportionate in relation to the aggregate Merger
Consideration.
The Board also was aware that an expected benefit of the Merger
to Larcan would be improved operational efficiencies. Although such
efficiencies were not quantified, Larcan expects to realize savings
through the consolidation of administrative functions, the
elimination of redundant functions, and the more effective
utilization of design, manufacturing and engineering functions.
Although legal, accounting and other expenses associated with public
reporting also will be eliminated, the savings of those costs only
will be realized over time. See "--Financing of the Merger
Consideration." While the Board believed that the Merger
Consideration factored in such efficiencies, particularly in light of
the extent of Larcan's prior advances and operational support, the
Board did not formally attempt to quantify the operational
efficiencies in relation to the Merger Consideration.
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<PAGE>
The Board did not specifically consider the allocation of the
transactional costs in connection with its consideration of the
Merger.
In addition to the various factors discussed above, the Board of
Directors considered that, if the Merger is completed, the Company's
stockholders will be unable to share in any improvement in the
Company's financial condition. Such improvements could result, for
example, from the growth in demand for UHF transmitters or the
Company's sale of existing products or new products for the HDTV
market. The Board of Directors concluded, however, that the timing of
such improvement, if any, is uncertain and speculative, and product
development costs are expected to be significant. Moreover, in order
to take advantage of the growth in demand for UHF transmitters or
opportunities in the HDTV market, the Company will require a
continued source of capital to continue to develop, and ultimately
market, new products. As discussed above, without Larcan's continued
financial support, the Board of Directors believes that it is
unlikely that these objectives would be realized.
Based on the foregoing, the Board of Directors concluded that
the Merger is fair to and in the best interests of the Company and
its stockholders, including unaffiliated stockholders. Accordingly,
the Board of Directors unanimously voted to recommend that
stockholders vote "FOR" the Agreement.
The discussion of the information and factors considered and
given weight by the Board of Directors is not intended to be
exhaustive. In view of the wide variety of factors considered in
connection with its evaluation of the terms of the Merger, the Board
did not find it practicable to, and did not, quantify or otherwise
attempt to assign relative weight to the specific factors considered
in reaching its determinations. In addition, individual members of
the Board may have given different weight to different factors.
Recommendations of Larcan as to the Fairness of the Merger
Larcan was not privy to the deliberations of Mr. Freeman and Dr.
St. Clair and did not receive any written or oral report, opinion or
appraisal from any outside party as to the fairness of the Merger to
the stockholders of the Company. Nevertheless, Larcan believes that
the Merger is fair to the unaffiliated holders of the Common Stock.
This opinion is based principally on Larcan's belief that the
procedures used to negotiate the Merger Consideration resulted in a
transaction that is fair to unaffiliated stockholders. It was
significant to Larcan's determination in this regard that the two
independent directors, who, after Larcan, are the two
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<PAGE>
largest shareholders of the Company, were in favor of the Merger and
proposed the amount of the Merger Consideration. Such independent
directors are not past or present employees or affiliates of Larcan
and there are no agreements or understandings with respect to their
continued role in the Company. See "--History and Background."
While Larcan recognizes that approval of the Merger does not
require the affirmative vote of a majority of the shares of Common
Stock held by non-affiliates of the Company, Larcan believes that the
procedures employed by the Company were reasonably implemented to
ensure fairness to such holders.
In determining that the Merger is fair to the unaffiliated
stockholders of the Company, Larcan also considered the following
factors which Larcan believes bear on the Company's business and the
Merger:
(i) the competitive conditions of, and the Company's position
and reputation in, the radio and television broadcasting and
communications industry;
(ii) the fact that it is unlikely that the Company will continue
as a going concern without Larcan's continued financial support;
(iii) the current and historical bid and ask prices and limited
trading volume of the Common Stock; and
(iv) Larcan's belief that upon dissolution and liquidation of
the Company and repayment of the Company's indebtedness, no proceeds
would remain for stockholders.
While Larcan did not quantify the importance of the foregoing
factors, the role of Mr. Freeman and Dr. St. Clair described above,
as well as factors (ii), (iii), and (iv), received the greatest
weight in Larcan's consideration of fairness of the Merger.
Larcan recognized that the Merger Consideration does not reflect
a premium to the reported market prices for a share of Common Stock.
Larcan noted, however, that during the five months preceding the date
that a tentative agreement was reached with respect to the Merger
Consideration, trades were reported only on four dates and all of
such trades were at the bid price of $.0625 per share. Larcan also
believed that the "bid" price, which was the only price at which any
trades in the Common Stock actually took place, represented the fair
market value for the Common Stock as determined by the marketplace.
Accordingly, Larcan concluded that $.0625 was at least equal to the
highest price paid for a share of Common Stock since 1996 and thus
reflected a fair price for a share of Common Stock.
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<PAGE>
As also noted by the Company's Board of Directors in its
discussion of fairness of the Merger to the unaffiliated stockholders
of the Company (see "--Recommendations of the Company's Board of
Directors; Fairness of the Merger"), Larcan believes that absent a
continued capital infusion, the Company is at a competitive
disadvantage vis-a-vis many other companies in the same industry and
consequently would have only a limited ability to participate in the
development, production and marketing of new products and
technologies. On balance, Larcan believes that the Merger will
provide the unaffiliated stockholders of the Company fair value for
their investment in the Company without requiring that such
stockholders undertake the risk attendant to the Company's remaining
independent.
In addition to the procedures discussed above, Larcan noted that
Section 262 affords the Company's stockholders with appraisal rights
such that any stockholder who believes that $0.0625 per share is
unfair or inadequate, and who strictly complies with Section 262,
will be able to have the fair value of his, her or its shares of
Common Stock judicially determined.
No other factors were considered by Larcan in arriving at their
determination that the Merger is fair to the unaffiliated
stockholders of the Company.
Purpose and Effects of and Alternatives to the Merger
The purpose of the Merger is to effect the acquisition by Larcan
of the entire equity interest in the Company. Larcan believes that a
combination at this time of the Company and Larcan will enhance the
efficient use and focus of management, engineering and capital
resources and generally promote strategic, operational and financial
synergies. In addition, the Merger is expected to eliminate annual
fees and expenses associated with being a public company of
approximately $10,000.
Larcan has concluded that it will continue to bear the risks of
its investment in the Company only if it can operate the Company as a
wholly-owned subsidiary, and thereby fully integrate the Company and
its products into the Larcan corporate structure. Larcan believes
that if the Company is a wholly-owned subsidiary, Larcan will be
better able to direct the Company's business and respond to the
Company's engineering needs, and generally promote strategic
operational and financial synergies. Larcan also will be able to
benefit
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<PAGE>
from the future success, if any, of HDTV-related products, should the
development of these products be completed by the Company.
The acquisition of the Company by Larcan has been structured as
a merger of LSI into the Company with the Company as the surviving
entity in order to effectuate the foregoing purposes and to preserve
the Company's existing contractual arrangements with third parties.
While the Company's Board of Directors considered other alternatives
to the Merger, including (i) seeking capital elsewhere, (ii) scaling
down or closing the Company's operations, and (iii) commencing a
voluntary case under either Federal or state bankruptcy law, the
Company concluded that, in light of Larcan's current equity interest
in the Company and the significant indebtedness of the Company to
Larcan, the Merger was the Company's most viable alternative. The
Company's Board of Directors concluded that (i) it would not be
possible to obtain capital from an entity other than Larcan or
without Larcan's guarantees and (ii) scaling down the Company's
operations would preclude the Company from successfully developing
products that would enable the Company to continue as a going concern
in the future (e.g. HDTV and DTV).
As a result of the Merger, the entire equity interest of the
Company will be owned by Larcan. Following the Merger, the present
holders of the Common Stock will no longer have an equity interest in
the Company and will no longer share in any future earnings or growth
of the Company, the risks associated with achieving any such earnings
and growth, or the potential to realize greater value for their
shares of the Common Stock through divestitures, strategic
acquisitions or other corporate opportunities that could have been
pursued by the Company. Instead, each such holder of shares of the
Common Stock will have the right to receive a cash payment of $0.0625
per share of Common Stock held or to seek appraisal rights as
described below under "APPRAISAL RIGHTS" pursuant to a transaction
which has been determined by the Board of Directors, as discussed
above, to be fair to such stockholders. See "Recommendations of the
Company's Board of Directors; Fairness of the Merger."
Subsequent to the Merger, the registration of the Common Stock
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), will be terminated and the Company will cease filing reports
with the Commission.
The Merger Agreement is not structured so that approval of at
least a majority of unaffiliated stockholders is required. Based upon
the steps taken by the Company and its Board of Directors described
in detail elsewhere in this Proxy
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<PAGE>
Statement, the Company believes that the procedures followed
approving the Merger Agreement for recommendation to the stockholders
of the Company were fair.
Holders of the Common Stock have the right to demand appraisal
of, and obtain payment for, the "fair value" of their shares by
following the procedures prescribed in Section 262, a copy of which
is attached as Annex C to this Proxy Statement, and is summarized
under "APPRAISAL RIGHTS" below. Failure to take any of the steps
required under Section 262 on a timely basis could result in the loss
of appraisal rights.
Conduct of Business of the Company After the Merger
Following consummation of the Merger, LTTC, as the Surviving
Corporation, will be operated as a direct wholly-owned subsidiary of
Larcan and will continue to hold and own all of its properties and
assets. The persons identified in Annex B as the directors of LSI
will be the initial directors of the Surviving Corporation. The
persons identified as such in Annex B will be the initial officers of
the Surviving Corporation. The Merger is anticipated to result in
overall savings as the overhead of Larcan and the Company are
consolidated.
Certain Federal Income Tax Consequences
The receipt of the Merger Consideration for the Common Stock
pursuant to the Merger will be a taxable transaction for the holders
of the Common Stock for federal income tax purposes under the
Internal Revenue Code of 1986, as amended (the "Code"), and also may
result in taxation to such holders under applicable state, local,
foreign and other tax laws.
In general, under the Code, a stockholder will recognize gain or
loss equal to the difference between the tax basis for the shares of
the Common Stock sold and the amount of cash received in exchange
therefor. Such gain or loss will be long-term capital gain or loss if
the holding period for the shares of the Common Stock is more than
one year. The distinction between capital gain and ordinary income
may be relevant for certain other purposes, including the taxpayer's
ability to utilize capital loss carryovers to offset any gain
recognized.
Federal income tax rates on long-term capital gain received by
individuals vary based on the individuals' income and the holding
period for the asset. In particular, different maximum federal income
tax rates will apply to gains recognized by an individual from the
sale or exchange of the Common Stock (i) held for more than one year
but not more than
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<PAGE>
18 months (presently 28 percent) and (ii) held for more than 18
months (presently 20 percent).
The foregoing discussion of the federal income tax consequences
may not be applicable to stockholders who acquired their shares of
the Common Stock pursuant to the exercise of options or other
compensation arrangements or who are not citizens or residents of the
United States or who are otherwise subject to special tax treatment
under the Code. The tax effects of the transaction under state,
local, foreign and other tax laws may be different.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER IS INCLUDED FOR GENERAL INFORMATION ONLY
AND IS BASED ON EXISTING TAX LAW AS OF THE DATE OF THIS PROXY
STATEMENT, WHICH MAY DIFFER ON THE DATE OF THE CONSUMMATION OF THE
MERGER OR AT THE EFFECTIVE TIME. EACH STOCKHOLDER IS URGED TO CONSULT
SUCH STOCKHOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO SUCH STOCKHOLDER OF THE TRANSACTION, INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
Accounting Treatment
The Merger will be accounted for as a "purchase" as that term is
used under generally accepted accounting principles for accounting
and financial reporting purposes.
Financing of Merger Consideration
Larcan intends to finance the Merger through its working
capital.
The aggregate of the fees and expenses that are estimated to be
incurred by the Company, Larcan and LSI in connection with the Merger
are as follows:
Legal fees and expenses $ 60,000.00
Accounting fees and expenses $ 5,000.00
Printing and mailing expenses $ 4,750.00
Filing fees $ 31.13
Transfer Agent and Paying Agent fees $ 3,500.00
-----------
TOTAL $ 73,281.13
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THE MERGER AGREEMENT
General
The Merger Agreement provides for the merger of LSI with and
into the Company, with the Company being the Surviving Corporation.
As a result of the Merger, the Company will be a wholly-owned
subsidiary of Larcan. LTTC's Certificate of Incorporation and Bylaws
will be the charter documents of the Surviving Corporation.
The following summary of the material terms of the Merger and
the Merger Agreement which is attached as Annex A to this Proxy
Statement.
Effective Time of the Merger
The Effective Time will occur upon the filing of a Certificate
of Merger with the Secretary of State of the State of Delaware in the
manner provided under the DGCL. The Company anticipates that the
closing of the Merger transaction and the filing of the Certificate
of Merger will occur promptly following the Special Meeting.
Merger Consideration
Under the terms of the Merger Agreement, at the Effective Time,
(a) each share of the Common Stock outstanding immediately prior to
the Effective Time (other than shares owned by Larcan and shares for
which appraisal rights under the DGCL have been perfected) will be
converted into the right to receive the Merger Consideration, (b)
each share of Common Stock owned by Larcan immediately prior to the
Effective Time will be cancelled and retired and cease to exist (and
no consideration will be paid with respect thereto) (c) each share of
the Common Stock held in the treasury of the Company at the Effective
Time, if any, will be cancelled and retired and cease to exist (and
no consideration will be paid with respect thereto), and (d) each
share of the common stock of LSI will be converted into one share of
the Common Stock of the Surviving Corporation.
Instructions with regard to the surrender of certificates
representing shares of the Common Stock which are entitled to receive
the Merger Consideration, together with a letter of transmittal to be
used for that purpose, will be mailed to each holder thereof as soon
as practicable after the Effective Time. American Securities Transfer
and Trust, Inc., as the paying agent (the "Paying Agent"), as soon as
practicable following receipt from a stockholder of a duly executed
letter of transmittal, together with certificates representing the
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shares being surrendered and any other items specified in the letter
of transmittal, shall pay such stockholder, by check, the Merger
Consideration to which he, she or it is entitled.
STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES
FOR SHARES OF THE COMMON STOCK WITH THE ENCLOSED PROXY CARD
After the Effective Time, holder of certificates representing
shares of the Common Stock who do not perfect their appraisal rights
under the DGCL will cease to have any rights as a stockholder of the
Company and such holder's sole right will be to receive the Merger
Consideration to which he, she or it is entitled. In no event will
any holder be entitled to receive any interest on the Merger
Consideration to be distributed in connection with the Merger.
At the Effective Time, the stock transfer books of the Company
will be closed with respect to shares of the Common Stock issued and
outstanding immediately prior to the Effective Time and no transfers
will be made thereafter on the Company's stock transfer books.
Certificates representing former shares of the Common Stock of the
Company which are presented to the Paying Agent will be cancelled in
exchange for the Merger Consideration.
At or prior to the Effective Time, Larcan will provide the
Paying Agent with sufficient funds to enable the Paying Agent to pay
the aggregate Merger Consideration. The Paying Agent will hold the
funds in trust and deliver the funds (in the form of checks of the
Paying Agent) to the person entitled thereto upon surrender of their
certificates representing shares of the former Common Stock. Any cash
delivered to the Paying Agent pursuant to the Merger Agreement and
not paid upon the surrender of such certificates within one year
after the Effective Time will be returned to Larcan, subject of the
rights of holders of unsurrendered certificates.
Conditions to Closing
The obligations of Larcan and LSI to consummate the transactions
contemplated by the Merger Agreement are subject to the satisfaction
of certain conditions including without limitation (a) approval and
adoption of the Merger Agreement by the requisite vote of the
stockholders of the Company, (b) receipt by the Company of all
required consents and approvals and all other requirements prescribed
by law which are necessary to the consummation of the transactions
contemplated by the Merger Agreement, and all statutory waiting
periods in respect thereof shall have expired, (c) the absence of (i)
any inquiry, action or proceeding which, in the
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opinion of Larcan, is material, that is instituted to restrain or
prohibit the carrying out of the transactions contemplated by the
Merger Agreement or to challenge the validity of such transactions or
any part thereof, or seeking damages on account or as a result
thereof or (ii) any material adverse change in the financial
condition, results of operations, business or prospects of the
Company since June 30, 1997.
Neither the Company nor Larcan is aware of any material
condition or necessary approval that would prevent the closing of the
Merger promptly following stockholder approval of the Merger
Agreement.
Termination or Amendment of Merger Agreement
At any time prior to the Effective Time the Merger Agreement may
be terminated by the Boards of Directors of the Company, Larcan and
LSI notwithstanding approval thereof by the stockholders of the
Company. Subject to the applicable provisions of the DGCL, the Boards
of Directors of such entities also may amend the Merger Agreement at
any time prior to the Effective Time. Under the DGCL, no amendment
made after stockholder approval will (i) alter the amount of the
Merger Consideration, (ii) change the certificate of incorporation of
the surviving corporation or (iii) alter any terms and conditions of
the Merger Agreement if such alteration would adversely effect the
stockholders.
Voting Requirements
Under the DGCL, the Merger Agreement must be approved by the
holders of a majority of the outstanding shares of the Common Stock
entitled to vote at the Special Meeting. Abstentions and broker
non-votes will not be voted for or against the proposal to approve
and adopt the Merger Agreement but will have the effect of a negative
vote because the affirmative vote of holders of a majority of the
shares of the Common Stock entitled to vote is required to pass such
proposal.
Mr. Dirk B. Freeman and Dr. Byron W. St. Clair each has agreed
with Larcan to vote all of their respective shares of the Common
Stock of LTTC in favor of the approval and adoption of the Merger
Agreement, which shares in the aggregate represent approximately
12.33% of the shares of the Common Stock entitled to vote at the
Special Meeting. Larcan holds 9,053,195 shares, which shares
represent approximately 78.42% of the shares of the Common Stock
entitled to vote at the Special Meeting. The number of shares of the
Common Stock held or controlled by Larcan, Mr. Freeman and Dr. St.
Clair represents a majority of the shares of the Common Stock
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entitled to vote on the Merger Agreement and, if voted in favor of
the Merger Agreement, will be a sufficient number to approve the
Merger Agreement.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR
ADOPTION AND APPROVAL OF THE MERGER AGREEMENT.
APPRAISAL RIGHTS
Holders of record of the Common Stock who comply with the
applicable statutory procedures summarized herein will be entitled to
appraisal rights under Section 262 of the DGCL. A person having a
beneficial interest in the Common Stock held of record in the name of
another person, such as a broker or nominee, must act promptly to
cause the record holder to follow the steps summarized below properly
and in a timely manner to perfect appraisal rights.
The following discussion is not a complete statement of the law
pertaining to appraisal rights under the DGCL. The full text of
Section 262 which is reprinted in its entirety as Annex C to this
Proxy Statement. All references in Section 262 and in this summary to
a "stockholder" are to the record holder of shares of the Common
Stock as to which appraisal rights are asserted. In the absence of
fraud in connection with a transaction such as the Merger, the
appraisal rights discussed herein are the exclusive remedy under the
DGCL by which a stockholder may establish the "fair value" of his or
her shares of Common Stock.
The failure of a stockholder to vote against a proposal will
not, in and of itself, constitute a waiver of such stockholder's
appraisal rights under Section 262. In addition, the delivery of a
signed, but unmarked, proxy will constitute a vote in favor of the
Merger and thus a waiver of appraisal rights under Section 262.
Under the DGCL, holders of shares of the Common stock who follow
the procedures set forth in Section 262 will be entitled to have
their shares appraised by the Delaware Chancery Court and to receive
payment in cash of the "fair value" of such shares at the Effective
Time, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair
rate of interest, if any, as determined by such court.
Under Section 262, where a proposed merger is to be submitted
for approval at a meeting of stockholders, the corporation, not less
than 20 days prior to the meeting, must notify its stockholders who
were stockholders on the record
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date for such meeting that appraisal rights are so available, and
must include in such notice a copy of Section 262. This Proxy
Statement constitutes such notice to the holders of the Common Stock
of the Company on the Record Date and a copy of Section 262 is
attached to this Proxy Statement as Annex C. Any stockholder who
wishes to exercise such appraisal rights or who wishes to preserve
his, her or its right to do so should review the following discussion
and the full text of Section 262 carefully because the failure to
timely and properly comply with the procedures specified will result
in the loss of appraisal rights under Section 262.
A holder of shares of the Common Stock wishing to exercise such
holder's appraisal rights (i) must not vote in favor of an adoption
of the Merger Agreement and (ii) must deliver to the Company prior to
the vote on the Merger Agreement at the Special Meeting, a written
demand for appraisal of such holder's shares of the Common Stock. The
written demand must inform the Company of the identity of the
stockholder and that he, she or it intends thereby to demand
appraisal of his, her or its shares. Voting against (whether in
person or by proxy), abstaining from voting or failing to vote on
approval and adoption of the Merger Agreement will not constitute a
demand for appraisal within the meaning of Section 262. All written
demands of appraisal should be sent or delivered to the Company at
650 South Taylor Avenue, Louisville, Colorado 80027, Attention:
Corporate Secretary.
A holder of shares of the Common Stock wishing to exercise such
holder's appraisal rights must be the record holder of such shares on
the date the written demand of appraisal is made and must continue to
hold such shares of record until the Effective Time. Accordingly, a
holder of the Common Stock who is the record holder of shares of the
Common Stock on the date that written demand for appraisal is made,
but who thereafter transfers such shares prior to the Effective Time,
will lose any right to appraisal in respect of such shares.
Only a holder of record of shares of the Common Stock is
entitled to assert appraisal rights for shares of the Common Stock
registered in that holder's name. A demand for appraisal should be
executed by or on behalf of the holder of record, fully and
correctly, as such holder's name appears on such holder's stock
certificates. If shares of the Common Stock are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian,
execution of the demand should be made in that capacity, and if the
shares of the Common Stock are owned of record by more than one
person as in a joint tenancy or tenancy in common, the demand should
be executed by or on behalf of all joint owners. An authorized
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agent, including an agent for two or more joint owners, may execute a
demand for appraisal on behalf of a holder of record; however the
agent must identify the record owner or owners and expressly disclose
the fact that in executing the demand, the agent is agent for such
owner or owners. A record holder such as a broker who holds shares of
the Common Stock as nominee for several beneficial owners may
exercise appraisal rights with respect to shares of the Common Stock
held for one or more beneficial owners while not exercising such
rights with respect to the shares of the Common Stock held for other
beneficial owners. In such case, the written demand should set forth
the number of shares of the Common Stock as to which appraisal is
sought. If the number of shares is not set forth, the demand will be
treated as a demand as to all shares of the Common Stock held in the
name of the record owners. Stockholders who hold their Common Stock
in brokerage accounts or other nominee form and who wish to exercise
appraisal rights are urged to consult with their brokers to determine
the appropriate procedures for the making of a demand for appraisal
by such a nominee.
The Surviving Corporation will within 10 days after the
Effective Date of the Merger notify such stockholders of the Company
who have complied with the statutory requirements summarized above
that the Merger has become effective. Within 120 days after the
effective date of the Merger, but not thereafter, the Surviving
Corporation or any stockholder who has complied with the statutory
requirements summarized above may file a petition in the Delaware
Chancery Court demanding a certification of the value of the stock of
all such stockholders. The Company has no obligation to and has no
present intention to file petition with respect to the appraisal of
the fair value of the shares of the Common Stock. Accordingly, it is
the obligation of the stockholders to initiate all necessary action
to perfect their appraisal rights within the time prescribed in
Section 262.
Within 120 days after the effective date of the Merger, any
stockholder who has complied with the requirements for exercising
appraisal rights will be entitled, upon written request, to receive
from the Surviving Corporation a written statement setting forth the
aggregate number of shares of the Common Stock not voted in favor of
adoption and approval of the Merger Agreement and with respect to
which demands for appraisal have been received and the aggregate
number of holders of such shares. Such statements must be mailed
within 10 days after a written request therefor has been received by
the Company.
If a petition for an appraisal is timely filed, after a hearing
on such petition, the Delaware Chancery Court will
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determine the stockholders entitled to appraisal rights and will
appraise the "fair value" of their shares of the Common Stock,
exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if
any, to be paid upon the amount determined to be the fair value.
Stockholders considering seeking appraisal should be aware that the
fair value of their shares of the Common Stock as determined under
Section 262 could be more than, the same as, or less than the Merger
Consideration they would receive pursuant to the Merger Agreement if
they did not seek appraisal of their shares of the Common Stock. The
Delaware Supreme Court has stated that proof of value by any
techniques or methods which are generally considered acceptable in
the financial community and otherwise admissible in court should be
considered in the appraisal proceedings.
The costs of the action may be determined by the Delaware
Chancery Court and taxed upon the parties, as the Delaware Chancery
Court deems equitable in the circumstances. Upon application of a
stockholder, the Delaware Chancery Court may also order that all or a
portion of the expenses incurred by a stockholder in connection with
an appraisal, including, without limitation, reasonable attorney's
fees and the fees and expenses of experts utilized in the appraisal
proceeding, be charged pro rata against the value of all of the
shares entitled to an appraisal.
Any holder of shares of the Common Stock who has duly demanded
an appraisal in compliance with Section 262 will not, after the
Effective Time, be entitled to vote the shares subject to such demand
for any purpose or be entitled to the payment of dividends or other
distributions on those shares (except dividends or other
distributions payable to holders of record of shares of the Common
Stock as of a record date prior to the effective date of the Merger).
If any stockholder who properly demands appraisal of such
stockholder's shares of the Common Stock under Section 262 fails to
perfect, or effectively withdraws or loses, such stockholder's right
to appraisal, the shares of the Common Stock of such stockholder will
be converted into the right to receive the Merger Consideration. A
stockholder will fail to perfect, or effectively withdraw or lose,
such stockholder's right to appraisal if, among other things, no
petition for appraisal is filed within 120 days after the Effective
Time, or if the stockholder delivers to the Company a written
withdrawal of such stockholder's demand for appraisal and acceptance
of the Merger Consideration. Any such attempt to withdraw an
appraisal demand more than 60 days after the
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Effective Time of the Merger will require the written approval of the
Company.
Failure to follow the steps required by Section 262 for
perfecting appraisal rights will result in the loss of such rights
(in which event a stockholder will be entitled to receive the Merger
Consideration with respect to his, her or its shares of the Common
Stock in accordance with the Merger Agreement).
INFORMATION REGARDING LTTC AND LARCAN
LTTC
The Company is a Delaware corporation whose executive offices
and manufacturing plant are located at 650 South Taylor Avenue,
Louisville, Colorado 80027. The Company's principal telephone number
is (303) 665-8000. The Company has been in existence continuously
since 1967 when it was incorporated as a Maryland corporation under
the name Television Technology Corporation ("TTC"). It was
reincorporated in 1983 under the laws of the State of Delaware.
LTTC is a fully integrated producer of television and FM radio
transmission equipment. At its Louisville, Colorado facility, LTTC
designs, develops, and manufactures a variety of FM and television
broadcast transmitters/translators including low power television
equipment and high power UHF television equipment. LTTC also provides
system design services, sells accessory items manufactured by LTTC
and others, and performs installation as requested by its customers.
Major Products and Markets
The Company's major products and markets are described below.
Translators and Low Power Television ("LPTV")
Translators (sometimes known as transposers in the international
marketplace) function to rebroadcast the signal of a regular
(primary) radio or TV station automatically. They operate unattended,
and retransmit the signal of the primary station on a different
(i.e., translated) channel. They are commonly financed as a public
service by local organizations or governmental entities. They may
also be owned and operated by primary stations to extend their signal
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into areas which are not able to receive a clean signal (i.e.,
shadowed areas) or to extend the station coverage area.
In contrast, LPTV stations have Federal Communication Commission
("FCC") authority to originate programs. Some of these stations
operate a small general purpose studio, while others maintain no
studio, but continuously transmit programs obtained from external
sources. These purchased programs may be delivered directly to the
transmitter by satellite. While the low transmitter power restricts
the coverage area, LPTV stations operate under much more flexible and
less complex rules than traditional "full service" TV stations. LPTV
stations typically have much smaller start-up costs and operating
budgets. As a result, they are feasible as either commercial or
non-profit stations serving a small community or a specialized
audience with an interest in a particular programming format.
One watt to 1kW television products are normally considered by
the Company to be in the low power transmitter/ translator class. The
range of list prices for the Company's line of translators and LPTV
transmitters is $4,995 to $45,000. This price is dependent primarily
on the power level of the transmitter, with special features, if any,
also having an impact.
The Company believes that its continued commitment to the
domestic LPTV/Translator market has allowed the Company to maintain a
reasonable share of this market.
UHF High Power Television
Around the world, television broadcasting exists primarily in
two bands, Very High Frequency ("VHF") and Ultra High Frequency
("UHF"). The VHF band which came into use first, consists in the U.S.
of Channels 2-13. The UHF band consists in the U.S. of Channels
14-69. The Company manufactures UHF high power transmitters, but does
not manufacture VHF high power transmitters.
The Company believes those agencies responsible for
telecommunications around the world will continue to authorize a
steady expansion of the number of UHF television stations.
Transmitters rated at greater than 1kW constitute the Company's
UHF high power television broadcasting line. In major metropolitan
areas, UHF transmitters may be rated as high as 280kW. The Company
currently markets "IOT/Klystrode type" transmitters ranging in output
power from 10kW to 240kW. The range of list prices for the Company's
line of UHF high power transmitters ranges from $250,000 to
$2,000,000. The
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price is based primarily on the power level of the equipment with
special features and design configurations also having an impact.
FM Radio Transmitters
The Company offers solid-state FM radio transmitters/
transposers. This product line satisfies the technical requirements
of the broadcast regulatory authorities of most countries and sales
are made throughout the world.
The FM transmitter generates the necessary power to carry the
station's program to the listening public on the assigned frequency.
These transmitters range in power from 30 watts to 12kW. Customers
include commercial and non-commercial broadcast organizations and
governmental entities worldwide.
The range of list prices for the Company's FM radio
transmitters/transposers is from $5,990 to $103,000. These prices are
based primarily on the power level of the equipment.
The Company's radio product line includes a power line surge
protector offered for use in all types of electronic installations.
It also includes an FM broadcast exciter which can be sold as a
stand-alone 30-watt transmitter or as an upgrade for older FM
transmitters, regardless of manufacturer. The current sales volume in
these products continues to be small but consistent.
Supplementary Products and Accessories
A number of products purchased by the Company from other
manufacturers are offered to complement the Company's own products.
Typical items are pre-amplifiers, filters, antennas, transmission
line, studio equipment, and test equipment. These products are
obtained from a number of different sources and no one supplier is
considered critical. The Company estimates that less than 10 percent
of its sales for the fiscal year ended June 1997 was derived from the
resale of these products, exclusive of products sold as components of
the Company's products or as part of an installed broadcast system.
From time to time, at the specific request of the customer, the
Company will perform system design and/or coverage design services.
The Company has in-house expertise, or can obtain the necessary
expertise, to perform these services.
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Governmental Regulation
Suppliers of broadcast transmitters intended for use in the more
developed countries are generally required to obtain approval of the
technical characteristics of their transmitters from the appropriate
regulatory authority in their country. In the U.S., the Company must
have FCC "Type Acceptance/Notice" of its transmitters. FCC
requirements are generally less stringent than those imposed by
competitive forces and, accordingly, the Company generally does not
experience difficulties obtaining FCC Type Acceptances for new or
revised models. The Company has FCC Type Acceptances/ Notices for
required products.
Customers of the Company constructing new broadcast stations of
any class in the U.S. generally must obtain a permit from the FCC.
Such a permit is granted to an applicant for an available channel
based on an application showing that the proposed station would meet
the technical, legal, and financial requirements of the FCC.
Marketing
During fiscal 1997, the Company continued to refine its internal
Sales and Marketing Department and its technical service and support
capabilities, with the goal of exceeding industry standards. The
Company continues to investigate new ways to enhance its marketing
effort and maximize its market penetration. A more aggressive sales
effort is being formulated for 1997 and 1998 along with pursuing
greater synergy with the Larcan sales force.
Domestic
The Company's rural translator business depends heavily on a
network of dealers who buy the Company's products, related
supplementary products and accessories at a discount and resell the
equipment to an end user. This is usually done as part of an
installed system. In some instances, business relationships between
these dealers and employees of the Company have continued for more
than twenty years. In some circumstances the Company acts as its own
installer when contracted to do so and has the equipment, knowledge,
and personnel to complete these installations.
In the LPTV sector, equipment is sold both directly to an end
user and through distributors, some of whom focus on certain areas of
interest (i.e. religious, educational, etc.), rather than strictly on
geographic areas. The Company's internal sales/marketing staff
coordinates, motivates, and assists dealers/distributors as
necessary, and makes direct sales to the Company's end user customers
when appropriate.
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Beginning in fiscal 1994, the Company primarily focused its
sales efforts for high power transmitters in the United States
through the efforts of LDL Communications, Inc. ("LDL") an affiliate
of LARCAN. LDL functions as a dealer, and buys and resells the
Company's UHF high power transmitters for resale in a stand-alone
configuration or as a part of larger systems containing materials
from other manufacturers.
Sales by the Company to LDL were $1,470,000 and $1,646,000 for
the fiscal years ended June 30, 1997 and 1996, respectively.
Transmitters are custom built to the customer's specifications and
thus are priced on an individualized basis. In general, sales by the
Company of transmitters to LDL are priced to yield a maximum sales
commission of 5%, which the Company believes is less than what would
be paid to an unaffiliated dealer. Such sales accounted for 22% and
27% of total sales by the Company during the fiscal years ended June
30, 1997 and 1996, respectively.
The Company's FM radio products are sold through a network of
dealers and representatives, and when appropriate, directly to end
users.
International
On a regular basis the Company receives requests for quotations
and proposals from many parts of the world. There continues to be an
upward trend in the number of such requests which the Company
believes is due to the increasing breadth of the Company's product
line and its increasing reputation in the world market.
The Company exports directly to both end users and to dealers or
agents. Some of these dealers/agents are based in the destination
country and others concentrate on particular countries from a
business location in the United States. Internationally, the Company
sells its high power transmitters to end users directly paying a
commission to independent manufacturers' representatives where
appropriate.
One of the major goals of the Company has been to achieve
significant penetration of the international low power and high power
television markets by making major sales to customers in developing
countries. The Company will continue to emphasize quality and
customer satisfaction in expanding its market share.
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Competition
The Company's products compete in the marketplace on the basis
of their performance characteristics, price, and the Company's
reputation for the quality of its products and service to its
customers. Many of the Company's competitors have substantially
greater financial resources than the Company has available to it. As
a result, the Company believes that some of its competitors are
better positioned to pursue the development and introduction of new
products.
In the translator and LPTV market, the Company and its three
domestic competitors (Acrodyne, ADC/ITS, and EMCEE) account for most
of the sales of television translators and LPTV transmitters in the
United States.
In the UHF high power transmitter market, the Company competes
against two domestic manufacturers (Harris and Comark). The Company
believes these domestic competitors each have greater sales volume
than the Company. Additionally, there are other minor manufacturers
of directly competing equipment which the Company believes account
for less than five percent of the domestic market.
In the international market, large companies such as NEC,
Thomcast, Marconi, Harris, Itelco and Rhode & Schwarz dominate in
most developed countries due to their long-standing and
well-established direct sales organizations. Developing countries
currently offer the greatest potential for the Company's products.
The growing emergence of non-state controlled broadcast stations,
both FM and TV, continues to represent new and growing opportunities
for the Company's products.
The Company estimates there are more than 25 FM radio
transmitter manufacturers worldwide, several of which are
substantially larger than the Company. Almost half of these firms
actively compete with the Company. The Company believes several
competitors have significantly greater sales volume of these products
than the Company.
Product Development
The Company's engineering and support group pursues product
development efforts aimed at improving current products and
developing new products. Only a small effort is made toward applied
research and none towards fundamental research. The Company expended
$726,000, and $898,000 respectively, for research and development
("R&D") during fiscal 1997 and 1996. Reduction in R&D costs resulted
from the suspension of the development of the high power products of
the RMS series. After a detailed review of the RMS 1000
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portion of the development program, it became doubtful that the
product would be cost competitive.
The Company's product development efforts, including efforts
targeted at the emerging high definition television market, have been
adversely affected by the Company's financial condition. The
Company's working capital deficit and cash flow deficiency have
caused the Company to delay and curtail certain development efforts.
Single Suppliers
Most materials and equipment used in manufacturing the Company's
products are available from more than one supplier and many are
available from numerous suppliers. While the Company's transmitters
have been developed using some component parts from a particular
vendor, it is the Company's belief that, with only moderate redesign
efforts, a transition to another supplier could be made. The Company
strives to maintain good relationships with all suppliers and is not
aware of any plans that any of these suppliers have to discontinue
supplying these materials and components.
Customers
A domestic high power sale accounted for 10% of the Company's
sales in fiscal 1997.
Sales to foreign customers are subject to unique risks which are
not present in sales to domestic customers. The Company attempts to
mitigate these risks by carefully considering the political and
economic conditions in a foreign country along with the financial
viability of its customer before doing business there. Generally,
sales to foreign customers are priced in U.S. dollars to avoid
currency fluctuations and are sold under irrevocable letters of
credit, confirmed by a major U.S. bank, when the political, economic,
or financial viability is uncertain.
Employees
As of June 30, 1997 the Company employed 48 full-time employees
at its headquarters in Louisville, CO. The Company's employees are
not covered by any collective bargaining agreement and management
believes its employee relations are satisfactory.
Properties
The Company occupies a 44,000 square foot facility in
Louisville, Colorado under a five-year non-cancelable
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operating lease, expiring on April 30, 1998. All manufacturing,
warehousing, marketing, engineering, and administrative functions are
based at this location.
Legal Proceedings
The Company is presently engaged in litigation concerning the
collection of outstanding accounts receivable. There are no material
legal proceedings to which the Company is a party.
Transmitter Industry Overview and Effect of
Recent Developments on Operations
During 1997 the Company saw the FCC adopt a transmission
standard for DTV. Under the FCC DTV rules, each primary broadcaster
in the U.S. has been offered a second channel to be used for the
broadcast of a DTV signal while still continuing to broadcast the
current broadcast standard. The market demand for DTV transmitters is
expected to develop rapidly over a period of a few years,
necessitating a substantial development effort on the Company's part
in order to participate in this opportunity.
While, as stated above, the Company believes it has maintained a
reasonable share of the domestic LPTV/Translater market, a decline in
its traditional market is forecasted due to the uncertainties
surrounding the introduction of DTV to the U.S. marketplace. A
significant portion of LPTV stations presently in service may be
forced to cease broadcasting due to interference created with newly
deployed DTV channels. This uncertainty is apt to prevail through the
transition from analog to digital service in the U.S.
Financial Statements
Attached hereto and included as a part of this Proxy Statement
are the financial statements and Management's Discussion and Analysis
of Financial Condition and Results of Operations for the Years ended
June 30, 1997 and 1996 and the Three Months ended September 30, 1997
and 1996. See "Index to Financial Statements."
Larcan and LSI
Larcan was established in 1981 when the employees of Canadian
General Electric ("CGE"), in association with LeBlanc & Royle
Enterprises Inc., purchased CGE's broadcast operation. Larcan and its
predecessor have been a major supplier of premium quality VHF
television transmitters for over thirty-five years. Larcan designs,
manufactures, sells, and services VHF solid state television
transmitters with
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powers from 10 watts to 60,000 watts and has more recently
manufactured and delivered 10,000 watt solid state UHF transmitters.
Larcan is a majority-owned subsidiary of Le Blanc and Royle
Enterprises Inc., a telecommunications investment holding company
organized under the laws of Canada. The principal executive offices
of LeBlanc and Royle Enterprises Inc. are located at 514 Chartwell
Road, P.O. Box 880, Oakville, Ontario, L6J 5C5 and the telephone
number is (905) 844-1242.
LSI is a recently-formed Delaware corporation organized by
Larcan for the purpose of enabling Larcan to acquire LTTC. LSI has
not conducted any activities other than those related to its
formation, the preparation of this Proxy Statement and the Schedule
13E-3 filed with the Commission and the negotiation of the Merger
Agreement and its obligations thereunder.
The principal executive offices of each of Larcan and LSI are
located at 228 Ambassador Drive, Mississauga, Ontario, Canada L5T 2J2
and the telephone number of each is (905) 564-9222.
Certain information regarding the directors and executive
officers of Larcan is set forth in Annex B hereto.
MARKET PRICES FOR THE COMMON STOCK
The Common Stock is quoted on the Over the Counter System. The
following table sets forth, for the quarterly periods indicated, the
ask and bid prices or the Common Stock as reported on NASDAQ's Over
the Counter System. Such market quotations reflect interdealer prices
without retail mark-up, mark-down or commission and do not
necessarily represent actual transactions.
Quarter Ending High Low
-------------- ---- ---
September 30, 1995 6/16 3/16
December 31, 1995 6/16 3/16
March 31, 1996 6/16 3/16
June 30, 1996 6/16 3/16
September 30, 1996 4/16 3/16
December 31, 1996 1/16 1/16
March 31, 1997 1/16 1/16
June 30, 1997 1/16 1/16
December 31, 1997 1/16 $.05
- 37 -
<PAGE>
At February 10, 1998, the approximate number of holders of the
Company's common stock was 475, including both record and beneficial
shareholders in security position listings.
The Company has never declared or paid any cash dividends on its
Common Stock.
On July 17, 1997, the last trading day before Larcan and LTTC
publicly announced the anticipated Merger, the ask and bid prices of
the Common Stock of the Company on the NASDAQ Over the Counter System
was $.2188 and $.0625, respectively. On July 18, 1997, the ask and
bid price for the Common Stock of the Company on the NASDAQ Over the
Counter System were $.2188 and $.0625, respectively. On February 10,
1998, the last reported ask and bid prices were $.05 and $.05,
respectively.
Principal Holders of Securities
The following table sets forth as of October 10, 1997, the
number and percentage of shares of the Company's Common Stock
beneficially owned by each person who was known by the Company to be
the beneficial owner of more than 5% of the shares of the Common
Stock.
Amount and
Nature of
Name and Address Beneficial Percent
of Beneficial Owner Ownership(1) of Class
------------------- ------------ --------
Larcan Inc. 14,053,195* 85.49%
228 Ambassador Drive
Mississauga, Ontario
Canada L5T 2J2
Dirk B. Freeman 905,803 7.85%
Director
650 South Taylor Avenue
Louisville, Colorado 80027
---------------
* Includes 5,000,000 shares of Common Stock issuable upon conversion
of Series A, 5% Cumulative Convertible Preferred shares.
Voting and investment decisions with respect to the shares of
Common Stock beneficially owned by Larcan are made by the Board of
Directors of Larcan.
--------------------
(1) Nature of ownership is possession of sole investment and voting
power unless otherwise indicated.
- 38 -
<PAGE>
Security Ownership of Management
The following table sets forth, as of October 10, 1997, the
number and percentage of shares of the Common Stock owned
beneficially by each member of the Company's Board of Directors and
the executive officers of the Company.
Amount and
Nature of
Beneficial Percent
Name Ownership(2) of Class
---- ------------ --------
Byron W. St. Clair, Ph.D. 517,379 4.48%
Director
Paul A. Dickie 0 0.00%
Chairman of the Board
Dirk B. Freeman 905,803 7.85%
Director
Nancy E. McGee 0 0.00%
Director
James D. Adamson
Director, Vice President 0 0.00%
G. James Wilson 0 0.00%
Director and President
All Directors and Executive 1,423,182 12.33%
Officers
Attached as Annex B to this Proxy Statement is information
regarding the directors and executive officers of the Company,
Larcan, LSI and the Surviving Corporation. None of the directors or
executive officers identified in Annex B, other than those identified
in the chart above and the footnotes thereto, or as specified in
Annex B, beneficially owns any shares of the Common Stock as of the
date of this Proxy Statement.
--------------------
(2) Except as otherwise indicated, nature of beneficial ownership is
possession of sole voting and investment power.
- 39 -
<PAGE>
INDEPENDENT ACCOUNTANTS
The financial statements for the Company and the notes thereto,
together with supplementary financial information for the fiscal year
ended June 30, 1997 included in this Proxy Statement have been
audited by Ehrhardt, Keefe, Steiner & Hoffman PC ("EKSH"), the
Company's independent public accountants for the fiscal year ending
June 30, 1997.
Representatives of EKSH are expected to be present at the
meeting with the opportunity to make a statement if they so desire
and are expected to be available to respond to appropriate questions.
MISCELLANEOUS
If the Merger is not consummated for any reason, the Company
intends to hold the 1997 Annual Meeting of Stockholders on or about
May 29, 1998. Any stockholder of the Company wishing to include
proposals in the proxy materials for such meeting must meet the
requirements of the rules of the Commission relating to stockholders'
proposals. Such proposals must have been received by the Secretary of
the Company in writing at the principal executive office of the
Company prior to __________, 1998.
AVAILABLE INFORMATION
The Company is subject to information requirements of the
Exchange Act, and, in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange
Commission ("Commission"). Such reports and other information may be
inspected and copied or obtained by mail upon payment of the
Commission's prescribed rates at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549.
This Proxy Statement includes information required by the
Commission to be disclosed pursuant to Rule 13E-3 under the Exchange
Act, which governs so-called "going private" transactions by certain
issuers or their affiliates. In accordance with such rule, the
Company, Larcan and LSI have jointly filed with the Commission, under
the Exchange Act, a Transaction Statement on Schedule 13E-3 with
respect to the Merger. This Proxy Statement does not contain all of
the information set forth in the Schedule 13E-3, parts of which
- 40 -
<PAGE>
are omitted in accordance with the regulations of the Commission. The
Schedule 13E-3, and any amendments thereto, including exhibits filed
as a part thereof, will be available for inspection and copying at
the offices of the Commission as set forth above.
BY ORDER OF THE BOARD OF DIRECTORS
Louisville, Colorado
February 12, 1998
- 41 -
<PAGE>
Table of Contents
Page
----
Audited Financial Statements
Independent Auditors' Report.............................. F-2
Balance Sheet at June 30, 1997 and 1996................... F-3
Statements of Operations for the Years Ended June 30,
1997 and 1996............................................. F-4
Statement of Stockholders' Deficit for the Years Ended
June 30, 1997 and 1996.................................... F-5
Statements of Cash Flows for the Years Ended June 30,
1997 and 1996............................................. F-6
Notes to Financial Statements.............................
Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... F-16
Interim Financial Statements
Balance Sheet at September 30, 1997 and June 30, 1997
(restated)................................................. F-19
Statements of Operations (unaudited) for the Three Months
Ended September 30, 1997 and September 30, 1996........... F-21
Statements of Cash Flows (unaudited) for the Three Months
Ended September 30, 1997 and September 30, 1996
(restated)................................................ F-22
Notes to Financial Statements............................. F-24
Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... F-25
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
LARCAN-TTC, INC.
Louisville, Colorado
We have audited the balance sheets of LARCAN-TTC, INC. as of June 30,
1997 and 1996 and the related statements of operations, stockholders'
deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
LARCAN-TTC, INC. as of June 30, 1997 and 1996 and the results of its
operations and its cash flows for the years then ended, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As further
discussed in Note 2 to the financial statements, the Company has a
net working capital deficiency of $6,099,000 and a net stockholders'
deficiency of $5,804,000 at June 30, 1997, that raises substantial
doubt about its ability to continue as a going concern. Current
management's plans in regard to these matters are also described in
Note 2. The financial statements do not include any adjustments that
might result from this uncertainty.
/s/ Ehrhardt Keefe Steiner &
Hottman PC
August 15, 1997
Denver, Colorado
F-2
<PAGE>
LARCAN-TTC, INC.
Balance Sheet
June 30,
1997 1996
---- ----
Assets
Current Sheets
Cash and cash equivalents $ 65,000 $ 98,000
Accounts receivable - trade, less allowance for
doubtful accounts of $173,000 (1997) and
$154,000 (1996) (Note 6) 378,000 363,000
Accounts receivable - related party (Note 7) 96,000 782,000
Inventories, net (Notes 3 and 6) 1,871,000 1,797,000
Other 42,000 23,000
--------- ---------
Total current assets 2,563,000 3,073,000
--------- ---------
Equipment and improvements (Notes 5 and 6) 2,034,000 1,923,000
Less accumulated depreciation and amortization (1,772,000) (1,695,000)
---------- ----------
262,000 228,000
---------- ----------
Total assets $2,747,000 $3,339,000
========== ==========
Liabilities and Stockholders' Deficit
Current liabilities
Line-of-credit (Note 6) $ 154,000 $ 200,000
Advances from stockholder (Note 7) 6,895,000 --
Accounts payable - trade 456,000 1,410,000
Accounts payable - related party (Note 7) 78,000 698,000
Accrued payroll and payroll taxes 145,000 181,000
Other accrued expenses and other liabilities 158,000 142,000
Accrued warranty and other reserves 110,000 32,000
Customer advances 555,000 302,000
---------- ---------
Total current liabilities 8,551,000 2,965,000
---------- ---------
Advances from stockholder (Note 7) -- 3,825,000
Commitments (Note 9)
Stockholders' deficit (Notes 7, 10 and 13)
Preferred stock, $1.00 par value; 1,000,000
shares authorized
Series A 5% cumulative convertible, 500,000
shares issued and outstanding, liquidation
preference of $550,000 500,000 500,000
Common stock, $.04 par value; 30,000,000
shares authorized,
11,543,934 shares issued and outstanding 462,000 462,000
Additional paid-in capital 4,694,000 4,744,000
Accumulated deficit (11,450,000) (9,147,000)
Common stock held in treasury, at cost;
1,796 shares (10,000) (10,000)
---------- ----------
Total stockholders' deficit (5,804,000) (3,451,000)
---------- ----------
Total liabilities and stockholders' deficit $ 2,747,000 $3,339,000
=========== ==========
F-3
<PAGE>
LARCAN-TTC, INC.
Statements of Operations
Fiscal Years Ended June 30,
1997 1996
------------ --------------
Sales (Notes 7 and 11) $5,436,000 $7,474,000
Operating expenses
Cost of sales 5,089,000 7,293,000
Selling, general and administrative 1,489,000 1,573,000
Research and development 726,000 898,000
----------- -----------
Total operating expenses 7,304,000 9,764,000
----------- -----------
Loss from Operations (1,868,000) (2,290,000)
----------- -----------
Other income and (expense)
Interest (436,000) (21,000)
Other 1,000 (15,000)
----------- -----------
Total other income and (expense) (435,000) (36,000)
----------- -----------
Net loss (2,303,000) (2,326,000)
Preferred stock dividends 50,000 --
----------- ----------
Net loss applicable to common stockholders $(2,353,000) $(2,326,000)
----------- -----------
Net loss per common share $ (.20) (.23)
----------- -----------
Weighted average number of common shares
outstanding 11,543,934 10,293,561
----------- -----------
F-4
<PAGE>
LARCAN-TTC, INC.
Statement of Stockholders' Deficit
For the Years Ended June 1997 and 1996
<TABLE>
<CAPTION>
Preferred Stock, Series A Common Stock
------------------------- ------------
Subscribed Subscribed
---------- ----------
Shares Amount Shares Amount Shares Amount Shares Amount Capital
------ ------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended
June 30, 1995 -- $ -- 500,000 $500,000 6,543,934 $262,000 5,000,000 $ 200,000 $
Issuance of
subscribed
common stock -- -- -- -- 5,000,000 200,000 (5,000,000) (200,000)
Issuance of
subscribed
preferred stock
for cash 500,000 500,000 (500,000) (500,000) -- -- -- --
Net loss -- -- -- -- -- -- -- -- --
------- ------- -------- ------- ---------- -------- -------- -------- --------
Year Ended
June 30, 1996 500,000 500,000 -- -- 11,543,934 462,000 -- --
Preferred stock
dividends -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- -- -- --
------- -------- -------- ------- ---------- -------- -------- -------- ---------
Year Ended
June 30, 1997 500,000 $500,000 -- -- $11,543,934 $462,000 -- $ -- $
======= ======== ======== ======= =========== ======== ========= ========= =========
</TABLE>
F-5
<PAGE>
Statements of Cash Flows
For the Years Ended June 30
1997 1996
------------- -------------
Cash flows from operating activities
Net loss $(2,303,000) $(2,326,000)
----------- -----------
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 77,000 94,000
Provision for losses on accounts receivable 19,000 (49,000)
Provision for inventory reserves 68,000 72,000
Change in assets and liabilities
Accounts receivable 662,000 (756,000)
Inventories (142,000) (305,000)
Other current assets (19,000) (13,000)
Accounts payable (1,574,000) 1,373,000
Accrued payroll and payroll taxes (36,000) 4,000
Other accrued expenses and other
liabilities (34,000) 42,000
Accrued warranty reserves 78,000 (2,000)
Customer deposits 253,000 (180,000)
----------- -----------
(648,000) 280,000
----------- -----------
Net cash used in operating
activities (2,951,000) (2,046,000)
----------- -----------
Cash flows from investing activities
Purchases of equipment and improvements (111,000) (135,000)
Net change of note receivable 6,000 (19,000)
Net change in other assets (1,000) --
----------- -----------
Net cash used in investing activities (106,000) (154,000)
----------- -----------
Cash flows from financing activities
Payments on note payable and line-of-credit (46,000) (70,000)
Borrowings from stockholder 3,270,000 2,250,000
Payments to stockholder (200,000) --
----------- -----------
Net cash provided by financing activities 3,024,000 2,180,000
----------- -----------
Net decrease in cash and cash equivalents (33,000) (20,000)
Cash and cash equivalents at beginning of year 98,000 118,000
----------- -----------
Cash and cash equivalents at end of year $ 65,000 $ 98,000
=========== ===========
Supplemental disclosures of cash flow information: Cash paid for interest was
$16,000 and $21,000 for 1997 and 1996, respectively.
Supplemental disclosure of non-cash financing activities:
Accrual of undeclared, cumulative preferred stock dividends was $50,000 and
$0 for June 30, 1997 and 1996, respectively.
F-6
<PAGE>
Note 1 - Organization and Summary of Significant Accounting
Policies
Organization
LARCAN-TTC, INC. (the Company), is a fully integrated producer of
television and FM radio transmission equipment. The Company designs,
develops and manufactures a variety of FM and television broadcast
transmitters/translators including low power television equipment and
high power UHF television equipment. The Company also provides system
design services, sells accessory items manufactured by the Company and
others, and performs installation as requested by its customers.
LARCAN, INC. (a Canadian Corporation) (LARCAN) controls approximately
78 percent of the Company's outstanding common stock as of June 30,
1997.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with an
original maturity of three months or less at the time of purchase to be
cash equivalents. The Company, at times, maintains cash balances in
depository accounts in excess of FDIC insurable limits.
Inventories
Inventories are stated at the lower of cost (first-in, first-out
method) or market.
Equipment and Improvements
Equipment and improvements are stated at cost. Depreciation and
amortization are provided using the straight line method over the
estimated useful life of the related assets, or the related lease term
for leasehold improvements.
Revenue Recognition
Sales are recognized when the product is shipped, or pursuant to the
terms of sales contracts when manufacturing is completed. Revenues from
services are recognized when the services are rendered.
Warranty Costs
The Company generally provides a limited warranty for its products of
one to two years. Included in cost of sales are projected future costs
of providing such warranties on products which have been sold.
F-7
<PAGE>
Research and Development
Research and product development expenditures are charged to operations
as incurred.
Net loss per common share
Loss per share of common stock was computed based on the weighted
average number of common shares outstanding during the period. Common
stock equivalents are not included as their effect would be
antidilutive.
Reclassification
Certain amounts in the 1996 balance sheet have been reclassified to
conform with the 1997 presentation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Fair Value of Financial Instruments
The carrying amounts of financial instruments including cash and cash
equivalents, accounts receivable, note receivable, accounts payable,
accrued expenses, and line-of-credit approximated fair value as of June
30, 1997 and 1996, because of the relatively short maturity of these
instruments.
It is not practicable to estimate the fair value of the advances from
stockholder due to the inability to estimate fair value with out
incurring excessive costs.
Note 2 - Continued Operations and Realization of Assets
At June 30, 1997, the Company has a net working capital deficiency of
$6,099,000 and a net stockholders' deficiency of $5,804,000.
F-8
<PAGE>
Management's plans in regards to these matters include ongoing efforts
to increase market share for the Company's product and continued
efforts to increase profitability. Additionally, the note payable to
the Company's majority stockholder is currently due (Note 7). The
majority stockholder has not extended the term of the note and as such
it becomes due on demand (Notes 7 and 13). The Company is dependent on
financing from the majority stockholder.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts
and classification of liabilities that might be necessary should the
Company be unable to continue in existence.
Note 3 - Inventories
Inventories consist of the following:
June 30,
1997 1996
---- ----
Parts, raw materials and sub-assemblies $ 1,979,000 $ 1,930,000
Work in process 256,000 163,000
Gross inventory 2,235,000 2,093,000
Less inventory reserves (364,000) (296,000)
Net inventory $ 1,871,000 $ 1,797,000
Note 4 - Note Receivable Note receivable consists of the following:
June 30,
1997 1996
---- ----
Note receivable related to the conversion
of trade accounts receivable, interest at
7%. The note requires monthly principal
and interest payments of approximately
$618 through May 1999 and is secured by
equipment. $ 13,000 $ 19,000
Note 5 - Equipment and Improvements
Equipment and improvements consist of the following:
F-9
<PAGE>
June 30,
1997 1996
---- ----
Manufacturing equipment $ 1,167,000 $ 1,045,000
Furniture and fixtures 714,000 714,000
Leasehold improvements 123,000 123,000
Transportation equipment 30,000 41,000
Gross equipment 2,034,000 1,923,000
Less accumulated depreciation and
amortization (1,772,000) (1,695,000)
Net equipment $ 262,000 $ 228,000
Note 6 - Note Payable and Line-of-Credit
Note payable and line-of-credit consist of the following:
June 30,
1997 1996
---- ----
Bank revolving line-of-credit, interest
at prime plus 1.5% (8.5% at June 30, 1997),
was due June 1, 1997, collateralized by trade
accounts receivable, inventories, and
equipment..................................... $150,000 $200,000
Bank term loan, paid subsequent to
June 30, 1997. $ 4,000 $ --
Note 7 - Related Parties
The following is a summary of significant transactions with affiliated
companies:
Advances from Stockholder
The Company receives advances from its major stockholder, LARCAN, for
working capital and other purposes. These advances are subordinate to
the bank debt (Note 6), and were non-interest-bearing and unsecured,
with no fixed terms of repayment through August 1, 1996. In August
1996, LARCAN formalized its advances into a $10,000,000 note payable
with interest at 8%, collateralized by substantially all the assets of
the Company, subject to the bank debt (Note 6). The Note is currently
due. The Company had total borrowings from LARCAN of $6,895,000
(including $420,000 of accrued interest) and $3,825,000 at June 30,
1997 and 1996 respectively.
F-10
<PAGE>
Sales to Affiliates
Sales to an affiliate of the Company's major stockholder, LARCAN, were
approximately $1,570,000 and $792,000 for the years ended June 30, 1997
and 1996, respectively. Amounts owed at June 30, 1997 and 1996 by
affiliates were $96,000 and 792,000, respectively. Amounts owed to
affiliates at June 30, 1997 and 1996 were $78,000 and 698,000,
respectively.
Note 8 - Income Taxes
Income Taxes
The Company recognizes deferred tax liabilities and assets based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which
differences are expected to reverse. The measurement of deferred tax
assets is reduced if necessary, by the amount of any tax benefits that,
based on available evidence, are not expected to be realized.
Deferred income taxes at a tax rate of 37% are comprised of the
following:
June 30,
1997 1996
---- ----
Deferred tax assets
Allowance for doubtful accounts $ 64,000 $ 57,000
Inventory 308,000 283,000
Accrued vacation and other liabilities 52,000 60,000
Accrued warranty reserves 41,000 12,000
Research and development 84,000 84,000
Net operating loss carryforwards 3,800,000 2,714,000
Valuation allowance on deferred tax assets (4,349,000) (3,186,000)
Net deferred tax asset -- 24,000
Deferred tax liability-equipment
and improvements depreciation -- (24,000)
Net deferred taxes $ -- $ --
A valuation allowance of $4,349,000 and $3,186,000 as of June 30, 1997
and 1996, respectively, has been recognized to offset the related
deferred tax assets due to the uncertainty of realizing the benefit of
these items.
F-11
<PAGE>
The Company has available, for federal income tax purposes, net
operating loss carryforwards of approximately $10,200,000 which expire
in varying amounts through 2012. The Company's net operating loss
carryforwards, computed under the provisions of the alternative minimum
tax, are not significantly different from the Company's regular net
operating loss carryforwards. In addition, due to the change in control
of stock ownership of the Company, the Company's utilization of its net
operating losses, which were incurred prior to the change in control,
are subject to an annual limitation. The benefit is not recognized due
to the valuation allowance described above.
Note 9 - Commitments
Leases
The Company has a noncancelable operating lease for its office and
manufacturing facility and equipment. The real estate lease, which
expires in April, 1998, provides for an increase in rental payments
based on increases in the Consumer Price Index. In addition, the
Company is required to pay property taxes, insurance and maintenance
costs relating to the leased facility. The Company has also entered
into certain other noncancelable operating leases extending through
2001. As of June 30, 1997, the Company's commitments under these
operating leases are as follows:
Fiscal Years Ending June 30,
----------------------------
1998 $ 316,000
1999 23,000
2000 16,000
2001 1,000
Total $ 356,000
Total rental expense under operating leases for the fiscal years ended
June 1997 and 1996 was $360,000 and $378,000, respectively.
F-12
<PAGE>
Note 10 - Stockholders' Deficit
Preferred Stock
During 1995, the Company amended its Articles of Incorporation to
provide for 1,000,000 shares of preferred stock, $1.00 par value, with
such rights, preferences, designations and to be issued in such series
as to be determined by the Company's Board of Directors.
In June 1995, the Board of Directors created Series A, 5% cumulative
convertible preferred (Convertible Preferred) stock value at $1.00 per
share. The maximum issuable shares under the series is 500,000 shares.
Holders of the Convertible Preferred shares shall be entitled to
dividends as declared by the Board of Directors at $.05 per share. The
non-declared cumulative dividend was $25,000 at June 30, 1997 and 1996.
The Convertible Preferred stockholders, in the event of liquidation of
the Company, will receive an amount equal to $1.00 per share plus
declared and unpaid dividends before any holder of common stock
receives any amount. The Convertible Preferred stock is redeemable at
the sole discretion of the Company. Subsequent to January 1, 1997, each
Convertible Preferred share is convertible into common stock by
multiplying the number of shares times the "liquidation value" divided
by $.10.
Stock Option Plan
The Company adopted an Incentive Stock Option Plan (the Plan) which, as
amended in February 1986, allowed the issuance of up to 687,500 shares
of both incentive stock options (ISOs), as amended, and non-qualified
options (NQOs), which are options that do not qualify as ISOs. Under
the Plan, any employee of the Company, including salaried officers and
directors, could be granted options to purchase common stock of the
Company. The Plan expired in June 1993. Stock options granted pursuant
to the terms of the Plan continue to be governed by the Plan's
provisions.
The following is a summary of changes in the qualified options for the
last two years:
F-13
<PAGE>
Number of Option Price
Shares Range Per Share
--------- ---------------
Outstanding at June 30, 1995 110,766 .28
Canceled (36,219) .28
Outstanding at June 30, 1996 74,547 .28
Canceled (22,136) .28
Total exercisable at June 30, 1997 52,411 $ .28
Effective October 15, 1993, the Board of Directors authorized a
resolution which reset all qualified options to $.28 per share.
Note 11 - Concentration of Credit Risk
The Company operates in one industry segment and sells some products in
foreign markets. Export sales totaled $872,000 and $2,699,000, for the
fiscal years ended June 30, 1997 and 1996, respectively. During the
year ended June 30, 1997, 51% of exports sales were to Norway, while in
fiscal year 1996, 67% of export sales were to Saudi Arabia.
Sales to international customers are subject to unique risks which are
not present in sales to domestic customers. The Company attempts to
mitigate these risks by carefully considering the political and
economic conditions in a foreign country along with the financial
viability of its customer before doing business there. For
international customers, sales are priced in U.S. dollars to avoid
currency fluctuations and are sold under irrevocable letters of credit,
which are usually confirmed by a major U.S. bank when the political,
economic, or financial validity is uncertain.
Generally, it is the Company's policy to obtain a cash advance from its
domestic customers of approximately 35% of the sales price prior to
commencement of production. Subsequently, progress payments are
received during the production of the equipment.
The Company had individual customer(s) whose sales accounted for 10%
and 26% of total sales during the years ended June 1997 and 1996,
respectively.
Note 12 - Significant Fourth Quarter Adjustments
During the fourth quarter of the year ended June 30, 1997, the Company
made the following adjustments to the financial statements:
F-14
<PAGE>
The Company accrued interest of approximately $420,000 on advances due
its major shareholder (Note 7).
Note 13 - Subsequent Event
Subsequent to June 30, 1997, the Board of Directors of the Company
agreed to a plan of merger, with a wholly owned subsidiary of its
majority stockholder with the Company as the surviving entity. Under
the terms of the merger agreement, each share of the Company's common
stock not owned by LARCAN will be canceled in exchange for $.0625,
which equaled the sale price of every Company share traded on its
principal trading market for the 30 days immediately preceding the date
of the merger agreement. As a result of the merger the Company will
become a wholly owned subsidiary of LARCAN. The merger is subject to
stockholder approval. LARCAN currently owns 78.6% of the Company's
outstanding stock.
F-15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Operating Results
For the fiscal year ended June 30, 1997 the Company reported a
net loss of $2,353,000. This compares to a net loss of $2,326,000 for
the fiscal year ended June 30, 1996. Overall sales decreased 27% from
1996. Sales were adversely impacted by the hesitancy of broadcasters to
place orders for high power product due to the uncertainty surrounding
the market situation for digital TV. Radio revenues also decreased
during the year due to no large international order comparable to the
one for Saudi Arabia in 1996. Sales of LPTV products increased by 11%
in fiscal 1997 as quality and reliability issues addressed previously
had a positive impact.
Cost of sales as a percent of net sales in fiscal 1997 were 94%
compared to 98% in fiscal 1996. As a result, gross margin, as a
percentage of sales, increased in fiscal 1997 to 6% from 2% in fiscal
1996. Improved cost control especially in manufacturing overhead and in
distribution costs, coupled with a modest selling price increase were
the primary reasons for improvement which was seen mostly in the core
LPTV product line. While an increase was achieved, the 6% level of
gross margin attained remains well below industry standards for
companies profitability engaged in the development, production and sale
of products like those of the Company. The Company continues to be
challenged in its efforts to reduce manufacturing costs and improve
margins with respect to all of its product lines.
Selling, general, and administrative ("SG&A") expenses decreased
5% from fiscal 1996 to fiscal 1997. These expenses were reduced from
$1,573,000 in 1996 to $1,489,000 in 1997. However due to the reduced
revenue base, SG&A costs increased as a percent of sales from 21% in
fiscal 1996 to 27% in fiscal 1997.
Selling expenses were reduced 23% from the prior fiscal year.
Selling expense fell from $574,000 to $444,000 in 1997. A smaller
in-house sales force coupled with lower travel expenses contributed to
the majority of the reduction in selling expense. A better utilization
of space at the National Association of Broadcasters show also held
costs down. General and administrative costs increased 5% in comparison
to fiscal 1996 from $999,000 to $1,045,000. An increase in staffing to
enhance customer service response time was a major factor. Other costs
were held to general inflation or reduced.
Research and product development costs, reflecting the changing
emphasis from high power projects to low power improvements, were
reduced during the year by $172,000 or 19%
F-16
<PAGE>
from the prior year. As a percentage of revenues, however, spending
increased slightly from 12% in fiscal 1996 to 13% in 1997. The Company
experienced unexpected development costs associated with a new
transmitter expected to be marketed in the current fiscal year. It
became evident that the revenue stream originally projected would not
occur in the near future and that engineering and other development
costs were exceeding projections. As a result the Company suspended
this particular project and concentrated on new marketing efforts for
existing products. In addition, the Company defined more modest
engineering objectives focused on current product enhancements and cost
reductions. It is believed by the Company that this new focus is more
appropriate for current market conditions.
The reduction in research and product development costs also is
attributable, in part, to the financial condition of the Company. The
Company's working capital deficit and cash flow deficiency have led to
delays in product development.
Interest expense increased dramatically in recognition of the
interest due Larcan on advances made for working capital and other
purposes. The fiscal 1997 adjustment for interest due on these advances
was $420,000. Other interest expense decreased during the year from
$21,000 in 1996 to $16,000 in 1997. This reflects a decreasing balance
on the bank line of credit.
Liquidity and Capital Resources
During fiscal 1997 cash advances from Larcan of $2,650,00
(excluding interest) were used primarily to reduce trade payables
(including intercompany payables) from $2,108,000 as of June 30, 1996
to $534,000 at June 30, 1997. As noted in the opinion of the Company's
independent auditors, there is substantial doubt about the Company's
ability to continue as a going concern.
The deficiency in working capital grew to $6,099,000 versus
$108,000 of working capital in fiscal 1996 primarily due to the
reclassification of shareholder advances as a current liability in
fiscal 1997. Had shareholder advances been classified as a current
liability in the prior fiscal year, the comparable working capital
deficiency would have been $3,717,000 at June 30, 1996.
Subsequent to fiscal 1997 the Company renegotiated its bank line
of credit reducing the outstanding balance to $75,000 with an
additional $75,000 term note. The line of credit note is due June 1,
1998 and the term note expires September 15, 1998.
As of June 30, 1997 the Company had cash and short term
investments of $65,000, other current assets of $2,387,000 and
F-17
<PAGE>
current liabilities (including the note to Larcan) of $8,551,000. The
Company's current ratio at June 30, 1997, was .29, compared to 1.04 at
June 30, 1996. The major impact was the increase in cash advances from
Larcan during the year. Had shareholder advances been classified as a
current liability in the prior fiscal year the comparable current ratio
would have been .45 at June 30, 1996.
Due to the Company's current cash flow constraints, there are no
current plans for significant capital expenditures. In addition, until
the Company's operations provide adequate working capital, the Company
will be dependent on Larcan for its cash needs. The cash needs of the
Company are expected to remain at current levels until such time as the
operating efficiencies of overhead consolidation with Larcan are
achieved.
F-18
<PAGE>
LARCAN-TTC INC.
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, June 30,
1997 1997 (restated)
------------- ---------------
CURRENT ASSETS
Cash and cash equivalents $ 61,000 $ 65,000
Trade accounts receivable less
allowance for doubtful accounts of
$181,000 (September) and $173,000
(June) 200,000 378,000
Accounts Receivable - related party 399,000 96,000
Inventories (Net) 1,738,000 1,871,000
Other 31,000 42,000
---------- ----------
TOTAL CURRENT ASSETS 2,429,000 2,452,000
---------- ----------
Equipment and Improvements 1,809,000 2,034,000
Less accumulated depreciation
and amortization (1,578,000) (1,772,000)
---------- ----------
Net equipment and Improvements 231,000 262,000
---------- ----------
Note Receivable 11,000 13,000
Other Assets 20,000 20,000
---------- ----------
TOTAL ASSETS 2,691,000 2,747,000
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Line of Credit $ 75,000 $ 154,000
Note Payable 69,000 --
Advances from Stockholder 6,475,000 6,475,000
Accounts Payable-Trade 664,000 456,000
Accounts Payable - related party 324,000 78,000
Salaries, wages and employee
benefits 115,000 145,000
Accrued expenses and other
liabilities 214,000 158,000
Accrued warranty and other
reserves 130,000 110,000
Accrued interest payable 557,000 420,000
Customer Advances 227,000 555,000
--------- ----------
TOTAL CURRENT LIABILITIES 8,850,000 8,551,000
========= =========
STOCKHOLDERS' DEFICIT
Preferred stock, $1.00 par value;
1,000,000 shares authorized
Series A 5% cumulative convertible,
500,000 shares issued and
F-19
<PAGE>
outstanding, liquidation
preferences $1.00 per share 500,000 500,000
Common stock, $0.04 par value;
30,000,000 shares authorized,
11,543,934 shares issued 462,000 462,000
Additional paid-in capital 4,682,000 4,694,000
Accumulated deficit (11,793,000) (11,450,000)
Common stock held in treasury, at
cost; 1,796 shares (10,000) (10,000)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT (6,159,000) (5,804,000)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT 2,691,000 2,747,000
=========== ===========
See note to financial statements
F-20
<PAGE>
LARCAN-TTC INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
--------------------------------
September 30, September 30,
1997 1996 (restated)
------------- ---------------
NET SALES $ 1,617,000 $ 1,526,000
COST OF GOODS SOLD 1,359,000 1,492,000
OPERATING EXPENSES:
Selling, general and
administrative 337,000 359,000
Research and development 151,000 251,000
----------- -----------
TOTAL EXPENSES 1,847,000 2,102,000
----------- -----------
LOSS FROM OPERATIONS (230,000) (576,000)
----------- -----------
OTHER INCOME (EXPENSE)
Interest expense (140,000) (71,000)
Other income 27,000 (3,000)
----------- -----------
TOTAL OTHER (113,000) (74,000)
----------- -----------
NET LOSS $ (343,000) $ (650,000)
=========== ===========
Preferred stock dividends 6,000 6,000
----------- -----------
Net loss applicable to common
stockholders $ (349,000) $ (656,000)
=========== ===========
NET LOSS PER COMMON SHARE $ (0.03) $ (0.06)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 11,543,934 11,543,934
=========== ===========
See note to financial statements
F-21
<PAGE>
LARCAN-TTC INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
--------------------------------
September 30, September 30,
1997 1996 (restated)
------------ ---------------
Cash flows from operating activities:
Net Loss $(343,000) $(650,000)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation & Amortization 26,000 18,000
Provision for losses on A/R 8,000 10,000
Provision for losses on inventory 15,000 15,000
Gain on sale of fixed assets (57,000) --
Change in operating assets and liabilities:
Trade A/R (133,000) 15,000
Inventories 118,000 75,000
Other Current Assets 11,000 (18,000)
Trade A/P 454,000 (470,000)
Salaries, Wages & Benefits (30,000) (36,000)
Accrued Expenses & Other
Liabilities 44,000 (15,000)
Accrued Warranty & Other
Reserves 20,000 87,000
Accrued interest payable 137,000 66,000
Customer Advances (328,000) 336,000
--------- ---------
Total adjustments 285,000 83,000
--------- ---------
Net cash used in operating activities (58,000) (567,000)
Cash flows from investing activities:
Purchase of Equip. & Improvements (4,000) (13,000)
Proceeds from sale of fixed assets 6,000 --
Net change of note receivable 2,000 --
--------- --------
Net cash used in investing
activities 64,000 (13,000)
Cash flows from financing activities
Payments on note payable and
line-of-credit (10,000) (12,000)
Borrowings from stockholder -- 650,000
--------- --------
Net cash provided by financing
activities (10,000) 638,000
Increase/Decrease in Cash (4,000) 58,000
--------- --------
Cash and cash equivalents at the
beginning of the fiscal year 65,000 98,000
F-22
<PAGE>
Cash and cash equivalents at the end
of three months 61,000 156,000
========= ========
Supplemental disclosures of cash flow information: Cash paid for interest
was $3,000 and $6,000 for September 30, 1997 and 1996, respectively.
Supplemental disclosure of non-cash financing activities: Accrual of
undeclared, cumulative preferred stock dividends was $12,000 and $0 for
September 30, 1997 and 1996, respectively.
See note to financial statements
F-23
<PAGE>
LARCAN-TTC INC.
NOTES TO FINANCIAL STATEMENTS
Reference is made to the financial statements included in the LARCAN-TTC
INC. (the Company) annual report on Form 10-KSB for the year ended June
30, 1997, which describes the accounting policies of the Company for
annual reporting purposes.
The Statement of Operations and the Statement of Cash Flows for the
period ended September 30, 1996 have been restated to reflect the
accrual of interest due on shareholder notes and the accrual for
cumulative dividends on preferred stock for the three months ended
September 30, 1996. As referenced in note 12 to the financial statements
as of June 30, 1997 included in the Company's annual report on form
10-KSB, the Company accrued the annual interest payable in the fourth
quarter of the year ended June 30, 1997.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the Company's financial position,
and the results of its operations and cash flows for the periods
presented. The results of the interim period are not necessarily
indicative of results to be expected for the full year.
F-24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Operating Results
First quarter revenues increased marginally (5%, $91,000) from the prior
year. All product lines generated an increase except high power which
declined 37%. Low power products increased 33%, more than compensating
for the decrease in high power. Radio revenues were also up over prior
year while repair sales were flat. Market demand for high power
transmitters continues to be adversely affected by the transition to a
digital market. The market uncertainties surrounding this transition are
also forecast to impact low power products as well. The traditional low
power market will consolidate into a replacement market until the
transition to digital service is clarified.
The forecasted trend in revenues is evidenced by the Company's backlog
which declined $937,000 (64%) from prior year and $674,000 (56%) from
June 30, 1997. As of September 30, 1997, sales booked but not yet
shipped were $511,000. The backlog for all product lines has decreased
from the fiscal year ending June 30, 1997 and new orders for the quarter
were the lowest in the last twelve fiscal quarters.
Gross margins increased to 16% from 2% in the prior year. Even though a
mid-teen gross margin percentage continues the upward trend of the
previous three quarters, the Company remains well below the industry
standards required for profitability.
The decrease in operating expenses of $122,000 (20%) in comparison to
the first quarter of the prior year was due primarily to the reduction
in engineering spending reflecting the suspension in the development
program for the high power members of the RMS series.
Interest expense increased under the terms of the interest bearing loan
agreement with LARCAN.
Other income reflected the sale of excess machine shop equipment no
longer used in the production process.
Capital Resources
The deficiency in working capital grew by $322,000 to $6,421,000 from
June 30, 1997. The primary reason was the operating losses of $343,000
in the quarter. The reclassification of advances from LARCAN to current
liabilities as of June 1997 unfavorably impacts comparisons with prior
year, when the company reported working capital of $180,000.
F-25
<PAGE>
Reflecting the renegotiation of the Company's short term bank
borrowings, the revolving line of credit was reduced to $75,000 from
$150,000 at June 30, 1997 with $75,000 being converted to a term note
payable. During the quarter the balance on the term note payable was
reduced to $69,000. The line of credit note is due June 1, 1998 and the
term note expires September 15, 1998.
F-26
<PAGE>
Annex A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Merger Agreement") dated as
of July 17, 1997 by and among Larcan Inc., a Canadian corporation
("Larcan"), Larcan Sub, Inc., a Delaware corporation and wholly-owned
subsidiary of Larcan ("LSI"), and Larcan-TTC Inc., a Delaware
corporation ("LTTC"). (LSI and LTTC are referred to herein collectively
as the "Constituent Corporations.")
RECITALS
WHEREAS, the Boards of Directors of Larcan and LTTC each have
determined that it is in the best interests of their stockholders to
effect the merger provided for herein upon the terms and subject to the
conditions set forth herein; and
NOW, THEREFORE, in consideration of the premises, and of the
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
The Merger; Effective Time
1.1 The Merger. At the Effective Time (as defined in
Section 1.2) LSI shall be merged with and into LTTC and the
separate corporate existence of LSI shall thereupon cease (the
"Merger"). LTTC shall be the surviving corporation in the Merger
(the "Surviving Corporation") and shall continue to be governed by
the laws of the State of Delaware, and the separate corporate
existence of LTTC with all its rights, privileges, immunities,
powers and franchises shall continue unaffected by the Merger. The
Merger shall have the effects specified in the Delaware General
Corporation Law (the "DGCL").
1.2. Effective Time. The Merger shall be effective at 5:00
p.m. Eastern Time on the day on which a Certificate of Merger is
filed with the Secretary of State of Delaware (the "Effective
Time").
A-1
<PAGE>
ARTICLE II
Certificate of Incorporation and By-Laws
of the Surviving Corporation
2.1. The Certificate of Incorporation. The
Certificate of Incorporation of LTTC in effect at the
Effective Time shall be the Certificate of Incorporation
of the Surviving Corporation, until duly amended in
accordance with the terms thereof and the DGCL.
2.2. The By-Laws. The By-Laws of LTTC in effect
at the Effective Time shall be the By-Laws of the
Surviving Corporation, until duly amended in accordance
with the terms thereof and the DGCL.
ARTICLE III
Officers and Directors
of the Surviving Corporation
3.1. Officers and Directors. The directors of LSI at the
Effective Time shall, from and after the Effective Time, be the
directors of the Surviving Corporation and the officers of LTTC
shall, from and after the Effective Time, be the officers of the
Surviving Corporation, in each case until their successors have
been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-Laws
and the DGCL.
ARTICLE IV
Effect of the Merger on Capital Stock
At the Effective Time, by virtue of the Merger and without
any action on the part of the holders of any capital stock of the
Constituent Corporations:
(a) Each share of the Common Stock, par value $.01 per
share, of LSI (the "LSI Shares") issued and outstanding
immediately prior to the Effective Time shall be converted into
one share of the Common Stock, par value $0.04 per share of LTTC
(the "LTTC Shares").
(b) Each LTTC Share issued and outstanding immediately
prior to the Effective Time (other than those owned by Larcan)
shall be cancelled at the Effective Time in exchange for the
Merger Consideration (as defined below).
A-2
<PAGE>
(c) Each LTTC Share issued and outstanding immediately
prior to the Effective Time that is owned by Larcan shall be
cancelled at the Effective Time without any consideration
therefor.
(d) As used herein Merger Consideration means $0.0625,
which equals the sale price of each and every LTTC Share traded on
its principal trading market for 30 days immediately prior to the
date hereof.
(e) At and after the Effective Time, each holder of a
certificate or certificates theretofore representing LTTC Shares
("OLD LTTC Shares") that were converted into the Merger
Consideration in the Merger (a "Certificate") may surrender the
same to LTTC or its agent for cancellation, and each such holder
shall be entitled upon such surrender to receive in exchange
therefor a check in an amount equal to the aggregate amount of
cash to which such holder is entitled to be paid pursuant to this
Article IV, without interest. Until so surrendered, each
Certificate, after the Effective Time, shall be deemed for all
purposes to evidence the right to receive such payment. If any
amount is to be paid to a person other than the person to which
the Certificate surrendered for exchange is issued, the
Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and the person requesting
such exchange shall affix any requisite stock transfer tax stamps
to the Certificate surrendered or provide funds for their purchase
or establish to the reasonable satisfaction of LTTC or its agent
that such taxes are not payable.
(f) At the Effective Time, the stock transfer books of
LTTC shall be closed regarding Old LTTC Shares and no transfer of
Old LTTC Shares shall thereafter be made or recognized. Any other
provision of this Agreement notwithstanding, neither LTTC nor its
agent nor any party to the Merger shall be liable to a holder of
Old LTTC Shares for any amount paid or property delivered in good
faith to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(g) Notwithstanding any other provision hereof, any
holder of Old LTTC Shares that perfects appraisal rights under the
Section 262 of the DGCL shall
A-3
<PAGE>
have their Old LTTC Shares converted into the consideration
determined in accordance with such statute.
ARTICLE V
Conditions; Termination
5.1 Conditions. Consummation of the Merger shall be subject
to satisfaction of the following conditions (unless waived by
Larcan):
(a) The stockholders of LTTC shall have approved this
Agreement and the Merger by the vote required under the DGCL.
(b) No inquiry, action or proceeding which, in the
opinion of Larcan, is material shall have been instituted to
restrain or prohibit the carrying out of the transactions
contemplated by this Agreement or to challenge the validity of
such transactions or any part thereof, or seeking damages on
account or as a result thereof.
(c) There shall have been no material adverse change in
the financial condition, results of operations, business or
prospects of LTTC since March 31, 1997.
(d) All required consents and approvals shall have been
obtained, all other requirements prescribed by law which are
necessary to the consummation of the transactions contemplated
hereby shall have been obtained, and all statutory waiting periods
in respect thereof shall have expired.
5.2 Termination. This Agreement may be terminated and the
Merger abandoned as follows:
(a) Larcan and LTTC may terminate this Agreement at any
time prior to the Effective Time, before or after the approval by
the stockholders of LTTC, by their mutual agreement;
(b) Larcan may terminate this Agreement at any time
prior to the Effective Time if it concludes in good faith that (i)
there has been a material adverse change in the financial
condition, results of operations, business or prospects of LTTC
since
A-4
<PAGE>
March 31, 1997 or (ii) any of the conditions specified in Section
5.1 is unlikely to be satisfied in a timely manner.
5.3 Effect of Termination and Abandonment. In the event of
termination of this Agreement and abandonment of the Merger
pursuant to this Article V, no party hereto (or any of its
directors or officers) shall have any liability or further
obligation to any other party to this Agreement.
ARTICLE VI
Miscellaneous and General
6.1. Modification or Amendment. Subject to the applicable
provisions of the DGCL, at any time prior to the Effective Time,
Larcan and LTTC may modify or amend this Agreement, by written
agreement executed and delivered by their duly authorized
officers.
6.2. Counterparts; Effectiveness. For convenience of the
parties hereto, this Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute
the same agreement. This Agreement shall become effective when
duly executed and delivered by Larcan and LTTC. Larcan shall use
reasonable efforts to form LSI promptly and shall cause LSI to
execute and deliver this Agreement promptly after its formation.
6.3. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware
without regard to principles of conflicts of laws thereof.
6.4. Captions. The Article, Section and paragraph captions
herein are for convenience of reference only, do not constitute
part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof.
A-5
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered by the duly authorized officers of the parties
hereto on the date first hereinabove written.
LARCAN INC.
By_____________________________
Name:________________________
Title:_______________________
LARCAN SUB, INC.
By:___________________________
Name:______________________
Title:_____________________
LARCAN TTC INC.
By:__________________________
Name:_____________________
Title:____________________
A-6
<PAGE>
ANNEX B
The name, office, address and present principal occupation or employment
of each executive officer and director of Larcan is:
<TABLE>
<CAPTION>
Office and Principal Residential or
Name Occupation Business Address Citizenship
---- ---------- ---------------- -----------
<S> <C> <C> <C>
P. Clyde Turner Chairman of the Board 228 Ambassador Drive Canada
of Larcan Mississauga, Ontario
CANADA L5T 2J2
James D. Adamson Director and President 228 Ambassador Drive Canada
of Larcan Mississauga, Ontario
CANADA L5T 2J2
Paul A. Dickie Director and Senior Vice 514 Chartwell Road Canada
President of Larcan P.O. Box 880
President of LRE Oakville, Ontario
CANADA L6J 5C5
John E. Tremblay Vice President, 228 Ambassador Drive Canada
Engineering Mississauga, Ontario
CANADA L5T 2J2
Ronald E. Comforth Vice President, 228 Ambassador Drive Canada
Manufacturing Mississauga, Ontario
CANADA L5T 2J2
Stan Maruno Vice President, Sales 228 Ambassador Drive Canada
and Marketing Mississauga, Ontario
CANADA L5T 2J2
Michael P. Gagnon Vice President, Customer 228 Ambassador Drive Canada
Services and Treasurer Mississauga, Ontario
CANADA L5T 2J2
Nancy E. McGee Director and Assistant 514 Chartwell Road Canada
Treasurer of Larcan P.O. Box 880
Senior Vice President, Oakville, Ontario
Chief Financial Officer CANADA L6J 5C5
and Treasurer of LRE
Thomas F. Byrne Director of Larcan 8 King Street East Canada
Secretary of both Larcan Suite 1600
and LRE Toronto, Ontario
Partner in the law firm CANADA M5C 1B5
of Byrne, Crosby
B-1
<PAGE>
Constance L. Crosby Assistant Secretary of 8 King Street East Canada
Larcan, Partner in the Suite 1600
law firm of Byrne, Crosby Toronto, Ontario
CANADA M5C 1B5
George E. Patton Director of Larcan 514 Chartwell Road Canada
Chairman of the Board and P.O. Box 80
Chief Executive Officer Oakville, Ontario
of LRE CANADA L6J 5C5
</TABLE>
The name, address and present principal occupation or employment of each
executive officer and director of LARCAN-TTC is:
<TABLE>
<CAPTION>
Office and Principal Residential or
Name Occupation Business Address Citizenship
---- ---------- ---------------- -----------
<S> <C> <C> <C>
Paul A. Dickie Chairman of the Board 514 Chartwell Road Canada
P.O. Box 880
Oakville, Ontario
CANADA L6J 5C5
Nancy E. McGee Director 514 Chartwell Road Canada
P.O. Box 880
Oakville, Ontario
CANADA L6J 5C5
G. James Wilson Director and President 650 South Taylor Avenue U.S./Canada/
of LARCAN-TTC Louisville, CO 80027 Ireland
James D. Adamson Director and Vice President 228 Ambassador Drive Canada
of LARCAN-TTC Mississauga, Ontario
CANADA L5T 2J2
Byron W. St. Clair Director 650 South Taylor Avenue U.S.
Louisville, CO 80027
Dirk B. Freeman Director and Assistant 650 South Taylor Avenue U.S.
Secretary Louisville, CO 80027
David Hale Vice President, Operations 650 South Taylor Avenue U.S.
Louisville, CO 80027
Ronald M. Eve Secretary and Controller 650 South Taylor Avenue U.S.
Louisville, CO 80027
Michael P. Gagnon Treasurer 228 Ambassador Drive Canada
Mississauga, Ontario
CANADA L5T 2J2
</TABLE>
B-2
<PAGE>
The name, office, address and present principal occupation or employment
of each executive officer and director of LSI is:
<TABLE>
<CAPTION>
Office and Principal Residential or
Name Occupation Business Address
---- ---------- ----------------
<S> <C> <C> <C>
James D. Adamson Director and President 228 Ambassador Drive Canada
Mississauga, Ontario
CANADA L5T 2J2
Paul A. Dickie Director and Chairman 514 Chartwell Road Canada
of the Board P.O. Box 880
Oakville, Ontario
CANADA L6J 5C5
Nancy E. McGee Director and Vice President 514 Chartwell Road Canada
P.O. Box 880
Oakville, Ontario
CANADA L6J 5C5
G. James Wilson Director 650 South Taylor Avenue U.S./Canada/
Louisville, CO 80027 Ireland
Michael P. Gagnon Treasurer 228 Ambassador Drive Canada
Mississauga, Ontario
CANADA L5T 2J2
Thomas F. Byrne Secretary 8 King Street East Canada
Suite 1600
Toronto, Ontario
CANADA M5C 1B5
</TABLE>
The name, office, address and present principal occupation or employment
of each executive officer and director of the Surviving Corporation is:
<TABLE>
<CAPTION>
Office and Principal Residential or
Name Occupation Business Address
---- ---------- ----------------
<S> <C> <C> <C>
Paul A. Dickie Director and Chairman 514 Chartwell Road Canada
of the Board P.O. Box 880
Oakville, Ontario
CANADA L6J 5C5
Nancy E. McGee Director 514 Chartwell Road Canada
P.O. Box 880
Oakville, Ontario
CANADA L6J 5C5
B-3
<PAGE>
G. James Wilson Director and President 650 South Taylor Avenue U.S./Canada/
Louisville, CO 80027 Ireland
James D. Adamson Director and Vice President 228 Ambassador Drive Canada
Mississauga, Ontario
CANADA L5T 2J2
David Hale Vice President 650 South Taylor Avenue U.S.
Louisville, CO 80027
Ronald M. Eve Secretary 650 South Taylor Avenue U.S.
Louisville, CO 80027
Michael P. Gagnon Treasurer 228 Ambassador Drive Canada
Mississauga, Ontario
CANADA L5T 2J2
</TABLE>
B-4
<PAGE>
Annex C
SECTION 262 OF THE DGCL
Section 262. Appraisal Rights.
(a) Any stockholder of a corporation of this State who holds
shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger
or consolidation, who has otherwise complied with subsection (d) of this
section and who has neither voted in favor of the merger or consolidation
nor consented thereto in writing pursuant to ss 228 of this title shall
be entitled to an appraisal by the Court of Chancery of the fair value of
his shares of stock under the circumstances described in subsections (b)
and (c) of this section. As used in this section, the word "stockholder"
means a holder of record of stock in a stock corporation and also a
member of record of a nonstock corporation; the words "stock" and "share"
mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation;
and the words "depository receipt" mean a receipt or other instrument
issued by a depository representing an interest in one or more shares, or
fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any
class or series of stock of a constituent corporation in a merger or
consolidation to be effected pursuant to ss 251 (other than a merger
effected pursuant to subsection (g) of Section 251), 252, 254, 257, 258,
263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series of
stock, which stock, or depository receipts in respect thereof, at the
record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, were either (i) listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000
holders; and further provided that no appraisal rights shall be available
for any shares of stock of the constituent corporation surviving a merger
if the merger did not require for its approval the vote of the holders of
the surviving corporation as provided in subsection (f) of ss 251 of this
title.
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<PAGE>
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the shares of
any class or series of stock of a constituent corporation if the holders
thereof are required by the terms of an agreement of merger or
consolidation to ss ss 251, 252, 254, 257, 258, 263 and 264 of this title
to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective date
of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security on
an interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under ss 253 of this title is not
owned by the parent corporation immediately prior to the merger,
appraisal rights shall be available for the shares of the subsidiary
Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be available
for the shares of any class or series of its stock as a result of an
amendment to its certificate of incorporation, any merger or
consolidation in which the corporation is a constituent corporation or
the sale of all or substantially all of the assets of the corporation. If
the certificate of incorporation contains such a provision, the
procedures of this section, including those set forth in subsections (d)
and (e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
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<PAGE>
submitted for approval at a meeting of stockholders, the corporation, not
less than 20 days prior to the meeting, shall notify each of its
stockholders who was such on the record date for such meeting with
respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any
or all of the shares of the constituent corporations, and shall include
in such notice a copy of this section. Each stockholder electing to
demand the appraisal of his shares shall deliver to the corporation,
before the taking of the vote on the merger or consolidation, a written
demand for appraisal of his shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of his
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days
after the effective date of such merger or consolidation, the surviving
or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of the date
that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to
ss 228 or ss 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten
days thereafter, shall notify each of the holders of any class or series
of stock of such constituent corporation who are entitled to appraisal
rights of the approval of the merger or consolidation and that appraisal
rights are available for any or all shares of such class or series of
stock of such constituent corporation, and shall include in such notice a
copy of this section; provided that, if the notice is given on or after
the effective date of the merger or consolidation, such notice shall be
given by the surviving or resulting corporation to all such holders of
any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after
the effective date of the merger or consolidation, shall, also notify
such stockholders of the effective date of the merger or consolidation.
Any stockholder entitled to appraisal rights may, within twenty days
after the date of mailing of such notice, demand in writing from the
surviving or resulting corporation the appraisal of such holder's shares.
Such demand will be sufficient if it reasonably informs the corporation
of the identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holder's shares. If such notice
did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
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<PAGE>
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders
on or within 10 days after such effective date; provided, however, that
if such second notice is sent more than 20 days following the sending of
the first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer
agent of the corporation that is required to give either notice that such
notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more
than 10 days prior to the date the notice is given; provided that, if the
notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder
who has complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of
Chancery demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within 60 days
after the effective date of the merger or consolidation, any stockholder
shall have the right to withdraw his demand for appraisal and to accept
the terms offered upon the merger or consolidation. Within 120 days after
the effective date of the merger or consolidation, any stockholder who
has complied with the requirements of subsections (a) and (d) hereof,
upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement
setting forth the aggregate number of shares not voted in favor of the
merger or consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days
after his written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d)
hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service
of a copy thereof shall be made upon the
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<PAGE>
surviving or resulting corporation, which shall within 20 days after such
service file in the office of the Register in Chancery in which the
petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares
and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall
be filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for
the hearing of such petition by registered or certified mail to the
surviving or resulting corporation and to the stockholders shown on the
list at the addresses therein stated. Such notice shall also be given by
1 or more publications at least 1 week before the day of the hearing, in
a newspaper of general circulation published in the City of Wilmington,
Delaware or such publication as the Court deems advisable. The forms of
the notices by mail and by publication shall be approved by the Court,
and the costs thereof shall be borne by the surviving or resulting
corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become
entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock
represented by certificates to submit their certificates of stock to the
Register in Chancery for notation thereon of the pendency of the
appraisal proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal,
the Court shall appraise the shares, determining their fair value
exclusive of any element of value arising from the accomplishment or
expectation of the merger or consolidation, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair
value. In determining such fair value, the Court shall take into account
all relevant factors. In determining the fair rate of interest, the Court
may consider all relevant factors, including the rate of interest which
the surviving or resulting corporation would have had to pay to borrow
money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to
participate in the appraisal proceeding, the Court may, in its
discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of
the stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is
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<PAGE>
required, may participate fully in all proceedings until it is finally
determined that he is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple
or compound, as the Court may direct. Payment shall be so made to each
such stockholder, in the case of holders of uncertificated stock
forthwith, and the case of holders of shares represented by certificates
upon the surrender to the corporation of the certificates representing
such stock. The Court's decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion
of the expenses incurred by any stockholder in connection with the
appraisal proceeding, including, without limitation, reasonable
attorney's fees and the fees and expenses of experts, to be charged pro
rata against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded his appraisal rights as
provided in subsection (d) of this section shall be entitled to vote such
stock for any purpose or to receive payment of dividends or other
distributions on the stock (except dividends or other distributions
payable to stockholders of record at a date which is prior to the
effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided
in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter
with the written approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the foregoing,
no appraisal proceeding in the Court of Chancery shall be dismissed as to
any stockholder without the approval of the Court, and such approval may
be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which
the shares of such objecting stockholders would have been converted had
they assented to the merger or consolidation shall have the status of
authorized and unissued shares of the surviving or resulting corporation.
(Last amended by Ch. 120, L.'97, eff. 7/1/97.)
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