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INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
PERCEPTRONICS, INC.
----------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
_____________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined:
_____________________________________________________________________
(4) Proposed maximum aggregate value of transaction:_____________________
(5) Total fee paid:______________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:______________________________________________
(2) Form, Schedule or Registration Statement No.: _______________________
(3) Filing Party: _______________________________________________________
(4) Date Filed: _________________________________________________________
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PERCEPTRONICS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 15, 2000
To The Stockholders:
The Annual Meeting of Stockholders of Perceptronics, Inc. (the
"Company") will be held at the Company's offices located at 21010 Erwin
Street, Woodland Hills, California, on September 15, 2000, at 10:00 a.m. for
the following purposes:
1. To elect six directors to serve until the next Annual Meeting of
Stockholders or until their successors are duly elected and qualified.
The Board of Directors' nominees are Dr. Gershon Weltman, Richard
Moskowitz, Dr. Amos Freedy, Dr. John Lyman, Robert Parker and Stanley
B. Schneider;
2. To approve an amendment to the Company's Certificate of Incorporation
to increase the number of common and preferred shares authorized;
3. To approve an amendment to the Company's 1999 Stock Option Plan for
employees, consultants and advisors to increase the number of shares
authorized; and
4. To transact such other business as may properly come before the
Meeting and any adjournments thereof.
The Board of Directors has fixed the close of business, July 28, 2000, as
the record date for determination of stockholders entitled to notice of and to
vote at the Annual Meeting.
EVEN THOUGH YOU MAY EXPECT TO BE PERSONALLY PRESENT AT THE MEETING, PLEASE
BE SURE THAT THE ENCLOSED PROXY CARD IS PROPERLY COMPLETED, DATED, SIGNED AND
RETURNED WITHOUT DELAY IN THE ACCOMPANYING ENVELOPE TO WHICH NO POSTAGE NEED BE
AFFIXED IF MAILED IN THE UNITED STATES.
GERSHON WELTMAN
Secretary
July 28, 2000
<PAGE>
PERCEPTRONICS, INC.
21010 Erwin Street
Woodland Hills, California 91367
PROXY STATEMENT
GENERAL INFORMATION
SOLICITATION, REVOCATION AND VOTING OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Perceptronics, Inc. (the "Company"), for
use at the Annual Meeting of Stockholders (the "Meeting") to be held at 10:00
a.m. on September 15, 2000, at the Company's offices located at 21010 Erwin
Street, Woodland Hills, California, and at any and all adjournments thereof.
It is anticipated that this Proxy Statement and accompanying proxy will first
be mailed to stockholders on or about August 10, 2000.
The accompanying proxy, if properly executed and returned, will be voted as
specified by the stockholder or, if no vote is indicated, the proxy will be
voted FOR the Board of Directors' nominees for director, FOR the approval of the
amendment to the Company's Certificate of Incorporation (the "Certificate of
Incorporation") and FOR the approval of the amendment to the Company's 1999
Stock Option Plan (the "Plan"). As to any other matter of business that may be
brought before the Meeting, a vote may be cast pursuant to the accompanying
proxy in accordance with the judgment of the persons voting the same, but
management does not know of any such other matter of business. A stockholder may
revoke his proxy at any time prior to the voting of shares by voting in person
at the Meeting or by filing with the Secretary of the Company a duly executed
proxy bearing a later date or an instrument revoking the proxy.
The costs of solicitation of proxies will be paid by the Company. In
addition to soliciting proxies by mail, the Company's officers, directors and
other regular employees, without additional compensation, may solicit proxies
personally or by other appropriate means. Banks, brokers, fiduciaries and other
custodians and nominees who forward proxy soliciting material to their
principals will be reimbursed their customary and reasonable out-of-pocket
expenses.
RECORD DATE AND VOTING RIGHTS
Only stockholders of record of the Company's Common Stock as of the
close of business on July 28, 2000 will be entitled to vote at the Meeting.
On July 28, 2000, there were outstanding 7,763,760 shares of Common Stock,
which constituted all of the outstanding voting securities of the Company,
each of which is entitled to one vote per share. A majority of the shares
entitled to vote, represented in person or by proxy, constitutes a quorum at
the Meeting. Abstentions and broker non-votes are counted as present for
purposes of determining the existence of a quorum. Abstentions are counted in
tabulations of the votes cast on proposals presented to the stockholders
(other than the election of directors), but broker non-votes are not counted
in determining whether a proposal has been approved. Abstentions and broker
non-votes have no effect on the outcome of the election of directors.
In the election of directors only, each stockholder has the right to
cumulate his votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of shares he is entitled to
vote, or to distribute his votes on the same principle among as many candidates
as he sees fit. No stockholder is entitled to cumulate votes unless the name of
the candidate or candidates for whom such votes would be cast has been placed in
nomination prior to the voting and such stockholder has given notice at the
meeting prior to the voting of his intention to cumulate his votes. See
"Stockholder Proposals." The candidates receiving the highest number of
affirmative votes, up to the number of directors to be elected, will be elected
directors.
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If voting for directors is conducted by cumulative voting, the persons
named on the enclosed proxy will have discretionary authority to cumulate and
distribute votes among the nominees with respect to which authority was not
withheld or, if the proxy either was not marked or was marked for all nominees,
among all nominees. In any case, the proxies may be voted for less than the
entire number of nominees if any situation arises which, in the opinion of the
proxy holders, makes such action necessary or desirable.
PROPOSAL ONE - ELECTION OF DIRECTORS
The six directors to be elected at the Annual Meeting will hold office
until the next Annual Meeting of Stockholders and until the election of their
respective successors. All proxies received by the Board of Directors will be
voted for the nominees listed below if no direction to the contrary is given. In
the event that any nominee is unable or declines to serve, an event that is not
anticipated, the proxies will be voted for the election of any nominee who may
be designated by the Board of Directors.
Set forth below is information concerning the nominees for director:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
<S> <C> <C> <C>
Gershon Weltman, Ph.D. 63 Chairman and President 1969
Richard Moskowitz 55 Chief Executive Officer 2000
Amos Freedy, Ph.D. 61 Management, American Medical 1998
Laboratories, Ltd.
John Lyman, Ph.D. 79 Professor Emeritus (retired), UCLA 1969
Robert Parker 71 President, Flyer Group, Inc. 1992
Stanley B. Schneider 64 Partner, Gursey, Schneider and Co. LLP 1972
</TABLE>
DR. GERSHON WELTMAN was a co-founder of the Company in 1969. He served as
President from 1969 until 1982, when he became Chief Executive Officer and
Chairman of the Board. In January 2000, he became President and Chairman of the
Board. Prior to forming Perceptronics, Dr. Weltman was a member of the
engineering faculty at the University of California, Los Angeles, where he
taught human factors engineering and other courses, and an independent
consultant to industry in the areas of human factors and biomedical engineering.
At Perceptronics, in addition to his executive role, Dr. Weltman has served as
scientific and/or technical director for a large number of R&D programs. His
work has focused on developing innovative computer-based simulators for
individual and team training. Dr. Weltman is currently serving his second
two-year term on the U.S. Army Science Board, a group that advises the U.S. Army
on scientific and technological issues. Dr. Weltman received a Ph.D. degree in
engineering in 1962 from UCLA.
MR. RICHARD MOSKOWITZ has served as a Director and Chief Executive Officer
of Perceptronics since January 2000. Mr. Moskowitz' recent business activities
have focused on investing in and participating in start-up companies. He has
played an active role in several Internet related ventures including One World
Integrated Technologies, an Internet communications and multilevel marketing
firm, and Robin Baron Home.com, an Internet decorator-interior design site with
both a business-to-consumer and business-to-business revenue model. Before this,
Mr. Moskowitz' business interests centered on California Connection, a major
women's clothing company of which he was founder and CEO. At California
Connection, Mr. Moskowitz headed a design, production and marketing operation of
up to 2000 employees, with manufacturing facilities in both the United States
and Mexico, supplying a broad variety of clothing products to nationally
recognized retail stores and mass merchants. The company grew to over $100
million in annual revenues as a result of his keen marketing and sales
abilities. Mr. Moskowitz
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is based in the New York area, and provides Perceptronics with an enhanced
presence in this dynamic business location. He travels frequently to Woodland
Hills for company and marketing meetings.
DR. AMOS FREEDY was a co-founder of Perceptronics in 1969 and served as a
Director and executive officer of Perceptronics from 1969 through 1996, when he
retired. He has been providing part-time management services to American Medical
Laboratories, Ltd., of Tel Aviv, Israel, since 1997. While at Perceptronics, Dr.
Freedy specialized in robotics and the practical applications of artificial
intelligence technology, and was also the first director of Perceptronics'
ongoing, successful R&D program in the area of High Level Architecture software
for simulator networking. Dr. Freedy received a PhD in engineering in 1969 from
UCLA.
DR. JOHN LYMAN retired as a Professor Emeritus from UCLA in 1994 where he
had been a Professor of Engineering and Applied Science and Professor of
Psychology since 1951. From 1969 to 1997, Dr. Lyman served as a consultant on
management and new program development to the Company. He is a founding member
and past president of the Human Factors and Ergonomics Society and of the
Biomedical Engineering Society. Dr. Lyman received a PhD in psychology in 1951
from UCLA.
MR. ROBERT PARKER has been President and Chief Operating Officer of Flyer
Group, Inc., a manufacturer of high-performance military scout vehicles, for the
last three years, and President of Outstanding Futures, Inc., a consulting firm,
since 1990. In 1990, Mr. Parker retired as Executive Vice President of LTV
Aerospace and Defense Company, where he had served more than a dozen years in
senior management capacities, including president of its missile division. As a
recognized authority on research, science and engineering for the defense
industry, Mr. Parker has served on the Defense Science Board since 1985. This
advisory panel, appointed by the U.S. Secretary of Defense, provides independent
scientific evaluations of advanced defense systems. Mr. Parker also serves on
the Advisory Board of Directors for the Association of the U.S. Army, on the
Land Warfare Committee, and as a director of the American Defense Preparedness
Association. From 1973 to 1977, he was principal deputy director of defense
research and engineering in the U.S. Department of Defense. Mr. Parker received
an M.S. degree in 1956 from UCLA.
MR. STANLEY B. SCHNEIDER is a Certified Public Accountant and has been a
partner in the Los Angeles accounting firm of Gursey, Schneider and Co. LLP for
more than five years. Mr. Schneider is also a director of Chicago Pizza &
Brewery, Inc., Jerry's Famous Deli, Inc., The Autry Museum of Western Heritage
and P.A.T.H. Mr. Schneider received a B.A. degree in 1958 from UCLA.
INFORMATION CONCERNING BOARD AND COMMITTEE MEETINGS
The Board of Directors held three meetings and executed nine unanimous
written consents during the fiscal year ended March 31, 2000. Messrs. Freedy,
Parker and Schneider each did not attend at least one meeting. The Audit
Committee is responsible for periodically reviewing the financial condition and
the results of audit examinations of the Company with its independent
accountants. Stanley Schneider and John Lyman serve on the Audit Committee. The
Audit Committee did not meet during the last fiscal year. The members of the
Compensation Committee are Messrs. Parker and Lyman. The responsibilities of the
Compensation Committee include reviewing and recommending to the Board of
Directors the compensation, bonuses and employee benefits of senior management.
The Compensation Committee did not meet during the last fiscal year. The Board
of Directors also has a Stock Option Committee, consisting of Messrs. Freedy,
Lyman and Weltman, which administers the Company's stock option plans and may
approve stock option grants. The Stock Option Committee did not meet during the
last fiscal year as the Board of Directors served in this capacity. The Company
does not have a nominating committee.
DIRECTORS' COMPENSATION
Directors are not paid cash fees for attending Board of Directors or
committee meetings, but they are reimbursed their out-of-pocket expenses for
attending such meetings.
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Under the Company's 1999 Directors' Stock Option Plan, on September 14,
1999 and on April 1 of each subsequent year, each non-employee director of the
Company was, and will be, automatically granted fully vested, 5-year stock
options to purchase 12,500 shares of Common Stock at an exercise price equal to
100% of the fair market value of the Common Stock on the date of grant. Under
this plan, each of Messrs. Lyman, Parker and Schneider was granted 12,500
options on September 14, 1999 at an exercise price of $0.625 per share and
12,500 options on April 1, 2000 at an exercise price of $1.156 per share.
EXECUTIVE OFFICERS
The following information is provided with respect to the Company's
current executive officers. Officers serve at the discretion of the Board of
Directors.
MR. RICHARD MOSKOWITZ has served as Chief Executive Officer since January
2000. See "Proposal One - Election of Directors."
DR. GERSHON WELTMAN has served as President and Chairman of the Board since
January 2000. See "Proposal One - Election of Directors."
PROPOSAL TWO - APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
The Board of Directors believes that it is in the best interests of the
Company and its stockholders to have a sufficient number of shares of Common
and Preferred Stock to issue in connection with such corporate purposes as
the Board of Directors may, from time to time, consider advisable.
Accordingly, on July 10, 2000, the Board of Directors adopted, subject to
stockholder approval, an amendment to the Company's Certificate of
Incorporation to increase the number of shares of Common Stock from
15,000,000 to 30,000,000 and to increase the number of shares of Preferred
Stock from 1,000,000 to 2,000,000. The Certificate of Incorporation will
remain the same in all other respects. The form of the amendment to the
Certificate of Incorporation is attached hereto as APPENDIX A.
Having such shares available for issuance in the future will give the
Company greater flexibility and will allow the Board of Directors to issue such
shares without the delay and expense of a special meeting of stockholders to
authorize such issuance. The Company could issue such shares in connection with
acquisitions, stock splits, stock dividends, the exercise of options granted
under various stock option and other employee benefit plans, equity financings
or other transactions.
On June 30, 2000, there were approximately 7,763,760 shares of Common Stock
issued and outstanding. This number does not include 4,729,055 shares reserved
for issuance under outstanding options and warrants to purchase shares of Common
Stock as well as shares reserved for future issuance under our equity incentive
plans as of June 30, 2000.
The increase in authorized Common and Preferred Stock will not have any
immediate effect on the rights of existing stockholders. However, the Board of
Directors will have the authority to issue authorized Common and Preferred Stock
without requiring future stockholder approval of such issuances, except as may
be required by the Certificate of Incorporation and applicable law and
regulations. To the extent that the additional authorized shares are issued in
the future, they will decrease the existing stockholders' percentage equity
ownership and, depending upon the price at which they are issued as compared to
the price paid by existing stockholders for their shares, could be dilutive to
our existing stockholders. The holders of Common and Preferred Stock have no
preemptive rights to subscribe for or purchase any additional shares of Common
and Preferred Stock that may be issued in the future, although the conversion
price of the Preferred Stock will be adjusted upon the sale of additional shares
of Common Stock at below-market rates.
The increase in the authorized number of shares of Common and Preferred
Stock and the subsequent issuance of such shares could have the effect of
delaying or preventing a change in control of the Company without further action
by the stockholders. Shares of authorized and unissued Common
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and Preferred Stock could (within the limits imposed by applicable law) be
issued in one or more transactions which would make a change in control of the
Company more difficult, and therefore less likely. Any such issuance of
additional stock could have the effect of diluting the earnings per share and
book value per share of outstanding shares of Common and Preferred Stock, and
such additional shares could be used to dilute the stock ownership or voting
rights of a person seeking to obtain control of the Company. The Board of
Directors is not aware of any attempt to take control of the Company and has not
presented this proposal with the intention that the increase in the authorized
shares of Common and Preferred Stock be used as a type of antitakeover device.
VOTE REQUIRED
The affirmative vote of a majority of the shares outstanding is
necessary for approval of the amendment to the Certificate of Incorporation.
Abstentions are counted in the tabulation of votes entitled to be cast and
therefore have the effect of a vote against the proposal, whereas broker
non-votes are not counted and have no effect on the vote.
The Board of Directors recommends that the stockholders vote FOR approval
of Proposal Two.
PROPOSAL THREE - APPROVAL OF AMENDMENT TO 1999 STOCK OPTION PLAN
The Board of Directors believes that it is in the best interests of the
Company and its stockholders to encourage the highest level of performance by
selected employees, consultants and advisors of the Company by enabling these
persons to acquire a proprietary interest in the Company. Accordingly, on June
29, 1999, the Board of Directors adopted the 1999 Stock Option Plan (the "Plan")
pursuant to which up to 500,000 shares of common stock may be issued upon the
exercise of stock options granted to eligible participants, and, on July 10,
2000, the Board of Directors adopted an amendment to the Plan to increase the
number of shares available for the grant of options by 500,000 shares to an
aggregate of 1,000,000 shares, subject to the approval of stockholders.
Currently, there are 100,000 options outstanding under the Plan and 400,000
shares available for future option grants thereunder. Richard Moskowitz will be
eligible for grants of 240,000 shares in January 2001 and 240,000 shares in
January 2002 if he fulfills the term of his employment agreement. See "Executive
Compensation - Employment Agreements". The Company also has outstanding a total
of 862,050 options previously granted under other option plans and 144,150
shares available for future grants under such plans.
Due to the limited number of non-committed shares available for option
grants under these plans, the Board of Directors decided to amend the Plan so
that the Company would be able to continue to grant options as a means of
attracting, retaining and motivating its employees, consultants and advisors.
The following summary of the principal provisions of the Plan is subject to
the full text thereof. The form of the amendment to the Plan is attached hereto
as APPENDIX B. A copy of the Plan in its entirety may be obtained from the
Company by any stockholder upon written request.
GENERAL NATURE AND PURPOSE OF THE PLAN
The underlying objective of the Plan is to further the interests of the
Company by strengthening the desire of employees, consultants and advisors to
continue their relationship with the Company and by inducing other individuals
to become employees, consultants or advisors to the Company through the grant of
options. Options issued under the Plan may be either incentive stock options
under Section 422 of the Internal Revenue Code of 1986 (the "Code") or
non-qualified stock options.
SECURITIES SUBJECT TO THE PLAN
At this time, the Plan authorizes the issuance of up to 500,000 shares of
Common Stock, which represents approximately 6.4% of the shares outstanding on
June 30, 2000. In the event of any change in the number of outstanding shares of
Common Stock by reason of reorganization, merger, recapitalization,
reclassification, stock dividend, stock split, exchange or combination of shares
or other
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similar transactions, appropriate and proportionate adjustment will be made in
the number of shares subject to outstanding options and the exercise price
thereof.
ADMINISTRATION
The Plan may be administered either by a committee consisting of at least
two directors appointed by the Board of Directors or by the Board of Directors
as a whole. If a committee is appointed, the Board of Directors, instead of that
committee, may at any time take any action permitted to be taken by such
committee under the Plan. As used hereafter, the term "Committee" refers to the
body, whether a committee or the Board of Directors as a whole, that is at the
time administering the Plan. The Committee has full authority, subject to the
provisions of the Plan, to grant options, to designate recipients and determine
the terms of their options, to establish rules and regulations that it deems
appropriate for the proper administration of the Plan and to interpret and make
determinations under the Plan. Members of the Committee serve at the discretion
of the Board of Directors.
ELIGIBILITY
Options may be granted to persons who are employees, consultants or
advisors of the Company or any subsidiary or parent company of the Company.
Incentive options may be granted only to employees of the Company or any
subsidiary or parent of the Company.
At June 30, 2000, the Company had nine employees and two consultants who
were eligible to receive options under the Plan. At June 30, 2000, executive
officers as a group (two persons) held options to purchase 429,500 shares, and
all employees as a group (other than executive officers) held options to
purchase 402,050 shares of Common Stock under all of the Company's option plans.
For information concerning stock options previously granted to certain
executive officers and directors of the Company under the Company's other plans,
see "Executive Compensation" and "Proposal One - Election of Directors -
Directors' Compensation."
TERMS AND CONDITIONS OF OPTIONS
Options granted under the Plan expire on such date as is determined by the
Committee, unless earlier terminated as provided in the Plan, but in no event
later than ten years after the grant date (five years with respect to incentive
options granted to an optionee who owns, or would be considered to own by reason
of Section 424(d) of the Code, more than 10% of the outstanding Common Stock of
the Company or any subsidiary on the grant date).
Options are exercisable in installments as determined by the Committee,
except that options must vest at a rate of at least 20% per year beginning one
year after the grant date. The exercise price for options is determined by the
Committee at the time of grant, subject to the following: (a) the exercise price
of an incentive option may not be less than 100% of the fair market value of the
Common Stock on the grant date (110% of the fair market value in the case of
incentive options granted to a person who on the grant date owns or is
considered to own more than 10% of the outstanding Common Stock); and (b) the
exercise price of a non-qualified option may not be less than 85% of the fair
market value of the Common Stock on the grant date. On July 28, 2000, the
closing price of the Common Stock on the OTC Bulletin Board was $0.75 per share.
If the aggregate fair market value (determined at the time each incentive
option is granted) of Common Stock for which all incentive options held by an
optionee (whether granted under the Plan or any other plan of the Company) are
exercisable for the first time during any calendar year exceeds $100,000, the
amount of such excess will be treated as a non-qualified option.
The exercise price of an option is payable in cash or, with the approval of
the Committee, in shares of Common Stock that have been owned by the optionee
for at least six months, by full recourse promissory note secured by the shares
purchased, by cancellation of indebtedness of the Company to the optionee, by
waiver of compensation due or accrued for services rendered or through a same
day
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sale arranged through a broker.
If an optionee ceases to be employed or retained by the Company for any
reason other than death or permanent disability, options will expire on the
earlier of three months from the date of such termination or expiration of the
term of the option. During the period between the optionee's termination and
expiration of the option, the option may only be exercised to the extent that it
was exercisable on the date of such termination. Upon the death or permanent
disability of an optionee while an employee, director, consultant or advisor,
options will expire on the earlier of one year from the date of death or
permanent disability or the expiration of the term of the option, and can be
exercised only to the extent that the options could have been exercised on the
date of death or permanent disability.
TRANSFERABILITY OF AWARDS
Options granted under the Plan are not transferable or assignable other
than by will or by the laws of descent and distribution.
DURATION AND MODIFICATION OF THE PLAN AND OPTIONS
The Plan will remain in effect until all shares covered by options granted
under the Plan have been purchased or all rights to acquire the shares have
lapsed. No options may be granted under the Plan after June 28, 2009, although
the Board of Directors may terminate the granting of options under the Plan at
an earlier date or may amend or otherwise modify the Plan. Except for
adjustments made necessary by changes in the Common Stock, the Board of
Directors may not, without stockholder approval, increase the total number of
shares to be offered under the Plan or materially modify the eligible class of
participants in the Plan.
The Committee may modify or amend the terms of outstanding options,
including to change or accelerate the vesting of an options or to change the
exercise price of an option, with the consent of the holder thereof.
In the event of the liquidation or dissolution of the Company, or upon any
reorganization, merger or consolidation in which the Company is not the
survivor, or upon the sale (by merger or otherwise) of substantially all of the
assets of the Company or of more than 80% of the then outstanding stock of the
Company to another corporation or entity, unless the options are assumed or
equivalent options are substituted by the surviving or acquiring company, all
outstanding options will become fully exercisable during the 30 days preceding
the effective date of such event and will terminate on the effective date of
such event.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is only a summary of certain significant United
States federal income tax consequences of the Plan based on currently applicable
provisions of the Code and the regulations promulgated thereon.
GRANT OF STOCK OPTIONS. The grant of an incentive option or a non-qualified
option under the Plan is not a taxable event to the optionee.
EXERCISE OF NON-QUALIFIED STOCK OPTIONS. An optionee will recognize
ordinary income for federal income tax purposes on the date a non-qualified
option is exercised. The amount of income recognized is equal to the excess of
the fair market value of the shares acquired on the date of exercise over the
purchase price of such shares. The optionee's tax basis in the shares acquired
upon the exercise of a non-qualified option is equal to the fair market value of
such shares on the exercise date. The optionee will recognize capital gain or
loss upon a sale or exchange of the option shares to the extent of any
difference between the amount realized and the optionee's tax basis in the
shares.
EXERCISE OF INCENTIVE STOCK OPTIONS. An optionee will not recognize income
upon the exercise of an incentive option. However, the "spread" between the fair
market value of the shares at the time of
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exercise and the exercise price is included in the calculation of alternative
minimum taxable income for purposes of the alternative minimum tax.
If the optionee does not dispose of the shares received upon exercise of
the option within both the two-year period after the incentive option was
granted and the one-year period after the exercise of the incentive option (the
"ISO holding periods"), the optionee will recognize capital gain or loss when he
disposes of the shares. Such gain or loss will be measured by the difference
between the exercise price and the amount received for the shares at the time of
disposition.
If the shares acquired upon exercise of an incentive option are disposed of
before the end of the ISO holding periods, the disposition is a "disqualifying
disposition" which results in the optionee recognizing ordinary income in an
amount generally equal to the lesser of (a) the excess of the value of the
shares on the option exercise date over the exercise price or (b) the excess of
the amount received upon disposition of the shares over the exercise price. Any
excess of the amount received upon disposition of the shares over the value of
the shares on the exercise date will be taxed to the optionee as capital gain.
COMPANY DEDUCTIONS. The Company (or its subsidiary) generally is entitled
to a deduction for federal income tax purposes at the same time and in the same
amount that the participant recognizes ordinary income, to the extent that such
income is considered reasonable compensation under the Code. Deductions may be
limited by Section 162(m) of the Code with respect to options granted to certain
executive officers if the options do not qualify as "performance-based
compensation" under that section. Neither the Company nor any subsidiary is
entitled to a deduction with respect to payments that constitute "excess
parachute payments" pursuant to Section 280G of the Code and that do not qualify
as reasonable compensation pursuant to that section. Such payments also subject
the recipients to a 20% excise tax.
ACCOUNTING TREATMENT
Option grants to employees and directors with an exercise price less than
the fair market value of the common stock on the grant date will result in
compensation expense to the Company in an amount equal to the excess of the fair
market value of the shares on the grant date over the exercise price. This
charge will generally be expensed by the Company over the vesting period of the
option. Option grants with exercise prices not less than fair market value on
the grant date will not result in any direct charge to the Company's earnings.
However, the fair value of these options is required to be disclosed in the
notes to the Company's financial statements and the Company must also disclose,
on a proforma basis, the impact that those options would have on the Company's
reported earnings with the value of the options at the time of grant treated as
a compensation expense. Whether or not granted at a discount, the number of
outstanding options may be a factor in determining the Company's earnings per
share on a fully diluted basis.
VOTE REQUIRED
The affirmative vote of a majority of the shares represented in person or
by proxy and entitled to vote on this proposal is necessary for the approval of
the amendment to the Plan. Abstentions are counted in the tabulation of votes
entitled to be cast and therefore have the effect of a vote against the
proposal, whereas broker non-votes are not counted and have no effect on the
vote.
The Board of Directors recommends that the stockholders vote FOR approval
of Proposal Three.
8
<PAGE>
EXECUTIVE COMPENSATION
The following tables provide information concerning the compensation of the
Chairman/President and the Chief Executive Officer and each other executive
officer whose total salary and bonus exceeded $100,000 in the fiscal year ended
March 31, 2000 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------- ------------------
SECURITIES
NAME AND FISCAL UNDERLYING OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS (#) COMPENSATION(2)
------------------ ---- --------- ----- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
Dr. Gershon Weltman, 2000 $136,480 $-0- 7,500 $17,433
President 1999 179,563 -0- -0- 17,433
1998 162,741 -0- 45,000 17,433
Richard Moskowitz, 2000 $ 37,500 $-0- 765,000 $ -0-
Chief Executive Officer 1999 -0- -0- -0- -0-
1998 -0- -0- -0- -0-
</TABLE>
---------------------------
(1) Includes amounts deferred under the Company's 401(K) Plan, payments for
vacation in lieu of time off and deferred compensation of $37,500 for Mr.
Moskowitz per his employment agreement.
(2) Represents premiums for life and disability insurance for the benefit of
Dr. Weltman.
FISCAL YEAR 2000 OPTION/WARRANT GRANTS
<TABLE>
<CAPTION>
% OF TOTAL OPTIONS
NUMBER OF SECURITIES GRANTED TO EXERCISE
UNDERLYING OPTIONS EMPLOYEES IN PRICE PER EXPIRATION
NAME GRANTED (1) FISCAL YEAR SHARE DATE
---- ----------------------- ----------- ----- ----
<S> <C> <C> <C> <C>
Dr. Gershon Weltman 7,500 0.6% $0.530 1/05
Richard Moskowitz 100,000 8.6% $0.250 11/02
400,000 34.2% 0.250 12/02
265,000 22.7% 0.770 1/04
Robert Parker 12,500 1.1% $0.625 9/04
12,500 1.1% 1.156 4/05
Dr. John Lyman 12,500 1.1% $0.625 9/04
12,500 1.1% 1.156 4/05
Stanley Schneider 12,500 1.1% $0.625 9/04
12,500 1.1% 1.156 4/05
Dr. Amos Freedy 12,500 1.1% $0.625 9/04
12,500 1.1% 1.156 4/05
</TABLE>
_________________________
(1) The options are fully vested and are subject to earlier termination in
the event of termination of employment, death and certain corporate
events as described under "Option Exercises and Fiscal Year-End Option
Values."
9
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES
ACQUIRED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ON VALUE OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
NAME EXERCISE REALIZED(1) FISCAL YEAR-END FISCAL YEAR-END(2)
---- ------------- ----------- ---------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Gershon Weltman 1,000 $344 62,500 2,000 $ 35,076 $ 1,953
Richard Moskowitz -- -- 566,250 198,750 $478,714 $76,767
</TABLE>
_____________________
(1) Represents the difference between the aggregate market value on the date of
exercise and the aggregate exercise price in accordance with SEC rules. The
actual value that may be realized depends on the amount by which the sales
price of the shares exceeds the exercise price.
(2) Represents the difference between the aggregate market value on March 31,
2000 ($1.15625 per share) and the aggregate exercise price of options with
an exercise price of less than $1.15625 per share.
Under the terms of the Company's stock option plans, the Stock Option
Committee may modify the terms of outstanding options, including the exercise
price and vesting schedule. In the event of the dissolution or liquidation of
the Company, or any reorganization, merger or consolidation in which the Company
is not the surviving corporation, or the sale of substantially all of the
Company's assets or of more than 80% of its outstanding stock to another
corporation or entity, all outstanding options will become fully exercisable 30
days prior to the effective date of any such transaction unless the options are
assumed by the surviving or successor corporation.
EMPLOYMENT AGREEMENTS
Mr. Richard Moskowitz is employed pursuant to an employment agreement
with the Company for a term of three years. The employment agreement provides
for a base salary of $150,000 and includes potential annual bonuses related
to gross receipts of the Company. The agreement also provides for an annual
grant of 240,000 options to purchase common stock at the market price at the
time of such grant. Such options vest on a quarterly basis over a three-year
period. The Company has a right to terminate the agreement for cause if Mr.
Moskowitz fails to meet certain performance criteria, or if he resigns. If
Mr. Moskowitz is terminated without cause, he will be entitled to: (a)
payment of his annual salary for periods between one year and the remaining
term of the agreement; (b) bonuses up to the point of termination; and (c)
options between one year's grant and all those remaining under the agreement.
During the term of his employment, Mr. Moskowitz may not directly or
indirectly engage or participate in any business that is in competition with
the Company.
Dr. Gershon Weltman is employed pursuant to an employment agreement with
the Company that automatically renews for one-year periods unless notice is
given by either party at least 30 days prior to August 1 of each year. The
agreement provides for a minimum annual base salary of $168,000, which is
adjusted annually for increases in the Consumer Price Index for Los Angeles. In
the event Dr. Weltman becomes permanently disabled during the term of the
agreement, he will be entitled to a minimum monthly disability benefit of
approximately $8,000. If Dr. Weltman dies during the term of the agreement, the
Company will receive a payment of $500,000 and his beneficiary will receive a
payment of $750,000. The Company is funding the disability and death benefits
payable to Dr. Weltman with insurance policies. Dr. Weltman has the right to
terminate his employment in the event of a change in control (as defined in the
agreement) of the Company if he determines in his sole discretion that such
change would impair his ability to effectively discharge his duties or if his
position is down-graded. If Dr. Weltman terminates his
10
<PAGE>
employment because of such a change of control, he will be entitled to receive
in each of the three years following termination of employment an amount equal
to 60%, 50% and 40%, respectively, of his base annual salary plus bonus, if any,
for the year immediately preceding such termination payable in 36 monthly
installments. During the term of his employment and during any period in which
he receives severance benefits, Dr. Weltman may not directly or indirectly
engage or participate in any business that is in competition with the Company.
CERTAIN TRANSACTIONS
In April 1999 and July 1999, November Lazar Scher, Inc. was granted
warrants to purchase 50,000 shares and 200,000 shares of the Company's common
stock, respectively. The warrants have an exercise price of $0.85 per share and
were issued to the marketing services firm for services rendered in accordance
with a service agreement with the Company. The warrants have a five-year term.
In December 1999, Richard Moskowitz purchased for $100,000 in cash 400,000
shares of common stock and warrants exercisable for 500,000 shares of common
stock. The warrants have an exercise price of $0.25 per share and a three-year
term.
In December 1999, Jason Goodman purchased for $50,000 in cash 200,000
shares of common stock and warrants exercisable for 50,000 shares of common
stock. The warrants have an exercise price of $0.25 per share and a three-year
term.
In December 1999, Ronald Marks purchased for $100,000 in cash 222,222
shares of common stock and warrants exercisable for 222,222 shares of common
stock. The warrants have an exercise price of $0.56 per share and a four-year
term.
In January 2000, Gary Boxer purchased for $50,000 in cash 111,111 shares of
common stock and warrants exercisable for 111,111 shares of common stock. The
warrants have an exercise price of $0.56 per share and a three-year term.
In February 2000, Puglisi Capital Partners purchased for $375,000 in cash
750,000 shares of common stock and warrants exercisable for 750,000 shares of
common stock. The warrants have an exercise price of $1.00 per share and a
one-year term.
In February 2000, Wardenclyffe MicroCap Fund L.P. purchased for $65,000 in
cash 130,000 shares of common stock and warrants exercisable for 130,000 shares
of common stock. The warrants have an exercise price of $1.00 per share and a
six-month term.
Instead of paying the exercise price in cash, all of the foregoing warrants
may be exercised for the net number of shares issuable on the basis that a
portion of the shares having a fair market value equal to the exercise price are
delivered in payment of the exercise price. The Company has also granted the
warrantholders the right to include their shares of Common Stock in certain
registration statements filed by the Company under the Securities Act of 1933.
See "Ownership of Common Stock."
11
<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth certain information, as of June 30, 2000,
with respect to ownership of shares of Common Stock by each person who is known
by the Company to own beneficially 5% or more of the Common Stock, each Named
Officer, each director of the Company and all executive officers and directors
of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENTAGE
NAME* OWNED OWNERSHIP
----- ------------------- -----------
<S> <C> <C>
Richard Moskowitz 1,032,500 (1) 12.3%
1 Hickory Lane
Westport, Connecticut 06880
Dr. Gershon Weltman 310,011 (2) 4.0%
3527 Beverly Glen Terrace
Sherman Oaks, California 91423
Dr. Amos Freedy
3A Kashani Street 307,919 (3) 3.9%
Tel Aviv, Israel 69499
Dr. John Lyman 221,911 (4) 2.9%
Stanley B. Schneider 162,111 (5) 2.1%
Robert Parker 35,500 (6) **
Richard Vestewig 38,000 (7) **
All Executive Officers and Directors 2,107,952 (8) 24.3%
as a Group (7 persons)
Winston Mar 503,286 (9) 6.3%
TWG, Inc.
5631 Leeds Street
Southgate, California 90280
Eagle Capital, Ltd. 835,888(10) 10.2%
3836 North Keeler Street
Suite 200
Chicago, Illinois 60641
Puglisi Capital Partners, L.P. 1,500,000(11) 17.6%
399 Park Avenue
New York, New York 10022
Ronald A. Marks 444,444(12) 5.6%
315 South June Street
Los Angeles, California 90020
</TABLE>
_______________________________
* Includes addresses of 5% or more stockholders
** Less than 1%
12
<PAGE>
(1) Includes 132,000 shares subject to options and 500,000 shares subject to
warrants that are exercisable within 60 days.
(2) Includes 62,500 shares subject to options that are exercisable within 60
days and 1,670 shares held in the Company's 401(k) Plan over which Dr.
Weltman, as trustee, has voting power.
(3) Includes 155,521 shares of Common Stock and warrants to purchase 55,556
shares of Common Stock held by the Freedy Family Trust, of which Mr. Freedy
is a trustee and beneficiary, 59,842 shares held for the benefit of minor
children and 37,000 shares subject to options that are exercisable within
60 days.
(4) Includes 31,000 shares subject to options that are exercisable within 60
days.
(5) Includes 31,000 shares subject to options that are exercisable within 60
days.
(6) Includes 33,500 shares subject to options that are exercisable within 60
days.
(7) Includes 31,000 shares subject to options that are exercisable within 60
days.
(8) Includes 914,056 warrants that are exercisable within 60 days.
(9) Includes 282,143 shares subject to exercisable warrants. TWG, Inc., the
record owner of the shares, is controlled by Winston Mar.
(10) Includes 444,444 shares subject to exercisable warrants. Eagle Capital,
Ltd. is a limited partnership of which Michael P. Traba and Christine M.
Traba, husband and wife, are general partners.
(11) Includes 750,000 shares subject to warrants that are exercisable within 60
days.
(12) Includes 222,222 shares subject to warrants that are exercisable within 60
days.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers, directors and holders that own more than 10% of Perceptronics stock to
file reports regarding their ownership and changes in ownership of Perceptronics
equity securities. Based on its review of these reports and written statements
from executive officers and directors, Perceptronics is aware of the following
filing deficiencies: Amos Freedy, Michael Laney (a former director), Eagle
Capital, Ltd., Michael P. Traba, Christine M. Traba and Daniel J. Mack as
custodian for Andrew M. Traba each filed a late Form 3; Thomas J. Lubaczewski,
Richard E. Vestewig, Eagle Capital, Ltd., Michael P. Traba, Christine M. Traba
and Daniel J. Mack, as custodian for Andrew M. Traba, each filed a Form 4 late,
each with respect to one transaction; and TWG, Inc. did not file a Form 3 upon
subscribing to purchase shares and warrants, which purchases, if completed,
would have made it a holder of more than 10% of the outstanding Common Stock at
that time. TWG, Inc. did not complete the purchases and does not beneficially
own more than 10% of the outstanding Common Stock at June 30, 2000. See "Certain
Transactions."
AUDITORS OF THE COMPANY
The Company's independent certified public accountants for the fiscal year
ended March 31, 2000 were Beckman Kirkland & Whitney, which firm the Company
intends to appoint for the current fiscal year. A representative of Beckman
Kirkland & Whitney is expected to be present at the Meeting with the opportunity
to make a statement if he so desires and to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Any stockholder intending to submit to the Company a proposal for inclusion
in the Company's Proxy Statement and proxy for the Annual Meeting of
Stockholders to be held in 2001 must submit such proposal so that it is received
by the Company no later than APRIL 13, 2001, and such proposal must otherwise
comply with the Company's Bylaws (the "Bylaws") and Rule 14a-8 under the
Securities Exchange Act of 1934, as amended.
Pursuant to the Bylaws, no business proposal will be considered properly
brought before an Annual Meeting by a stockholder, and no nomination for the
election of directors will be considered properly made at an Annual Meeting by a
stockholder, unless advance notice thereof and certain information is provided
to the Company in accordance with the Bylaws by June 14, 2000. If a stockholder
submits a proposal at the Meeting to be held in 2000 other than in accordance
with Rule 14a-8 and does
13
<PAGE>
not provide notice of such proposal to the Company by June 14, 2000, the holders
of any proxy solicited by the Board of Directors for use at the Meeting will
have discretionary authority to vote with respect to such proposal.
DISCRETIONARY AUTHORITY
While the Notice of Annual Meeting of Stockholders calls for the
transaction of such other business as may properly come before the meeting, the
Board of Directors has no knowledge of any matters to be presented for action by
the stockholders other than as set forth above. The enclosed proxy gives
discretionary authority, however, in the event any additional matters should be
properly presented.
GERSHON WELTMAN
Secretary
July 28, 2000
14
<PAGE>
APPENDIX A
AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
PERCEPTRONICS, INC.
The following is the text of Article Fourth of the Certificate of
Incorporation of the Company, as proposed to be amended:
FOURTH:
(a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is thirty-two million (32,000,000),
consisting of:
(1) two million (2,000,000) shares of Preferred Stock, par value
one-tenth cent ($.001 per share) (the "Preferred Stock"); and
(2) thirty million (30,000,000) shares of Common Stock, par value
one-tenth cent ($.001) per share (the "Common Stock").
(b) The Board of Directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of the shares of Preferred Stock
in series, and by filing a certificate pursuant to the applicable law of the
State of Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers, preferences
and rights of the shares of each such series and any qualifications, limitations
or restrictions thereof, and to increase or decrease the number of shares of any
such series to the extent permitted by the Delaware General Corporation Law, as
amended from time to time.
A-1
<PAGE>
APPENDIX B
AMENDMENT
TO
1999 STOCK OPTION PLAN
OF
PERCEPTRONICS, INC.
The following is the text of Section 4 of the 1999 Stock Option Plan of the
Company, as proposed to be amended:
4. NUMBER OF SHARES SUBJECT TO PLAN
The stock to be offered under the Plan shall consist of up to 1,000,000
shares of the Company's Common Stock. If any Option granted hereunder shall
expire or terminate for any reason without having been exercised in full, the
unpurchased shares subject thereto shall again be available for purposes of this
Plan.
B-1
<PAGE>
PERCEPTRONICS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 15, 2000
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby constitutes and
appoints DR. GERSHON WELTMAN and RICHARD MOSKOWITZ, and each of them, the
attorneys and proxies of the undersigned with full power of substitution to
appear and to vote all of the common shares of PERCEPTRONICS, INC. held of
record by the undersigned at July 28, 2000 at the Annual Meeting of Stockholders
to be held on September 15, 2000, or any adjournment thereof, as indicated below
and, in their discretion, on other matters which properly come before the
meeting.
<TABLE>
<S> <C>
(1) Election of Directors:
/ / FOR all nominees listed below (except as / / WITHHOLD AUTHORITY to vote for all nominees listed
indicated to the contrary below)
</TABLE>
Dr. Gershon Weltman, Richard Moskowitz, Dr. Amos Freedy, Dr. John Lyman, Robert
Parker and Stanley B. Schneider.
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
--------------------------------------------------------------------------------
(2) To approve an amendment to the Company's Certificate of Incorporation to
increase the number of common and preferred shares authorized.
FOR / / AGAINST / / ABSTAIN / /
(3) To approve an amendment to the Company's 1999 Stock Option Plan for
employees, consultants and advisors to increase the number of shares authorized.
FOR / / AGAINST / / ABSTAIN / /
(4) IN THEIR DISCRETION, ON OTHER MATTERS THAT PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PERCEPTRONICS, INC. IF NO VOTE IS INDICATED, THIS PROXY WILL BE VOTED WITH
AUTHORITY FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR AND FOR PROPOSALS
(2) AND (3).
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
<PAGE>
(CONTINUED FROM REVERSE SIDE)
YOU ARE URGED TO DATE, SIGN AND RETURN PROMPTLY THIS PROXY IN THE ENVELOPE
PROVIDED. IT IS IMPORTANT FOR YOU TO BE REPRESENTED AT THE MEETING. THE
EXECUTION OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE
PRESENT AT THE MEETING.
IMPORTANT. Please sign exactly
as your name or names appear
on the share certificates, and
when signing as an attorney,
executor, administrator,
trustee or guardian, give your
full title as such. If the
signatory is a corporation,
sign the full corporate name
by duly authorized officer, or
if a partnership, sign in
partnership name by authorized
person.
Date: __________________, 2000
______________________________
Signature
______________________________
Signature
