<PAGE>
AS FILED WITH THE COMMISSION ON JANUARY 22, 1998
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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
LASERTECHNICS, INC.
------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
LASERTECHNICS, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Notice is hereby given that a Special Meeting of Stockholders of
Lasertechnics, Inc. (the "Company") will be held at
- ------- on
- ------- , 1998, at 9:30 a.m., local time, and at any adjournments thereof, for
the following purposes as set forth in the accompanying Proxy Statement:
1. To consider and vote upon a proposal (the "Reverse Stock Split
Proposal") to amend the Company's Certificate of Incorporation to effect a
one-for-twenty reverse stock split of the outstanding Common Stock,
Non-voting Common Stock, and Series A, B, and C Convertible Preferred Stock
of the Company, and to provide for certain corresponding changes in the
terms of the Series A, B, and C Convertible Preferred Stock;
2. To consider and vote upon a proposal (the "Authorized Shares
Proposal") to amend the Company's Certificate of Incorporation to reduce the
number of authorized shares of the Company's Common Stock from 56,750,000 to
6,250,000;
3. To consider and vote upon a proposal (the "Name Change Proposal") to
amend the Company's Certificate of Incorporation to change the Company's
name to "AXCESS Inc."; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Authorized Shares Proposal will not be presented to the stockholders of
the Company at the Special Meeting unless the Reverse Stock Split Proposal shall
first have been approved.
The holders of a majority of the voting power of the issued and outstanding
stock of the Company entitled to vote at the Special Meeting, present in person
or represented by proxy, shall constitute a quorum for the transaction of
business at the Special Meeting. If a quorum is not present or represented by
proxy at the Special Meeting, the stockholders entitled to vote at the meeting,
present in person or represented by proxy, shall have the power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented by proxy. At such
adjourned meeting at which a quorum shall be presented or represented by proxy,
any business may be transacted which might have been transacted at the meeting
as originally called. If the adjournment is for more than thirty days, or, if
after the adjournment a new record date is set, a notice of adjourned meeting
shall be given to each stockholder of record entitled to vote at the meeting.
Holders of record of the Company's Common Stock, Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred
Stock and Series G Preferred Stock at the close of business on Friday, January
30, 1998 (the "Record Date"), will be entitled to vote at the meeting with
respect to each of the above Proposals. Holders of record of the Company's
Non-voting Common Stock at the close of business on the Record Date will be
entitled to vote at the meeting with respect to the Authorized Shares Proposal.
Whether or not you plan to attend the meeting, please date and sign the
enclosed proxy and return it in the envelope provided. Any person giving a proxy
has the power to revoke it at any time prior to its exercise and, if present at
the meeting, may withdraw it and vote in person. The last proxy executed by a
shareholder revokes all previous proxies executed by that shareholder.
By Order of the Board of Directors
Harry S. Budow, Secretary
Dated: February , 1998
<PAGE>
LASERTECHNICS, INC.
3208 COMMANDER DRIVE
CARROLLTON, TEXAS 75006
------------------------
PROXY STATEMENT
------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION--THE SPECIAL MEETING...................................................... 1
ITEM I. REVERSE STOCK SPLIT PROPOSAL................................................... 4
General............................................................................ 4
Reasons for the Reverse Stock Split Proposal....................................... 4
Effect of the Reverse Stock Split Proposal......................................... 5
Impact on Options, Warrants, and Convertible Securities............................ 7
Exchange of Stock Certificates and Payment for Fractional Shares................... 7
Federal Income Tax Consequences.................................................... 8
Other Nasdaq Requirements.......................................................... 9
ITEM II. AUTHORIZED SHARES PROPOSAL.................................................... 9
General............................................................................ 9
Reasons for the Authorized Shares Proposal......................................... 10
Certain Possible Effects of Authorized but Unissued Shares......................... 11
ITEM III. NAME CHANGE PROPOSAL......................................................... 12
DESCRIPTION OF CAPITAL STOCK........................................................... 13
Authorized Shares.................................................................. 13
Common Stock and Non-voting Common Stock........................................... 13
Preferred Stock.................................................................... 14
Series A Preferred Stock....................................................... 14
Series B Preferred Stock....................................................... 15
Series C Preferred Stock....................................................... 15
Series F Preferred Stock....................................................... 16
Series G Preferred Stock....................................................... 18
COMPARISON OF STOCKHOLDER RIGHTS....................................................... 20
Authorized Capital Stock........................................................... 20
Outstanding Capital Stock.......................................................... 21
Stated Capital..................................................................... 21
Par Value.......................................................................... 21
RECENT DEVELOPMENTS.................................................................... 21
Nasdaq Listing Requirements........................................................ 21
Equity Investments by Major Stockholders........................................... 22
Extension of Bridge Loans.......................................................... 22
Restructuring of Variable Price Convertible Securities............................. 22
Increase in Aggregate Voting Power of the Amphion Group;
Possible Deemed Change of Control................................................ 24
Legal Proceedings.................................................................. 24
Deferral of Rights Offering........................................................ 25
Dispute regarding DataGlyphs License............................................... 25
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Technology Acquisition Agreement................................................... 25
Acquisition of Technology...................................................... 25
Technology Enhancement Services................................................ 26
Assignment of Spot/Mag Agreement............................................... 26
Lock-up Agreement.............................................................. 27
Registration Rights............................................................ 27
Board Representation........................................................... 27
The XLV Technology............................................................. 27
Applications to the Company's Business......................................... 28
XLV............................................................................ 28
Effect of the Technology Acquisition Agreement................................. 28
Contingency with respect to the Reverse Stock Split Proposal................... 29
COSTS OF SOLICITATION.................................................................. 29
APPRAISAL RIGHTS....................................................................... 29
OTHER MATTERS.......................................................................... 29
PRINCIPAL STOCKHOLDERS................................................................. 30
DEADLINE FOR STOCKHOLDER PROPOSALS..................................................... 33
</TABLE>
ii
<PAGE>
LASERTECHNICS, INC.
3208 COMMANDER DRIVE
CARROLLTON, TEXAS 75006
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON
------------ , 1998
------------------------
PROXY STATEMENT
------------------------
INTRODUCTION--THE SPECIAL MEETING
This Proxy Statement is furnished in connection with the solicitation by
management of proxies to be voted at a Special Meeting of Stockholders of
Lasertechnics, Inc. (the "Company") to be held at
- --------------------- on
- --------------------- , 1998 at 9:30 a.m., local time, and at any adjournments
thereof. The purpose of the meeting is to consider and vote upon each of the
following proposals (each a "Proposal" and, collectively, the "Proposals"):
1. a proposal (the "Reverse Stock Split Proposal") to amend the
Company's Certificate of Incorporation to effect a one-for-twenty reverse
stock split of the outstanding Common Stock, Non-voting Common Stock, and
Series A, B, and C Convertible Preferred Stock of the Company, and to
provide for certain corresponding changes in the terms of the Series A, B,
and C Convertible Preferred Stock;
2. a proposal (the "Authorized Shares Proposal") to amend the Company's
Certificate of Incorporation to reduce the number of authorized shares of
the Company's Common Stock from 56,750,000 to 6,250,000; and
3. a proposal (the "Name Change Proposal") to amend the Company's
Certificate of Incorporation to change the Company's name to "AXCESS Inc."
The Authorized Shares Proposal will not be presented to the stockholders of
the Company at the Special Meeting unless the Reverse Stock Split Proposal shall
first have been approved.
Shares represented by proxies, received in the enclosed form and properly
filled out, will be voted in accordance with the specifications made thereon. In
the absence of specific instructions, proxies will be voted in favor of each of
the Proposals described in this Proxy Statement. Proxies may be revoked by
stockholders by written notice received by the Secretary of the Company at the
address set forth above, at any time prior to the exercise thereof. The last
proxy executed by a stockholder revokes all previous proxies executed by that
stockholder. A stockholder may also attend the Special Meeting in person and
vote by ballot, thereby canceling any proxy previously given. Except for the
Proposals described in this Proxy Statement, management expects no other matters
to be presented for action at the Special Meeting. If, however, any other
matters properly come before the Special Meeting, the persons named as proxies
in the enclosed form of proxy intend to vote in accordance with their judgment
on any such matters so presented, unless otherwise specified in the Proxy.
The holders of a majority of the voting power of the issued and outstanding
stock of the Company entitled to vote at the Special Meeting, present in person
or represented by proxy, shall constitute a quorum for the transaction of
business at the Special Meeting. If a quorum is not present or represented by
proxy at the Special Meeting, the stockholders entitled to vote at the meeting,
present in person or represented by proxy, shall have the power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented by proxy. At such
adjourned meeting at which a quorum shall be present or represented by proxy,
any business may be transacted which might have been transacted at the meeting
as originally called. If the adjournment is for more than thirty days, or, if
after the adjournment a new record date is set, a notice of adjourned meeting
1
<PAGE>
shall be given to each stockholder of record entitled to vote at the meeting.
Abstentions and broker non-votes with respect to particular proposals will not
affect the determination of a quorum. Stockholders of record at the close of
business on Friday, January 30, 1998 (the "Record Date") are entitled to notice
of and to vote at the Special Meeting or any adjournments thereof. As of the
Record Date, the Company's outstanding voting securities consisted of 47,234,154
shares of Common Stock, par value $.01 per share (the "Common Stock"); 1,153,846
shares of Series A Convertible Preferred Stock, par value $.01 per share (the
"Series A Preferred Stock"); 1,056,338 shares of Series B Convertible Preferred
Stock, par value $.01 per share (the "Series B Preferred Stock"); 708,530 shares
of Series C Convertible Preferred Stock par value $.01 per share (the "Series C
Preferred Stock"); and 789.74 shares of Series G Preferred Stock, par value $.01
per share (the "Series G Preferred Stock"). The Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock are sometimes referred to
collectively herein as the "Single Vote Preferred Stock, and the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series G
Preferred Stock are sometimes referred to collectively herein as the "Voting
Preferred Stock." Each share of Common Stock and each share of Single Vote
Preferred Stock is entitled to one vote on each of the Proposals described in
this Proxy Statement, and each share of Series G Preferred Stock is entitled to
20,000 votes on each of such Proposals, representing one vote for each share of
Common Stock into which a single share of Series G Preferred Stock is
convertible on the Record Date. The Company also has authorized a class of
Non-voting Common Stock, par value $.01 per share (the "Non-voting Common
Stock"), of which 2,249,842 shares were outstanding on the Record Date. Each
share of Non-voting Common Stock is entitled to one vote on the Authorized
Shares Proposal, voting together with the Common Stock as a single class.
The affirmative vote of a majority of the outstanding voting power of the
Common Stock and Voting Preferred Stock, voting together as a single class, is
required to adopt the Reverse Stock Split Proposal and the Name Change Proposal.
The affirmative votes of the majority of the outstanding voting power of the
Common Stock, voting as a separate class; Common Stock and Non-voting Common
Stock, voting together as a single class; and Common Stock and Voting Preferred
Stock, voting together as a single class, are required to adopt the Authorized
Shares Proposal.
Abstentions will not be counted as affirmative votes. The following table
indicates the number of shares outstanding, their respective voting power, and
the number and percentage of shares held by members of the Board of Directors of
the Company as of January 8, 1998:
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF SHARES SHARES
NUMBER NUMBER OF HELD BY BOARD OF HELD BY BOARD OF
OF SHARES ENTITLED DIRECTORS DIRECTORS
STOCK CLASS OUTSTANDING VOTES MEMBERS MEMBERS
- ------------------------------------------------ ------------ ------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Common Stock.................................... 47,234,154 47,234,154 See note (3) See note (3)
Non-voting Common Stock......................... 2,249,842 2,249,842 *** ***
Series A Preferred Stock........................ 1,153,846 1,153,846 See note (3) See note (3)
Series B Preferred Stock........................ 1,056,338 1,056,338 See note (3) See note (3)
Series C Preferred Stock........................ 708,530 708,530 See note (3) See note (3)
Series G Preferred Stock(1)..................... 789.74 15,794,800 See note (3) See note (3)
Voting Preferred Stock.......................... 2,919,504 18,713,514 See note (3) See note (3)
Aggregate of Common Stock and Voting Preferred
Stock......................................... 50,153,658 65,947,668 See note (3) See note (3)
Aggregate of Common Stock and Non-voting Common
Stock(2)...................................... 49,483,996 49,483,996 See note (3) See note (3)
</TABLE>
- ------------------------
(1) Each share of Series G Preferred Stock has an Original Series G Issue Price
of $10,000, and is convertible at a conversion price of $.50 per share into
20,000 shares of Common Stock. The Series G
2
<PAGE>
Preferred Stock votes with the Common Stock and other series of Voting
Preferred Stock as a single class, on an "as-converted" basis.
(2) The voting power of the Non-voting Common Stock is applicable only to the
separate class vote of the Voting Common Stock and Non-Voting Common Stock,
voting together as a single class, with respect to the Authorized Shares
Proposal.
(3) 100% of the outstanding shares of the Series A Preferred Stock and Series B
Preferred Stock, and 72% of the outstanding shares of Series C Preferred
Stock, are owned beneficially and of record by Amphion Ventures L.P., a
Delaware limited partnership ("Amphion Ventures"), and 95% of the
outstanding shares of the Series G Preferred Stock are currently owned in
the aggregate by Amphion Ventures and Antiope Partners L.L.C., a Delaware
limited liability company ("Antiope Partners"). Richard C. E. Morgan, the
chairman and chief executive officer of the Company and a member of the
Company's Board of Directors, is a managing member of Antiope Partners and a
managing member of Amphion Partners L.L.C. ("Amphion Partners"), a Delaware
limited liability company and the sole general partner of Amphion Ventures.
As such Mr. Morgan may be deemed to have beneficial ownership of the
securities of the Company owned by Amphion Ventures and Antiope Partners,
although Mr. Morgan disclaims such beneficial ownership. If such deemed
beneficial ownership is taken into account, Mr. Morgan would be deemed to
own 100% of the voting power of the Series A Preferred Stock and the Series
B Preferred Stock; 72% of the voting power of the Series C Preferred Stock;
95% of the voting power of the Series G Preferred Stock; and 95% of the
combined voting power of the Voting Preferred Stock. In addition, Amphion
Ventures, Amphion Partners and Antiope Partners (collectively, the "Amphion
Group") own in the aggregate 8,160,303 shares of Common Stock, or 17.3% of
the class outstanding. See, "RECENT DEVELOPMENTS," "DESCRIPTION OF CAPITAL
STOCK."
Mr. Morgan has direct beneficial ownership of 364,766 shares of Common Stock
as of January 8, 1998, or approximately 0.8% of the Common Stock and 0.5% of
the total voting power of the Company outstanding (including 37,500 shares
subject to options that are currently exercisable, at an exercise price in
excess of the current market price). Including the shares held by the
Amphion Group, Mr. Morgan may be deemed to have beneficial ownership of
securities representing approximately 42.8% of the total outstanding voting
power of the Company.
Not including the securities held by the Amphion Group, but including those
held by Mr. Morgan directly, the directors of the Company own in the
aggregate 971,602 shares of Common Stock as of January 8, 1998, or
approximately 2.1% of the Common Stock and 1.5% of the total voting power of
the Company outstanding (including 288,786 shares subject to options that
are currently exercisable, at an exercise price in excess of the current
market price). Including the securities held by the Amphion Group, which may
be deemed to be indirectly beneficially owned by Mr. Morgan, the directors
of the Company own in the aggregate voting securities representing
approximately 42.7% of the total voting power of the Company outstanding.
See, "PRINCIPAL STOCKHOLDERS."
The security holdings of the Amphion Group in the Company are largely the
result of a restructuring of Wolfensohn Associates L.P., now known as
Antiope Ventures L.P. ("Antiope Ventures"). As of August 19, 1997, Antiope
Ventures transferred all its assets and liabilities to Amphion Ventures, in
exchange for limited partnership interests of Amphion Ventures. Amphion
Partners is the sole general partner of Amphion Ventures, and Antiope
Partners is the sole general partner of Antiope Ventures. Richard C.E.
Morgan, a director and the Chairman and Chief Executive Officer of the
Company, is a managing member of both Amphion Partners and Antiope Partners.
See, "PRINCIPAL STOCKHOLDERS."
The Amphion Group, and each of the directors of the Company, have separately
advised the Company that they intend to vote FOR approval of each of the
Proposals. In addition, Jackson Hole Investments Acquisition Inc. ("JHIA") has
advised the Company that it intends to vote FOR approval of each of the
Proposals. JHIA, an entity related indirectly to the Amphion Group, holds the
198,676 shares of Series C Preferred Stock of the Company not held by the
Amphion Group, representing 28.0% of the Series C Preferred Stock and 0.3% of
the total voting power of the Company outstanding.
3
<PAGE>
Votes cast at the Special Meeting will be counted by the persons appointed
by the Company to act as inspectors of election for the Special Meeting. The
inspectors of election will treat Common Stock, Non-voting Common Stock, and
Voting Preferred Stock represented by a properly executed and returned proxy as
present at the Meeting for purpose of determining a quorum.
ITEM I. REVERSE STOCK SPLIT PROPOSAL
GENERAL
At the Special Meeting, the stockholders of the Company will consider and
vote upon the Reverse Stock Split Proposal. The Reverse Stock Split Proposal
provides for the combination and reclassification of the presently issued and
outstanding shares (the "pre-split shares") of Common Stock, into a smaller
number of shares (the "post-split shares") of identical Common Stock, on the
basis of one post-split share of Common Stock for each twenty pre-split shares
of Common Stock previously issued and outstanding, and a corresponding
combination and reclassification of the presently issued and outstanding shares
of each of the Non-voting Common Stock, Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock (collectively, the "Reverse Stock
Split"). The Common Stock will not be modified or amended in any way by the
Reverse Stock Split, other than the combination and reclassification of
outstanding shares as described herein and the payment of cash for fractional
shares, as described below. Except as may result from the payment of cash for
fractional shares, each stockholder will hold the same percentage of common
stock outstanding immediately following the Reverse Stock Split as it did
immediately prior to the Reverse Stock Split. If approved by the stockholders of
the Company as provided herein, the Reverse Stock Split will be effected by an
amendment to the Company's Certificate of Incorporation in substantially the
form attached to this Proxy Statement as Appendix A (the "Reverse Stock Split
Amendment"), and will become effective upon the filing of the Reverse Stock
Split Amendment with the Secretary of State of Delaware (the "Effective Time").
The following discussion is qualified in its entirety by the full text of the
Reverse Stock Split Amendment, which is hereby incorporated by reference herein.
At the Effective Time, each share of Common Stock issued and outstanding
will automatically be reclassified and converted into one-twentieth of a share
of Common Stock, and each share of Non-voting Common Stock and Single Vote
Preferred Stock issued and outstanding will automatically be reclassified and
converted into one-twentieth of a share of Non-voting Common Stock or
one-twentieth of a share of the applicable series of Single Vote Preferred
Stock, as the case may be.
Fractional shares of Common Stock will not be issued as a result of the
Reverse Stock Split. Stockholders entitled to receive a fractional share of
Common Stock as a consequence of the Reverse Stock Split will, instead, receive
from the Company a cash payment in U.S. dollars equal to such fraction
multiplied by twenty times the average closing bid price per share of the Common
Stock on The Nasdaq Stock Market, Inc. ("Nasdaq") for the five trading days
immediately preceding the Effective Date.
The Company expects that, if the Reverse Stock Split Proposal is approved by
the stockholders at the Special Meeting, the Reverse Stock Split Amendment will
be filed immediately. However, notwithstanding approval of the Reverse Stock
Split Proposal by the stockholders of the Company, the Board of Directors of the
Company may elect not to file, or to delay the filing of, the Reverse Stock
Split Amendment, if the Board of Directors determines that filing the Reverse
Stock Split Amendment would not be in the best interest of the Company's
stockholders at such time. Factors leading to such a determination could
include, without limitation, any possible effect on Nasdaq listing or future
securities offerings (see "Reasons for the Reverse Stock Split Proposal,"
below).
REASONS FOR THE REVERSE STOCK SPLIT PROPOSAL
The purpose of the Reverse Stock Split is to combine the outstanding shares
of Common Stock so that the Common Stock outstanding after giving effect to the
Reverse Stock Split trades at a significantly higher price per share than the
Common Stock outstanding before giving effect to the Reverse Stock Split.
4
<PAGE>
During 1997, the closing bid price for the Common Stock on the SmallCap tier
of The Nasdaq Stock Market, Inc. (the "Nasdaq SmallCap Market") ranged from
$1.34 to $0.25 per share. The closing bid price for the Common Stock on January
2, 1998, was $0.28 per share. The Company believes that such a low quoted market
price per share may discourage potential new investors, increase market price
volatility and decrease the liquidity of the Common Stock. Most importantly, the
Company's current market price is below the minimum bid price of $1.00 per share
required for continued inclusion of the Common Stock on the Nasdaq SmallCap
Market, pursuant to new rules scheduled to go into effect on February 22, 1998
(the "New Nasdaq Listing Requirements"). The Company believes, but cannot
assure, that the reverse stock split will enable the Common Stock to trade above
the minimum bid price established by the New Nasdaq Listing Requirements.
The Company believes that maintaining the listing of the Common Stock on
Nasdaq is very important to the Company and its stockholders. Inclusion in
Nasdaq advantages stockholders by increasing liquidity and potentially
minimizing the spread between the "bid" and "asked" prices quoted by market
makers. Further, a Nasdaq listing may enhance the Company's access to capital
and increase the Company's flexibility in responding to anticipated capital
requirements. The Company believes that prospective investors will view an
investment in the Company more favorably if its shares qualify for listing on
Nasdaq.
Additionally, Rule 15c2-6 of the Securities and Exchange Commission (the
"Penny Stock Rule") requires broker-dealers to comply with certain supplemental
requirements when recommending and selling to certain customers certain
low-priced securities that are not listed on any national securities exchange or
included for trading on Nasdaq. The Company believes that the market for the
Common Stock will be improved by continued listing on the Nasdaq SmallCap
Market, thereby providing an exemption from the impact of the Rule.
The Company also believes that the current per share price level of the
Company's Common Stock has reduced the effective marketability of the shares
because of the reluctance of many leading brokerage firms to recommend low
priced stock to their clients. Certain investors view low-priced stock as
unattractive, although certain other investors may be attracted to low-priced
stock because of the greater trading volatility sometimes associated with such
securities. In addition, a variety of brokerage house policies and practices
tend to discourage individual brokers within those firms from dealing in low
priced stock. Some of those policies and practices pertain to the payment of
brokers commissions and to time consuming procedures that function to make the
handling of low priced stocks unattractive to brokers from an economic
standpoint.
In addition, since brokerage commissions on low-priced stock generally
represent a higher percentage of the stock price than commissions on higher
priced stock, the current share price of the Common Stock can result in
individual stockholders paying transaction costs (commission, markups, or
markdowns) which are a higher percentage of their total share value than would
be the case if the share price were substantially higher. This factor also may
limit the willingness of institutions to purchase the Common Stock at its
current low share price.
For all the above reasons, the Company believes that the Reverse Stock Split
is in the best interests of the Company and its stockholders. However, there can
be no assurances that the Reverse Stock Split will have the desired
consequences. The Company anticipates that, following the consummation of the
Reverse Stock Split, the Common Stock will trade at a price per share that is
significantly higher than the current market price of the Common Stock. However,
there can be no assurance that, following the Reverse Stock Split, the Common
Stock will trade at twenty times the market price of the Common Stock prior to
the Reverse Stock Split.
EFFECT OF THE REVERSE STOCK SPLIT PROPOSAL
Subject to stockholder approval, the Reverse Stock Split will be effected by
the filing of an amendment to the Company's Certificate of Incorporation, and
will be effective immediately upon such filing.
5
<PAGE>
Although the Company expects to file the Reverse Stock Split Amendment with the
Delaware Secretary of State's office immediately following approval of the
Reverse Stock Split Proposal at the Special Meeting, the actual timing of such
filing will be determined by the Company's management based upon their
evaluation as to when such action will be most advantageous to the Company and
its stockholders. The Company reserves the right to forego or postpone filing
the Reverse Stock Split Amendment, if such action is determined to be in the
best interests of the Company and its stockholders.
Each stockholder that owns fewer than twenty shares of Common Stock will
have his or her fractional share of Common Stock converted into the right to
receive cash as set forth below in "Exchange of Stock Certificates and Payment
for Fractional Shares." The interest of such stockholder in the Company will
thereby be terminated, and such stockholder will have no right to share in the
assets or future growth of the Company. Each stockholder that owns twenty or
more shares of Common Stock will continue to own shares of Common Stock and will
continue to share in the assets and future growth of the Company as a
stockholder. Such interest will be represented by one-twentieth as many shares
as such stockholder owned before the Reverse Stock Split, subject to the
adjustment for fractional shares described herein.
Effectuation of the Reverse Stock Split as of September 30, 1997 would not
have had an effect on the Company's $8.4 million consolidated net loss for the
nine month period then ended. However, net loss per share of $.20 would have
been proportionately increased to approximately $4.00. No adjustment has been
made for the reduction in the number of shares of Common Stock resulting from
the payment of cash for fractional shares.
Adoption of the reverse stock split will reduce the presently issued and
outstanding shares of Common Stock, Non-voting Common Stock, and Single Vote
Preferred Stock as indicated in the following table. The Single Vote Preferred
Stock has been included in the Reverse Stock Split Proposal because by its terms
it converts on a one-for-one basis into shares of Common Stock. The Series F
Preferred Stock (to the extent any remains outstanding) and Series G Preferred
Stock have not been included in the Reverse Stock Split Proposal because their
respective conversion rates into Common Stock automatically adjust to reflect
the effects of the Reverse Stock Split. The post-split outstanding amounts have
been calculated without regard for the payment of cash for fractional shares,
and accordingly are approximate.
<TABLE>
<CAPTION>
PRE-SPLIT POST-SPLIT
STOCK CLASS OUTSTANDING(1) OUTSTANDING(1)
- ---------------------------------------------------------------------------------- -------------- --------------
<S> <C> <C>
Common Stock...................................................................... 47,234,154 2,361,708
Non-voting Common Stock........................................................... 2,249,842 112,494
Series A Convertible Preferred Stock.............................................. 1,153,846 57,692
Series B Convertible Preferred Stock.............................................. 1,056,338 52,817
Series C Convertible Preferred Stock.............................................. 708,530 35,427
Total Common Stock, Non-voting Common Stock and
Single Vote Preferred Stock..................................................... 52,402,710 2,620,136
</TABLE>
- ------------------------
(1) Based on the number of shares of each such series issued and outstanding as
of January 21, 1998.
EXCEPT FOR THE RECEIPT OF CASH IN LIEU OF FRACTIONAL INTERESTS, THE REVERSE
STOCK SPLIT WILL NOT AFFECT ANY STOCKHOLDER'S PROPORTIONATE EQUITY INTEREST IN
THE COMPANY.
As of January 2, 1998, the Company had approximately 1,500 record holders of
Common Stock and believes, based on information received from the transfer agent
and those brokerage firms that hold the Company's securities in custodial or
"street" name, that such shares were beneficially owned by an aggregate of
approximately 10,070 beneficial owners. All the issued and outstanding shares of
the Non-voting Common Stock are held beneficially and of record by J.P. Morgan
Investment Corporation ("JPMIC"). As indicated above, all the issued and
outstanding shares of the Series A Preferred Stock and Series B Preferred Stock
are owned beneficially and of record by Amphion Ventures; all the issued and
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<PAGE>
outstanding shares of the Series C Preferred Stock are in the aggregate owned
beneficially and of record by Amphion Ventures and JHIA; and all the issued and
outstanding shares of the Series G Preferred Stock are in the aggregate owned
beneficially and of record by Amphion Ventures and Antiope Partners. Based on
estimated stockholdings as of January 2, 1998, the Company estimates that, after
the reverse stock split, the Company will continue to have approximately the
same number of stockholders.
The Company currently is authorized under its Certificate of Incorporation
to issue 56,750,000 shares of the Common Stock. As of January 21, 1998, an
aggregate of 47,234,154 shares of the Common Stock were issued and outstanding.
The Reverse Stock Split will reduce the number of issued and outstanding shares
of the Common Stock to approximately 2,361,708; however, the number of
authorized shares will remain at 56,750,000. Following the Reverse Stock Split,
the Company would have a very large number of authorized but unissued shares of
Common Stock. Accordingly, if the Reverse Stock Split Proposal is adopted, the
Company will propose the Authorized Shares Proposal, which provides for the
decrease in the number of authorized shares of Common Stock from 56,750,000 to
6,250,000.
The par value of the Common Stock will remain at $.01 per share following
the Reverse Stock Split, and the number of shares of the Common Stock
outstanding will be reduced. As a consequence, the aggregate par value of the
outstanding Common Stock will be reduced, while the aggregate capital in excess
of par value attributable to the outstanding Common Stock for statutory and
accounting purposes will be correspondingly increased. The Reverse Stock Split
will not affect the Company's retained deficit, and stockholders' equity will
remain substantially unchanged.
If the Reverse Split is effected, the per share information and the average
number of shares outstanding as presented in previously issued consolidated
financial statements and other publicly available information of the Company
would be restated following the Effective Date to reflect the Reverse Split.
The Common Stock, but neither the Non-voting Common Stock nor any series of
Voting Preferred Stock, is currently listed on the Nasdaq SmallCap Market, under
the trading symbol LASX. In connection with the Reverse Stock Split Proposal and
the Name Change Proposal described below, the Company intends to request a new
symbol, "AXSI" to represent the Common Stock following effectiveness of such
Proposals, if available. See, "ITEM III. NAME CHANGE PROPOSAL."
IMPACT ON OPTIONS, WARRANTS, AND CONVERTIBLE SECURITIES
If the Reverse Stock Split is effected, the number of shares of Common Stock
that may be purchased upon the exercise of outstanding options, warrants, and
other securities convertible into, or exercisable or exchangeable for, shares of
Common Stock, including without limitation the Series F Preferred Stock (to the
extent any remain outstanding) and the Series G Preferred Stock (collectively,
"Convertible Securities"), and the per share exercise or conversion prices
thereunder, will be adjusted appropriately pursuant to the terms of such
Convertible Securities, effective as of the Effective Date, so that the
aggregate number of shares of Common Stock issuable in respect of Convertible
Securities immediately following the Effective Date will be one-twentieth of the
number issuable in respect thereof immediately prior to the Effective Date, and
the aggregate exercise or conversion prices thereunder shall remain unchanged.
EXCHANGE OF STOCK CERTIFICATES AND PAYMENT FOR FRACTIONAL SHARES
The combination and reclassification of shares of Common Stock pursuant to
the Reverse Stock Split will occur automatically on the Effective Date without
any action on the part of stockholders of the Company and without regard to the
date certificates representing shares of Common Stock prior to the Reverse Stock
Split are physically surrendered for new certificates. If the number of shares
of Common Stock to which a holder is entitled as a result of the Reverse Stock
Split would otherwise include a fraction, the Company will pay to the
stockholder, in lieu of issuing fractional shares of the Company, cash in an
amount equal to the same fraction multiplied by twenty times the average closing
price of the Common Stock on the Nasdaq SmallCap Market for the five days
immediately preceding the Effective Date. A
7
<PAGE>
change in the closing price of the Common Stock will affect the amount received
by stockholders in lieu of fractional shares.
As soon as practicable after the Effective Date, transmittal forms will be
mailed to each holder of record of certificates for shares of Common Stock to be
used in forwarding such certificates for surrender and exchange for certificates
representing the number of shares of Common Stock such stockholder is entitled
to receive as a consequence of the Reverse Stock Split. The transmittal forms
will be accompanied by instructions specifying other details of the exchange.
Upon receipt of such transmittal form, each stockholder should surrender the
certificates representing shares of Common Stock prior to the Reverse Stock
Split, in accordance with the applicable instructions. Each holder who
surrenders certificates will receive new certificates representing the whole
number of shares of Common Stock that he holds as a result of the Reverse Stock
Split and any cash payable in lieu of a fractional share. STOCKHOLDERS SHOULD
NOT SEND THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM.
After the Effective Date, each certificate representing shares of Common
Stock outstanding prior to the Effective Date (an "old certificate") will, until
surrendered and exchanged as described above, be deemed, for all corporate
purposes, to evidence ownership of the whole number of shares of Common Stock,
and the right to receive from the Company the amount of cash for any fractional
shares, into which the shares of Common Stock evidenced by such certificate have
been converted by the Reverse Stock Split, except that the holder of such
unexchanged certificates will not be entitled to receive any dividends or other
distributions payable by the Company after the Effective Date, until the old
certificates have been surrendered. Such dividends and distributions, if any,
will be accumulated, and at the time of surrender of the old certificates, all
such unpaid dividends or distributions will be paid without interest.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion describes certain federal income tax consequences
of the Reverse Stock Split. This discussion is based upon the Internal Revenue
Code of 1986 (the "Code"), existing and proposed regulations thereunder, reports
of congressional committees, judicial decisions, and current administrative
rulings and practices, all as amended and in effect on the date hereof. Any of
these authorities could be repealed, overruled, or modified at any time. Any
such change could be retroactive and, accordingly, could cause the tax
consequences to vary substantially from the consequences described herein. No
ruling from the Internal Revenue Service (the "IRS") with respect to the matters
discussed herein has been requested, and there is no assurance that the IRS
would agree with the conclusions set forth in this discussion. All stockholders
should consult with their own tax advisors.
This discussion may not address certain federal income tax consequences that
may be relevant to particular stockholders in light of their personal
circumstances or to certain types of stockholders (such as dealers in
securities, insurance companies, foreign individuals and entities, financial
institutions, and tax-exempt entities) who may be subject to special treatment
under the federal income tax laws. This discussion also does not address any tax
consequences under state, local, or foreign laws.
STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISERS AS TO THE PARTICULAR
TAX CONSEQUENCES TO THEM OF THE REVERSE SPLIT, INCLUDING THE APPLICABILITY OF
ANY STATE, LOCAL, OR FOREIGN TAX LAWS, CHANGES IN APPLICABLE TAX LAWS, AND ANY
PENDING OR PROPOSED LEGISLATION.
The Company should not recognize any gain or loss as a result of the Reverse
Stock Split. No gain or loss should be recognized by a stockholder who receives
only Common Stock upon the Reverse Stock Split. A stockholder who receives cash
in lieu of a fractional share of Common Stock that otherwise would be held as a
capital asset generally should recognize capital gain or loss on an amount equal
to the difference between the cash received and his basis in such fractional
share of Common Stock. For this purpose, a stockholder's basis in such
fractional share of Common Stock will be determined as if the stockholder
actually received such fractional share. Except as provided with respect to
fractional shares, the aggregate
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<PAGE>
tax basis of the shares of Common Stock held by a stockholder following the
Reverse Stock Split will equal the stockholder's aggregate basis in the Common
Stock held immediately prior to the Reverse Stock Split and generally will be
allocated among the shares of Common Stock held following the Reverse Stock
Split on a pro-rata basis. Stockholders who have used the specific
identification method to identify their basis in shares of Common Stock combined
in the Reverse Stock Split should consult their own tax advisors to determine
their basis in the post-Reverse Stock Split shares Common Stock received in
exchange therefor.
OTHER NASDAQ REQUIREMENTS
In addition to the minimum bid price per share requirement described above,
the Common Stock's continued listing on the Nasdaq SmallCap Market is subject to
the maintenance of other quantitative and non-quantitative requirements, as set
forth in the New Nasdaq Listing Requirements. In particular, the New Nasdaq
Listing Requirements require that a company currently included in Nasdaq meet
each of the following standards to maintain its continued listing: (i) either
(A) net tangible assets (defined as total assets, minus goodwill, minus total
liabilities) of $2 million, (B) total market capitalization of $35 million, or
(C) net income (in the latest fiscal year or in two of the last three fiscal
years) of $500,000; and (ii) public float of at least 500,000 shares, with a
market value of at least $1 million; and (iii) minimum and bid price of $1; and
(iv) at least two market makers; and (v) at least 300 round lot beneficial
shareholders; and (vi) compliance with certain corporate governance
requirements. Although the Company believes that it will meet such requirements
at the time that the New Nasdaq Listing Requirements go into effect, there can
be no assurances that such will be the case, or that continued losses or other
factors beyond the control of the Company will not cause the Company to fail to
meet such requirements.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
REVERSE STOCK SPLIT PROPOSAL.
ITEM II. AUTHORIZED SHARES PROPOSAL
GENERAL
At the Special Meeting, assuming approval of the Reverse Stock Split
Proposal, the stockholders of the Company will consider and vote upon the
Authorized Shares Proposal. The Authorized Shares Proposal provides for the
amendment of the Certificate of Incorporation of the Company to reduce the
number of authorized shares of the Company's Common Stock from 56,750,000 to
6,250,000. The Authorized Shares Proposal will not be presented to the
stockholders for consideration at the Special Meeting unless the Reverse Stock
Split Proposal is approved. It is important to note that although the Authorized
Shares Proposal will result in a numeric decrease in the number of shares of
Common Stock authorized, the combination of the Reverse Stock Proposal and the
Authorized Shares Proposal will result in an increase in the number of
authorized but unissued shares as a percentage of shares authorized. The
following table shows the change in the number of shares of Common Stock
authorized, issued and outstanding, and authorized but unissued, and the change
in the number of authorized but unissued shares as a percentage of authorized
shares, as a result of the Authorized Shares Proposal and the Reverse Stock
Split Proposal:
<TABLE>
<CAPTION>
AFTER GIVING
PRIOR TO GIVING EFFECT TO
COMMON STOCK EFFECT TO PROPOSALS PROPOSALS
- ------------------------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
Total Authorized......................................................... 56,750,000 6,250,000
Issued and Outstanding(1)................................................ 47,234,154 2,361,708
Authorized but Unissued.................................................. 9,515,846 3,888,292
Percentage Authorized but Unissued....................................... 16.8% 62.2%
</TABLE>
- ------------------------
(1) Based on shares outstanding at January 21, 1998. Post-Reverse Stock Split
outstanding amounts have been calculated without regard for the payment of
cash for fractional shares, and accordingly are approximate.
9
<PAGE>
Subject to stockholder approval, the Authorized Shares Proposal will be
effected by the filing of an amendment to the Certificate of Incorporation of
the Company, substantially in the form of Appendix B. The change in the number
of authorized shares of Common Stock as provided for in the Authorized Shares
Proposal will be effective immediately upon the filing of such Certificate of
Amendment with the office of the Delaware Secretary of State.
REASONS FOR THE AUTHORIZED SHARES PROPOSAL
The purpose of the Authorized Shares Proposal is to decrease the number of
authorized shares of Common Stock following effectiveness of the Reverse Stock
Split, so that the number of authorized but unissued shares of Common Stock
following the Reverse Stock Split bears a more appropriate relation to the total
number of shares of Common Stock then authorized. As the Reverse Stock Split
Proposal will reduce the number of issued and outstanding shares of Common Stock
by 95%, but will not affect the number of shares of Common Stock authorized, the
Reverse Stock Split will greatly increase the percentage that the number of
authorized shares of Common Stock bears to the number of shares of Common Stock
issued and outstanding. The Authorized Shares Proposal will reduce the number of
shares of Common Stock authorized, but will not reduce the number of such
authorized shares to the same degree that the Reverse Stock Split will reduce
the number of shares of Common Stock outstanding. Accordingly, the number of
authorized but unissued shares, as a percentage of the number of shares
authorized, will be increased by the combination of the Authorized Shares
Proposal and the Reverse Stock Split Proposal. The Authorized Shares Proposal
will not be presented to the stockholders of the Company at the Special Meeting
unless the Reverse Stock Split Proposal has been approved.
The following table shows the number of shares of Common Stock authorized,
issued and outstanding, reserved for issuance, and available for future
purposes, after giving effect to the Authorized Shares Proposal and the Reverse
Stock Split:
<TABLE>
<CAPTION>
NUMBER OF SHARES
ASSUMING APPROVAL OF
REVERSE
STOCK SPLIT PROPOSAL AND
AUTHORIZED SHARES PROPOSAL
---------------------------
<S> <C>
Authorized........................................................................... 6,250,000
Issued and Outstanding(1)............................................................ 2,361,708
Reserved for Issuance upon the Conversion of
Outstanding Convertible Preferred Stock(2)......................................... 935,676
Reserved for Issuance upon the Exercise of
Outstanding Common Stock Warrants and Convertible Notes(3)......................... 459,883
Reserved for Issuance pursuant to Outstanding Stock
Options(4)......................................................................... 30,778
Reserved for Issuance pursuant to the Technology
Acquisition Agreement(5)........................................................... 1,000,000
Available for Other Corporate Purposes............................................... 1,461,955
</TABLE>
- ------------------------
(1) Based on the number of shares of Common Stock issued and outstanding on
January 8, 1998.
(2) Based on Single Vote Preferred Stock and Series G Preferred Stock
outstanding on January 21, 1998.
(3) Includes shares issuable upon exercise of all outstanding common stock
warrants as of January 21, 1998, whether or not then exercisable and whether
or not the exercise price thereof is greater or less than the current market
price per share of Common Stock.
(4) Includes shares issuable upon the conversion of an outstanding fixed price
convertible promissory note, and the exercise of all outstanding options as
of January 21, 1998, whether or not then
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<PAGE>
exercisable and whether or not the exercise price thereof is greater or less
than the current market price per share of Common Stock.
(5) See "RECENT DEVELOPMENTS--Technology Acquisition Agreement," below.
Authorized shares of Common Stock in excess of the number of shares of
Common Stock issued and outstanding, reserved for issuance upon the conversion,
exercise or exchange of outstanding Convertible Securities or otherwise reserved
for issuance may be used for any proper corporate purposes that may in the
future from time to time be identified by the Board of Directors, such as
financing transactions, possible future acquisitions, employee benefits, and
other corporate purposes. The Board of Directors believes that the availability
of such additional shares gives the Company the flexibility necessary to take
advantage of opportunities that may arise, without the delay and expense of a
stockholders' meeting.
The Company currently intends to seek additional financing through the
possible public or private sale of its securities. The availability of
authorized but unissued shares of Common Stock would permit the Company to issue
Common Stock or Convertible Securities in connection with any such financing, if
the Board of Directors determines that such issuance is in the best interests of
the Company and its stockholders. The Company has not determined how many of its
authorized but unissued shares it intends to issue for any of the above
purposes, if any, or when, if ever, it intends to issue such shares. The Board
of Directors does not intend to solicit stockholder authorization for the
issuance of any additional shares of Common Stock, unless required by applicable
law or the requirements of Nasdaq.
CERTAIN POSSIBLE EFFECTS OF AUTHORIZED BUT UNISSUED SHARES
The Company's existing stockholders do not have any preemptive rights under
the Certificate of Incorporation of the Company or otherwise to purchase any
shares of Common Stock that may from time to time be issued by the Company. It
is possible that shares of Common Stock may be issued at a time and under
circumstances that may dilute the voting power of existing stockholders,
increase or decrease earnings per share and/or increase or decrease the book
value per share of the shares then outstanding. The Authorized Shares Proposal
would significantly reduce the number of shares of Common Stock authorized
following effectiveness of the Reverse Stock Split, but the combination of the
Reverse Stock Split and the Authorized Shares Proposal would nevertheless result
in an increase in the number of authorized but unissued shares of Common Stock,
as a percentage of the total number of shares of Common Stock authorized.
The ability of the Board of Directors to issue additional shares of Common
Stock without further stockholder approval could have the effect of discouraging
any possible unsolicited efforts to acquire control of the Company. However,
neither the Authorized Shares Proposal nor the Reverse Stock Split Proposal is
intended as an anti-takeover device, and no specific anti-takeover measures are
currently being contemplated by the Board of Directors. Management is not aware
of any third party that may currently intend to accumulate the Company's Common
Stock or to obtain control of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
THE AUTHORIZED SHARES PROPOSAL.
11
<PAGE>
ITEM III. NAME CHANGE PROPOSAL
At the Special Meeting, the stockholders of the Company will also consider
and vote upon the Name Change Proposal. The Name Change Proposal provides for
the Company to change its corporate name from "Lasertechnics, Inc." to "AXCESS
Inc." If approved by the stockholders, such change in corporate name will be
effected by an amendment to the Company's Certificate of Incorporation in the
form of Appendix C to this Proxy Statement, and will become effective upon the
filing of such amendment with the Secretary of State of Delaware. The Company
will also seek to change its Nasdaq trading symbol from "LASX" to "AXSI",
subject to availability, effective upon the approval of the Name Change
Proposal.
The purpose of the Name Change Proposal is to change the corporate name of
the Company to better reflect the current primary business focus of the Company
and its subsidiary Sandia Imaging Systems Corporation ("Sandia"). Sandia is
currently principally engaged in the businesses of (a) distributing and
reselling card printers and printer consumables, (b) service bureau production
of wallet-sized ID cards for business customers, and (c) designing and marketing
corporate access control systems based on card-mounted biometric and other
verification.
The name Lasertechnics is primarily associated with the Company's other
subsidiary, Lasertechnics Marking Corporation ("Lasertechnics Marking"), which
designs and manufactures laser marking systems for coding products and packages
to facilitate inventory control, liability containment and/or freshness dating.
Lasertechnics Marking will continue to use and promote the Lasertechnics name as
part of its corporate name and identity.
The Company anticipates that the cost of implementing and publicizing its
change of name will not be significant.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE IN FAVOR OF THE NAME CHANGE PROPOSAL.
12
<PAGE>
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED SHARES
The authorized capital stock of the Company consists of (a) 56,750,000
shares of Common Stock, (b) 2,250,000 shares of Non-voting Common Stock, and (c)
7,000,000 shares of Preferred Stock, par value $.01 per share (the "Preferred
Stock"), issuable in series. To date, seven series of Preferred Stock have been
authorized, of which five are currently outstanding: (i) a series of 1,500,000
shares of Preferred Stock designated the Series A Convertible Preferred Stock;
(ii) a series of 1,500,000 shares of Preferred Stock designated the Series B
Convertible Preferred Stock; (iii) a series of 1,500,000 shares of Preferred
Stock designated the Series C Convertible Preferred Stock; (iv) a series of 850
shares of Preferred Stock designated the Series D Convertible Preferred Stock;
(v) a series of 50 shares of Preferred Stock designated the Series E Convertible
Preferred Stock; (vi) a series of 900 shares of Preferred Stock designated the
Series F Convertible Preferred Stock; and (vi) as series of 2,500 shares of
Preferred Stock designated the Series G Convertible Preferred Stock. See,
"--Preferred Stock," below.
As of January 8, 1998, a total of 47,234,154 shares of Common Stock and
2,249,842 shares of Non-voting Common Stock were issued and outstanding. As of
January 21, 1998, a total of 2,919,511.24 shares of Preferred Stock were issued
and outstanding as follows: (i) 1,153,846 shares of Series A Preferred Stock;
(ii) 1,056,338 shares of Series B Preferred Stock; (iii) 708,530 shares of
Series C Preferred Stock; (iv) 7.5 shares of Series F Preferred Stock, all of
which are subject to a lock-up agreement, pending an agreed future redemption;
and (v) 789.74 shares of Series G Preferred Stock. No shares of Series D
Preferred Stock or Series E Preferred Stock are issued or outstanding. All
outstanding shares of the Company's Common Stock, Non-voting Common Stock and
Preferred Stock are fully paid and nonassessable. None of the shares of Common
Stock, Nonvoting Common Stock or Preferred Stock has preemptive rights.
COMMON STOCK AND NON-VOTING COMMON STOCK
Each share of Common Stock entitles its holder to one vote on all matters
submitted to a vote of stockholders. Holders of Non-voting Common Stock do not
have voting rights, except as otherwise provided in the Company's Certificate of
Incorporation, or as required by applicable law. Holders of Non-voting Common
Stock are entitled to vote as a separate class on any amendment to the
Certificate of Incorporation that adversely affects the powers, preferences or
special rights of holders of Non-voting Common Stock, and vote together with the
holders of the Common Stock, as a single class, with respect to any proposal to
increase or decrease the number of authorized shares of Common Stock or
Non-voting Common Stock, and on certain other specified matters. Holders of
Non-voting Common Stock are entitled to one vote per share for matters on which
such holders are entitled to vote. The Common Stock and Non-voting Common Stock
are otherwise identical in all respects.
Regulated Stockholders (as defined in the Certificate of Incorporation) are
entitled to convert shares of Common Stock into shares of Non-voting Common
Stock. Subject to certain conditions, all stockholders are entitled to convert
shares of Non-voting Common Stock into shares of Common Stock. Upon conversion
of shares of the Common Stock or Non-voting Common Stock, the shares of Common
Stock or Non-voting Common Stock so converted will not be eligible for
reissuance except for reissuance in connection with the conversion of shares of
Common Stock held by Regulated Stockholders into shares of Non-voting Stock or
the conversion of shares of Non-voting Common Stock into shares of Common Stock.
Subject to certain conditions, the Company may not convert or directly or
indirectly redeem, purchase or otherwise acquire any shares of Common Stock or
take any other action affecting the voting rights of such shares, if such action
would increase the percentage of outstanding voting securities owned or
controlled by any Regulated Stockholder.
The holders of Common Stock and Non-voting Common Stock are entitled to
receive ratably such dividends, if any, as are declared by the Company's Board
of Directors out of funds legally available for that purpose, subject to the
rights of holders of Preferred Stock. In the event of the Company's liquidation,
13
<PAGE>
dissolution or winding up, the holders of Common Stock and Non-voting Common
Stock would be entitled to share ratably in all assets of the Company available
for distribution to holders of the Common Stock and Non-voting Common Stock,
subject to the preferential rights of holders, if any, of shares of Preferred
Stock. See "--Preferred Stock" below.
The Company's Certificate of Incorporation provides that if the Company in
any manner subdivides (by stock split, stock dividend or otherwise) or combines
(by reverse stock split or otherwise) the outstanding shares of the Common Stock
or the Non-voting Common Stock, the outstanding shares of the other such class
shall be proportionately subdivided or combined, as the case may be. For
purposes of the foregoing, if a dividend of shares of Common Stock were paid on
the outstanding shares of Common Stock, a corresponding dividend of shares of
Non-voting Common Stock would be required to be paid on the shares of Non-voting
Common Stock.
PREFERRED STOCK
The Certificate of Incorporation authorizes the Company's Board of Directors
to issue shares of Preferred Stock in one or more series and to fix and state
the designations, powers, preferences, qualifications, limitations, restrictions
and relative rights of the shares of each such series. The Board of Directors
may determine, without any vote or action by the holders of either Common Stock
or Non-voting Common Stock, among other things, the payment and rates of
dividends, if any, whether dividends are to be cumulative or noncumulative,
whether the Preferred Stock is to be subject to redemption and, if so, the
manner of redemption and the redemption price, the preference of any series of
Preferred Stock over any other series of Preferred Stock or Common Stock or
Nonvoting Common Stock on liquidation, dissolution, distribution of assets or
winding up of the Company, any sinking fund or other retirement provisions for
the Preferred Stock and any conversion or exchange rights or other privilege of
the holders to acquire shares of any other series of Preferred Stock or Common
Stock or Non-voting Common Stock. The Board of Directors may also determine the
number of shares in each series of Preferred Stock, the voting rights of each
such series (subject to any requirements of applicable law) and any stated value
applicable to the shares of any series of Preferred Stock.
SERIES A PREFERRED STOCK. The Board of Directors has designated a maximum of
1,500,000 shares of the Preferred Stock as Series A Preferred Stock, $1.30
stated value per share. Each share of Series A Preferred Stock is convertible at
any time, at the option of the holder, into one share of Common Stock, subject
to anti-dilution adjustments. All shares of Series A Preferred Stock are
entitled to vote on matters brought before the Company's stockholders as if such
shares of Series A Preferred Stock had been converted into shares of Common
Stock, in addition to any class voting rights provided by law.
Subject to the prior preferences and other rights of any class or series of
the Company's capital stock ranking prior to the Series A Preferred Stock, the
holders of shares of Series A Preferred Stock are entitled to receive and,
subject to any prohibition or restriction contained in any instrument evidencing
indebtedness of the Company, the Company will be obligated to pay, preferential
cumulative cash dividends on such shares out of funds legally available
therefor. Dividends are payable quarterly and accrue cumulatively, whether or
not such dividends are declared or funds are legally or contractually available
for payment of dividends, at a rate per annum as follows: (i) 5% from January 1,
1996 to March 31, 1996; (ii) 7 1/2% from April 1, 1996 through June 30, 1996;
and (iii) 10% from July 1, 1996 and thereafter. Dividends are payable in cash or
in additional shares of Series A Preferred Stock, but since July 1, 1996, only
the holders of the Series A Preferred Stock, rather than the Company, may make
such election. Any dividends paid in kind on the Series A Preferred Stock are to
be valued on the basis of the stated value of the Series A Preferred Stock.
Upon dissolution, liquidation or winding up of the Company, holders of the
Series A Preferred Stock will be entitled, after payment of preferential amounts
on any securities ranking senior to the Series A Preferred Stock, to receive
from the assets of the Company available for distribution to stockholders an
14
<PAGE>
amount in cash, per share, equal to the stated value of such share and all
accrued dividends attributable to such share at the time of such dissolution,
liquidation or winding up of the Company. The Series A Preferred Stock ranks
senior to the Common Stock and Nonvoting Common Stock as to any such
distributions and PARI PASSU with the Series B Preferred Stock, the Series C
Preferred Stock, the Series F Preferred Stock and the Series G Preferred Stock.
The Series A Preferred Stock is subject to optional redemption at any time
by the Company, in whole or in part, at a redemption price per share equal to
the stated value of the shares of Series A Preferred Stock so redeemed and all
accrued unpaid dividends thereon. The Company's optional right of redemption is
subject to each Series A Preferred stockholder's right to convert such Series A
Preferred Stock into Common Stock within the 10 business days immediately
following the Company's notice of such redemption.
SERIES B PREFERRED STOCK. The Board of Directors has designated a maximum of
1,500,000 shares of the Preferred Stock as Series B Preferred Stock, $1.30
stated value per share. Each share of Series B Preferred Stock is convertible at
any time, at the option of the holder, into one share of Common Stock, subject
to anti-dilution adjustments. All shares of Series B Preferred Stock are
entitled to vote on matters brought before the Company's stockholders as if such
shares of Series B Preferred Stock had been converted into shares of Common
Stock, in addition to any class voting rights provided by law.
Subject to the prior preferences and other rights of any class or series of
the Company's capital stock ranking prior to the Series B Preferred Stock, the
holders of shares of Series B Preferred Stock are entitled to receive and,
subject to any prohibition or restriction contained in any instrument evidencing
indebtedness of the Company, the Company will be obligated to pay, preferential
cumulative cash dividends on such shares out of funds legally available
therefor. Dividends are payable quarterly and accrue cumulatively, whether or
not such dividends are declared or funds are legally or contractually available
for payment of dividends, at a variable rate per annum as follows: (i) 5% from
January 1, 1996 to March 31, 1996; (ii) 7 1/2% from April 1, 1996 through June
30, 1996; and (iii) 10% from July 1, 1996 and thereafter. Dividends are payable
in cash or in additional shares of Series B Preferred Stock, but since July 1,
1996, only holders of Series B Preferred Stock, rather than the Company, may
make such election. Any dividends paid in kind on the Series B Preferred Stock
are to be valued on the basis of the stated value of the Series B Preferred
Stock.
Upon dissolution, liquidation or winding up of the Company, holders of the
Series B Preferred Stock will be entitled, after payment of preferential amounts
on any securities ranking senior to the Series B Preferred Stock, to receive
from the assets of the Company available for distribution to stockholders an
amount in cash, per share, equal to the stated value of such share and all
accrued dividends attributable to such share at the time of such dissolution,
liquidation or winding up of the Company. The Series B Preferred Stock ranks
senior to the Common Stock and Nonvoting Common Stock as to any such
distributions and PARI PASSU with the Series A Preferred Stock, the Series C
Preferred Stock, the Series F Preferred Stock and the Series G Preferred Stock.
The Series B Preferred Stock is subject to optional redemption at any time
by the Company, in whole or in part, at a redemption price per share equal to
the stated value of the shares of Series B Preferred Stock so redeemed and all
accrued dividends thereon. The Company's optional right of redemption is subject
to each Series B Preferred stockholder's right to convert such Series B
Preferred Stock into Common Stock within the 10 business days immediately
following the Company's notice of such redemption.
SERIES C PREFERRED STOCK. The Board of Directors has designated a maximum of
1,500,000 shares of the Preferred Stock as Series C Preferred Stock, $1.51
stated value per share. Each share of Series C Preferred Stock is convertible at
any time, at the option of the holder, into one share of Common Stock, subject
to anti-dilution adjustments. All shares of Series C Preferred Stock are
entitled to vote on matters brought
15
<PAGE>
before the Company's stockholders as if such shares of Series C Preferred Stock
had been converted into shares of Common Stock, in addition to any class voting
rights provided by law.
Subject to the prior preferences and other rights of any class or series of
the Company's capital stock ranking prior to the Series C Preferred Stock, the
holders of shares of Series C Preferred Stock are entitled to receive and,
subject to any prohibition or restriction contained in any instrument evidencing
indebtedness of the Company, the Company will be obligated to pay, preferential
cumulative cash dividends on such shares out of funds legally available
therefor. Dividends are payable quarterly and accrue cumulatively, whether or
not such dividends are declared or funds are legally or contractually available
for payment of dividends, at a rate of 10% per annum commencing January 1, 1996.
Dividends are payable in cash or in additional shares of Series C Preferred
Stock, but since October 1, 1996, only holders of Series C Preferred Stock,
rather than the Company, may make such election. Any dividends paid in kind on
the Series C Preferred Stock are to be valued on the basis of the stated value
of the Series C Preferred Stock.
Upon dissolution, liquidation or winding up of the Company, holders of the
Series C Preferred Stock will be entitled, after payment of preferential amounts
on any securities ranking senior to the Series C Preferred Stock, to receive
from the assets of the Company available for distribution to stockholders an
amount in cash, per share, equal to the stated value of such share and all
accrued dividends attributable to such share at the time of such dissolution,
liquidation or winding up of the Company. The Series C Preferred Stock ranks
senior to the Common Stock and Nonvoting Common Stock as to any such
distributions and PARI PASSU with the Series A Preferred Stock, the Series B
Preferred Stock, the Series F Preferred Stock and the Series G Preferred Stock.
The Series C Preferred Stock is subject to optional redemption at any time
by the Company, in whole or in part, at a redemption price per share equal to
the stated value of the shares of Series C Preferred Stock so redeemed and all
accrued dividends thereon. The Company's optional right of redemption is subject
to each Series C Preferred stockholder's right to convert such Series C
Preferred Stock into Common Stock within the 10 business days immediately
following the Company's notice of such redemption.
SERIES F PREFERRED STOCK. The Board of Directors has designated a maximum of
900 shares of the Preferred Stock as Series F Preferred Stock. An aggregate of
283 shares of Series F Preferred Stock were originally issued, of which 50
shares were converted or redeemed prior to December 1997 and the remainder
converted, redeemed or restructured pursuant to the December 1997 Restructuring
(other than 7.5 shares which remain outstanding but are subject to a lock-up
agreement pending consummation of an agreed future redemption). See "RECENT
DEVELOPMENTS--Restructuring of Variable Price Convertible Securities." Shares of
Series F Preferred Stock heretofore converted or redeemed have been cancelled
and have reverted to the status of authorized but unissued shares of Preferred
Stock of no particular designation. Each share of Series F Preferred Stock is
convertible at the option of the holder (subject to the conditions described in
the next paragraph) into Common Stock at the Preferred Conversion Rate, subject
to anti-dilution provisions. All shares of Series F Preferred Stock outstanding
on July 30, 1999 are subject to automatic conversion at the Preferred Conversion
Rate then in effect. Upon the election of a holder of shares of Series F
Preferred Stock to convert such shares into Common Stock, the Company, subject
to certain conditions, shall have the right to redeem, rather than convert, such
shares. If the Company exercises its right to redeem shares of Series F
Preferred Stock as described in the preceding sentence, but fails to pay timely
the holders thereof the redemption price therefor, the Company will be required
to issue shares of Common Stock to such holders.
During the period from and including July 14, 1997, to and including
February 13, 1998 (the "Standstill Period"), no holder of Series F Preferred
Stock is entitled to convert any shares of Series F Preferred Stock held by such
holder, except to the extent that the aggregate number of shares of Series F
Preferred Stock converted by such holder (or redeemed by the Company in lieu of
conversion) during the Standstill Period does not, during the period indicated
below, exceed the applicable aggregate percentage
16
<PAGE>
set forth below of the number of shares of Series F Preferred Stock held by such
holder on the first day of the Standstill Period:
<TABLE>
<CAPTION>
PORTION OF STANDSTILL PERIOD AGGREGATE PERCENTAGE
- --------------------------------------------------------------------------------------- -----------------------------
<S> <C>
From and including July 14, 1997, to and including October 13, 1997.................... 25%
From and including October 14, 1997, to and including November 13, 1997................ 40%
From and including November 14, 1997, to and including December 13, 1997............... 55%
From and including December 14, 1997, to and including January 13, 1998................ 70%
From and including January 14, 1998, to and including February 13, 1998................ 85%
From and after February 14, 1998....................................................... 100%
</TABLE>
Any holder (a "Transferee") that acquires Series F Preferred Stock during
the Standstill Period from another holder (the "Transferor") in any single
transaction (the "Transfer") shall be deemed (i) to have held at the beginning
of the Standstill Period a number of shares of Series F Preferred Stock equal to
the product of (x) the number of shares of Series F Preferred Stock held by the
Transferor at the beginning of the Standstill Period times (y) the Acquired
Percentage; and (ii) to have converted (or have had redeemed by the Company in
lieu of conversion) during the period from the beginning of the Standstill
Period through the date of such Transfer a number of shares of Series F
Preferred Stock equal to the product of (x) the number of shares of Series F
Preferred Stock converted by such Transferor (or redeemed by the Company in lieu
of conversion) from the beginning of the Standstill Period through the date of
such Transfer times (y) the Acquired Percentage. As used in this paragraph, the
term "Acquired Percentage" means the percentage that the number of shares of
Series F Preferred Stock acquired by the Transferee from the Transferor in such
Transfer bears to the total number of shares of Series F Preferred Stock held by
the Transferor immediately before giving effect to such Transfer. Upon any
Transfer, the Transferor shall be deemed (i) to have held at the beginning of
the Standstill Period a number of shares of Series F Preferred Stock equal to
the product of (x) the number of shares of Series F Preferred Stock held by the
Transferor at the beginning of the Standstill Period times (y) the difference
between 100% and the Acquired Percentage; and (ii) to have converted (or have
had redeemed by the Company in lieu of conversion) during the period from the
beginning of the Standstill Period through the date of such Transfer a number of
shares of Series F Preferred Stock equal to the product of (x) the number of
shares of Series F Preferred Stock converted by such Transferor (or redeemed by
the Company in lieu of conversion) from the beginning of the Standstill Period
through the date of such Transfer times (y) the difference between 100% and the
Acquired Percentage.
Holders of Series F Preferred Stock have no voting power whatsoever, except
as otherwise provided by the Delaware General Corporation Law, and no holder of
Series F Preferred Stock (i) may vote or otherwise participate in any proceeding
in which actions are to be taken by the Company or the Company's stockholders or
(ii) is entitled to notification as to any meeting of the Company's
stockholders, except for meetings regarding any major corporate events affecting
the Company. However, as long as shares of Series F Preferred Stock remain
outstanding, the Company is not permitted, without first obtaining approval of
at least 75% of the then outstanding shares of Series F Preferred Stock and at
least 75% of the outstanding holders of the Series F Preferred Stock, to do any
of the following: (i) alter or change the rights, preferences or privileges of
the Series F Preferred Stock or any securities ranking senior to the Series F
Preferred Stock to adversely affect the Series F Preferred Stock; (ii) create
any new class or series of capital stock having a preference over the Series F
Preferred Stock with respect to distributions pursuant to the liquidation,
dissolution or winding up of the Company or increase the size of the authorized
number of shares of Series F Preferred Stock; or (iii) do any act or thing not
authorized or contemplated by the Series F Preferred Stock Certificate of
Designation which would result in taxation of the holders of shares of Series F
Preferred Stock under Section 305 of the Internal Revenue Code of 1986, as
amended.
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<PAGE>
The holders of Series F Preferred Stock are not entitled to receive any
dividends. However, prior to conversion, the Series F Preferred Stock accrues
the Series F Premium, which is payable in Common Stock upon conversion or
redemption at the Preferred Conversion Rate or redemption price then in effect.
Upon dissolution, liquidation or winding up of the Company or, in certain
circumstances, upon a Change in Control (as such term is defined in the
Certificate of Designations relating to the Series F Preferred Stock), each
holder of Series F Preferred Stock will be entitled, after payment of
preferential amounts on any securities ranking senior to the Series F Preferred
Stock, to receive from the assets of the Company available for distribution to
stockholders an amount in cash, per share, equal to the sum of (i) $10,000 per
share of Series F Preferred Stock so held and (ii) the Series F Premium that has
accrued since the Initial Funding Date (as such term is defined in the
Certificate of Designations relating to the Series F Preferred Stock)
(collectively, the "Series F Stated Value"). The Series F Preferred Stock ranks
senior to the Common Stock and Non-voting Common Stock as to any such
distributions and PARI PASSU with the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock and the Series G Preferred Stock.
The Series F Preferred Stock is subject to optional redemption by the
Company at any time after July 30, 1998, in whole or in part, subject to a
minimum redemption of such Series F Preferred Stock having an aggregate Series F
Stated Value of at least $1,000,000. If the Company redeems any Series F
Preferred Stock it must do so at a redemption price per share equal to a
percentage ranging from 130% to 115% of the Series F Stated Value of the shares
of Series F Preferred Stock so redeemed, depending on the date of such
redemption. The Company's optional right of redemption is subject to each Series
F Preferred Stock stockholder's right to convert such Series F Preferred Stock
into Common Stock within the 30 business days immediately following the
Company's notice of such redemption.
Any shares of Series F Preferred Stock that are converted or redeemed shall
be canceled and shall return to the status of authorized but unissued shares of
Preferred Stock of no designated series, and shall not be issuable by the
Company as Series F Preferred Stock.
SERIES G PREFERRED STOCK. The Board of Directors has designated 2,500 shares
of the Preferred Stock as Series G Preferred Stock, par value $.01 per share.
Each share of Series G Preferred Stock has a stated value of $10,000 (the
"Original Series G Issue Price") and is convertible into Common Stock at any
time, at the option of the holder, at a conversion rate equal to the Original
Series G Issue Price divided by the Conversion Price of the Series G Preferred
Stock, as in effect from time to time. Such Conversion Price shall initially be
$.50 per share of Common Stock, subject to anti-dilution adjustments (the
"Conversion Price"). If the Reverse Stock Split Proposal is approved by the
stockholders of the Company and the Reverse Stock Split is effected, the
Conversion Price will automatically be adjusted to $10.00 per share (i.e.,
twenty times the Conversion Price as previously in effect). Holders of shares of
Series G Preferred Stock are entitled to vote on all matters brought before the
Company's stockholders as if such shares of Series G Preferred Stock had been
converted into shares of Common Stock, in addition to any class voting rights
provided by law.
Subject to the prior preferences and other rights of any class or series of
the Company's capital stock ranking prior to the Series G Preferred Stock, and
in preference to the holders of shares of capital stock ranking junior to the
Series G Preferred Stock as to dividends, the holders of Series G Preferred
Stock are entitled to receive dividends on each share of Series G Preferred
Stock held of record at the annual rate of 8% of the Original Series G Issue
Price, payable semi-annually, to the extent of funds legally available therefor.
Such dividends shall be cumulative, shall accrue on each share on a daily basis
(calculated on the basis of a 360-day year, whether or not earned or declared,
from the date of original issue of such shares) and shall be payable in arrears,
when, as and if declared by the Board, in cash or additional shares of Series G
Preferred Stock, or any combination thereof, as determined from time to time by
the Company in its sole discretion. If at any time that any shares of Series G
Preferred Stock are outstanding, the closing bid price per share of the Common
Stock on The Nasdaq Stock Market (or, if the Common Stock is not
18
<PAGE>
then included in Nasdaq, but is listed on any national securities exchange, on
the principal national securities exchange on which the Common Stock is then
listed) remains above $1.00 per share (on a pre-Reverse Stock Split basis) for
20 consecutive trading days, then, commencing on such 20th trading day, the
cumulative dividend will not be payable; provided, however, that if the closing
bid price per share of the Common Stock remains below $1.00 for 20 consecutive
trading days, then the dividend will resume as of such 20th day.
Upon dissolution, liquidation or winding up of the Company, holders of the
Series G Preferred Stock will be entitled, after payment of preferential amounts
on any securities ranking senior to the Series G Preferred Stock, to receive
from the assets of the Company available for distribution to stockholders an
amount in cash, per share, equal to the Original Series G Issue Price, plus any
and all accrued unpaid dividends attributable to such share at the time of such
dissolution, liquidation or winding up of the Company. The Series G Preferred
Stock ranks senior to the Common Stock and Non-voting Common Stock as to any
such distributions and PARI PASSU with the Series A Preferred Stock, the Series
B Preferred Stock, the Series C Preferred Stock and the Series F Preferred
Stock.
The Series G Preferred Stock is not subject to optional redemption at any
time by the Company, in whole or in part, at a redemption price per share equal
to the Original Series G Issue Price plus any accrued unpaid dividends thereon.
The Company's optional right of redemption is subject to each Series G Preferred
Stock holder's right to convert such Series G Preferred Stock into Common Stock
within 10 business days after the Company's notice of redemption.
In addition to the rights and privileges of the Series G Preferred Stock, as
set forth in the Certificate of Designations with respect thereto, the Company
has agreed with the initial holders of the Series G Preferred Stock, that if, at
any time prior to December 31, 1999, the Company completes a financing with
third parties raising at least $3,000,000 in new equity, such initial holders
will have the non-assignable right, but not the obligation, to exchange all or a
portion of their shares of Series G Preferred Stock for shares of a new series
of preferred stock with substantially the same terms and conditions offered to
such third parties; provided that no such exchange will result in an increase in
the conversion price above $.50 per share (determined on a pre-Reverse Stock
Split basis).
19
<PAGE>
COMPARISON OF STOCKHOLDER RIGHTS
The following is a summary of certain provisions affecting, and differences
between, the rights of Company stockholders before and after adoption of the
Proposals. The Reverse Stock Split Proposal and the Authorized Shares Proposal,
separately or together, will alter stockholder rights. The Name Change Proposal
will not have any effect on the terms and provisions of the capital stock.
The effects of the Reverse Stock Split Proposal and the Authorized Shares
Proposal on the terms of the Common Stock, Non-voting Common Stock and Single
Vote Preferred Stock, and related stockholder rights, giving effect both to the
Reverse Stock Split alone and to the Reverse Stock Split and the Authorized
Shares Proposal together, are detailed in the following chart:
<TABLE>
<CAPTION>
GIVING EFFECT TO
THE REVERSE STOCK GIVING EFFECT
SPLIT PROPOSAL TO
CURRENT TERMS ONLY BOTH PROPOSALS
----------------- ------------------ --------------
<S> <C> <C> <C>
AUTHORIZED SHARES
Common Stock.............................................. 56,750,000 56,750,000 6,250,000
Non-voting Common Stock................................... 2,250,000 2,250,000 2,250,000
Series A Preferred Stock.................................. 1,500,000 1,500,000 1,500,000
Series B Preferred Stock.................................. 1,500,000 1,500,000 1,500,000
Series C Preferred Stock.................................. 1,500,000 1,500,000 1,500,000
OUTSTANDING SHARES
Common Stock (1).......................................... 47,234,154 2,361,708 2,361,708
Non-voting Common Stock................................... 2,249,842 112,492.1 112,492.1
Series A Preferred Stock.................................. 1,153,846 57,692.3 57,692.3
Series B Preferred Stock.................................. 1,056,338 52,816.9 52,816.9
Series C Preferred Stock.................................. 708,530 35,426.5 35,426.5
STATED VALUE
Series A Preferred Stock.................................. $1.30 $26.00 $26.00
Series B Preferred Stock.................................. $1.30 $26.00 $26.00
Series C Preferred Stock.................................. $1.51 $30.20 $30.20
PAR VALUE
Common Stock.............................................. $.01 $.01 $.01
Non-voting Common Stock................................... $.01 $.01 $.01
</TABLE>
The Series F Preferred Stock and the Series G Preferred Stock are not
directly modified by either of the Reverse Stock Split Proposal or by the
Authorized Shares Proposal. However, both the conversion rate of the Series F
Preferred Stock, and the conversion price of the Series G Preferred Stock, will
be adjusted automatically in proportion to the changes in the Common Stock
effected by the Reverse Stock Split Proposal and the Authorized Shares Proposal.
AUTHORIZED CAPITAL STOCK
The Reverse Stock Split Proposal will not have any effect on the Company's
authorized capital stock. If adopted by the stockholders at the Special Meeting,
the Authorized Shares Proposal will result in a reduction in the number of
shares of Common Stock authorized from 56,750,000 to 6,250,000. See, "ITEM II.
AUTHORIZED SHARES PROPOSAL--Effect of Authorized Shares Proposal." The
Authorized Shares Proposal will not effect the number of authorized shares of
any class or series of the Company's capital stock, other than the Common Stock.
20
<PAGE>
OUTSTANDING CAPITAL STOCK
If adopted by the stockholders at the Special Meeting, the Reverse Stock
Split Proposal will result in (i) a reduction in the number of shares of Common
Stock outstanding from 47,234,154 to approximately 2,361,708 (determined without
taking into account the effects of paying cash for fractional shares), (ii) a
reduction in the number of shares of Non-voting Common Stock outstanding from
2,249,842 to 112,492.1, (iii) a reduction in the number of shares of Series A
Preferred Stock outstanding from 1,153,846 to 57,692.3, (iv) a reduction in the
number of shares of Series B Preferred Stock outstanding from 1,056,338 to
52,816.9, and (v) a reduction in the number of shares of Series C Preferred
Stock outstanding from 708,530 to 35,426.5. The Authorized Shares Proposal will
not have any effect on the number of shares of capital stock of the Company
outstanding.
STATED CAPITAL
Each series of Single Vote Preferred Stock has a "stated value" per share.
This amount represents the base liquidation value and redemption price per share
of such series of preferred stock, as well as the base upon which cumulative
dividends are calculated on a percentage basis. The Reverse Stock Split Proposal
provides for the stated value per share of each series of Single Vote Preferred
Stock to be increased by multiplying the original stated value in each case by
twenty, so that the aggregate stated value of all shares of Single Vote
Preferred Stock outstanding immediately after the effectiveness of the Reverse
Stock Split equals the aggregate stated value of all shares of Single Vote
Preferred Stock outstanding immediately before the effectiveness of the Reverse
Stock Split. Accordingly, the Reverse Stock Split Proposal provides for an
increase in the stated value of the Series A Preferred Stock from $1.30 per
share to $26.00 per share; of the Series B Preferred Stock from $1.30 per share
to $26.00 per share; and of the Series C Preferred Stock from $1.51 per share to
$30.20 per share. The Authorized Shares Proposal will not have any effect on the
stated capital of any shares of capital stock of the Company.
PAR VALUE
Neither the Reverse Stock Split Proposal nor the Authorized Shares Proposal
has any effect on the par value per share of any class or series of capital
stock of the Company. However, because the Reverse Stock Split Proposal reduces
the number of shares of Common Stock, Non-Voting Common Stock and Single Vote
Preferred Stock outstanding by 95%, without affecting the par value per share of
each such class or series, the aggregate par value of each such class or series
shall be effectively reduced by 95%, with a corresponding increase in the amount
of "paid in capital in excess of par value" for each such class or series.
RECENT DEVELOPMENTS
NASDAQ LISTING REQUIREMENTS
In its quarterly report on Form 10-QSB for the fiscal quarter ended
September 30, 1997, the Company reported total stockholders' equity of
approximately $1.3 million, down from approximately $5.3 million at June 30,
1997, reflecting the Company's consolidated net loss for the three month period
ending September 30, 1997 of approximately $4.7 million, partially offset by
conversions into common stock of outstanding convertible notes. On November 17,
1997, Nasdaq advised the Company that the Company was not in compliance with the
listing requirements of the Nasdaq SmallCap Market, as currently in effect (the
"Old Nasdaq Listing Requirements") which require a minimum bid price of $1.00
per share or, as an alternative if the bid price is less than $1.00, maintenance
of capital and surplus of $2,000,000 and a public float of $1,000,000. The
Nasdaq's letter stated that no delisting action with respect to the bid price
deficiency would be initiated at that time and that the Company would be
provided 90 calendar days in which to regain compliance with either the minimum
bid price or the alternative stockholders' equity/ public float requirement.
21
<PAGE>
The Company believes that it is currently in compliance with the
stockholders' equity and public float provisions of the Old Nasdaq Listing
Requirements, and that it will remain in compliance with such standards until
the New Nasdaq Listing Requirements go into effect on February 22, 1998. The
Company also believes, but cannot assure, that, if the Reverse Stock Split
Proposal is adopted at the Special Meeting, the Company will be able to meet the
New Nasdaq Listing Requirements at the time such requirements go into effect.
(See, "--Equity Investments by Major Stockholder").
EQUITY INVESTMENTS BY MAJOR STOCKHOLDERS
On December 29, 1997, the Company concluded an agreement with Amphion
Ventures and Antiope Partners with respect to the purchase by Amphion Ventures
and Antiope Partners as of such date of 700 shares of the Company's Series G
Preferred Stock, for an aggregate purchase price of $7,000,000. The purchase
price was payable primarily through a combination of cash and the cancellation
and exchange of existing indebtedness of the Company to Amphion Ventures. In
addition, the purchasers had the right to offset a portion of the purchase
price, aggregating approximately $707,000, against the Company's obligation to
pay previously accrued and unpaid cash dividends on outstanding shares of Series
A, Series B and/or Series C Preferred Stock of the Company held by Amphion
Ventures on such date, and to pay a portion of such total purchase price, not to
exceed an aggregate of $1,500,000, by delivery of Amphion Ventures'
unconditional promissory note, payable on demand, in principal amount equal to
the portion of the purchase price so paid.
As additional consideration to Amphion Ventures, the Company agreed that if,
at any time prior to December 31, 1999, the Company completes a financing with
third parties raising at least $3,000,000 in new equity, the initial holders of
the Series G Preferred will have the non-assignable right (the "Series G Reset
Right"), but not the obligation, to exchange all or a portion of their shares of
Series G Preferred Stock for shares of a new series of preferred stock with
substantially the same terms and conditions offered to such third parties;
provided that no such exchange will result in an increase in the conversion
price above $.50 per share (as determined without giving effect to the Reverse
Stock Split). See, "DESCRIPTION OF CAPITAL STOCK--Series G Preferred Stock".
EXTENSION OF BRIDGE LOANS
Also on December 29, 1997, the Company concluded an agreement (the
"Extension Agreement") with Amphion Ventures, Antiope Partners and JPMIC, with
respect to the extension of the Company's obligations under a Note Purchase
Agreement dated as of June 25, 1997 (the "June Note Purchase Agreement"), among
the Company, Antiope Partners (formerly, Wolfensohn Partners, L.P.), Amphion
Ventures (by assignment from Antiope Partners) and JPMIC, and the several Senior
Promissory Notes issued and sold by the Company pursuant to the June Note
Purchase Agreement. The Extension Agreement extended the maturity date of such
promissory notes for one year, through December 31, 1998. In addition, the
agreement provided for the base interest rate on the promissory note payable to
JPMIC to be increased from 6.64% to 10% per annum, which is the same rate
originally payable under the promissory note payable to Amphion Ventures. As
provided for in the original June Note Purchase Agreement, on December 31, 1997,
the holders of such promissory notes also became entitled to receive, as a late
payment fee, (i) additional 3-year warrants to purchase Common Stock with an
aggregate strike price, (based on current market value per share) equal to 5% of
the unpaid principal balance of the notes and (ii) additional shares of
restricted Common Stock having an aggregate market value on the date of issuance
equal to 1% of such unpaid principal amount.
RESTRUCTURING OF VARIABLE PRICE CONVERTIBLE SECURITIES
In December 1997, the Company entered into negotiations with the holders of
certain outstanding convertible securities of the Company, with respect to the
restructuring and/or refinancing of such securities.
22
<PAGE>
The Company originally issued its Convertible Debentures due March 1, 1999
(the "March 1996 Debentures"), Convertible Debentures due March 1, 1999, Series
B (the "Series B Debentures" and, together with the March 1996 Debentures, the
"Convertible Debentures"), Series D Convertible Preferred Stock, par value $.01
per share ("Series D Preferred Stock"), and Series E Convertible Preferred
Stock, par value $.01 per share ("Series E Preferred Stock"), in separate
private placements to institutional investors in 1996 and 1997. The Series F
Preferred Stock was issued by the Company in July 1997 in exchange for, and/or
to finance the repurchase of, all the outstanding shares of Series D Preferred
Stock and Series E Preferred Stock, as described below. The Convertible
Debentures, Series D Preferred Stock, Series E Preferred Stock and Series F
Preferred Stock were all convertible into Common Stock at a conversion price
determined by formula, which was generally about 85% of the recent average
market price of the Common Stock at the time of conversion, subject to a fixed
maximum conversion price. The Convertible Debentures, Series D Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock are sometimes referred to
collectively herein as the Company's "Variable Price Convertible Securities".
In July 1997, the Company and certain holders of Variable Price Convertible
Securities negotiated a gated standstill arrangement (the "Standstill
Agreement"), in which such holders agreed to refrain from converting 75% of
their holdings for a period of at least three months, with the locked-up portion
released in five equal monthly installments thereafter. The provisions of the
Standstill Agreement (which also included a reduction in the maximum conversion
price to $1.14 in the case of the Series D and Series E Preferred Stock and
$1.00 in the case of the Convertible Debentures, and the issuance of $.70
warrants as additional compensation to the participating holders) were
implemented by the execution of allonges to the Convertible Debentures and by
exchanging all of the outstanding shares of Series D Preferred Stock and Series
E Preferred Stock for an equal number of shares of Series F Preferred Stock,
which shares were substantially identical to the shares exchanged, except as
necessary to implement the terms of the Standstill Agreement. Concurrently
therewith, the Company issued 48 shares of Series F Preferred Stock to Antiope
Partners, for $480,000 in cash, which was used by the Company to repurchase and
cancel an equal number of shares of Series D Preferred Stock, the holder of
which had declined to participate in the Standstill Agreement. By December 14,
1997, 70% of the face amount of the Variable Price Convertible Securities held
by such holders on the date of the Standstill Agreement were available for
conversion, with the remainder to become convertible in equal installments in
January and February 1998.
In December 1997, the Company re-initiated negotiations with the holders of
the Variable Price Convertible Securities, with the intention of restructuring
or refinancing such securities to remove the variable price conversion feature.
In December 1997 and January 1998, the Company converted, redeemed or
restructured all of the Variable Price Convertible Securities that had been
outstanding on December 1, 1997, comprising in the aggregate $1,250,000
principal amount of Convertible Debentures and 237 shares ($2,370,000 face
amount) of Series F Preferred Stock (collectively, the "December 1997
Restructuring"). Based on the closing bid prices of the Common Stock for the
applicable trading periods prior to December 24, 1997, such Variable Price
Convertible Securities, together with accrued interest and dividends, would have
been convertible on that date into an aggregate of approximately 17 million
shares of Common Stock, with further dilution possible in the event of further
declines in the market price of the Common Stock.
To implement the December 1997 Restructuring, including all related
conversions, the Company made cash payments totaling approximately $1.3 million
and issued in the aggregate approximately: $1.1 million in non-convertible
short-term indebtedness; $535,000 of indebtedness with a two-year maturity,
convertible into Common Stock at $.25 per share; 1,407,000 shares of Common
Stock, most of which are subject to certain transfer restrictions; 89.74 shares
of Series G Preferred Stock; and warrants to purchase an additional 1,440,000
shares of Common Stock at an average exercise price in excess of $.46 per share.
The Company funded the cash and short-term debt portion of the restructuring by
issuing shares of Series G Preferred Stock to Amphion Ventures, as described
above. See, "--Equity Investments by Major Stockholders." The Series G Preferred
Stock has a fixed conversion price of $.50 per share on a pre-
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<PAGE>
Reverse Stock Split Basis, (i.e., 20,000 pre-split shares of Common Stock for
each share of Series G Preferred Stock outstanding, based on the Series G
Original Issue Price of $10,000 per share), subject to the Series G Reset Right.
See "DESCRIPTION OF CAPITAL STOCK--Series G Preferred Stock."
All references in this section to numbers of shares and to the exercise or
conversion prices of convertible securities were determined without reference to
the Reverse Stock Split Proposal.
INCREASE IN AGGREGATE VOTING POWER OF THE AMPHION GROUP; POSSIBLE DEEMED CHANGE
OF CONTROL
The issuance of shares of Common Stock and Series G Preferred Stock to
Amphion Ventures and Antiope Partners in connection with the transactions
described above (see, "--Equity Investments by Major Stockholders," and
"--Restructuring of Variable Price Convertible Securities"), together with open
market purchases of Common Stock, have resulted in an increase in the collective
aggregate voting power in the Company of the Amphion Group and Richard Morgan
from approximately 23.08% at September 30, 1997, to approximately 42% at January
21, 1998. Such ownership of voting securities, together with Mr. Morgan's
position as chairman and chief executive officer of the Company and the service
on its Board of Directors of two representatives of the Amphion Group, Mr.
Morgan and C. Seth Cunningham, may be deemed for some purposes to confer control
of the Company. However, Amphion Ventures, Antiope Partners and Amphion
Partners, individually and in the aggregate, disclaim control of the Company or
any intent or purpose to acquire such control; and each of Mr. Morgan and Mr.
Cunningham disclaims the possession or exercise of any right or power to control
the Company, except to the extent that, as directors, Mr. Morgan and Mr.
Cunningham participate in the direction of the management and control of the
Company, in accordance with Delaware law.
LEGAL PROCEEDINGS
As previously reported, on February 28, 1996, an investor group filed suit
against the Company in the U.S. District Court for the Southern District of New
York. This lawsuit arises out of the Company's refusal to recognize the investor
group's attempt to exercise an option to purchase 1,400,000 shares of Common
Stock at a price of $.495 per share. The option had been granted to the
Company's former President and CEO, who attempted to transfer his option to the
investor group on the last day of the option term in September of 1995. On that
same day, the investor group attempted to exercise the option. The Company
refused to recognize the attempted transfer of the option to the investor group
on the primary grounds that the option was granted personally to the Company's
former President and CEO and was not transferable to third-parties. The lawsuit
seeks issuance and registration of the 1,400,000 shares upon payment of the
exercise price, or in the alternative, monetary damages which the investor group
alleges to be not less than $2,800,000. On May 1, 1996, the Company moved to
dismiss the complaint on the grounds that the court in New York lacked personal
jurisdiction over the Company. The court denied the motion to dismiss by order
dated June 10, 1997. Subsequently, the Company filed an answer, denying the
material allegations of the complaint and asserting various defenses. By letter
dated December 19, 1997, the Company withdrew its defense that the court lacked
personal jurisdiction over it. On December 31, 1997, plaintiffs moved for
partial summary judgment on the question of liability, as to whether or not the
option was assignable. The Company expects to file papers opposing this motion
on or about January 26, 1998. The Company believes the claim is without merit
and will vigorously oppose it.
DEFERRAL OF RIGHTS OFFERING
On November 10, 1997, the Company announced a proposed restructuring plan,
consisting of (i) the proposed acquisition of the XLV Technology, (ii) a plan to
seek up to $10 million in additional financing, including a commitment for up to
$4 million from Amphion Ventures and Antiope Partners, and (iii) the
reorganization of Sandia into two divisions, the Systems Division and the
Technology Division. The Proposals described in this Proxy Statement, and the
transactions described above under the headings "--Equity Investments by Major
Stockholders," "--Extension of Bridge Loans," and "--Restructuring of
24
<PAGE>
Variable Price Convertible Securities" are consistent with, and a part of, such
previously announced restructuring plan. As part of such earlier announcement,
the Company had also announced that it was planning a rights offering to its
stockholders as part of its financing plan. The Company does not believe that a
rights offering is in the best interests of the Company and its stockholders at
this time, and on December 29, 1997, the Board of Directors voted to defer
further consideration of a rights offering until such time as management
determined that such an offering would be in the interests of the Company and
its stockholders.
DISPUTE REGARDING DATAGLYPHS LICENSE
The Company is currently in discussions with Xerox Corporation ("Xerox")
regarding the Company's license for DataGlyphs-TM-, a 2-D symbology developed by
Xerox. In 1995, the Company was granted an exclusive license from Xerox, for an
initial license fee of $2.1 million, for the right to develop and sell products
utilizing DataGlyphs-TM- for the secured access industry. The royalty obligation
was evidenced by the Company's promissory note payable to Xerox, due in three
equal annual principal installments, plus interest, beginning December 1997. In
December 1997, the Company notified Xerox that it would not make the payment due
under the note, pending satisfactory resolution of certain issues identified by
the Company relating to the license. Xerox has advised the Company in writing
that it believes that such payment is now past due. The Company has scheduled a
meeting with Xerox to discuss this matter in January 1998.
TECHNOLOGY ACQUISITION AGREEMENT
ACQUISITION OF TECHNOLOGY
In January 1998, the Company and XL Vision, Inc. ("XLV") entered into a
Technology Acquisition Agreement dated as of January 7, 1998 (the "Technology
Acquisition Agreement"). The Technology Acquisition Agreement provides that,
beginning on April 1, 1998, and extending for a period of six months, the
Company will have the option (the "License Option") to acquire a non-exclusive
perpetual license to XLV's document reader and digital camera technology and its
dithering technology (the "XLV Technology") in exchange for 200,000 shares of
Common Stock (as in effect following the Reverse Stock Split). If the Company
exercises the License Option, then, for 90 days beginning on the earlier of
January 1, 1999, and the date on which payment of all development funds
contemplated by the Technology Acquisition Agreement has been made in full (the
"Final Funding Date"), the Company will have the further option, in exchange for
an additional 300,000 post-split shares of Common Stock, to acquire an exclusive
perpetual license to the XLV Technology (the "Exclusive License Option"). If the
Company exercises the Exclusive License Option, then, for 90 days beginning on
the earlier of April 1, 1999, and the Final Funding Date, the Company will have
the further option to acquire outright ownership of the XLV Technology in
exchange for an additional 300,000 post-split shares of Common Stock (the
"Assignment Option"). If the Company exercises the License Option, XLV will
indemnify the Company against any claims of intellectual property infringement
by a third party relating to the XLV Technology. If the Company exercises the
Assignment Option, it will grant to XLV an exclusive license to the XLV
Technology within a specified field of use. XLV makes customary representations
and warranties regarding the XLV Technology in the Technology Acquisition
Agreement, including as to the ownership of the technology. To the extent that
the Technology Acquisition Agreement may result in the issuance of shares of
Common Stock constituting in the aggregate more than 20% of the number of shares
of Common Stock outstanding prior to such issuance, the Technology Acquisition
Agreement may require stockholder approval under the New Nasdaq Listing
Requirements. The Technology Acquisition Agreement provides that it is a
condition precedent to certain rights and obligations of the parties thereunder
that such stockholder approval be obtained, to the extent necessary, at or prior
to the time required. The Company intends to seek such approval at its 1998
annual meeting of stockholders, which is expected to be held in late May or
early June 1998.
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<PAGE>
TECHNOLOGY ENHANCEMENT SERVICES
Pursuant to the Technology Agreement, XLV will continue to provide
personnel, services and project management for the enhancement and
commercialization of the XLV Technology. The Company will fund the enhancement
of the XLV Technology pursuant to this arrangement, as provided in the
Technology Acquisition Agreement. The Company paid to XLV $500,000 at the
execution of the Technology Acquisition Agreement, and will pay an additional
$1,000,000 within 30 days after the Company's 1998 Annual Meeting of
Stockholders, subject to receipt of any necessary stockholder approval. Such
funds will be used to fund technology enhancement activities by XLV with respect
to the XLV Technology, with the goal of making such technology market-ready, as
determined by mutual agreement of the Company and XLV. The Technology
Acquisition Agreement provides for the Company to make additional payments to
XLV in the aggregate amount of $3.1 million for further development expenses,
payable in several installments over the development period. The Company may, at
its option, accelerate funding the development of the XLV Technology. All
payments made prior to the development of a working model, including the costs
of acquiring the options under the agreement, will be expensed as research and
development costs. The Company does not currently have any binding commitment in
place to finance such development expenses, but intends to seek the necessary
funding through the issuance of additional debt and/or equity securities. The
Company has the option to cease funding the development of the XLV Technology at
any time without further liability in its reasonable business judgment or for
the failure of XLV to meet the development schedule; however, if the Company
terminates such funding without cause, the License Option, the Exclusive License
Option and the Assignment Option, to the extent not previously exercised, will
terminate automatically.
All technology and intellectual property rights developed pursuant to these
joint efforts will initially be the property of XLV, subject to the License
Option, the Exclusive License Option and the Assignment Option, and will
constitute XLV Technology for all purposes thereof.
ASSIGNMENT OF SPOT/MAG AGREEMENT
XLV and Spot/Mag, Inc., a corporation organized under the laws of Taiwan
("Spot/Mag"), are currently engaged in discussions regarding the possibility of
entering into an agreement (the "Spot/Mag Agreement") under which Spot/Mag would
receive certain intellectual property rights relating to the XLV Technology, for
certain limited uses, in exchange for an obligation to pay royalties and other
remuneration to XLV. If the Spot/Mag Agreement is executed within three years
after the effective date of the Technology Acquisition Agreement, and if the
Company exercises the Assignment Option, XLV will assign its rights and
obligations under the Spot/Mag Agreement to the Company, including the right to
receive all royalties and amounts payable under the Spot/Mag Agreement. In
consideration for the assignment of the Spot/Mag Agreement, the Company has
agreed to pay to XLV on a quarterly basis one share of Common Stock for each ten
dollars ($10.00) of royalty actually received by the Company from Spot/Mag under
the Spot Mag Agreement, up to a maximum of 200,000 shares of Common Stock (in
each case, based on the Common Stock outstanding after the Reverse Stock Split).
Thereafter, any additional royalties would inure solely to the benefit of the
Company.
LOCK-UP AGREEMENT
XLV has agreed that it will not sell, offer to sell, solicit an offer to
buy, contract to sell, grant any option to purchase, or otherwise transfer or
dispose of any shares of Common Stock issued pursuant to the License Option, the
Exclusive License Option, or the Assignment Option for a period of one year
after the exercise of the applicable option, without the prior written consent
of the Company; provided, however, that XLV may pledge such shares of Common
Stock as long as the beneficiary of such pledge agrees in writing to be bound by
the terms of this lock-up provision.
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<PAGE>
REGISTRATION RIGHTS
The Company has granted XLV the right, exercisable on any two occasions
between the second and fourth anniversary of the effective date under the
Technology Acquisition Agreement, to require the Company to file a registration
statement (a "Demand Registration") with the Securities and Exchange Commission
to permit the offer and sale by XLV of the shares of Common Stock issued
pursuant to the Technology Acquisition Agreement. The Company will file a
registration statement with the Securities and Exchange Commission within 60
days after receipt of a request for a Demand Registration, and will use
reasonable efforts to have such registration statement declared effective as
promptly as reasonably practicable and to keep such registration statement
effective for a period of at least 90 days. The Company has agreed to indemnify
XLV against certain liabilities relating to the filing of such registration
statement.
BOARD REPRESENTATION
The Company has agreed that, as long as XLV owns at least 400,000 shares of
Common Stock delivered pursuant to the Technology Acquisition Agreement (as in
effect after the Reverse Stock Split), the Company will use its reasonable best
efforts to cause two persons designated by XLV to be nominated to serve as
members of the Board of Directors of the Company.
THE XLV TECHNOLOGY
The XLV Technology consists of both hardware and software technology. The
hardware technology includes designs for a digital still camera. The software
technology includes a series of temporal and spatial optical butting techniques.
The term "optical butting" refers to a series of techniques whereby the
resolution of an imaging system can exceed the resolution of a single
two-dimensional imaging chip (typically, 640 by 480 pixels). This is
accomplished spatially by optically combining multiple chips to create a
seamless image mosaic, or, temporally, by successive micro-motion of a single
chip, also known as "dithering". The result is an image with integrated
multiples of a single chip's resolution.
The Company believes that, in particular, dithering offers significant
market opportunities in the area of card reading for access control or other
secure uses. Secure ID cards must be read with resolutions that exceed those
available from single two-dimensional chips. Historically, therefore, card
readers have been large, linear CCD-based scanning systems. Such systems are
relatively expensive, slow and unreliable, as a result of the need for
mechanical moving parts. The Company believes that the dithering technology
provided for under the Technology Acquisition Agreement will allow both the
performance and cost of a card reader to be improved simultaneously.
The Company also believes that the digital still camera technology provided
for under the Technology Acquisition Agreement is complementary to XLV's optical
butting technology and will further enhance the Company's prospects of
developing a high performance, low cost card reader for the secure card,
portable database and access control markets.
APPLICATIONS TO THE COMPANY'S BUSINESSES
Sandia Imaging Systems Corporation ("Sandia"), a 96%-owned subsidiary of the
Company, is principally engaged in the businesses of (a) distributing and
reselling high and mid-range performance dye-sublimation card printers and
printer consumables, (b) turnkey service bureau production of customized, high
quality, fraud resistant, personalized color ID cards, and (c) designing and
marketing corporate access control systems based on card-mounted biometric and
other verification for point-of-entry security applications. The Company
believes that access to the XLV Technology, and the development of a high
performance, low cost card reader, may enhance Sandia's opportunities in each of
its primary business areas.
27
<PAGE>
XLV
XLV is a privately-held corporation with its principal executive offices in
Sebastian, Florida, which specializes in the development of front-end
applications for the electronic imaging industry. XLV is a "partnership company"
of Safeguard Scientifics, Inc. ("Safeguard"), a NYSE-listed company with
principal executive offices in Wayne, Pennsylvania. Safeguard currently owns
approximately 26% of the outstanding voting power, and 57% of the fully-diluted
equity, of XLV.
Richard Morgan, the chairman and chief executive officer of the Company and
a member of its Board of Directors, also serves as an outside director of
ChromaVision Medical Systems, Inc. ("ChromaVision"). ChromaVision is also a
Safeguard "partnership company," and Safeguard retains approximately 20% of the
common stock of ChromaVision. Mr. Morgan and the Amphion Group do not have any
ownership interest in XLV and hold, in the aggregate, less than 0.1% of the
common stock of Safeguard and ChromaVision, respectively. There are no
agreements between ChromaVision and any other person with respect to Mr.
Morgan's service as a director of ChromaVision. The Technology Acquisition
Agreement was negotiated by the Company and XLV on an arms'-length basis and
unanimously approved by the Board of Directors of the Company.
CERTAIN INFORMATION IN THIS PROXY STATEMENT REGARDING SAFEGUARD, XLV AND
CHROMAVISION WAS PROVIDED BY SAFEGUARD, XLV AND CHROMAVISION THROUGH
PUBLICLY-AVAILABLE SOURCES. ALTHOUGH SUCH INFORMATION IS BELIEVED BY THE COMPANY
TO BE ACCURATE, THE COMPANY MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT
THERETO.
CERTAIN EFFECTS OF THE TECHNOLOGY ACQUISITION AGREEMENT
If the Company exercises the License Option, the Exclusive License Option
and the Assignment Option, the maximum number of shares issuable pursuant to the
Technology Acquisition Agreement would be 1,000,000 shares of Common Stock
(after giving effect to the Reverse Stock Split) (collectively, the "Maximum
Technology Shares"). The Maximum Technology Shares represent approximately 23.3%
of the voting power, 28.8% of the outstanding common equity and 20.9% of the
full-diluted equity of the Company as of January 21, 1998.
Although the Technology Acquisition Agreement values the shares of Common
Stock issuable thereunder at $10.00 per share of Common Stock (after giving
effect to the Reverse Stock Split), and although the Company believes that the
value of the XLV Technology and related rights that the Company has the option
to acquire thereunder is in excess of the aggregate current market value of the
Maximum Technology Shares, based on the closing bid price per share of Common
Stock on the Nasdaq SmallCap Market as of the date of this Proxy Statement,
there can be no assurance that the aggregate value of any technology and related
rights acquired by the Company under the Technology Acquisition Agreement will
equal or exceed the aggregate market price of the of the Maximum Technology
Shares on the date of issuance. The Company has not obtained an independent
appraisal or valuation of the XLV Technology and does not intend to do so.
Moreover, if the market value of the Common Stock increases over the period that
the options under the Technology Acquisition Agreement are exercisable, such
options may be exercised at a time when the market value per share of Common
Stock exceeds the deemed value per share of Common Stock under the Technology
Acquisition Agreement. The Company does not make any representation or warranty
whatsoever herein as to the value of the Common Stock or the anticipated trading
range of the Common Stock, whether before or after the Reverse Stock Split.
Accordingly, the issuance of shares of Common Stock to XLV pursuant to the
Technology Acquisition Agreement may result in dilution to the stockholders of
the Company at the date of such issuance.
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<PAGE>
CONTINGENCY WITH RESPECT TO THE REVERSE STOCK SPLIT PROPOSAL
The Technology Acquisition Agreement is subject to certain conditions,
including (1) the approval of the Reverse Stock Split Proposal by the
stockholders of the Company and (2) the receipt of any other stockholder
approval required by law or by the rules of Nasdaq, to the extent and on or
before the time required.
COSTS OF SOLICITATION
The cost of solicitng proxies, which also includes the preparation,
printing, and mailing of this Proxy Statement, will be borne by the Company.
Solicitation will be made by the company primarily through the mail, but certain
employees of the company, who will receive no compensation for their services
other than their regular remuneration, may also solicit proxies by telephone,
telegram, telex, telecopy, or personal interview. The Company will request
brokers and nominees to obtain voting instructions of beneficial owners of stock
registered in the names of such brokers and nominees and other "street names"
and will reimburse them for any expenses incurred in connection therewith. The
Company's transfer agent, American Stock Transfer Company, will assist the
company in the solicitation of proxies from brokers and nominees. The fees for
the services of the transfer agent are included in the monthly fees paid by the
Company; however, the company will reimburse the transfer agent for its
reasonable out-of-pocket expenses incurred in connection with providing
solicitation services.
APPRAISAL RIGHTS
Under Delaware law and the Company's Certificate of Incorporation, no
appraisal rights are available to dissenting stockholders in regard to the
Reverse Stock Split Proposal, the Authorized Shares Proposal, or the Name Change
Proposal.
OTHER MATTERS
The Company knows of no items of business that are expected to be presented
for consideration at the Special Meeting and that are not enumerated herein.
However, if other matters properly come before the Meeting, it is intended that
the persons named in the accompanying proxy will vote thereon in accordance with
their best judgment.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth the number of shares of (i) Common Stock,
(ii) Non-voting Common Stock, (iii) Series A Preferred Stock, (iv) Series B
Preferred Stock, (v) Series C Preferred Stock, (vi) Series F Preferred Stock,
(vii) Series G Preferred Stock (viii) common stock, par value $.01 per share
("Sandia Common Stock"), of Sandia, and (ix) common stock, par value $.01 per
share ("LMC Common Stock"), of Lasertechnics Marking, beneficially owned as of
December 31, 1997 for (a) each person known by the Company to be the beneficial
owner of more than 5% of any class of voting securities of the Company, (b) each
current director of the Company, (c) each of the five most highly compensated
executive officers of the Company, (d) two former executive officers of the
Company and (e) all directors and named executive officers (including named
former officers) as a group. Except as otherwise indicated, the persons or
entities set forth in the table below have sole investment and voting power with
respect to all shares shown as beneficially owned, subject to community property
laws, where applicable. The business address of each director and current
executive officer is c/o Lasertechnics, Inc., 3208 Commander Drive, Carrollton,
Texas 75006.
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND ADDRESS OF NUMBER PERCENTAGE OF COMPANY
BENEFICIAL OWNER TITLE OF CLASS OF SHARES OF CLASS VOTING POWER
- --------------------------------------------------------- ------------------------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
Jean-Pierre Arnaudo...................................... Common Stock 37,500(1) * *
Sandia Common Stock 287,500(2)(3) 3.29% n/a
Eugene A. Bourque........................................ Common Stock 156,286(4) * *
Sandia Common Stock 10,000(5)(3) * n/a
LMC Common Stock 32,000(6) n/a
Harry Budow.............................................. Sandia Common Stock 50,000(7) * n/a
Richard M. Clarke........................................ Common Stock 265,000 * *
Sandia Common Stock 10,000(8)(3) * n/a
C. Seth Cunningham....................................... Common Stock 85,000(9) * *
Paul J. Coleman, Jr...................................... Common Stock 2,000(10) * *
Sandia Common Stock 7,500(11)(3) * n/a
E.A. Milo Mattorano...................................... Common Stock 30,000(12) * *
7213 Ridgemoor Lane Sandia Common Stock 39,667(13)(3) * n/a
Plano, Texas 75025
Richard C.E. Morgan...................................... Common Stock 10,015,980(14) 19.3% 14.8%
Series A Preferred Stock 1,153,846(15) 100.0% 1.7%
Series B Preferred Stock 1,056,338(16) 100.0% 1.6%
Series C Preferred Stock 708,530(17) 100.0% 1.0%
Series G Preferred Stock 749.78(18) 94.9% 22.7%
Sandia Common Stock 10,000(19)(3) * n/a
Stephen C. Nesbit........................................ Sandia Common Stock 20,000(20)(3) * n/a
4627 Travis Street #603
Dallas, Texas 75205
Alfred E. Paulekas....................................... Common Stock 45,000(21) * *
J.P. Morgan Investment (22) %
Corporation............................................ Common Stock 5,598,335 11.1% 8.5
60 Wall Street Non-voting Common 2,249,842 100.0% 3.3%
New York, NY 10260 Stock
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND ADDRESS OF NUMBER PERCENTAGE OF COMPANY
BENEFICIAL OWNER TITLE OF CLASS OF SHARES OF CLASS VOTING POWER
- --------------------------------------------------------- ------------------------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
Amphion Ventures, L.P.................................... Common Stock 9,978,480(23) 19.3% 14.8%
590 Madison Avenue Series A Preferred Stock 1,153,846 100.0% 1.7%
New York, NY Series B Preferred Stock 1,056,338 100.0% 1.6%
10021(26) Series C Preferred Stock 708,530(24) 100.0% 1.0%
Series G Preferred Stock 749.78 94.9% 22.7%
All directors and named executive officers as a
group (10 individuals)................................. Common Stock 10,624,266(25) 20.4% 15.3%
Sandia Common Stock 434,667(26)(3) 7.9% 4.9%
</TABLE>
- ------------------------
* Denotes percentage ownership of less than 1%.
(1) Includes 37,500 shares that Mr. Arnaudo has the right to acquire within 60
days pursuant to options.
(2) Includes 80,417 shares that Mr. Arnaudo has the right to acquire within 60
days pursuant to options
(3) The authorized voting capital stock of Sandia consists of (i) 18,000,000
shares of Sandia Common Stock, of which 4,830,000 shares are issued and
outstanding and held by the Company and 260,000 shares are issued and
outstanding and held by certain individuals previously employed by Sandia or
the Company, (ii) 3,500,000 shares of Sandia Voting Convertible Preferred
Stock, of which 3,370,925 shares are issued and outstanding and held by the
Company.
(4) Includes 146,286 shares that Mr. Bourque has the right to acquire within 60
days pursuant to options.
(5) Includes 10,000 shares that Mr. Bourque has the right to acquire within 60
days pursuant to options.
(6) Includes 32,000 shares of preferred stock convertible into common stock that
Mr. Bourque has the right to acquire within 60 days pursuant to options.
(7) Includes 50,000 shares that Mr. Budow has the right to acquire within 60
days pursuant to options.
(8) Includes 10,000 shares that Mr. Clarke has the right to acquire within 60
days pursuant to options.
(9) Includes 30,000 shares that Mr. Cunningham has the right to acquire within
60 days pursuant to options.
(10) Includes 16,250 shares that Mr. Coleman has the right to acquire within 60
days pursuant to options.
(11) Includes 7,500 shares that Mr. Coleman has the right to acquire within 60
days pursuant to options.
(12) Includes 10,000 shares that Mr. Mattorano has the right to acquire within
60 days pursuant to options. Mr. Mattorano is not currently employed by, or
an officer of, the Company. His options will terminate in the first quarter
of 1998 if not theretofore exercised.
(13) Includes 39,667 shares that Mr. Mattorano has the right to acquire within
60 days pursuant to options. See Note 12.
(14) Includes 37,500 shares that Mr. Morgan has the right to acquire within 60
days pursuant to options, 8,160,303 shares held by entities within the
Amphion Group, 1,414,056 shares that entities within the Amphion Group have
the right to acquire within 60 days pursuant to warrants and 76,855 shares
that entities within the Amphion Group have the right to acquire within 60
days pursuant to options. Mr. Morgan is a Managing Member of Amphion
Partners L.L.C., the sole general partner of Amphion Ventures, L.P. Mr.
Morgan disclaims beneficial ownership as to all such shares beneficially
owned by entities within the Amphion Group. See Note 27.
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<PAGE>
(15) Includes 1,153,846 shares held by Amphion Ventures. See Note 14 and Note
27.
(16) Includes 1,056,338 shares held by Amphion Ventures. See Note 14 and Note
27.
(17) Includes 509,854 shares held by Amphion Ventures and 198,676 shares held by
Jackson Hole Investments Acquisitions, L.P., ("Jackson Hole"). Jackson Hole
is not affiliated with Amphion Ventures. See Note 14 and Note 27.
(18) Includes 700 shares held by Amphion Ventures and 50 shares held by Amphion
Partners. See Note 14 and Note 27.
(19) Includes 10,000 shares that Mr. Morgan has the right to acquire within 60
days pursuant to options.
(20) Includes 20,000 shares that Mr. Nesbit has the right to acquire within 60
days pursuant to options. Mr. Nesbit is not currently employed by, or an
officer of, the Company. His options will terminate in the first quarter of
1998 if not theretofore exercised.
(21) Includes 30,000 shares that Mr. Paulekas may have the right to acquire
within 60 days pursuant to options.
(22) Includes 285,049 shares that JPMIC has the right to acquire within 60 days
pursuant to warrants. As a result of an agreement between JPMIC and Antiope
Ventures (formerly known as Wolfensohn Associates L.P.), Antiope agreed to
vote at JPMIC's request for any one person designated by JPMIC to be a
director of the Company. To the extent that agreement is binding on any
entity in the Amphion Group, JPMIC could be deemed to have shared voting
power with respect to all the shares of voting stock held by entities within
the Amphion Group. If the shares held by entities within the Amphion Group
were deemed to be beneficially owned by JPMIC, JPMIC would beneficially own
in the aggregate voting securities representing approximately 50.4% of the
Company voting power. JPMIC disclaims beneficial ownership of the voting
stock held by entities within the Amphion Group.
(23) Includes 56,341 shares that Amphion has the right to acquire within 60 days
pursuant to warrants and 107,624 shares that Amphion has the right to
acquire within 60 days pursuant to options. See Note 27.
(24) Includes 198,676 shares held by Jackson Hole. See Note 27.
(25) Includes the 291,286 shares that officers, former officers and directors
have the right to acquire within 60 days pursuant to options, as described
in Notes 1, 4, 9, 12, 14, and 21; the 1,414,056 shares that Amphion Ventures
and Antiope Partners have the right to acquire pursuant to warrants, and the
76,855 shares that Amphion Ventures as the right to acquire pursuant to
options (as to which Mr. Morgan disclaims beneficial ownership); and the
9,978,480 shares held by entities within the Amphion Group (as to which Mr.
Morgan disclaims beneficial ownership). Does not include shares of Voting
Preferred Stock held by entities within the Amphion Group (as to which Mr.
Morgan disclaims beneficial ownership). See Notes 18 and 27.
(26) Includes the 692,203 shares that officers, former officers and directors
have the right to acquire within 60 days pursuant to options, as described
in Notes 2, 3, 5, 7, 8, 11, 13, 19, and 20.
(27) Includes shares beneficially owned by: (i) Amphion Ventures, formerly known
as Wolfensohn Associates II L.P.; (ii) Amphion Partners, formerly known as
Wolfensohn Partners II L.L.C.; and (iii) Antiope Partners, formerly known as
Wolfensohn Partners L.P. Amphion Ventures, Amphion Partners and Antiope
Partners disclaim that they hold any securities of the Company as a group,
within the meaning of any applicable securities law or regulation.
The security holdings of Amphion in the Company are largely the result of a
restructuring of Wolfensohn Associates L.P., now known as Antiope Ventures
L.P. ("Antiope Ventures"). As of August 19, 1997, Antiope Ventures
transferred all of its assets and liabilities to Amphion Ventures, in
32
<PAGE>
exchange for limited partnership interests of Amphion Ventures. Amphion
Partners is the sole general partner of Amphion Ventures, and Antiope
Partners is the sole general partner of Antiope Ventures.
Richard C.E. Morgan, a director and the Chairman and Chief Executive Officer
of the Company, is a managing member of both Amphion Partners and Antiope
Partners.
Jackson Hole Management Co. ("JHMC") provides management services to Amphion
Partners, Antiope Partners and the general partner of Jackson Hole. Richard
Morgan is an employee of JHMC. C. Seth Cunningham, a director of the
Company, is also an employee of JHMC. Each of Mr. Cunningham and Mr. Morgan
disclaims beneficial ownership of the securities of the Company owned
beneficially by Amphion Partners, Amphion Ventures, Antiope Partners and
Antiope Ventures, and disclaims beneficial ownership of the securities of
the Company owned beneficially by Jackson Hole.
The holdings of Amphion in the Company as of January 21, 1998, are as
follows:
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES G COMMON COMMON
COMMON PREFERRED PREFERRED PREFERRED PREFERRED STOCK STOCK
STOCK STOCK STOCK STOCK STOCK WARRANTS OPTIONS
---------- ---------- ---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Antiope Partners................... 682,080 -- -- -- 49.78 450,000 --
Amphion Ventures................... 6,910,723 1,153,846 1,056,338 509,855 700.00 964,056 76,855
Amphion Partners................... 567,500 -- -- -- -- -- --
Total.............................. 8,160,303 1,153,846 1,056,338 509,855 749.78 1,414,056 76,855
</TABLE>
DEADLINE FOR STOCKHOLDER PROPOSALS
As stated in the proxy statement distributed in connection with Company's
1997 annual meeting, proposals of stockholders intended to be presented at the
Company's 1998 annual meeting, and otherwise eligible, were required to be
received by the Company no later than January 14, 1998, to be included in the
Company's proxy material and form of proxy relating to that Meeting. The mailing
address of the Company for submission of any such proposal is given on the first
page of this Proxy Statement.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN THE
ENCLOSED RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED AS IT WILL SAVE THE
EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors
Harry S. Budow, Secretary
Carrollton, Texas
Dated: February , 1998
33
<PAGE>
APPENDIX A
[FORM OF]
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
LASERTECHNICS, INC.
Lasertechnics, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "DGCL") does hereby certify:
FIRST: That the Board of Directors of the Corporation duly adopted
resolutions setting forth the following amendment to the Certificate of
Incorporation of the Corporation (the "Amendment"), declaring the Amendment to
be advisable and calling for the submission of the proposed Amendment to the
stockholders of the Corporation for consideration thereof. The resolution
setting forth the proposed Amendment is as follows:
RESOLVED, that Article FOURTH of the Certificate of Incorporation is hereby
amended by adding thereto the following new paragraph (d) to the end thereof:
"(d) Reverse Split.
(A) Share Value Change. Effective immediately upon the filing of this
Amendment to the Certificate of Incorporation in the office of the Secretary of
State of the State of Delaware, the outstanding shares of Common Stock,
Non-Voting Common Stock, Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock, and Series C Convertible Preferred Stock, shall be
and hereby are combined and reclassified as follows: (i) each share of Common
Stock shall be reclassified as and converted into one-twentieth of a share of
Common Stock; (ii) each share of Non-Voting Common Stock shall be reclassified
as and converted into one-twentieth of a share of Non-Voting Common Stock; (iii)
each share of Series A Convertible Preferred Stock shall be reclassified as and
converted into one-twentieth of a share of Series A Convertible Preferred Stock;
(iv) each share of Series B Convertible Preferred Stock shall be reclassified as
and converted into one-twentieth of a share of Series B Convertible Preferred
Stock; and (v) each share of Series C Convertible Preferred Stock shall be
reclassified as and converted into one-twentieth of a share of Series C
Convertible Preferred Stock; provided, however, that fractional shares of Common
Stock will not be issued in connection with such combination and
reclassification, and each holder of a fractional share of Common Stock shall
receive in lieu thereof a cash payment from the Corporation determined by
multiplying such fractional share of Common Stock by twenty times the average
closing price per share of Common Stock on the Nasdaq SmallCap Market for the
five trading days immediately preceding the effective date of this Amendment,
such payment to be made upon such other terms and conditions as the officers of
the Corporation, in their judgment, determine to be advisable and in the best
interests of the Corporation.
(B) Certificate Exchange. Certificates representing shares combined and
reclassified as provided in this Amendment are hereby canceled, and, upon
presentation of the canceled certificates to the Corporation, the holders
thereof shall be entitled to receive new certificates representing the shares
resulting from such combination and reclassification.
(C) Effect on Stated Value. Effective immediately upon the combination and
reclassification of the outstanding shares of Common Stock. Non-Voting Common
Stock, Series A Convertible Preferred Stock, Series B Convertible Preferred
Stock, and Series C Convertible Preferred Stock provided for in subparagraph (A)
of this paragraph (d), the stated value of Series A Convertible Preferred Stock
will be adjusted from $1.30 per share to $26.00 per share, the stated value of
Series B Convertible Preferred Stock will be
A-1
<PAGE>
adjusted from $1.30 per share to $26.00 per share, and the stated value of
Series C Convertible Preferred Stock will be adjusted from $1.51 per share to
$30.20 per share."
SECOND: That thereafter, pursuant to a resolution of the Board of Directors,
a special meeting of the stockholders of the Corporation was duly called and
held, upon notice in accordance with Section 222 of the DGCL, at which meeting
the necessary number of shares as required by statute were voted in favor of the
Amendment.
THIRD: That the Amendment was duly adopted in accordance with the provisions
of Section 242 of the DGCL.
FOURTH: That the Amendment shall be effective on the date this Certificate
of Amendment is filed and accepted by the Secretary of State of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed
by , its , and attested by , its Secretary, this day of
, 1998.
LASERTECHNICS, INC.
By ____________________________________
Name:
Title:
ATTEST:
____________________________________
Name:
Title:
A-2
<PAGE>
APPENDIX B
[FORM OF]
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
LASERTECHNICS, INC.
Lasertechnics, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "DGCL"), does hereby certify:
FIRST: That the Board of Directors of the Corporation duly adopted
resolutions setting forth the following amendment to the Certificate of
Incorporation of the Corporation (the "Amendment"), declaring the Amendment to
be advisable and calling for the submission of the proposed Amendment to the
shareholders of the Corporation for consideration thereof. The resolution
setting forth the proposed Amendment is as follows:
RESOLVED, that Article FOURTH, paragraph (a) of the Certificate of
Incorporation is hereby amended to read in its entirety as follows:
"FOURTH: (a) The total number of shares of capital stock that the
Corporation shall have authority to issue is 15,500,000, consisting of 6,250,000
shares of Common Stock, par value $.01 per share ("Common Stock"), 2,250,000
shares of Non-Voting Common Stock, par value $.01 per share ("Non-Voting Common
Stock" and together with the Common Stock, "Common Shares"), and 7,000,000
shares of preferred stock, par value $.01 per share ("Preferred Stock").
SECOND: That thereafter, pursuant to a resolution of the Board of Directors,
a special meeting of the shareholders of the Corporation was duly called and
held, upon notice in accordance with Section 222 of the DGCL, at which meeting
the necessary number of shares as required by statute were voted in favor of the
Amendment.
THIRD: That the Amendment was duly adopted in accordance with the provisions
of Section 242 of the DGCL.
FOURTH: That the Amendment shall be effective on the date this Certificate
of Amendment is filed and accepted by the Secretary of State of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed
by , its , and attested by , its Secretary, this day of
, 1998.
LASERTECHNICS, INC.
By: _________________________________
Name:
Title:
ATTEST:
____________________________
Name:
Title:
B-1
<PAGE>
APPENDIX C
[FORM OF]
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
LASERTECHNICS, INC.
Lasertechnics, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "DGCL"), does hereby certify:
FIRST: That the Board of Directors of the Corporation duly adopted
resolutions setting forth the following amendment to the Certificate of
Incorporation of the Corporation (the "Amendment"), declaring the Amendment to
be advisable and calling for the submission of the proposed Amendment to the
stockholders of the Corporation for consideration thereof. The resolution
setting forth the proposed Amendment is as follows:
RESOLVED, that Article FIRST of the Certificate of Incorporation is hereby
amended to read in the its entirety as follows:
"FIRST: The name of the corporation is AXCESS Inc."
SECOND: That thereafter, pursuant to a resolution of the Board of Directors,
a special meeting of the stockholders of the Corporation was duly called and
held, upon notice in accordance with Section 222 of the DGCL, at which meeting
the necessary number of shares as required by statute were voted in favor of the
Amendment.
THIRD: That the Amendment was duly adopted in accordance with the provisions
of Section 242 of the DGCL.
FOURTH: That the Amendment shall be effective on the date this Certificate
of Amendment is filed and accepted by the Secretary of State of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed
by , its , and attested by , its Secretary, this day of
, 1998.
LASERTECHNICS, INC.
By: _________________________________
Name:
Title:
ATTEST:
____________________________
Name:
Title:
C-1
<PAGE>
LASERTECHNICS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
, 1998 9:30 A.M. C.S.T.
The undersigned hereby appoints Richard C.E. Morgan and Harry S. Budow,
severally, proxy, with full power of substitution and revocation, to vote on
behalf of the undersigned all shares of Common Stock of Lasertechnics, Inc. (The
"Company") which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held , 1998, and any adjournments thereof.
1. PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO EFFECT A
ONE-FOR-TWENTY REVERSE STOCK SPLIT OF THE ISSUED AND OUTSTANDING SHARES OF
THE COMPANY'S COMMON STOCK, NON-VOTING COMMON STOCK, AND SERIES A, B AND C
CONVERTIBLE PREFERRED STOCK.
/ / FOR / / AGAINST / / ABSTAIN
2. IF PROPOSAL 1 IS ADOPTED, PROPOSAL TO DECREASE THE AUTHORIZED NUMBER OF
SHARES OF COMMON STOCK TO 6,250,000 SHARES.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE THE
CORPORATE NAME TO "AXCESS Inc."
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) THEREOF.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
IN FAVOR OF EACH OF THE ABOVE PROPOSALS.
Dated:
----------------------------------------
----------------------------------------
Signature
----------------------------------------
Signature if held jointly
(Please sign exactly as ownership
appears on this proxy Where stock is
held by joint tenants, both should sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.)
