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MicroENERGY, Inc.
......................................................................
(Name of Registrant as Specified In Its Charter)
MicroENERGY, Inc.
......................................................................
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<PAGE>
MICROENERGY, INC.
NOTICE OF SPECIAL MEETING
To Be Held on April 2, 1996
To the Holders of the Common Stock:
PLEASE TAKE NOTICE that a Special Meeting of Stockholders of
MICROENERGY, INC. will be held on April 2, 1996 at 8:00 a.m., C.S.T, at the
offices of the Company, 350 Randy Road, Carol Stream, Illinois, 60188.
The purposes of the meeting are as follows:
1. To approve an amendment to the Company's certificate of
incorporation to reduce the authorized common stock from 180,000,000 shares to
500,000 shares and to effect a 1-for-360 reverse stock split of the Company's
Common Stock, whereby each outstanding share of Common Stock will be reclassi-
fied to .00278 of a share.
2. To approve an amendment to the Company's certificate of
incorporation so as to authorize an increase in the number of authorized
shares of common stock, par value $.01, (after the 1-for-360 reverse stock
split) from 500,000 to 4,000,000 and to further authorize an increase in
the number of authorized shares of preferred stock, no par value from 800 to
4,000,000, to be issued in such series, comprising such number of shares and
having the voting powers, designations, preferences, limitations, restric-
tions, relative rights, and distinguishing designations as may be determined
by the Company's Board of Directors.
3. To approve the Company's 1996 Incentive Stock Option Plan.
4. To transact such other business as may properly be brought
before the meeting.
Stockholders of record as of the close of business on February 23,
1996 will be entitled to vote at said meeting.
Enclosed are a proxy statement and proxy. Stockholders who do not
expect to attend the Special Meeting are requested to sign and return the
enclosed proxy in the enclosed envelope.
By Order of the Board of
Directors
Robert J. Fanella
March 4, 1996 Secretary<PAGE>
<PAGE>
MICROENERGY, INC.
350 Randy Road
Carol Stream, Illinois 60188
PROXY STATEMENT FOR HOLDERS OF COMMON STOCK
This Proxy Statement is furnished to stockholders of MICROENERGY,
INC. (the "Company") in connection with the solicitation by the Board of
Directors of proxies to be used at a Special Meeting of Stockholders of the
Company. Such meeting will be held on April 2, 1996, at 8:00 a.m., C.S.T., at
the offices of the Company, 350 Randy Road, Carol Stream, Illinois for the
purposes set forth in the Notice of Meeting. It is anticipated that this
Proxy Statement and accompanying material will be mailed to stockholders on
March 4, 1996.
If the enclosed form of proxy is executed and returned, it may
nevertheless be revoked at any time up until the time when it is voted by the
Proxy Committee. The proxy is in ballot form and each stockholder may
indicate approval or disapproval as to the proposals identified in the proxy
and accompanying Notice of Special Meeting and as set forth and discussed in
this Proxy Statement. The proposals will be presented by the Board of
Directors of the Company. Where a choice is specified with respect to a
proposal, the shares represented by the proxy will be voted in accordance with
the specification made. Where a choice is not so specified, the shares
represented by the proxy will be voted in favor of the proposal. The Proxy
Committee appointed by the Board of Directors consists of Robert G. Gatza and
Robert J. Fanella.
VOTING SECURITIES OUTSTANDING, AND PRINCIPAL HOLDERS
Stockholders of record entitled to vote will be determined as of
the close of business on February 23, 1996. At that date, there were out-
standing and entitled to vote 148,961,563 shares of Common Stock of the
Company. Each share of Common Stock entitles the holder thereof to one vote.
The following table sets forth the equity securities of the
Company beneficially owned by any person who, to the knowledge of the Company,
owned beneficially more than 5% of the outstanding Common Stock as of February
23, 1996, by all directors of the Company, by each of the executive officers
of the Company named in the Summary Compensation Table in item 10 of the
Company's Report on Form 10K for the fiscal year ended June 30, 1995, and by
the directors and executive officers of the Company as a group.
<PAGE>
<TABLE>
Amount and
Nature of
Beneficial Percentage
Title of Class Beneficial Owner Ownership of Class
<S> <C> <C> <C>
Common Stock Carol Ann Gatza 34,285,509 26.89%
$.001 par value 22 W. 309 Elmwood Dr. shares bene-
Glen Ellyn, IL 60137 ficially (1)
Robert G. Gatza 27,386,375 21.48%
350 Randy Road shares of
Carol Stream, IL 60188 record and
beneficially
(2)(3)
Robert Fanella 17,558,341 14.58%
350 Randy Road shares of
Carol Stream, IL 60188 record and
beneficially
(3)(4)
George M. Bradshaw 2,771,694 shares
550 Pennsylvania of record and
Glen Ellyn, IL 60137 beneficially (5) 2.40%
All Officers and 47,716,410 35.03%
Directors as a shares of
Group (3 persons) record bene-
ficially (3)(4)(5)
</TABLE>
(1) Includes 27,386,375 shares (including Class C Warrants) owned of
record by Mrs. Gatza's husband, Robert Gatza.
(2) Includes Class C Warrants to purchase 13,800,000 shares at $.063 per
share, exercisable after April 10, 1992. Does not include 6,899,134 shares
owned by Mr. Gatza's wife, as to which Mr. Gatza disclaims beneficial owner-
ship.
(3) Includes shares (Gatza - 12,500,000, Fanella - 6,500,000) subject to
the terms of the Company's Restricted Stock Grant Program.
(4) Includes Class C Warrants to purchase 6,700,000 shares at $.063 per
share, exercisable after April 10, 1992.
(5) Includes presently-exercisable option to purchase 2,000,000 shares
at $.033 per share.
<PAGE>
PREFACE TO THE PROPOSALS
Reasons for Proposals 1 and 2 - The Proposed Public Offering
The Company has been engaged since 1984 in the business of designing and
manufacturing high-frequency power supplies and DC-to-DC converters for
original equipment manufacturers ("OEMs") who are engaged in the telecommuni-
cations, computer, and instrumentation segments of the electronics industry.
During the Company's eleven years of operations, the Company has
acquired a reputation in the marketplace for making timely deliveries of high-
quality power supplies which incorporate state-of-the-art engineering. In
recent years, however, the Company's growth has been stagnant, as the
Company's ability to attract new customers has been hampered by the Company's
high debt-to-assets ratio, which has caused some potential customers to
question the Com-pany's financial stability.
During this past Winter, two events occurred which indicate that the
Company may now enter a period of significant growth. First, the Company
received pre-production orders for new product designs from eight OEM custom-
ers. While none of these orders create binding obligations on the customers,
the Company expects to receive production orders from each. If all eight
customers give the Company the production orders they have quoted, the eight
new products will represent $10.2 Million in annual sales beginning in July,
1996. The second favorable recent event was the agreement of the holder of
$2.3 Million of the Company's debt to compromise the debt in such a way that
it has been replaced by $1.0 Million in new debt. That compromise, which has
been completed by financing arranged by the Company's management, reduced the
Company's debt-to-assets ratio from .88-to-1 as of December 31, 1995 to .68-
to-1, and resulted in a positive shareholders equity for the first time in
several years.
In order to finance the debt compromise, the Company's two officers,
Robert G. Gatza and Robert J. Fanella, made a contribution to capital of
$250,000 and personally guaranteed loans to the Company totalling $800,000.
In compensation for those contributions, the Company agreed to issue each of
them 175,000 shares of Series A Preferred Stock (described under Proposal #2
below). The Company also raised an additional $250,000 from outside investors
by selling to them (a) 8% debentures in the principal amount of $220,000 which
are due in one year or upon completion of a public offering and (b) 700,000
Class A Warrants to purchase Series A Preferred Stock at $5.25 per share.
<PAGE>
In order to finance the expansion of operations necessitated by the
expected new orders and to repay some of the debt incurred to effectuate the
debt compromise, the Company has made a non-binding arrangement with a broker-
dealer to conduct a public offering of securities issued by the Company. The
offering, if completed, would yield net proceeds to the Company of approxi-
mately $1,747,000, or approximately $2,034,000 if the Underwrit-er's 15%
"over-allotment option" is exercised. The securities to be issued would
consist of 220,000 Units, each "Unit" to consist of two shares of Series A
Preferred Stock and one Class A Preferred Stock Warrant. Each Unit would be
sold for a price of $10.00.
In order for the Company to complete the proposed public offering, as
well as to issue the Series A Preferred Stock it owes to Messrs. Gatza and
Fanella and to honor the Class A Preferred Stock Warrants it has issued to the
outside investors, it is necessary that the shareholders approve an increase
in the number of authorized shares, both Common and Preferred. (Proposal No.
2). In addition, the broker-dealer which is proposing to underwrite the
offering believes that it can manage the offering only if the number of
outstanding shares of Common Stock is reduced from the present 148,961,563 to
a number under 500,000. To accomplish that it will be necessary for the
shareholders to approve a 1-for-360 reverse stock split of the Common Stock.
(Proposal No. 1).
PROPOSAL NO. 1
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
TO REDUCE THE AUTHORIZED COMMON STOCK FROM
180,000,000 SHARES TO 500,000
SHARES AND TO EFFECT A 1-FOR-360 REVERSE STOCK SPLIT
There are currently 148,961,563 shares of the Company's Common Stock
outstanding, and 180,000,000 authorized in total. The market price of the
Common Stock has never exceeded $.35 and for the past several years has been
$.06 and below. In order to increase the market price of the Common Stock to
a level suitable for a trading market, thus improving the marketability and
liquidity of the Common Stock, the broker-dealer which proposes to underwrite
a public offering for the Company has made it a condition of the offering that
the Company effect a 1-for-360 reverse split of the Common Stock. It is also
hoped that the reduction in outstanding shares will increase the quoted bid
price of the Common Stock to over $3.00, thus allowing the Company to satisfy
the market price criterion for listing of the Common Stock on NASDAQ. The
Company has no control over the bid price, however, and cannot safely predict
what effect the reverse stock split will have on the market price for the
Common Stock.
For the foregoing reasons, the Board of Directors has unanimously
adopted a resolution authorizing, subject to stockholder approval, a reverse
split of the Company's outstanding Common Stock on the basis of one new share
of Common Stock, $.01 par value, for each 360 shares of presently outstanding
Common Stock, $.001 par value. The reverse stock split will be effected by
means of an amendment (the "Amendment") to Article FOURTH of the Certificate
of Incorporation of the Corporation in the form attached hereto as Exhibit A.
Approval of the proposed Amendment by stockholders requires the affirmative
vote of the holders of a majority of the outstanding shares of the Company's
Common Stock. The Amendment will not change the par value of the Company's
Common Stock in proportion to the reduction in outstanding shares. According-
ly, subject to stockholder approval of the Amendment, the Board of Directors
has authorized an increase in the Company's additional paid-in capital account
in an amount equal to the reduction in the Company's Common Stock account
which will result from the reduction in number of shares of Common Stock
outstanding.
Principal Effects of the Reverse Split
The principal effects of the proposed reverse stock split will be as
follows:
1. The Company is presently authorized to issue 180,000,000 shares of
Common Stock, $.001 par value. At the close of business on March 3, 1996,
there were 148,961,563 shares of Common Stock outstanding. The proposed
reverse stock split would decrease the outstanding shares of Common Stock by
approximately and seven-tenths percent (99.722%). After the reverse split
took effect, 413,782 shares of Common Stock would be outstanding. The
proposed reverse stock split would not affect any stockholder's proportionate
equity interest in the Company, except for the adjustments caused by the
provisions for the elimination of fractional shares as described below under
"Exchange of Stock Certificates and Elimination of Fractional Interests".
2. As of March 3, 1996, there were outstanding options and warrants to
purchase an aggregate of 25,285,000 shares of Common Stock, including options
to purchase an aggregate 2,785,000 shares of Common Stock under the Company's
1984 and 1985 Incentive Stock Option Plans and warrants held by the Company's
directors (including Class C Warrants) to purchase 22,500,000 shares of Common
Stock. As of the date of this Proxy Statement, 2,000,000 shares remained
available for grant under the 1992 Incentive Stock Option Plan. All of the
outstanding options and warrants include provisions for adjustments in the
number of shares covered thereby, and the exercise price thereof, in the event
of a reverse stock split. If the proposed reverse stock split is approved and
effected, there would be reserved for issuance upon exercise of all outstand-
ing options and warrants a total of 70,236 shares of Common Stock. Each of
the outstanding options and warrants would thereafter evidence the right to
purchase .00278 of the shares of Common Stock previously covered thereby, and
the exercise price per share would be approximately three hundred and sixty
times the previous exercise price per share. The number of shares available
for grant under the Company's 1992 Incentive Stock Option Plan would be
decreased to 5,555 shares.
The following table illustrates the principal effects of the proposed
reverse stock split referred to in Paragraphs 1 and 2 above:
<TABLE>
Prior to Reverse After Reverse
Split and Amendment Split and Amendment
Number of Shares to Certificate to Certificate
<S> <C> <C>
Authorized................... 180,000,000 500,000
Outstanding.................. 148,961,563 413,782
Reserved for future issu-
ance upon exercise of
of outstanding options
and warrants............... 25,285,000 70,236
Reserved for future issu-
ance upon exercise of
of options which may be
granted pursuant to
the 1992 Stock Option Plan. 2,000,000 5,555
Available for future issuance
by action of Board of
Directors (including
treasury shares and after
giving effect to above
reservations).............. 3,070,278 8,528
</TABLE>
Assuming the proposed Amendment to Article FOURTH of the
Certificate of Incorporation effecting the reverse stock split is
approved, a Certificate of Amendment amending the Certificate of
Incorporation as set forth on Exhibit A hereto will be filed in
the Office of the Secretary of State of the State of Delaware as
promptly as practicable thereafter. The amendment and the
proposed reverse stock split would become effective as of 5:00 on
the date of such filing (the "Effective Date"). Without any
further action on the part of the Company or the stockholders,
each share of Common Stock would thereby be converted on the
Effective Date into .00278 of a share of Common Stock.
Exchange of Stock Certificates and Elimination of Fractional
Share Interests
As soon as practicable after the Effective Date of the
proposed reverse stock split, stockholders will be notified and
requested to surrender their present Common Stock certificates
for new certificates representing the number of shares of Common
Stock owned by them after the reverse split. American Stock
Transfer and Trust Company of New York, New York, will be ap-
pointed Exchange Agent to act for stockholders in effecting the
exchange of their certificates. Until surrendered, each current-
ly outstanding stock certificate shall be deemed for all purposes
to represent the number of whole shares of Common Stock to which
the holder thereof is entitled as a result of the stock split.
No scrip or fractional share certificates for Common Stock
will be issued in connection with the reverse split. The number
of shares to which a stockholder is entitled after the reverse
stock split will be rounded to the nearest integer such that
holders of a fractional share of .50 shares or greater will
receive one additional share in lieu of the fractional share, and
holders of a fractional share less than .50 shares will receive
no share in lieu of the fractional share.
In order to maintain the current number of stockholders in
the Company, and to avoid the buy out by the Company of the
fractional interests of holders of small lots of Common Stock,
holders of fewer than 360 shares of Common Stock will receive 1
share of Common Stock after the proposed reverse stock split.
The proposed amendment to the Certificate of Incorporation will
reflect the commitment of the Company to issue one share of
Common Stock to holders of 360 or fewer pre-split shares of
Common Stock. There will, therefore, be no change in the total
number of stockholders of the Company and there will be no change
in the Company's reporting requirements under the Securities
Exchange Act of 1934 after the proposed reverse stock split.
Holders of fewer than 100 shares after the reverse stock
split may find that it is difficult to sell such a small number
of shares and that brokerage commissions may make such transac-
tions impractical. Also, the reverse stock split may change
holders of "round lots" (i.e., multiples of 100 shares) into
holders of "odd lots" of shares. Brokerage commissions for sales
of odd lots of shares may be significantly higher than for sales
of round lots of shares.
Federal Income Tax Consequences
The federal income tax consequences of the proposed reverse
stock split will be as set forth below. The following informa-
tion is based upon existing law which is subject to change by
legislation, administrative action and judicial decision and is
necessarily general. Therefore, stockholders are advised to
consult with their own tax advisor for more detailed information
relating to their individual tax circumstances.
1. The proposed reverse stock split will be a tax-free
recapitalization for the Company and its stockholders.
2. The new shares of Common Stock in the hands of a stock-
holder will have an aggregate basis for computing gain or loss
equal to the aggregate basis of shares of Common Stock held by
that stockholder immediately prior to the proposed reverse stock
split.
3. A stockholder's holding period for the new shares of
Common Stock will be the same as the holding period of the shares
of Common Stock exchanged therefor, provided that the shares were
held as a capital asset immediately prior to the exchange.
Vote Required
Approval by stockholders of the proposed Amendment of the
Certificate of Incorporation in the form set forth in Exhibit A
hereto effecting the proposed reverse stock split requires the
affirmative vote of a majority of the outstanding shares of the
Company's Common Stock.
The Board of Directors recommends a vote FOR this proposal.
PROPOSAL NO. 2
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED CAPITAL STOCK
As of the date of this proxy statement, the authorized
capital stock of the Company consists of 180,000,000 shares of
Common Stock, par value $.001 per share, and 800 shares of
Preferred Stock, no par value. As of the record date for this
proxy statement, 148,961,563 shares of Common Stock were issued
and outstanding. In addition, 25,285,000 shares of Common Stock
are reserved for issuance under outstanding options and warrants,
including 22,500,000 issuable upon exercise of warrants held by
the Company's three directors. An additional 683,159 shares of
Common Stock are held in the Company's treasury. Accordingly,
only 3,070,278 shares of Common Stock are available for issuance.
If the shareholders approve Proposal No. 1, the reverse stock
split will reduce the number of available shares of Common Stock
to 8,528. No shares of the Preferred Stock are outstanding, but
769 were previously issued and converted to Common Stock.
Accordingly, only 31 shares of Preferred Stock are available for
issuance.
On February 2, 1996, the Board of Directors adopted a
resolution approving an amendment to the Company's Certificate of
Incorporation. The effect of the amendment will be to (a)
increase the number of authorized shares of Common Stock, $.01
par value, after the Reverse Split from 500,000 to 4,000,000, and
(b) to increase the number of authorized shares of Preferred
Stock, no par value, from 800 to 4,000,000, to be issued with
such voting powers, designations, preferences, rights, qualifica-
tions, limitations and restrictions as may be fixed by the
Company's Board of Directors. Pursuant to the requirements of
the Delaware General Corporation Law, if and at such time as the
Board of Directors exercises its authority as thereby granted to
it, then prior to the issuance of the Preferred Stock in any
series so defined, the Board must adopt a resolution describing
the aforesaid characteristics of said series, and the Company
must file with the Delaware Secretary of State a certificate
setting forth such description.
Pursuant to the aforesaid authority granted to the Board of
Directors, authorized but unissued shares of the Common Stock may
be issued at such times, for such purposes and for such consider-
ation as the Board of Directors may deem appropriate, without
further authority from the Company's stockholders. Likewise,
pursuant to the aforesaid authority granted to the Board of
Directors, authorized but unissued shares of the Preferred Stock
may be issued in such series, at such times, for such purposes
and for such consideration as the Board of Directors may deem
appropriate, without further authority from the Company's stock-
holders. The stockholders (whether Preferred or Common) do not
have preemptive rights.
If the amendment to the Certificate of Incorporation
proposed herein is approved by the stockholders, Article FOURTH
of the Certificate of Incorporation will be amended as set forth
in the form attached hereto as Exhibit.
The Board of Directors has recommended the authoriza-
tion of the additional Preferred Stock and the additional Common
Stock (a) in order to allow the Company to complete the financing
transactions described in the "Preface to the Proposals," and (b)
in order to provide the Company with additional flexibility in
pursuing its long-term business objectives. Management believes
that it will be useful to have a reserve of both Common and
Preferred Shares available for issuance from time-to-time to
raise additional capital for the Company, to provide incentives
for employees, consultants and business contacts, or for other
corporate purposes not now determinable. Except to the extent
described immediately below, the Company has no present plans to
issue either the additional Common Stock or the Preferred Stock.
Present Plans to Issue Preferred Stock to Management and Others
As described in the Preface to the Proposals, in order to
finance a debt compromise, the Company's Board of Directors has
already committed that, subject to shareholder approval of these
Proposals, the Company will issue (a) 700,000 Class A Preferred
Stock Purchase Warrants to certain outside investors, which will
permit them to purchase 700,000 shares of Series A Preferred
Stock (described below) at $5.25 per share, and (b) 350,000
shares of Series A Preferred Stock to Robert G. Gatza and Robert
J. Fanella, the officers of the Company. The Board has also made
a non-binding arrangement with a registered broker-dealer (the
"Underwriter") that the Underwriter will underwrite a public
offering of 440,000 shares of Series A Preferred Stock and
220,000 Class A Preferred Stock Warrants. At the present time,
it is contemplated that the Series A Preferred Stock and the
Class A Warrants will have the following terms.
Series A Cumulative Convertible Redeemable Preferred Stock
Dividend Rights
Holders of shares of Series A Preferred Stock will be
entitled to receive, out of the assets of the Company legally
available for the payment of dividends, dividends payable semi-
annually at a rate of 8% per annum. At the Company's option, the
Company may pay all or part of each dividend in shares of Common
Stock. Any such dividends will be paid before any dividends may
be paid to holders of the Common Stock.
Voting Rights
The holder of each share of Series A Preferred Stock will be
entitled to cast one vote at any meeting of the shareholders of
the Company, as will the holder of each share of Common Stock.
If the offering is completed as contemplated (without exercise of
the Over-Allotment Option) there would be 415,143 shares of
Common Stock outstanding and 790,000 shares of Series A Preferred
Stock. Accordingly, at a shareholders meeting held immediately
after completion of the offering, there would be 1,205,143 votes
authorized, of which the holders of Series A Preferred Stock
would be entitled to cast 790,000.
Company's Option to Redeem
The Series A Preferred Stock will be redeemable, in whole or
in part, at the option of the Company, at any time after 36
months from the date of issuance. The price payable by the
Company to the registered holder of the Series A Preferred Stock
upon redemption will be $5.00 per share plus all accrued but
unpaid dividends.
Conversion
The Series A Preferred Stock will be convertible at the
option of the holder, commencing on the first anniversary of the
date of the public offering. The conversion rate will be based
upon the average closing bid price for the Common Stock for the
twenty trading days preceding said anniversary date. If that
average exceeds $6.00, each share of Series A Preferred Stock
will be convertible into one share of Common Stock. If the
average bid price is $5.00 to $6.00, each Series A Preferred
Share will be convertible into 1.25 Common Shares. If the average
bid price is $4.00 to $4.99, each Series A Preferred Share will
be convertible into 1.5 Common Shares. If the average bid price
is less than $4.00, each Series A Preferred Share will be con-
vertible into 2 Common Shares. Notwithstanding the foregoing,
each Series A Preferred Share will be convertible at the Com-
pany's option into one share of Common Stock either (1) on or
after the third anniversary of the offering or (2) during the 24
months following the first anniversary of the offering if the
closing price of the Common Stock exceeds $7.00 for five con-
secutive trading days during that period.
Liquidation Preference
In the event of a voluntary or involuntary liquidation or
winding up of the Company, the holders of Series A Preferred
Stock will be entitled to receive out of the assets of the
Company available for distribution to shareholders $5.00 per
share plus all accrued and unpaid dividends before any distribu-
tion is made to the holders of Common Stock or any other class or
series of stock ranking junior to the Series A Preferred Stock as
to distribution of assets.
Class A Preferred Stock Purchase Warrants
Each Class A Warrant entitles the holder thereof to purchase
one share of Series A Preferred Stock at an exercise price of
$5.25 during the three year period beginning one year after the
offering. At any time during the exercise period, the Company
has the right to redeem all the Class A Warrants at a price of
$.05 per Warrant upon not less than 30 days' prior written notice
if the average closing bid price of the Company's Common Stock as
reported on NASDAQ shall have been $7.00 per share for 5 consecu-
tive trading days ending within 15 days prior to the date on
which notice of redemption is sent.
The aforesaid terms of the Series A Preferred Stock and
Class A Warrants are subject to change upon further negotiation
with the Underwriter. There is no assurance that an offering of
Series A Preferred Stock will occur, whether on the aforesaid or
any other terms. In any event, the issuance of Series A Pre-
ferred Stock (if it occurs) will be based solely upon the approv-
al of the Board of Directors pursuant to the authority granted by
the amendment to the Certificate of Incorporation proposed in
this proxy statement. Approval of the stockholders will not be
not required.
Effect on Possible Takeovers
The proposal to amend the Certificate of Incorporation
to authorize an increase in the Preferred Stock and an increase
in the authorized Common Stock is not being offered for the
purpose of impeding any takeover attempt, and the Company is not
aware of any person who is acquiring or plans to acquire control
of the Company. Nevertheless, the power of the Board of Direc-
tors to provide for the issuance of shares of Common Stock and/or
Preferred Stock, and to fix by resolution, without stockholder
approval, the designations, rights, preferences and limitations
of the shares of Preferred Stock, has potential utility as a
device to discourage or impede a takeover of the Company. In the
event that a non-negotiated takeover were attempted, the private
placement of stock into "friendly" hands, for example, could make
the Company unattractive to the party seeking control of the
Company. This would have a detrimental effect on the interests
of any stockholder who would want to tender his or her shares to
the party seeking control or who would favor a change in control.
Vote Required
Approval of the proposal to amend the Certificate of
Incorporation will require the affirmative vote of the holders of
a majority of the Company's outstanding Common Stock entitled to
vote thereon. Abstentions and persons failing to vote will have
the same effect as negative votes since the percentage require-
ment for approval is based on all shares outstanding and not only
on those shares casting votes. Broker non-votes, if any, will
not be counted and will have the same effect as a negative vote.
If adopted, the amendment would become effective upon
the filing with the Delaware Secretary of State of a Certificate
of Amendment to the Certificate of Incorporation, which filing is
expected to take place shortly after the Special Meeting.
The Board of Directors recommends a vote FOR this
proposal.
PROPOSAL NO. 3
PROPOSAL TO ADOPT THE
1996 INCENTIVE STOCK OPTION PLAN
In 1984, the Company adopted the 1984 Incentive Stock Option
Plan and the 1985 Incentive Stock Option Plan (collectively the
"Initial Plans") under which a total of 3,000,000 shares of
Common Stock were reserved for issuance. In 1994 and 1995 the
Initial Plans terminated. Options for 2,785,000 of the 3,000,000
shares which were reserved were granted to employees of the
Company and remain outstanding. The average exercise price of
the options which are outstanding is $.0149. No options were
issued under the Initial Plans to any person who is currently an
officer or director of the Company.
In 1992, the Company adopted the 1992 Incentive Stock Option
Plan (the "1992 Plan") under which a total of 2,000,000 shares of
Common Stock were reserved for issuance. No options have been
granted under the 1992 Plan.
In the event that the Shareholders approve Proposal No. 1
and the 1-for-360 reverse stock split is effectuated, there will
remain in the 1992 Plan options for only 5,555 shares of stock.
The Company's Board of Directors has determined, therefore, that
it is in the best interest of the Company to have a vehicle by
which further incentives can be offered to key employees.
Accordingly, the Board has adopted a resolution approving a 1996
Incentive Stock Option Plan (the "1996 Plan"). The 1996 Plan
provides for the reservation of 18,000,000 shares of Common Stock
for issuance thereunder. That number will be reduced to 50,000
if the proposed 1-for-360 reverse stock split is approved and put
into effect. No options have been granted under the 1996 Plan.
The salient provisions of the 1996 Plan are as follows:
(a) The options granted will be for a period not greater
than 10 years from the date of grant, except that the Board of
Directors may, in its discretion, prescribe a shorter period for
any individual option. Options granted to any person possessing
more than 10% of the voting power of the Company's Common Stock
shall have a term not exceeding five years.
(b) The Board of Directors will determine to whom options
are to be granted and the price per share at which the options
may be exercised (which must be at least 100% of the fair market
value of the Company's Common Stock on the date of grant, or 100%
in the case of any grantee owning more than 10% of the voting
power of the Company's Common Stock).
(c) The purchase price of shares issuable upon exercise of
an option must be paid in full at the time notice to exercise
such an option is given to the Secretary or Treasurer of the
Company.
(d) Options may be granted only to officers, directors, and
key employees of the Company or any subsidiary of the Company.
(e) All options granted will be adjusted for stock splits,
recapitalization and stock dividends.
(f) All shares issued pursuant to the exercise of options
under the Plan shall come from authorized but unissued shares (or
reacquired shares) of the Company's Common Stock.
(g) Any shares underlying options which have terminated or
expired shall become available for further options pursuant to
the Plan.
(h) The Board of Directors may appoint a Committee from
among its members to administer the Plan.
(i) Options to be granted under the Plan are not transfer-
able and are exercisable only during the optionee's lifetime, and
only by him or her.
(j) No employee may exercise any option after termination of
employment for any reason.
(k) The aggregate fair market value (determined as of the
date the option is granted) of the stock with respect to which
options are exercisable for the first time by any employee during
any calendar year under all plans of the Company (and parent and
subsidiary corporations) shall not exceed $100,000.
The options granted under the 1996 Plan are intended to
qualify under the Internal Revenue Code of 1986, as "incentive
stock options" within the meaning of Code Section 422A. The
Company has been advised that under the law as now in effect,
recipients of options will pay no tax upon the receipt or exer-
cise of the options if no disposition of the stock received upon
their exercise is made within two years of the granting of the
options or within one year of the exercise thereof. The amount
by which the fair market value of shares purchased upon exercise
of options exceeds the option price constitutes an item of tax
preference, potentially subjecting the recipient to the alterna-
tive minimum tax. Upon subsequent sale of the stock, the excess
of the sale price of the stock over the price paid therefor will
be taxable. If the tests described above are met, the Company
will receive no deduction for the difference between the fair
market value and the exercise price.
The Board of Directors believes that the adoption of the
1996 Plan is important to the Company in that it will help the
Company to attract and retain qualified personnel.
The affirmative vote of the majority of the votes cast at
the Stockholders Meeting will be required for approval of the
1996 Incentive Stock Option Plan.
The Board of Directors recommends a vote FOR this proposal.
TRANSACTION OF OTHER BUSINESS
As of the date of this Proxy Statement, Management has no
knowledge of any business which will be presented for consid-
eration at the meeting other than that described above. Should
any other matter come before the meeting, it is the intention of
the persons named in the accompanying proxy to vote such proxy in
accordance with their best judgment.
<PAGE>
SOLICITATION OF PROXIES
The entire expense of preparing, assembling and mailing this
Proxy Statement, the form of proxy and other material used in the
solicitation of proxies will be paid by the Company. In addition
to the solicitation of proxies by mail, arrangements may be made
with brokerage houses and other custodians, nominees and fiducia-
ries to send proxy material to their principals, and the Company
will reimburse them for expenses in so doing. To the extent
necessary in order to insure sufficient representation, officers
and other regular employees of the Company, who will not be
additionally compensated therefor, may request the return of
proxies personally, by telephone or telegram. The extent to
which this will be necessary depends on how promptly proxies are
received, and stockholders are urged to send their proxies
without delay.
By Order of the Board of Directors
ROBERT G. GATZA
Chairman
Dated: Carol Stream, Illinois
March 4, 1996 <PAGE>
FORM OF AMENDMENT TO CERTIFICATE OF INCORPORATION
A. AMENDMENT TO ARTICLE FOURTH
Article "Fourth" of the Company's Certificate of
Incorporation shall be amended
(1) By deleting the entirety and inserting the follow-
ing:
FOURTH: (A) The aggregate number of shares of stock
which the Corporation shall have the authority to issue
is eight million (8,000,000) shares, consisting of four
million (4,000,000) shares of Common Stock with $.01
par value and four million (4,000,000) shares of Pre-
ferred Stock with no par value. The Board of Directors
is authorized, subject to limitations prescribed by law
and the provisions hereof, to provide for the issuance
from time to time of Preferred Stock in one or more
series, and by filing a certificate pursuant to Sec 151 of
the Delaware General Corporation Law, as amended and
supplemented from time to time, to establish the number
of shares to be included in each such series, and fix
the voting powers, designations, preferences, rights,
qualifications, limitations and restrictions of the
shares of each such series not fixed hereby. The
aforesaid authorization of the Board shall include, but
not be limited to, the power to provide for the issu-
ance of shares of any series of Preferred Stock con-
vertible, at the option of the holder or of the Corpo-
ration or both, into shares of any other class or
classes or of any series of the same or any other class
or classes.
(ii) Adding the following paragraph "B:"
(B) Reverse Stock Split. At 5:00 p.m., New York City
time, on ______________, 1996 (the "Reverse Split
Date"), each share of Common Stock issued and outstand-
ing immediately prior to the Reverse Split Date (re-
ferred to in this Paragraph B as the "Old Common
Stock") automatically and without any action on the
part of the holder thereof will be reclassified and
changed into .00278 of a share of Common Stock, par
value $.01 per share (referred to in this Paragraph B
as the "New Common Stock", which is the Common Stock
authorized under Paragraph A of this Article Fourth),
subject to the treatment of fractional share interests
as described below. Each holder of a certificate or
certificates that immediately prior to the Reverse
Split Date represented outstanding shares of Old Common
Stock (the "Old Certificates") will be entitled to
receive, upon surrender of such Old Certificates to the
Company's exchange agent (the "Exchange Agent") for
cancellation, a certificate or certificates (the "New
Certificate", whether one or more) representing the
number of whole shares of the New Common Stock into
which and for which the shares of the Old Common Stock
formerly represented by such Old Certificates so sur-
rendered are reclassified under the terms hereof. From
and after the Reverse Split Date, Old Certificates
shall represent only the right to receive New Certifi-
cates pursuant to the provisions hereof. No certifi-
cates or scrip representing fractional share interests
in New Common Stock will be issued, and no such frac-
tional share interest will entitle the holder thereof
to vote, or to any rights of a shareholder of the
Company. The number of shares to which a stockholder
is entitled after the recapitalization will be rounded
to the nearest integer such that holders of a fraction-
al share of .50 shares or greater will receive one
additional share in lieu of the fractional share, and
holders of a fractional share less than .50 shares will
receive no share in lieu of the fractional share. Any
holder of fewer than 360 shares of Old Common Stock
will receive 1 share of New Common Stock upon surrender
of the Old Certificate. If more than one Old Certifi-
cate shall be surrendered at one time for the account
of the same stockholder, the number of full shares of
New Common Stock for which New Certificates shall be
issued shall be computed on the basis of the aggregate
number of shares represented by the Old Certificates so
surrendered. In the event that the Company's Exchange
Agent determines that a holder of Old Certificates has
not tendered all his certificates for exchange, the
Exchange Agent shall carry forward any fractional share
until all certificates of that holder have been pre-
sented for exchange. The Old Certificates surrendered
for exchange shall be properly endorsed and otherwise
in proper form for transfer, and the person or persons
requesting such exchange shall affix any requisite
stock transfer tax stamps to the Old Certificates
surrendered, or provide funds for their purchase, or
establish to the satisfaction of the Exchange Agent
that such taxes are not payable. From and after the
Reverse Split Date the amount of capital represented by
the shares of the New Common Stock into which and for
which the shares of the Old Common Stock are reclassi-
fied under the terms hereof shall be the same as the
amount of capital represented by the shares of Old
Common Stock so reclassified, until thereafter reduced
or increased in accordance with applicable law."
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1933, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Date February 9, 1996 By(s) Robert G. Gatza
Robert G. Gatza
President and CEO
Date February 9, 1996 By(s) Robert J. Fanella
Robert J. Fanella
Chief Financial Officer
and Treasurer
<PAGE>
PROXY
MICROENERGY, INC.
SOLICITED BY THE BOARD OF DIRECTORS
For use at April 2, 1996 Special Annual Meeting of Stockholders
The undersigned hereby appoints, as proxies for the
undersigned, ROBERT G. GATZA and ROBERT J. FANELLA (each with
power to act alone and with power of substitution) who shall be
present at the meeting to vote all of the stock of the under-
signed
(1) PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION to
reduce the authorized Common Stock from 180,000,000
shares to 500,000 shares and to effect a 1-for-360
reverse stock split of the Company's Common Stock.
/ / FOR / / AGAINST / / ABSTAIN
(2) PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION to
increase the authorize shares of Common Stock to
4,000,000 and the authorized shares of Preferred Stock
to 4,000,000.
/ / FOR / / AGAINST / / ABSTAIN
(3) PROPOSAL TO ADOPT THE 1996 INCENTIVE STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
and in their discretion upon such other business as may be
properly brought before the Special Meeting of Stockholders of
MICROENERGY, INC. to be held at the offices of the Company, 350
Randy Road, Carol Stream, Illinois on April 2, 1996 at 8:00 a.m.
Central Standard Time, and any adjournments thereof, hereby
revoking any proxy heretofore given by me.<PAGE>
IF NO INSTRUCTION IS INDICATED, THE UNDERSIGNED'S VOTE
SHALL BE CAST IN FAVOR OF THE PROPOSALS SET FORTH ABOVE.
Date
Shareholder, sign name exactly
as name appears on mailing label.
<PAGE>
<PAGE>
1996 INCENTIVE STOCK OPTION PLAN
OF
MICROENERGY, INC.
Adopted by the Board of Directors
on February 2, 1996
and by the Shareholders
on ______, 1996
1. Purpose.
The purpose of this Incentive Stock Option Plan (the
"Plan") is to provide an incentive for officers, directors, and
key employees to render services and make contributions to MICRO-
ENERGY, INC. (the "Company") and to give them an increased
interest in the Company's welfare and progress by affording them
an opportunity to acquire ownership of its stock.
2. Stock Subject to the Plan.
The stock to be issued upon exercise of options granted
under the Plan shall consist of authorized but unissued shares
(or of reacquired shares) of the Common Stock, $.001 par value,
of the Company. The maximum number of shares for which options
may be granted under the Plan is 18,000,000 shares, subject to
adjust ment as provided in Section 8.
If any options granted under the Plan expire or termi-
nate for any reason without having been exercised in full, the
unpurchased shares shall become available for further options
pursuant to the Plan.
3. Eligibility of Optionees.
Options may be granted only to officers or other key
employees of the Company or any subsidiary (and all references in
this Plan to officers and other key employees of the Company
shall also refer to and include officers and other key employees
of any subsidiary of the Company). More than one option may be
granted to any optionee.
In no event shall an option be granted to any person
who, at the time of grant, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes
of stock of the Company or of its parent or subsidiary corpora-
tions: provided, however, that this restriction shall not apply
if at the time of grant the option price is not less than 110% of
the fair market value of the stock subject to the option and such
option is not exercisable after the expiration of five (5) years
from the date of grant.
4. Administration.
The Plan shall be administered by the Board of Direc-
tors or, in the discretion of the Board, by a Committee (the
"Committee"). Hereinafter, and in the option agreements, the
term "Committee" shall mean the Board of Directors, if no other
Committee is appointed. The Committee, if any, shall be appoint-
ed by the Board of Directors and shall consist of not less then
three directors. The Board of Directors shall fill all vacancies
in the Committee and may remove any member of the Committee at
any time, with or without cause. The Committee shall select its
own Chairman and shall hold its meetings at such times and places
as it may determine. The acts of a majority of the Committee at
any meeting, or acts approved in writing by all members of the
Committee, shall be the acts of the Committee.
Subject to the express provisions of the Plan, the
Board of Directors or the Committee shall have full authority (a)
to determine, in its discretion, the individuals (including
employees who are members of the Board of Directors or the
Committee) to whom, and the times at which, options shall be
granted, the number of shares subject to each option, and the
provisions of the respective option agreements (which need not be
identical), including provisions concerning the time or times,
when, and the extent to which, the options may be exercised, the
conditions of exercise (including non-competition with the
Company after termination of employment) and the effect of
approved leaves of absence on continuity of service; (b) to
prescribe, amend and rescind rules and regulations relating to
the Plan; (c) to interpret the Plan and the respective option
agreements; and (d) to make all other determinations necessary or
advisable for administering the Plan. All determinations and
interpretations by the Board of Directors or the Committee shall
be binding and conclusive upon all parties.
Notwithstanding the powers vested in the Committee, if
such Committee be appointed, the Board of Directors may also
grant options hereunder by the vote of a majority of the direc-
tors.
The Plan shall be administered so as to qualify options
granted under it as "incentive stock options" under Section 422A
of the Internal Revenue Code of 1986.
5. Option Price.
The purchase price per share under each option shall be
determined by the Board of Directors or the Committee, in no
event, however, shall the price per share under each option be
less than 100% of the fair market value of the Common Stock on
the date of grant.
6. Exercise of Options.
(a) Each option granted under the Plan shall become
exercisable at such time, or in installments at such times, as
may be provided therein. To the extent that any installment of
an option has become exercisable it may be exercised thereafter,
until termination, in whole at any time or from time to time in
part.
(b) Each option granted under the Plan shall terminate
no later than ten years after the date on which it was granted,
but the Board of Directors or the Committee in its discretion may
prescribe a shorter period for any individual option or options.
(c) An option shall be exercised by written notice of
such exercise, in the form prescribed by the Board of Directors
or the Committee, to the Secretary or Treasurer of the Company,
at its principal office. The notice shall specify the number of
shares for which the option is being exercised (which number, if
less than all of the shares then subject to exercise, shall be 50
or a multiple thereof) and shall be accompanied by payment in
full of the purchase price of such shares. No shares shall be
delivered upon exercise of any option until all laws, rules and
regulations which the Board of Directors or the Committee may
deem applicable have been complied with. If a registration
statement under the Securities Act of 1933 is not then in effect
with respect to the shares issuable upon such exercise, it shall
be a condition precedent that the person exercising the option
give to the Company a written representation and undertaking,
satisfactory in form and substance to the Board of Directors or
the Committee, that he is acquiring the shares for his own
account for investment and not with a view to the distribution
thereof.
(d) The person exercising an option shall not be
considered a record holder of the stock so purchased for any
purpose until the date on which he is actually recorded as the
holder of such stock upon the stock records of the Company.
(e) The Company shall pay all original issue and
transfer taxes with respect to the issue and transfer of shares
of Common Stock of the Company pursuant hereto and all other fees
and expenses necessarily incurred by the Company in connection
therewith.
(f) The aggregate fair market value (determined as of
the date the option is granted) of the stock with respect to
which options are exercisable for the first time by any employee
during any calendar year under all plans of the Company (and
parent and subsidiary corporations) shall not exceed $100,000.
7. Other Option Conditions.
(a) Nothing in the Plan or in any option granted
pursuant thereto shall confer on any individual any right to
continue in the employ of the Company or interfere in any way
with the right of the Company to terminate his employment at any
time.
(b) Each option granted pursuant to the Plan shall be
evidenced by a written option agreement duly executed by the
Company and the optionee.
(c) No holder of any option under the Plan shall, by
virtue of holding such option, be entitled to any rights of a
stockholder in the Company.
8. Adjustments Upon Changes in Capitalization.
The option agreements shall contain such provisions as
the Board of Directors or the Committee shall determine to be
appropriate for the adjustment of the kind and number of shares
subject to each outstanding option, or the option prices, or
both, in the event of any changes in the outstanding Common Stock
of the Company by reason of stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations,
sales or exchanges of assets, combinations or exchange of shares,
offering of subscription rights or any other type of change. In
the event of any such change in the outstanding Common Stock, the
kind and aggregate number of shares available under the Plan
shall be appropriately adjusted by the Board of Directors or the
Committee, whose determination shall be conclusive.
9. Term of Plan.
The Board of Directors may terminate this Plan at any
time. Termination of the Plan will not affect rights and obliga-
tions theretofore granted and then in effect. No options may be
granted later than ten years from the date listed on page one
hereof as the date of the Plan's adoption.
10. Transferability.
Options granted under this Plan shall provide that they
will not be transferable; they shall only be exercisable during
the optionee's lifetime, and only by him.
11. Termination of Employment.
In the event the employment of an employee to whom an
option has been granted shall terminate for any reason, options
granted to him may no longer be exercised.
12. Amendment and Revocation.
The Board of Directors alone shall have the right to
alter, amend or revoke the Plan or any part thereof at any time
and from time to time, provided, however, that without the
consent of the optionees, no change may be made in any option
theretofore granted which will impair the rights of existing
optionees; and provided further that the Board of Directors may
not, without the approval of the holders of a majority of the
outstanding Common Stock, make any alteration or amendment to the
Plan which changes the aggregate number of shares of Common Stock
which may be issued, under the Plan, extend the term of the Plan
or of options granted thereunder, reduce the option price below
that now provided for in the Plan, change the conditions or
exercise of options no provided for in the Plan, or change the
employees or class of employees eligible to receive options
thereunder.
13. Ratification of the Plan.
This Plan shall be submitted to the stockholders of the
Company for approval at a meeting to be held within twelve months
following its adoption by the Board.
