DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION
16910 Dallas Parkway, Suite 100, Dallas, Texas 75248
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints KEVIN B. HALTER and KEVIN B. HALTER, JR.
and each of them as proxies with power of substitution to vote all shares of
Digital Communications Technology Corporation (the "Company") which the
undersigned is entitled to vote at an Annual Meeting of Stockholders on November
25, 1997, at the Company's offices at 16910 Dallas Parkway, Suite 100, Dallas,
Texas at 2:00 p.m., or any adjournment thereof, with all the powers the
undersigned would have if personally present as specified, respecting the
following matters described in the accompanying Proxy Statement and, in their
discretion, on other matters which come before the meeting.
1. To elect five directors to hold office until the next annual election of
directors by stockholders or until their respective successors have been duly
elected and qualified.
A. [ ] FOR the nominees listed below
B. [ ] WITHHOLD AUTHORITY to vote for all nominees listed below
C. [ ] FOR ALL NOMINEES EXCEPT:
Instructions: To withhold authority to vote for (an) any individual(s),
choose C and write in the name of the nominee(s) on this line
- -------------------------------------------------------------------------------
Nominees: Kevin B. Halter, Kevin B. Halter, Jr., Gary C. Evans, James Smith and
Don R. Benton
2. To approve the proposed amendment to the Company's Certificate of
Incorporation to effect a one-for -ten reverse split of the Company's Common
Stock and to adjust the par value of such stock proportionately.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To ratify the appointment of Coopers & Lybrand L.L.P. as independent
auditors to examine the accounts of the Company for the fiscal year ending June
30, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
This proxy will be voted in accordance with stockholder specifications.
Unless directed to the contrary, this proxy will be voted FOR Items 1, 2 and 3.
A majority (or if only one, then that one) of the proxies or substitutes acting
at the meeting may exercise the powers conferred herein. Receipt of accompanying
Notice of Meeting and Proxy Statement is hereby acknowledged.
Date: November __, 1997
---------------------------------
(Signature)
---------------------------------
---------------------------------
(Please print your name)
(Please sign name as fully and exactly as it appears opposite. When signing in a
fiduciary or representative capacity, please give full title as such. When more
than one owner, each owner should sign. Proxies executed by a corporation should
be signed in full corporate name by duly authorized officer.)
PLEASE MARK, SIGN, DATE AND MAIL TO THE COMPANY AT THE ADDRESS STATED ABOVE.
<PAGE>
DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
The Annual Meeting of Stockholders of Digital Communications Technology
Corporation (the "Company") will be held at the Company's offices at 16910
Dallas Parkway, Suite 100, Dallas, Texas 75248, on November 25, 1997 at 2:00
p.m., local time, for the following purposes:
1. To elect five directors to hold office until the next annual election of
directors by stockholders or until their respective successors have been duly
elected and qualified;
2. To approve an amendment to the Company's Certificate of Incorporation to
effect a one-for-ten reverse split of the Company's Common Stock and to adjust
the par value proportionately;
3. To ratify the appointment of independent auditors to examine the
accounts of the Company for the fiscal year ended June 30, 1998; and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on October 27, 1997 are
entitled to notice of and to vote at this Annual Meeting of Stockholders or any
adjournment thereof. The stock transfer books of the Company will remain open.
We hope that you attend the Annual Meeting in person, but in any event you
are urged to mark, date, sign and return your proxy in the enclosed
self-addressed envelope as soon as possible so that your shares may be voted in
accordance with your wishes. Any proxy given by a stockholder may be revoked by
that stockholder at any time prior to the voting of the proxy.
By Order of the Board of Directors,
Kevin B. Halter, Jr.
Secretary
Dallas, Texas
October 31, 1997
A RETURN OF A BLANK EXECUTED PROXY WILL BE DEEMED A VOTE IN FAVOR OF
THE PROPOSALS DESCRIBED HEREIN. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY.
<PAGE>
DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
To Be Held November 25, 1997
This proxy statement and the accompanying form of proxy are being furnished
to the stockholders of Digital Communications Technology Corporation (the
"Company") on or about October 31, 1997 in connection with the solicitation of
proxies by the Board of Directors of the Company for use at the Annual Meeting
of Stockholders (the "Annual Meeting") to be held on November 25, 1997 at 2:00
p.m., local time, at the Company's offices at 16910 Dallas Parkway, Suite 100,
Dallas, Texas 75248, and any adjournment thereof.
The matters to be considered and acted upon at the Annual Meeting are
described in the foregoing notice of the Annual Meeting and this Proxy
Statement. This Proxy Statement and the related form of proxy are being mailed
on or about October 31, 1997 to all stockholders of record on October 27 , 1997.
Shares of the Company's common stock, par value $.0002 (the "Common Stock"),
represented by proxies will be voted as described in this Proxy Statement or as
otherwise specified by a stockholder. As to the election of directors, a
stockholder may, by checking the appropriate box on the proxy: (i) vote for all
director nominees as a group; (ii) withhold authority to vote for all director
nominees as a group; or (iii) vote for all director nominees as a group except
those nominees identified by the stockholder in the appropriate area. See
"Proposal One: Election of Directors" below. With respect to the other
proposals, a stockholder may, by checking the appropriate box on the proxy: (i)
vote "FOR" the proposal; (ii) vote "AGAINST" the proposal; or (iii) "ABSTAIN"
from voting on the proposal.
THE PRINCIPAL STOCKHOLDERS, DIRECTORS AND OFFICERS OF THE COMPANY
BENEFICIALLY OWNING APPROXIMATELY 42 % OF THE ISSUED AND OUTSTANDING COMMON
STOCK HAVE ADVISED THE COMPANY OF THEIR INTENTION TO VOTE SUCH SHARES IN FAVOR
OF PROPOSALS ONE , TWO AND THREE.
Any stockholder who executes and delivers a proxy may revoke it at any time
prior to its use by (i) giving written notice of revocation to the Secretary of
the Company; (ii) executing and delivering a proxy bearing a later date; or
(iii) appearing at the Annual Meeting and voting in person.
The Company will bear the expense of preparing, printing, and mailing the
proxy solicitation material and the form of proxy. Brokerage houses, nominees,
custodians and fiduciaries will be requested to forward material to beneficial
owners of stock held of record by them, and the Company will reimburse such
persons for their reasonable expenses in doing so. In addition, directors,
officers and employees of the Company and its subsidiaries may solicit proxies
by telephone, telegram or in person.
If the proxy in the accompanying form is properly executed and not revoked,
the shares represented by the proxy will be voted in accordance with the
instructions thereon. If no instructions are given on the matters to be acted
upon, the shares represented by the proxy will be voted: (i) for the election of
directors nominated herein; (ii) to approve the amendment to the Company's
Certificate of Incorporation in order to effect a one-for-ten reverse stock
split; (iii) for the ratification of the appointment of independent auditors
named herein; and (iv) in the discretion of the proxyholders on any business as
may properly come before the meeting or any adjournment thereof.
A RETURN OF A BLANK EXECUTED PROXY WILL BE DEEMED A VOTE IN FAVOR OF THE
PROPOSALS DESCRIBED HEREIN.
<PAGE>
VOTING RIGHTS
Only holders of record of outstanding shares of Common Stock of the Company
at the close of business on October 27, 1997 are entitled to one vote for each
share held on all matters coming before the Annual Meeting. There were 7,451,386
shares of Common Stock outstanding and entitled to vote on October 20, 1997.
METHOD OF VOTING
To be elected, each director must receive the affirmative vote of the
holders of a plurality of the issued and outstanding shares of Common Stock
represented in person or by proxy at the Annual Meeting. Approval of Proposal
Two will require the affirmative vote of the holders of the majority of the
shares of Common Stock entitled to vote and represented at the Annual Meeting in
person or by proxy. Abstentions will have the effect of a vote against the
proposal. Non-votes (as defined below) will have no effect on the voting of any
of the proposals except they will count as a vote against Proposal 2. A
"non-vote" occurs when a nominee holding shares for a beneficial owner has voted
on certain matters at the Annual Meeting pursuant to discretionary authority or
instructions from the beneficial owner but may not have received instructions or
exercised discretionary voting power with respect to other matters.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 20, 1997
with regard to the beneficial ownership of the Common Stock by (i) each person
known to the Company to be the beneficial owner of 5% or more of its outstanding
Common Stock, (ii) by the officers, directors and key employees of the Company
individually and (iii) by the officers and directors as a group.
Name and Address of Number of Share Percent of
Beneficial Owner Beneficially Owned Class
Halter Capital Corporation 1,905,646 26%
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
Millennia, Inc. 808,862 11%
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
Kevin B. Halter 2,080,636(1) 28%
Kevin B. Halter, Jr 2,005,646(1) 27%
Gary C. Evans 164,376 2%
Don R. Benton 4,300 *
James Smith 236 *
Clifford E. Patton -0- 0%
All directors and officers as 2,249,548(2) 30%
a group (6 persons)
* Less than 1%
<PAGE>
(1) Kevin B. Halter and Kevin B. Halter, Jr. serve as directors and
officers of Halter Capital Corporation ("HCC") and as a result may be deemed to
be the beneficial owners of the 1,905,646 shares of Common Stock owned by HCC.
However, pursuant to Rule 16a-3 promulgated under the Exchange Act, they
expressly disclaim that they are the beneficial owners, for purposes of Section
16 of the Exchange Act, of any such stock, other than those shares in which they
have an economic interest. In addition, the total number of shares includes
100,000 shares which both Kevin B. Halter and Kevin B. Halter, Jr. have the
right to acquire from stock options previously granted pursuant to the 1990
Employees' Stock Option Plan. These options are fully vested and are exercisable
within the next 60 days.
(2) The number of shares includes shares for which the directors and
officers have the right to acquire from stock options previously granted
pursuant to the 1990 Employees' Stock Option Plan. These options are fully
vested and are exercisable within the next 60 days.
PROPOSAL ONE: ELECTION OF DIRECTORS
The Board of Directors of the Company has nominated five persons, Messrs.
Kevin B. Halter, Kevin B. Halter, Jr., Gary C. Evans, James Smith and Dr. Don R.
Benton for election to the Board of Directors, each to serve for a term of one
year until the next Annual Meeting of Stockholders or until his successor is
elected and qualified. Each nominee is currently serving as a director and has
consented to his nomination and, so far as the Company is aware, will serve as a
director if elected. For information regarding the background and business
experience of each, see "DIRECTORS AND EXECUTIVE OFFICERS" below. The shares
represented by proxies will be voted as specified by each stockholder. If a
stockholder does not specify his or her choice, the shares will be voted in
favor of the election of the nominees listed except that, in the event any
nominee should not continue to be available for election, such proxies will be
voted for the election of such other person as the Board of Directors may
recommend.
The Board of Directors unanimously recommends that the stockholders of the
Company vote FOR all of the nominees for director.
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth certain information regarding the background and
business experience of the Company's Board of Directors and the Company's
executive officers:
Name Age Position
Kevin B. Halter 62 Chairman of the Board of Directors
Clifford E. Patton 52 President and Chief Executive Officer
Kevin B. Halter, Jr. 36 Vice President, Secretary and Director
Gary C. Evans 40 Director
James Smith 60 Director
Don R. Benton 66 Director
Kevin B. Halter has served as Chairman of the Board of DCT since June 28,
1994 and as Vice Chairman of the Board of DCT from February 1994 to June 1994.
Mr. Halter served as Chief Executive Officer of DCT from June 1994 to May 1996.
Mr. Halter has served as President, Chief Executive Officer and Chairman of the
Board of Millennia, Inc. since June 28, 1994. Mr. Halter also served as Vice
Chairman of the Board of Millennia, Inc. from January 1994 to June 28, 1994.
<PAGE>
Mr. Halter also served as Chairman of the Board of Directors of American Quality
Manufacturing Corporation until September 1996. In addition, Mr. Halter has
served as Chairman of the Board and Chief Executive Officer of Halter Capital
Corporation ("HCC"), a privately-held investment and consulting company, since
1987. Kevin B. Halter is the father of Kevin B. Halter, Jr.
Clifford E. Patton has served as President and Chief Executive Officer of
the Company since May 1997. Mr. Patton has been in manufacturing management for
more than 12 years . Immediately prior to becoming President of the Company, Mr.
Patton had been employed by the Company for four months as a consultant,
directing the relocation of the Company's operations into new and expanded
quarters in Indianapolis. From 1994 to 1996, he served as President and Chief
Executive Officer of American Quality Manufacturing Corporation. From 1992 to
1994 , Mr. Patton was Vice President and General Manager of American Cabinet,
Inc. and, from 1989 to 1992, he was General Manager of Color Tile, Inc.'s
manufacturing plant in Melborn, Arkansas. From 1985 to 1989, Mr. Patton was Vice
President and General Manager of Brinkley Motor Products Division of Franklin
Electric Company at Brinkley, Arkansas.
Kevin B. Halter, Jr. has served as Vice President, Secretary and director
of the Company since January 1994. Mr. Halter has also served as Secretary,
Treasurer and director of Millennia, Inc. since February 1994. He served as
Secretary, Treasurer and director of American Quality Manufacturing Corporation
from 1994 until September 1996. Mr. Halter is also the President of Securities
Transfer Corporation, a registered stock transfer company, a position he has
held since 1987. Mr. Halter is also Vice President and Secretary of HCC. Kevin
B. Halter, Jr. is the son of Kevin B. Halter.
Gary C. Evans has served as a director of the Company since March 1995. Mr.
Evans has served as President and Chief Executive Officer of Magnum Hunter
Resources, Inc., a publicly-held company listed on the American Stock Exchange,
since July 1995. Mr. Evans served as Chairman of the Board, President and Chief
Executive Officer of Hunter Resources, Inc. (formerly Intramerican Corporation)
since September 1992, prior to it being acquired by Magnum Petroleum, Inc. Mr.
Evans also served as President, Chief Operating Officer and director of Hunter
Resources, Inc. from December 1990 to September 1992. Mr. Evans was President
and Chief Executive Officer of Sunbelt Energy, Inc. (the predecessor to Hunter
Resources, Inc.) and its subsidiaries from 1985 to December 1990. Mr. Evans is
President and Chief Executive Officer of Gruy Petroleum Management Co., Magnum
Hunter Production, Inc. and Hunter Gas Gathering, Inc., wholly-owned
subsidiaries of Magnum Petroleum, Inc. Mr. Evans was Vice President and Manager
of the Southwestern region of the Energy division of Mercantile Bank of Canada
for four years prior to forming Sunbelt Energy, Inc.
James Smith has served as a director of the Company since March 1995. He
has also served as a director of Millennia, Inc. since March 1995. Mr. Smith has
served as President of Pension Analysis Bureau, Inc., a consulting firm
specializing in the administration of company retirement and profit sharing
plans, since 1993. Mr. Smith served as Vice President of Pension Analysis
Bureau, Inc. from 1988 to 1992.
Don R. Benton has served as a director of the Company since October 1996.
Dr. Benton has served as President of The Kindness Foundation, based in Dallas,
Texas, since 1995. He has served as a director of Millennia, Inc. since December
1996. Dr. Benton has also served as a director and President of Arrowhead Ranch
Corporation since 1978 and, since 1975, as a director of American Diversified
Industries and Fagin Resources, Inc.
All directors of the Company hold office until the next annual meeting of
stockholders or until their successors have been elected and qualified.
Executive officers are elected by the Company's Board of Directors to hold
office until their respective successors are elected and qualified.
The full Board of Directors met or unanimously voted on resolutions five
times during fiscal year 1997. Each of the directors attended or acted upon at
least eighty percent of the aggregate number of Board of Director meetings,
consents, and Board of Directors Committee meetings or consents held or acted
upon during fiscal year 1997.
<PAGE>
The Company's Bylaws provide that directors may be paid their expenses, if
any, and may be paid a fixed sum for attendance at each Board of Directors
meeting attended. During fiscal year 1997 the non-officer directors each
received $500 for each Board meeting which they attended. Directors who are also
officers did not receive director's fees.
Committees of the Board of Directors
The Board of Directors has two committees, an Audit Committee and a
Compensation Committee, each composed of at least two independent directors. The
Audit Committee, composed of Kevin B. Halter, Gary C. Evans and James Smith,
recommends the annual appointment of the Company's auditors, with whom the Audit
Committee reviews the scope of audit and non-audit assignments and related fees,
accounting principals used by the Company in financial reporting, internal
auditing procedures and the adequacy of the Company's internal control
procedures. The Compensation Committee, composed of Kevin B. Halter, Gary C.
Evans and James Smith, administers the Company's 1988 Employee Stock Option Plan
and makes recommendations to the Board of Directors regarding compensation for
the Company's executive officers. During fiscal year 1997, there was one meeting
of the Audit Committee and one meeting of the Compensation Committee, both of
which were attended by all members.
Shareholder Derivative Lawsuit
On March 4, 1996, Richard Abrons, allegedly on behalf of the Company,
brought a purported shareholder derivative lawsuit against Messrs. Kevin B.
Halter, Kevin B. Halter, Jr., Gary C. Evans and James Smith (who were then
members of the Company's Board of Directors), Halter Capital Corporation and
Securities Transfer Corporation (the "Defendants"). In addition, the Company was
joined as a "nominal defendant." In the lawsuit, the plaintiffs have alleged
breaches of fiduciary duty, fraud, and violations of state securities laws. The
plaintiffs seek unspecified actual and exemplary damages, a constructive trust
against the assets of the Defendants and an accounting of the affairs of the
Defendants with respect to their dealings with the Company. In addition, the
plaintiffs have requested a temporary injunction and the appointment of a
receiver for the Company. The plaintiffs have brought this lawsuit allegedly to
vindicate the wrongs that the plaintiffs claim were done to the Company by the
individual defendants and their affiliated companies, and, if any damages are
ultimately awarded to the plaintiffs, those damages will be awarded on behalf
of, and for the benefit of, the Company and all of its shareholders. If
successful, the plaintiffs may, however, recover certain attorneys' fees and
costs. The case is entitled Richard Abrons et al v. Kevin B. Halter et al, cause
no. 96-02169-G, and is pending in the 134th Judicial District for the District
Court of Dallas County, Texas. Even though the Company is a nominal defendant in
the lawsuit, the plaintiffs have not sought to recover any damages against the
Company. In this type of lawsuit, the Company is joined as a procedural matter
to make it a party to the lawsuit.
All of the Defendants have answered and denied the allegations contained in
the petition. A certain amount of discovery has been conducted . All of the
Defendants deny all the material allegations and claims in the Petition, dispute
the plaintiffs contention that this is a proper shareholder derivative action,
deny that the plaintiffs have the right to pursue this lawsuit on behalf of the
Company and are vigorously defending the lawsuit. In addition, the Defendants
have filed counterclaims against the plaintiffs and third party actions against
Blake Beckham, attorney at law, Beckham & Thomas, L.L.P., and Sanford Whitman,
the former Chief Financial Officer of the Company, seeking damages in excess of
$50 million. In this counterclaim, the Company has asserted that the filing of
this lawsuit and temporary restraining order caused the Company damages.
However, the Company does not believe that the lawsuit will have any further
material impact on the operations or financial condition of the Company.
Discovery is continuing and the matter has not yet been set for trial.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation paid by the
Company to its Presidents and Chairman for the fiscal years ended June 30, 1997,
1996, and 1995. None of the Company's other executive officers and directors
received cash or non-cash compensation in excess of $100,000 for the fiscal year
ended June 30, 1997.
<TABLE>
<S> <C> <C> <C> <C> <C>
Long Term Compensation
Annual Compensation Awards Payout
------------------------------------ ---------------------------- ------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name Annual Restricted Securities All Other
and Compen- Stock Underlying LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) Bonus($) ($) ($) SARs (#) ($) ($)
- ----------------------- --------- ------------ ------------ ------------ ------------- -------------- ------------ -------------
Clifford E. Patton
President & CEO (1) 1997 $14,678 - - - - - -
Hugh C. Coppen
President & CEO(2) 1997 $146,635 - - - - - -
1996 $19,230
1995 - - - - - - -
Jack D. Brown, Jr.
President (3)
1996 $67,019 $20,946 - - - - $17,981
1995 $85,000 - - - - - -
Kevin B. Halter
Chairman 1997 $134,615 - - - - - -
1996 $114,538 - - - - - -
1995 $72,000 - - - - - -
</TABLE>
(1) Mr. Patton was named President and Chief Executive Officer on May 20,1997.
The salary listed reflects earnings from that date to the year ended June 30,
1997.
(2) Mr. Coppen was named President and Chief Executive Officer on May 6, 1996.
The salary listed reflects earnings from that date to the year ended June 30,
1996 and for the period from July 1, 1996 through May 20, 1997. Mr.
Coppen's employment was terminated May 20, 1997.
(3) Mr. Brown's employment was terminated April 12, 1996. The salary and bonus
listed reflects earnings from July 1, 1995 to that date. "All other
compensation" represents the partial accrual of a six month severance package
provided to Mr. Brown upon his termination. These severance payments were
accrued weekly in amounts equal to his salary at the termination date.
<PAGE>
Employment Agreement
The Company has an employment agreement with Kevin B. Halter for a term of
three years which expires on December 31, 1998. The agreement provides a salary
of $175,000 per annum. In addition, Mr. Halter receives the same benefits as
other employees of the Company and reimbursement for expenses incurred on behalf
of the Company. The employment agreement also contains, among other things,
covenants by Mr. Halter that in the event of termination for cause, he will not
associate with a business that competes with the Company for a period of one
year after cessation of employment.
Stock Options Granted
The Company granted no stock options in its fiscal year ended June 30,
1997. In January 1996 the Company granted stock options to Kevin B. Halter and
Kevin B. Halter, Jr. Each option covers 100,000 shares of the Company's common
stock and has an exercise price of $1.31 per share which is equal to the fair
market value of such shares on the day the grant was made. All of these options,
which expire January 12, 2001, are now exercisable.
Stock Options Exercised
No stock options were exercised during the Company's fiscal year ended June
30, 1997. All of the Company's unexercised stock options are "out of the money"
so no calculation of value can be made.
1990 Employees' Stock Option Plan
On January 25, 1990, the Company's Board of Directors adopted the 1990
Employees' Stock Option Plan (the "Plan").
The administration of the Plan rests with the Compensation Committee (the
"Committee"). Subject to the express provisions of the Plan and the Board of
Directors, the Committee has complete authority in its discretion to determine
those employees to whom, and the price at which options shall be granted, the
option periods and the number of shares of Common Stock to be subject to each
option. The Committee also has the authority in its discretion to prescribe the
time or times at which the options may be exercised and limitations upon the
exercise of options (including limitations effective upon the death or
termination of employment of the optionee), and the restrictions, if any, to be
imposed upon the transferability of shares acquired upon exercise of options. In
making such determinations, the Committee may take into account the nature of
the services rendered by respective employees, their present and potential
contributions to the success of the Company or its subsidiaries, and such other
factors as the Committee in its discretion shall deem relevant.
An option may be granted under the Plan only to an employee of the Company
or its subsidiaries. The Plan made available for option 1,000,000 shares of the
Company's Common Stock.
The term of each option granted under the Plan will be for such period not
exceeding five years as the Committee shall determine. Each option granted under
the Plan will be exercisable on such date or dates and during such period and
for such number of shares as shall be determined pursuant to the provisions of
the option agreement evidencing such option. Subject to the express provisions
of the Plan, the Committee shall have complete authority, in its discretion, to
determine the extent, if any, and the conditions under which an option may be
exercised in the event of the death of the optionee or in the event the optionee
leaves the employ of the Company or has his employment terminated by the
Company. The purchase price for shares of Common Stock under each option shall
be determined by the Committee at the time of the option's issuance and may be
less than the fair market value of such shares on the date on which the options
are granted. The agreements evidencing the grant of options may contain other
terms and conditions, consistent with the Plan, that the Committee may approve.
<PAGE>
The Company's Retirement Savings Plan (401-K Plan)
This savings plan is a tax-qualified defined contribution plan intended to
satisfy the requirements of Section 401(k) of the Internal Revenue Code.
Qualified employees may contribute up to 20% of their compensation, not to
0exceed $9500 (subject to certain adjustments) annually. The Company makes a
matching contribution annually to the account of each participating employee in
a percentage set prior to the end of each plan year. The Company may also make
discretionary contributions in an amount to be determined in its sole judgment.
The Company's contributions vest over a five year period at the rate of 20% per
year. Vested retirement benefits are payable to an employee upon separation from
service or actual retirement from the Company, or to a beneficiary in the event
of the employee's death, but in any case not later than the year in which the
employee attains age 70-1/2.
PROPOSAL TWO: REVERSE STOCK SPLIT
The Board of Directors recommends that the stockholders of the Company
approve amending Article Five of the Company's Certificate of Incorporation so
that it will read in its entirety as follows:
"The amount of total authorized capital stock the Corporation shall have
the authority to issue is 50,000,000 shares of Common Stock, each having a par
value of $.002, all of the same class, and 10,000,000 shares of Preferred Stock,
each having a par value of $.00001. Each one share of the corporation's Common
Stock issued and outstanding immediately prior to the effective date of this
Amendment shall be and hereby is automatically changed without further action
into one-tenth (1/10) of a fully paid and nonassessable share of the
Corporation's Common Stock, provided that no factional shares shall be issued
pursuant to such change. The Corporation shall issue to each stockholder who
would otherwise be entitled to a fractional share as a result of such change one
full share of the Corporation's Common Stock."
Summary of the Proposed Reverse Split
The Board of Directors has adopted a resolution declaring the advisability
of, and submits to the stockholders for approval, a proposal to amend the
Company's Certificate of Incorporation to effect a reverse split (the "Reverse
Split") of the Company's issued and outstanding Common Stock as of 5:00 p.m.
Central standard time, on the effective date of the amendment on the basis that
each ten shares of Common Stock then outstanding will be converted into one
share of Common Stock. No fraction of a share of Common Stock will be issued as
a result of such exchange. In lieu thereof all fractional shares which would
otherwise be issuable as a result of the exchange described above will be
rounded up to the nearest whole share and the stockholder who would otherwise be
entitled to a fraction of a share will be issued one full share in lieu thereof.
The proposal may be abandoned by the Board of Directors at any time prior to the
date and time at which the Reverse Split is scheduled to become effective (the
"Effective Date") if for any reason the Board of Directors deems it advisable to
abandon the proposal. The number of shares of capital stock authorized by the
Certificate of Incorporation will not change as a result of the Reverse Split.
The effect of the Reverse Split on the holders of Common Stock will be as
follows:
(i) Holders of record of fewer than ten shares of Common Stock on the
Effective Date will have their shares automatically converted in the Reverse
Split into the right to receive one full share in lieu of any fractional share.
<PAGE>
(ii) Holders of record of ten or more shares of Common Stock on the
Effective Date will have their shares automatically converted in the Reverse
Split into the number of whole shares equal to the number of their shares
divided by ten and the right to receive one full share in lieu of any fractional
share.
Amendment to Certificate of Incorporation
An amendment to the Certificate of Incorporation in substantially the form set
forth above, assuming approval of the Reverse Split by the stockholders at the
Annual Meeting, will be filed with the Secretary of State of Delaware and the
Reverse Split will become effective as of 5:00 p.m. Central standard time, on
the date of such filing. It is expected that such filing will take place as soon
as practicable after the Annual Meeting. Without any further action on the part
of the Company, the stockholders of record will have their shares of issued and
outstanding Common Stock converted, on the Effective Date, into the right to
receive the number of whole shares equal to the number of their shares divided
by ten plus the right to receive one full share in lieu of any fractional
shares.
Effect of the Proposed Reverse Split
The proposed Reverse Split will be effected by an amendment to the Certificate
of Incorporation in substantially the form set forth above. Stockholders have no
right to dissent from the proposed Reverse Split under Delaware law.
On the Effective Date, each stockholder of record will continue as a stockholder
of the Company with respect to the whole share or shares resulting from the
Reverse Split. Each such stockholder will continue to share in the future growth
and earnings of the Company, if any, to the extent of his or her ownership of
shares of Common Stock following the Reverse Split.
The Company has authorized capital stock of 50,000,000 shares of Common Stock.
As of the Record Date the number of issued and outstanding shares of Common
Stock was 7,451,386. Based upon the Company's best estimates, the number of
issued and outstanding shares of Common Stock will be reduced as a result of the
Reverse Split from 7,451,386 to approximately 746,000. Although the number of
shares of Common Stock outstanding will decrease, the number of authorized
shares of Common Stock will remain the same, resulting in additional shares of
Common Stock being available for issuance without further action by the
stockholders, unless such action is required by the rules of the American Stock
Exchange. The Board of Directors will have discretion to determine when and upon
which terms such shares may be issued. The Board of Directors has no present
agreements, commitments or plans to issue additional shares of Common Stock
except pursuant to its employee benefit plans.
Reasons For the Reverse Split
The Board of Directors believes that the decrease in the number of shares of
Common Stock outstanding as a consequence of the Reverse Split, and an
anticipated higher price level per share compared to that prior to such Reverse
Split, will (i) enable stockholders to margin their Common Stock if they wish
and (ii) encourage interest in the Company from institutional investors.
Although the Common Stock is traded on the American Stock Exchange, most brokers
and dealers typically will not allow stockholders to margin their stock unless
it has a minimum price of at least $5.00 per share. Additionally, the Board of
Directors believes that many institutional investors' investment policies will
not allow them to invest in lower-priced securities. The Board of Directors
believes that the anticipated higher price level for the Common Stock will
encourage investment in the Common Stock by institutional investors. There can,
however, be no assurances that the foregoing effects will occur or that
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the per-share price level of the Common Stock which will be effective
immediately after the Reverse Split will be maintained for any period of time.
The Board desires to effect the Reverse Split without changing the capital
accounts of the corporation. The simultaneous adjustment to the par value of the
Common Stock of the Company in the same proportion as the proposed ratio of the
Reverse Split will prevent any adjustments in the capital accounts of the
Company after the proposed Reverse Split.
Exchange of Stock Certificates
It is expected that the amendment of the Company's Certificate of Incorporation
effecting the Reverse Split will be filed as soon as practicable after the
Annual Meeting. Pursuant to the terms of such amendment, the Reverse Split will
become effective at 5:00 p.m., Central standard time, on the Effective Date.
As soon as practicable after the Effective Date, the Company will send letters
of transmittal to all stockholders of record on the Effective Date for use in
transmitting stock certificates to the Company's exchange agent. Upon proper
completion and execution of the letter of transmittal and return thereof to the
exchange agent, together with the stockholder's old certificates, each
stockholder will receive new certificates representing the number of whole
shares of Common Stock into which their shares of Common Stock have been
converted as a result of the Reverse Split.
Federal Income Tax Consequences of the Proposed Stock Split
The Company believes that the proposed Reverse Split will not result in any
adverse tax consequences either to the Company or its stockholders. As a result
of the Reverse Split, a stockholder will increase his or her basis in each share
of the Common Stock owned from that which was paid for the share to an amount
representing ten times the amount paid. Since the stockholder will own fewer
shares after the Reverse Split, any realized gain or loss will be identical to
the gain or loss which would have been realized by the stockholder if the split
had not occurred. If the stockholder receives a whole share in lieu of a
fractional share due to rounding, the stockholder may realize a taxable gain
based on the value of the additional fraction of a share received.
STOCKHOLDES ARE ADVISED TO CONSULT THEIR OPWN TAX ADVISORS REGARDING THIS
TRANSACTION.
Vote Required for Approval
At least a majority of the issued and outstanding shares of Common Stock of the
Company must be voted in favor of the proposal to amend the Certificate of
Incorporation. Abstentions and broker non-votes will have the effect of a vote
against the proposal. At this time, it is the current intention of the Company's
principal stockholders to vote in favor of the proposal described herein. Such
principal stockholders currently beneficially own approximately 43 % of the
Common Stock of the Company.
The Board of Directors unanimously recommends a vote FOR this proposal
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
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The Company's Board of Directors has appointed the accounting firm of Coopers &
Lybrand L.L.P. as independent auditors of the Company for its fiscal year ended
June 30, 1998, and is submitting such selection to the Company's stockholders
for their ratification. The Board of Directors recommends that such appointment
be approved by the stockholders. If the foregoing proposal is not approved, or
if Coopers & Lybrand L.L.P. declines to act or otherwise becomes incapable of
performing, or if its appointment is otherwise discontinued, the Board of
Directors will appoint other independent accountants whose appointment for any
period subsequent to fiscal year 1998 will be subject to approval by the
stockholders at the 1998 Annual Meeting of Stockholders. Representatives of
Coopers & Lybrand L.L.P. are expected to be present at the annual meeting and
such representatives will have an opportunity to make a statement if they so
desire. The representatives will also be expected to be available to answer
appropriate questions.
The Board of Directors unanimously recommends a vote FOR this proposal.
OTHER BUSINESS
The Company's management knows of no other matters than those stated above
which are to be brought before this meeting. However, if any such other matters
should be presented for consideration and voting, it is the intention of the
persons named in the proxy to vote thereon in accordance with their judgment.
SECTION 16(a) BENEFICAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and the disclosure
requirements of Item 405 of Regulation S-K require the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% stockholders are required by Securities and Exchange Commission
regulation to furnish the Company copies of all Section 16(a ) forms they file.
Based solely on the review of the copies of such forms furnished to the Company,
or written representations that no Forms 5 were required, the Company believes
that during fiscal year 1997 all Section 16(a) filing requirements applicable to
its greater than 10% beneficial owners, directors and officers were complied
with.
ANNUAL REPORT TO STOCKHOLDERS
The Annual Report for the Company's fiscal year ended June 30, 1997, including
financial statements, is being furnished with this Proxy Statement to
stockholders of record as of October 27, 1997 and is incorporated herein by
reference.
STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal for consideration at the
Company's next Annual Meeting of Stockholders and wishes to have the proposal
included in the Company's Proxy Statement for that meeting must submit the
proposal to the Secretary of the Company no later than June 30, 1998. All such
proposals should be in compliance with applicable Securities and Exchange
Commission regulations.
By Order of the Board of Directors
Kevin B. Halter, Jr.
Secretary
October 31, 1997
