PRELIMINARY COPY
MARGATE INDUSTRIES, INC.
129 North Main Street
Yale, Michigan 48097
(810) 387-4300
__________________________
PROXY STATEMENT
__________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held December 9, 1998
TO THE SHAREHOLDERS OF MARGATE INDUSTRIES, INC.
NOTICE HEREBY IS GIVEN that the Special Meeting of Shareholders of Margate
Industries, Inc., a Delaware corporation (the "Company") will be held at
the Company's corporate offices at 129 North Main Street, Yale, Michigan,
on December 9, 1998, at 9:00 a.m., Eastern Time, and at any and all
adjournments thereof, for the purpose of considering and acting upon the
following matters:
1. To grant the Board of Directors the authority to effect a reverse
stock split of one (1) for three (3) whereby each three shares of
currently outstanding $.005 par value Common Stock of the Company
(the "Old Common Stock") would be combined into one (1) share of
new Common Stock (the "New Common Stock").
2. To transact such other business as properly may come before the
meeting or any adjournment thereof.
Only holders of the voting $.005 par value common stock of the Company of
record at the close of business on October 30, 1998 will be entitled to
notice of and to vote at the Meeting or at any adjournment or adjournments
thereof.
All shareholders, whether or not they expect to attend the Annual Meeting
of Shareholders in person, are urged to sign and date the enclosed Proxy
and return it promptly in the enclosed postage-paid envelope which requires
no additional postage if mailed in the United States. The giving of a
proxy will not affect your right to vote in person if you attend the
Meeting.
BY ORDER OF THE BOARD OF DIRECTORS.
WILLIAM H. HOPTON
PRESIDENT
Yale, Michigan
October 30, 1998
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MARGATE INDUSTRIES, INC.
129 North Main Street
Yale, Michigan 48097
(810) 387-4300
__________________________
PROXY STATEMENT
__________________________
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 9, 1998
GENERAL INFORMATION
-------------------
The enclosed Proxy is solicited by and on behalf of the Board of
Directors of Margate Industries, Inc., a Delaware corporation (the
"Company"), for use at the Company's Special Meeting of Shareholders to be
held at the Company's corporate offices, 129 North Main Street, Yale,
Michigan, on December 9, 1998, at 9:00 a.m., Eastern Time, and at any
adjournment thereof. It is anticipated that this Proxy Statement and the
accompanying Proxy will be mailed to the Company's shareholders on or about
October 30, 1998.
Any person signing and returning the enclosed Proxy may revoke it at
any time before it is voted by giving written notice of such revocation to
the Company, or by voting in person at the Meeting. The expense of
soliciting proxies, including the cost of preparing, assembling and mailing
this proxy material to shareholders, will be borne by the Company. It is
anticipated that solicitations of proxies for the Meeting will be made only
by use of the mails; however, the Company may use the services of its
Directors, Officers and employees to solicit proxies personally or by
telephone, without additional salary or compensation to them. Brokerage
houses, custodians, nominees and fiduciaries will be requested to forward
the proxy soliciting materials to the beneficial owners of the Company's
shares held of record by such persons, and the Company will reimburse such
persons for their reasonable out-of-pocket expenses incurred by them in
that connection.
All shares represented by valid proxies will be voted in accordance
therewith at the Meeting.
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SHARES OUTSTANDING AND VOTING RIGHTS
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All voting rights are vested exclusively in the holders of the
Company's $.005 par value common stock, with each share entitled to one
vote. Only shareholders of record at the close of business on October 30,
1998, are entitled to notice of and to vote at the Meeting or any
adjournment thereof. On October 30, 1998, the Company had 4,513,637 shares
of its $.005 par value common stock outstanding, each share of which is
entitled to one vote on all matters to be voted upon at the Meeting,
including the election of Directors. Cumulative voting in the election of
Directors is not permitted.
A majority of the Company's outstanding common stock represented in
person or by proxy shall constitute a quorum at the Meeting.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------
The following table sets forth the number and percentage of shares of
the Company's $.005 par value common stock owned beneficially, as of
October 30, 1998, by any person who is known to the Company to be the
beneficial owner of 5% or more of such common stock and, in addition, by
each Director of the Company and its subsidiaries and by all Directors and
Officers of the Company and its subsidiaries as a group. Information as to
beneficial ownership is based upon statements furnished to the Company by
such persons.
Amount and
Nature of
Name and Address of Beneficial Percent of
Beneficial Owner Ownership Class (1)
- ------------------- ----------- ----------
Paul L. Cosper 284,120 (2) 6.3%
P.O. Box 96050
Wixom, MI 48096
Charles H. Raches, Jr. 252,840 5.6%
6600 Tepee Ridge Road
Bozeman, MT 59715
Frederick G. and
Patricia W. Schriever 795,147 17.6%
64 Clairview
Grosse Pointe Shores,
MI 48236
Frederick G. Berlet 225,416 (3) 5.0%
S.W.O. Management Consultants, Ltd.
35 Parkwood Drive
Tillsonburg, Ontario
Canada N4G 2B7
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David A. Widlak 100,000 2.2%
P.O. Box 482
Washington, MI 48094
Delbert W. Mullens 15,000 0.3%
2888 Bloomfield Crossings
Bloomfield Hills, MI 48013
William H. Hopton 136,059 (4) 3.0%
604 Maple Lane
Columbus, MI 48063
All Officers and Directors 1,271,622 28.2%
of the Company & Subsidiaries
as a Group (5 Persons)
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(1) Each person has sole voting and investment power with respect to the
shares shown except as noted.
(2) The shares beneficially owned by Mr. Cosper are held in the name of
Paul L. Cosper, Trustee under an Agreement of Trust executed by Paul
L. Cosper as Grantor. The beneficiaries of this trust are Mr.
Cosper's wife and children.
(3) 225,416 shares are held in a trust for Mr. Berlet's children. Mr.
Berlet has no voting or dispositive power over the trust and hence,
discloses no beneficial interest in those shares held in trust.
(4) Includes 106,059 shares held by William Hopton, individually, 30,000
shares held by his three children.
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PROPOSAL NUMBER ONE
-------------------
REVERSE STOCK SPLIT AND CORRESPONDING
AMENDMENT TO CERTIFICATE OF INCORPORATION
GENERAL BACKGROUND AND DESCRIPTION OF THE REVERSE STOCK SPLIT
Management is proposing to effect a reverse stock split to decrease
the number of shares of outstanding Common Stock of the Corporation (the
"Reverse Stock Split"). The exact ratio of the reverse stock split will be
one (1) share for each three (3) shares of Common Stock presently
outstanding. Management has determined the Reverse Stock Split will be
effected on December 15, 1998 after it is approved by Shareholders.
If Proposal One is approved, each three (3) shares of authorized and
currently outstanding $.005 par value Common Stock of the Company (the "Old
Common Stock") would be combined into one (1) share of new Common Stock
("New Common Stock"). Outstanding warrants and options to purchase Common
Stock of the Company would be correspondingly adjusted pursuant to the
terms of such warrants and options.
PRINCIPAL EFFECTS OF THE REVERSE STOCK SPLIT
The Corporation is presently authorized to issue outstanding shares of
stock, of which 4,513,637 shares are currently outstanding. The Reverse
Stock Split would result in the conversion of each three (3) authorized and
outstanding shares of Old Common Stock into one (1) share of New Common
Stock. Any fractional shares of New Common Stock resulting from the
Reverse Stock Split will become one (1) additional share of New Common
Stock.
If the Reverse Stock Split is approved, the maximum number of shares
of authorized New Common Stock would remain at 25 million shares.
The relative rights, preferences and qualifications of the New Common
Stock will be identical to the Old Common Stock. These rights include the
right to one (1) vote on all matters submitted to a vote of the
shareholders at meetings and the right to participate pro-rata in dividends
and asset distributions of the Company and any shares which the Company
might issue in the future.
Approval of Proposal One also constitutes approval to amend the
Company's Certificate of Incorporation. The Amendment to the Company's
Certificate of Incorporation will be filed in the office of the Secretary
of State of Delaware as promptly as practicable thereafter. The Amendment
and the Reverse Stock Split will become effective as of the close of
business on December 15, 1998 (the "Effective Date").
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REASONS FOR THE PROPOSED REVERSE STOCK SPLIT
Management believes that a low per share market price of the Common
Stock has and will continue to impair the acceptability of the Company's
equity by the financial community and the investing public. In addition,
the requirements for listing the Company's Common Stock in the future on
the Nasdaq Stock Market or another exchange will mandate a minimum share
price of $1.00 which may only be realized through a reduction in the total
number of outstanding shares of the Company's Common Stock.
In addition, management believes that a low per-share price of Common
Stock reduces the effective marketability of the shares of Common Stock
because of the reluctance of many leading brokerage firms to recommend low-
priced stock to their clients. Furthermore, a variety of brokerage house
policies and practices tend to discourage individual brokers within those
firms from dealing in low-priced stocks. Some of those policies and
practices pertain to the payment of brokers' commissions and to time-
consuming procedures that function to make the handling of low-priced
stocks unattractive to brokers from an economic standpoint. In addition,
the structure of trading commissions also tends to have an adverse impact
upon holders of low-priced stock because the brokerage commission on a sale
of low-priced stock generally represents a higher percentage of the sale
price than the commission on a relatively higher-priced issue.
Although there can be no assurance that the price of the shares of New
Common Stock after the Reverse Stock Split will reach a higher level than
it otherwise would have, the proposed Reverse Stock Split is intended to
result in a price level for the New Common Stock that will provide the
Company with the opportunity to qualify for continued listing on the Nasdaq
Small-Cap Stock Market, increase investor interest and eliminate the
resistance of brokerage firms to trading in and recommending the Company's
securities to their customers.
EXCHANGE OF STOCK CERTIFICATES AND FRACTIONAL SHARE INTERESTS
As soon as practicable after the Effective Date, shareholders will be
notified and requested to surrender their certificates for Old Common Stock
for certificates representing the corresponding number of shares of the New
Common Stock after the Reverse Stock Split. The notice will provide
instructions as to the procedures to forward certificates, and each record
holder will also be sent a Letter of Transmittal which should be completed
and returned with the certificate(s) for Old Common Stock subject to the
Reverse Stock Split. Certificates for the New Common Stock will be issued
promptly thereafter. Until so surrendered, each certificate representing
shares of Old Common Stock will be deemed for all corporate purposes after
the Effective Date to evidence ownership of the New Common Stock in the
appropriately reduced number. The Corporation has appointed American
Securities Transfer & Trust, Inc. (the "Transfer Agent") as its transfer
agent to act for shareholders in effecting the exchange of their
certificates.
No scrip or fractional share certificates of New Common Stock will be
issued in connection with the Reverse Stock Split. In lieu thereof,
shareholders will receive one (1) additional whole share of stock for any
fractional share which may result from application of the split ratio to
the shareholdings of such shareholder.
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FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the U.S. federal income tax
consequences of the Reverse Stock Split to an individual shareholder (who
is a U.S. citizen or resident alien) or a corporate shareholder (which is
an ordinary domestic U.S. corporation). The discussion is based upon the
Internal Revenue Code of 1986, as amended, and the related regulations,
rulings and decisions currently in effect. The discussion does not
encompass the effects of any tax laws (whether income, property, transfer
or other forms of tax laws) of any other jurisdiction (e.g., states,
municipalities or foreign countries).
BECAUSE THE FEDERAL INCOME TAX CONSEQUENCES DISCUSSED BELOW DEPEND
UPON EACH SHAREHOLDER'S PARTICULAR TAX STATUS, AND DEPEND FURTHER UPON
FEDERAL INCOME TAX LAWS, REGULATIONS, RULINGS AND DECISIONS WHICH ARE
SUBJECT TO CHANGE (WHICH CHANGES MAY BE RETROACTIVE IN EFFECT), EACH
SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR FOR A COMPLETE
DESCRIPTION OF THE TAX CONSEQUENCES TO THE SHAREHOLDER.
The Reverse Stock Split will be effected pursuant to Section 368
(a)(1)(E) of the Code. Generally, the Reverse Stock Split will be a tax-free
recapitalization for the Company and its shareholders. Shareholders
will have an aggregate basis in the New Common Stock for reporting gain or
loss equal to the aggregate basis they had in the Old Common Stock and the
holding period for the New Common Stock will be the same as the
shareholder's holding period in the Old Common Stock.
In summary:
1. The Reverse Stock Split will be a tax-free recapitalization for
the Company and its shareholders.
2. The shares of the New Common Stock in the hands of a shareholder
will have an aggregate basis for computing gain or loss equal to
the aggregate basis of shares of Old Common Stock held by the
shareholder immediately prior to the Reverse Stock Split.
3. A shareholder's holding period of the shares of the New Common
Stock will be the same as the holding period for the shares of
Old Common Stock exchanged therefor.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE FOR GENERAL
INFORMATION ONLY AND ARE BASED ON THE CODE, THE REGULATIONS PROMULGATED
THEREUNDER BY THE TREASURY DEPARTMENT, AND THE INTERPRETATIONS OF THE CODE
AND THE REGULATIONS BY THE COURTS AND THE INTERNAL REVENUE SERVICE, ALL AS
THEY EXIST AS OF THE DATE OF THIS PROXY STATEMENT. THE DISCUSSION SET
FORTH ABOVE IS NOT INTENDED AS LEGAL ADVICE APPLICABLE TO ANY SPECIFIC
SHAREHOLDER AND
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EACH SHAREHOLDER IS ENCOURAGED TO DISCUSS HIS OR HER PARTICULAR SITUATION
WITH THEIR TAX ADVISOR.
BOARD RECOMMENDATIONS TO SHAREHOLDERS
The Board of Directors has unanimously approved resolutions proposing
the Reverse Stock Split. For the reasons set forth above, the Board of
Directors unanimously recommends to shareholders that they approve the
Reverse Stock Split.
VOTE REQUIRED
The affirmative vote, in person or by proxy, of the holders of a
majority of the outstanding shares of the Company's Common Stock is
required to approve the Reverse Stock Split and effect the amendment to the
Company's Certificate of Incorporation. The Company's Officers and
Directors intend to vote their shares in favor of Proposal One.
OTHER BUSINESS
--------------
As of the date of this Proxy Statement, management of the Company was
not aware of any other matter to be presented at the Meeting other than as
set forth herein. However, if any other matters are properly brought
before the Meeting, the shares represented by valid proxies will be voted
with respect to such matters in accordance with the judgement of the
persons voting them. A majority vote of the shares outstanding is
necessary to approve any such matters.
WILLIAM H. HOPTON, PRESIDENT
Yale, Michigan
October 30, 1998
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PROXY PROXY
- ----- -----
MARGATE INDUSTRIES, INC.
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF THE SHAREHOLDERS TO BE HELD
DECEMBER 9, 1998
The undersigned hereby constitutes and appoints Fredrick G. Schriever and
Mr. William H. Hopton, and each of them, the true and lawful attorneys and
proxies of the undersigned, with full power of substitution and
appointment, for and in the name, place and stead of the undersigned, to
act for and vote all of the undersigned's shares of the $.005 par value
common stock of Margate Industries, Inc., a Delaware corporation at the
Special Meeting of Shareholders to be held at 129 North Main Street, Yale,
Michigan, at 9:00 a.m. Eastern Time, on December 9, 1998, and any and all
adjournments thereof, for the following purposes:
1. To grant the Board of Directors the authority to effect a reverse
stock split of one (1) for three (3) whereby each three shares of
currently outstanding $.005 par value Common Stock of the Company (the
"Old Common Stock") would be combined into one (1) share of new Common
Stock (the "New Common Stock").
/ / For / / Against.
2. To transact such other business as properly may come before the
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ABOVE.
The undersigned hereby revokes any proxies as to said shares and heretofore
given by the undersigned, and ratifies and confirms all that said attorneys
and proxies may lawfully do by virtue hereof.
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SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCORDANCE
WITH THE SHAREHOLDER'S SPECIFICATION ABOVE. THIS PROXY CONFERS
DISCRETIONARY AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT
THE TIME OF THE MAILING OF THE NOTICE OF THE SPECIAL MEETING OF
SHAREHOLDERS TO THE UNDERSIGNED.
The undersigned hereby acknowledges receipt
of the Notice of Special Meeting of
Shareholders and Proxy Statement furnished
therewith.
Dated: ______________________________, 1998
____________________________________________
____________________________________________
Signature(s) of Shareholder(s)
Signature(s) should agree with the name(s)
hereon. Executors, administrators,
trustees, guardians and attorneys should
indicate when signing. Attorneys should
submit powers of attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MARGATE
INDUSTRIES, INC. PLEASE SIGN AND RETURN THIS PROXY TO MARGATE INDUSTRIES,
INC., 129 NORTH MAIN STREET, YALE, MICHIGAN 70801. THE GIVING OF A PROXY
WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
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