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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
COMTREX SYSTEMS CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
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(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
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COMTREX SYSTEMS CORPORATION
102 EXECUTIVE DRIVE
MOORESTOWN, NEW JERSEY 08057
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 12, 2001
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TO THE SHAREHOLDERS:
A Special Meeting of Shareholders (the "Special Meeting") of Comtrex
Systems Corporation, a Delaware corporation (the "Company"), will be held at the
Radisson Hotel, Route 73, Mount Laurel, New Jersey, at 2:00 P.M., local time, on
Monday, February 12, 2001, for the following purposes:
(1) To consider and vote upon an amendment to the
Company's Certificate of Incorporation to effect a
one-for-three reverse stock split of all issued and
outstanding shares of the Company's common stock; and
(2) To transaction such other business as may properly
come before the meeting or any adjournments or
postponements thereof.
The Proxy Statement accompanying this Notice provides detailed
information concerning the matters to be considered and acted upon at the
Special Meeting. Please read it carefully.
The Board of Directors of the Company unanimously recommends that the
Shareholders vote in favor of the proposal for the amendment to the Company's
Certificate of Incorporation to effect a one-for-three reverse stock split of
all issued and outstanding shares of the Company's common stock.
The Board of Directors has fixed the close of business on December 15,
2000 as the record date for determining those shareholders who will be entitled
to notice of and to vote at the Special Meeting.
You are cordially invited to attend the Special Meeting. Whether or not
you plan to attend the meeting, please complete, date and sign the enclosed
proxy card and return it promptly in the enclosed envelope. Your proxy may be
revoked at any time prior to the time it is voted.
By Order of the Board of Directors,
CHARLES A. HARDIN
Secretary
Moorestown, New Jersey
January 8, 2001
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COMTREX SYSTEMS CORPORATION
102 Executive Drive
Moorestown, New Jersey 08057-4224
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 12, 2001
These proxy materials are furnished in connection with the solicitation
of proxies by the Board of Directors of Comtrex Systems Corporation, a Delaware
corporation ("Comtrex" or the "Company"), for a Special Meeting of Shareholders
of Comtrex (the "Special Meeting") to be held at 2:00 P.M. on Monday, February
12, 2001, at the Radisson Hotel, Route 73, Mount Laurel, New Jersey, and any
adjournments or postponements of such meeting. These proxy materials were first
mailed to shareholders on or about January 8, 2001. The address of the principal
executive office of Comtrex is 102 Executive Drive, Moorestown, New Jersey
08057-4224.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Special
Meeting are summarized below:
(l) To consider and vote upon an amendment to the Company's
Certificate of Incorporation to effect a one-for-three reverse stock
split of all issued and outstanding shares of the Company's common
stock; and
(2) To transact such other business as may properly come
before the Special Meeting or any adjournments or postponements
thereof.
COMMON STOCK AND PRINCIPAL HOLDERS THEREOF
Shares of the common stock, par value $.001 per share (the "Common
Stock"), of Comtrex, represented by proxies in the accompanying form which are
properly executed and returned to Comtrex before the Special Meeting, will be
voted at the meeting in accordance with the shareholders' instructions contained
in such proxies. In the absence of contrary instructions, shares represented by
such proxies will be voted for the proposed amendment to the Company's
Certificate of Incorporation to effect a one-for-three reverse stock split of
all issued and outstanding shares of the Common Stock; and in the discretion of
the proxy holders on such other matters as may properly come before the Special
Meeting. The Board of Directors knows of no other matters, other than the
proposed reverse stock split, to be presented for consideration at the Special
Meeting or any adjournments or postponements thereof. If, however, any other
matters properly come before the
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Special Meeting or any adjournments or postponements thereof, it is the
intention of the proxy holders to vote such proxy in accordance with their
judgment on any such matters. The proxy holders may also, if it is deemed to be
advisable, vote such proxy to adjourn or postpone the Special Meeting from time
to time.
Any shareholder has the power to revoke his proxy at any time before it
is voted. A proxy may be revoked by a shareholder, if it has not been exercised,
by filing with the Secretary of the Company a written notice of such revocation,
by a later dated proxy delivered to the Secretary of the Company at any time
prior to the voting of the shares represented by such proxy, by oral revocation
given by a shareholder in person at the Special Meeting or any adjournment
thereof prior to the exercise of such proxy, or by the shareholder voting the
shares represented by the proxy by written ballot at the Special Meeting or any
adjournment thereof.
The close of business on December 15, 2000 was the record date (the
"Record Date") for determining those shareholders of the Company entitled to
notice of and to vote at the Special Meeting. All shares of the Common Stock
outstanding on the Record Date are entitled to vote at the Special Meeting, and
the holders of record thereof will have one vote for each share so held on the
matters to be voted upon at the Special Meeting. The presence in person or by
proxy of the holders of a majority of the outstanding shares of the Common Stock
entitled to vote at the Special Meeting will constitute a quorum. Abstentions
and broker-non votes will be counted for the purpose of determining the presence
or absence of a quorum for the transaction of business at the Special Meeting.
The affirmative vote of a majority of all of the shares of the Common
Stock entitled to vote on the reverse stock split proposal is required to
authorize the proposed amendment to the Company's Certificate of Incorporation
and the one-for-three reverse stock split. Thus, any abstentions, "broker
non-votes" (shares held by brokers or nominees as to which they have no
discretionary authority to vote on a particular matter and have received no
instructions from the beneficial owners or persons entitled to vote thereon), or
other limited proxies will have the effect of a vote against amending the
Company's Certificate of Incorporation to implement the one-for- three reverse
stock split. Votes cast at the Special Meeting will be tabulated by the persons
appointed by the Company to act as inspectors for the Special Meeting.
As of the close of business on December 15, 2000, there were 3,866,572
outstanding shares of the Common Stock. The following table lists the
shareholders known to the Company to be beneficial owners of more than five
percent (5%) of the Common Stock as of December 15, 2000:
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Name and Number of Approximate
Address Shares Owned(1)(2) Percentage Owned
-------- ------------------ ----------------
Irene Maladra, 543,447(3) 14.1%
individually and as
Trustee of the Anthony
Maladra Residuary Trust
c/o Comtrex Systems
Corporation
102 Executive Drive
Moorestown, NJ 08057
Jeffrey C. Rice 418,200(4) 10.7%
c/o Comtrex Systems
Corporation
102 Executive Drive
Moorestown, NJ 08057
Norman and Shirley Roberts 280,000(5) 6.8%
c/o Comtrex Systems
Corporation LTD
2 Gatwick Metro Centre
Balcombe Road
Horley, Surrey RH6 9GA
Steven D. Roberts 406,000(6) 10.5%
c/o Comtrex Systems
Corporation LTD
2 Gatwick Metro Centre
Balcombe Road
Horley, Surrey RH6 9GA
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(1) Each person has sole voting and investment power with respect to the shares
unless otherwise indicated.
(2) Cede & Co., nominee for The Depository Trust Company, has informed the
Company that as of the close of business on December 15, 2000 it held
2,605,501 shares (67.4%) of the Common Stock of the Company. The Depository
Trust Company acts as central depository or "clearing house" for
certificates of the shares of numerous corporations held for the account of
banks and brokerage houses. The amount of shares held by Cede & Co. changes
daily.
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(3) Anthony Maladra, an individual owning in excess of five percent (5%) of the
capital stock of the Company, died on May 6, 1990. Pursuant to the terms and
provisions of Anthony Maladra's Last Will and Testament, the shares of the
capital stock of the Company owned by the deceased have been distributed to
the Anthony Maladra Residuary Trust (the "Trust"). Irene Maladra is a
co-trustee and the lifetime beneficiary of the Trust, and in such capacity
she is deemed to be the beneficial owner of the shares of the capital stock
of the Company held by the Trust.
(4) Includes 10,000 shares subject to stock options granted pursuant to the
1992 Non- Qualified Stock Option Plan; stock options pertaining to 2,000
shares became exercisable on July 1, 1996, stock options pertaining to 2,000
shares became exercisable on July 1, 1997, stock options pertaining to 2,000
shares became exercisable on August 1, 1998, stock options pertaining to
2,000 shares became exercisable on August 1, 1999, and stock options
pertaining to the remaining 2,000 shares became exercisable on August 1,
2000. Also includes 30,000 shares subject to stock options granted pursuant
to the 1995 Incentive Stock Option Plan, which became exercisable on July
28, 1997.
(5) Includes 260,000 shares issuable pursuant to the conversion terms of a
certain Subordinated Convertible Debenture, dated October 2, 1997, issued by
the Company to Norman and Shirley Roberts in connection with the acquisition
by the Company of all of the outstanding capital stock of Data Systems
Terminals Limited, a corporation formed and existing under the laws of
England.
(6) Includes 6,000 shares subject to stock options granted pursuant to the 1992
Non-Qualified Stock Option Plan, stock options pertaining to 2,000 shares
became exercisable on August 1, 1998, 2,000 became exercisable on August 1,
1999, and stock options pertaining to the remaining 2,000 shares became
exercisable on August 2, 2000.
Security Ownership of Management.
--------------------------------
The following table sets forth the beneficial ownership of the Common
Stock as of December 15, 2000 by each director, the Company's Chief Executive
Officer, and all directors and the Company's executive officers as a group:
Number of Approximate
Name Shares Owned(1) Percentage Owned
---- --------------- ----------------
NATHAN I. LIPSON 66,000(3) 1.7%
JEFFREY C. RICE 418,200(2)(4) 10.7%
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Number of Approximate
Name Shares Owned(1) Percentage Owned
---- --------------- ----------------
STEVEN D. ROBERTS 406,000(5) 10.5%
ALAN G. SCHWARTZ 92,842(2) 2.4%
ALL EXECUTIVE OFFICERS,
DIRECTORS AND NOMINEES
AS A GROUP (6 people) 1,105,542(6) 27.8%
---------------
(1) Each person has sole voting and investment power with respect to the shares
unless otherwise indicated.
(2) Includes 10,000 shares subject to stock options granted pursuant to the
1992 Non-Qualified Stock Option Plan; stock options pertaining to 2,000
shares became exercisable on July 1, 1996, stock options pertaining to 2,000
shares became exercisable on July 1, 1997, stock options pertaining to 2,000
shares became exercisable on August 1, 1998, stock options pertaining to
2,000 shares became exercisable on August 1, 1999, and stock options
pertaining to the remaining 2,000 shares became exercisable on August 1,
2000. None of such options had been exercised as of the date hereof.
(3) Includes 8,000 shares subject to stock options granted pursuant to the 1992
Non-Qualified Stock Option Plan, stock options pertaining to 2,000 shares
became exercisable on July 1, 1997, stock options pertaining to 2,000 shares
became exercisable on August 1, 1998, stock options pertaining to 2,000
shares became exercisable on August 1, 1999, and stock options pertaining to
the remaining 2,000 shares became exercisable on August 1, 2000. None of
such options had been exercised as of the date hereof.
(4) Includes 30,000 shares subject to options granted pursuant to the 1995
Incentive Stock Option Plan, which became exercisable on July 28, 1997. None
of such options had been exercised as of the date hereof.
(5) Includes 6,000 shares subject to stock options granted pursuant to the 1992
Non-Qualified Stock Option Plan; stock options pertaining to 2,000 shares
became exercisable on August 1, 1998, stock options pertaining to 2,000
shares became exercisable on August 1, 1999, stock options pertaining to the
remaining 2,000 shares became exercisable on August 1, 2000. None of such
options had been exercised as of the date hereof.
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(6) Includes (a) a total of 58,000 shares subject to options granted pursuant
to the provisions of the 1992 Non-Qualified Stock Option Plan, as detailed
in footnotes 2, 3, and 5 above, (b) a total of 20,500 shares owned by all
other executive officers of the Company who are not directors, (c) a total
of 25,000 shares subject to incentive stock options, granted to all other
executive officers of the Company who are not directors, under the 1995
Incentive Stock Option Plan, which shares became exercisable between October
4, 1999 and January 10, 2000, and (d) a total of 30,000 shares subject to
options granted under the 1995 Incentive Stock Option Plan, as detailed in
footnote 4 above. None of the options described in this footnote had been
exercised as of the date hereof. The number of shares indicated as owned by
executive officers and directors as a group does not reflect options which
are not exercisable within sixty (60) days after the date hereof.
PROPOSAL ONE: AMENDMENT TO CERTIFICATE OF INCORPORATION
TO EFFECT A ONE-FOR-THREE REVERSE STOCK SPLIT
Introduction
The Company's Board of Directors has approved a proposal to amend the
Company's Certificate of Incorporation to effect a one-for-three reverse stock
split of the Common Stock. We are submitting the proposal to you, the
shareholders, for approval. The proposed reverse stock split will take effect,
if at all, after it is approved by you and after we file a Certificate of
Amendment, in the form attached hereto as Appendix A, with the Secretary of
State of the State of Delaware. We expect that, if the proposal is approved by
you, the Certificate of Amendment will be filed promptly following the Special
Meeting.
Purpose of Reverse Stock Split
The proposed one-for-three reverse stock split has been approved by the
Board of Directors to reduce the number of issued and outstanding shares of the
Common Stock in order to increase the trading price of such shares on the Nasdaq
SmallCap Market. The Board took this action because the Common Stock has failed,
for more than 30 consecutive days, to maintain the $1.00 minimum bid price
required by Nasdaq Marketplace Rule 4310(c)(4) (the "Rule").
On October 18, 2000, Nasdaq formally notified the Company of its
failure to comply with the Rule. Pursuant to Nasdaq Marketplace Rule
4310(c)(8)(b), Nasdaq has given the Company 90 calendar days, or until January
16, 2001, to regain compliance with the Rule. If the minimum bid price for the
Company's Common Stock is at least $1.00 for at least ten consecutive trading
days prior to January 16, 2001, the Company will be deemed to have regained
compliance with the Rule.
However, Nasdaq has notified the Company that, if it is unable to
demonstrate compliance with the Rule on or before January 16, 2001, the
Company's Common Stock will be delisted from
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the Nasdaq SmallCap Market at the opening of business on January 18, 2001. This
automatic delisting will be temporarily stayed if the Company requests a hearing
before the Nasdaq Listing Qualifications Panel (the "Panel") before the close of
business on January 16, 2001. If the Company does not regain compliance with the
Rule before January 16, 2001, the Company intends to request a hearing before
the Panel and request a stay of the delisting of the Common Stock pending
shareholder approval and implementation of the proposed reverse stock split.
If the Common Stock is delisted from the Nasdaq SmallCap Market,
trading in the Common Stock, if any, would have to be conducted in the
non-Nasdaq over-the-counter market (also known as the pink sheet market). In
such an event, an investor could find it more difficult to dispose of, or to
obtain accurate quotations as to the market value of the Common Stock.
In addition, if the Common Stock were to become delisted from trading
on the Nasdaq SmallCap Market and the trading price were to remain below $5.00
per share, trading in the Common Stock may also be subject to the requirements
of certain rules promulgated under the Securities Exchange Act of 1934, which
require additional disclosures by broker-dealers in connection with any trades
involving a stock defined as a "penny stock" (generally, any non-Nasdaq equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions). The additional burdens imposed upon broker-dealers by these
requirements could discourage broker-dealers from facilitating trades in the
Common Stock, which could severely limit the market liquidity of the stock and
the ability of investors to trade the Common Stock.
While there can be no assurance, the Board of Directors believes that
the proposed one-for-three reverse stock split, if approved, will result in an
increase in the minimum bid price of the Common Stock to above the $1.00 per
share minimum bid requirement mandated by the Nasdaq continued listing
requirements and help enable the Common Stock to continue to trade on the Nasdaq
SmallCap Market.
Accordingly, the Board of Directors is asking that the shareholders
approve the proposed amendment to the Company's Certificate of Incorporation to
effectuate a one-for-three reverse stock split of the Common Stock. A vote in
favor of Proposal One (the "Reverse Stock Split Proposal") will be a vote for
approval of the proposed one-for-three reverse stock split and for granting
authority to the Board of Directors to effectuate the reverse stock split.
The Board of Directors has determined that the Reverse Stock Split
Proposal is advisable and in the best interests of the shareholders and
unanimously recommends that the shareholders vote "for" the Reverse Stock Split
Proposal.
Effects of Reverse Stock Split
A reverse stock split is a reduction in the number of outstanding
shares of a corporation's common stock, which is accomplished by the corporation
calling in all the outstanding common stock shares and reissuing a
proportionately fewer number of shares. For example, if our Board of
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Directors implements the proposed one-for-three reverse stock split, then
someone holding 300 shares of the Common Stock would receive 100 shares of the
Common Stock in exchange for such shares. This will also result in an increase
in the number of authorized but unissued shares of the Common Stock. However,
each shareholder's proportionate ownership of the issued and outstanding shares
of the Common Stock would remain the same, except for minor changes which may
result from the provisions of the Reverse Stock Split Proposal, as described
below, which require the rounding of any resulting fractional shares up to the
nearest whole share.
The primary purpose of the proposed one-for-three reverse stock split
is to combine the issued and outstanding shares of the Common Stock into a
smaller number of shares so that the shares of the Common Stock will trade at a
higher price per share than their recent trading prices. In addition to
increasing the market price of the Common Stock, a reverse stock split will also
affect the presentation of shareholders' equity in the Company's balance sheet.
Because the par value of the shares of the Common Stock is not changing as a
result of the implementation of the reverse stock split, the Company's stated
capital, which consists of the par value per share of the Common Stock
multiplied by the number of shares of the Common Stock issued and outstanding,
will be reduced proportionately on the effective date of the reverse stock
split. Correspondingly, the Company's additional paid-in capital, which consists
of the difference between its stated capital and the aggregate amount paid to
the Company upon the issuance of all currently outstanding shares of the Common
Stock, will be increased by a number equal to the decrease in stated capital.
Finally, the reverse stock split, if implemented, will affect the
outstanding stock options of the Company and certain other presently outstanding
convertible securities issued by the Company which contain anti-dilution
provisions. All of the Company's stock option plans include provisions requiring
adjustments to the number of shares covered by, the number of shares subject to
and the exercise prices of outstanding options granted under said plans, in the
event of a reverse stock split. For example, in a one-for-three reverse stock
split, each of the outstanding options would thereafter evidence the right to
purchase that number of shares of the Common Stock following the reverse stock
split equal to 33-1/3% of the shares of the Common Stock previously covered by
the options (with fractional shares rounded up to the nearest whole share) and
the exercise price per share would be three times the previous exercise price.
No Fractional Shares
In order that the Company may avoid the expense and inconvenience of
issuing and transferring fractional shares of the Common Stock as a result of
the reverse stock split, we will round any fractional shares resulting from the
reverse stock split up to the nearest whole share. This means that shareholders
who would otherwise be entitled to receive a fractional share of the Common
Stock following the reverse stock split will receive an extra whole share in
lieu thereof. For example, if any shareholder owns, in total, 100 shares, that
shareholder's shares would be converted into 34 shares if the proposed reverse
stock split is implemented.
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Implementation of Reverse Stock Split
If the shareholders approve the Reverse Stock Split Proposal, the Board
would direct management of the Company, as soon thereafter as is practicable, to
file an Amendment to the Company's Certificate of Incorporation, substantially
in the form attached hereto as Appendix A, with the Secretary of State of the
State of Delaware (the "Reverse Split Amendment"). The Reverse Split Amendment
specifies that, on the effective date specified in the Reverse Split Amendment,
each of the issued and outstanding shares of the Common Stock would
automatically be combined and converted into one-third of a share of the Common
Stock.
Reasons for Reverse Stock Split: Advantages
The Board of Directors believes that a reverse stock split is desirable
for the following reasons:
o If shares of the Common Stock continue to trade below $1.00
per share, the Common Stock will be delisted from the Nasdaq
SmallCap Market. Delisting could decrease the marketability,
liquidity and transparency of the Common Stock (which could,
in turn, further depress our stock price). Our Board believes
that the anticipated increase in the market price per share
resulting from a reverse stock split will lift the price of
the Common Stock above the $1.00 minimum bid threshold that
currently threatens our continued listing on Nasdaq.
o The anticipated increase in the per share market price of the
Common Stock should also enhance the acceptability of the
Common Stock by the financial community and the investing
public.
o Additionally, a variety of brokerage house policies and
practices tend to discourage individual brokers within those
firms from dealing with lower priced stocks. Some of the
policies and practices pertain to the payment of broker's
commissions and to time consuming procedures that function to
make the handling of lower priced stock economically
unattractive to brokers. The expected increase in the per
share price of the Common Stock may help alleviate some of
such problems.
o In addition, the structure of trading commissions also tends
to have an adverse impact upon holders of lower priced stock
because the brokerage commission on a sale of lower priced
stock generally represents a higher percentage of the sales
prices than the commission on a relatively higher priced
issue. A reverse stock split could result in a price level for
the Common Stock that may reduce, to some extent, the effect
of these policies and practices of brokerage firms and
diminish the adverse impact of trading commissions on the
market for the Common Stock.
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o The increase in the portion of the Company's authorized shares of
Common Stock that would be unissued after the reverse stock split is
effectuated could be used for any proper corporate purpose approved
by the Board of Directors. The increased number of authorized but
unissued shares of Common Stock will provide the Company with
additional flexibility to issue additional shares in connection with
future financings or other transactions. However, the Board of
Directors does not currently have any plans to utilize the increase
in the number of the authorized but unissued shares of the Common
Stock that would result from approval and implementation of the
proposed reverse stock split. The following table sets forth the
approximate effects of the proposed reverse stock split on the
authorized and the outstanding shares of the Common Stock and the
number of shares of the Common Stock that will be available for
issuance after implementation of the proposed reverse stock split
(without considering any additional decrease in available shares
that may result from rounding up fractional shares):
Prior to Reverse After 1-For-3
Stock Split Reverse Stock Split
---------------- -------------------
Authorized Shares 10,000,000 10,000,000
Outstanding Shares 3,886,572 1,295,524
Shares Available for Issuance 6,113,428 8,704,476
Reasons Against Reverse Stock Split: Disadvantages
Even though the Board of Directors believes that the potential
advantages of a reverse stock split outweigh any disadvantages that might
result, the following are the possible disadvantages of a reverse stock split:
o Despite the potential increase in liquidity discussed above,
the reduced number of shares resulting from a reverse stock split
could adversely affect the liquidity of the Common Stock.
o A reverse stock split may leave certain shareholders with one
or more "odd lots" of the Common Stock (stock holdings in amounts of
less than 100 shares). These odd lots may be more difficult to sell
than shares in even multiples of 100. Additionally, any reduction in
brokerage commissions resulting from the reverse stock split, as
discussed above, may be offset, in whole or in part, by increased
brokerage commissions required to be paid by shareholders selling
odd lots created by the reverse stock split.
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o Because a reverse stock split would result in an increased number
of authorized but unissued shares of the Common Stock, it may be
construed as having an anti- takeover effect, although neither the
Board of Directors nor the Company's management views this proposal
in that perspective. However, the Board of Directors could use this
increased number of authorized but unissued shares to frustrate
persons seeking to take over or otherwise gain control of the
Company by, for example, privately placing shares with purchasers
who might side with the Board of Directors in opposing a hostile
takeover bid. Shares of the Common Stock could also be issued to a
holder that would thereafter have sufficient voting power to assure
than any proposal to amend or repeal the Company's by-laws or
certain provisions of the Company's Certificate of Incorporation
would not receive the requisite vote. Such uses of the Common Stock
could render more difficult, or discourage, an attempt to acquire
control of the Company if such transaction were opposed by the Board
of Directors.
o Further, the increased number of authorized but unissued shares of
the Common Stock could be issued by the Board of Directors without
further shareholder approval, which could result in further dilution
to the holders of the Common Stock.
Exchange of Stock Certificates
If the reverse stock split is implemented, the Company's shareholders
will be required to exchange their stock certificates for new certificates
representing the new, post-split shares of the Common Stock. Shareholders of
record at the effective time of the reverse stock split will be furnished the
necessary materials and instructions for the surrender and exchange of share
certificates at the appropriate time by the Company's transfer agent.
Shareholders will not have to pay a transfer fee or other fee in
connection with the exchange of certificates. Shareholders should not submit any
certificates until requested to do so.
As soon as practicable after the effective time of the reverse stock
split, the transfer agent will send a letter of transmittal to each shareholder
advising such holder of the procedure for surrendering stock certificates in
exchange for new certificates representing the ownership of the new shares of
the Common Stock. No certificates representing fractional shares will be issued.
Instead, any fractional shares resulting from the reverse stock split will be
rounded up to the nearest whole share.
Until they have surrendered their stock certificates for exchange,
shareholders will not be entitled to received any dividends or other
distributions that may be declared and payable to holders of record of the new
shares of the Common Stock. Upon the surrender of certificates representing
shares of the Common Stock issued and outstanding prior to the reverse stock
split, certificates representing the new, post-split shares of the Common Stock,
together with any such withheld dividends or other distributions, without
interest, will be delivered.
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Any shareholder whose certificate for the Common Stock has been lost,
destroyed or stolen will be entitled to issuance of a certificate representing
the new, post-split shares of the Common Stock into which such shares will have
been converted upon compliance with such requirements as we and our transfer
agent customarily apply in connection with lost, stolen or destroyed
certificates.
Form of Certificate of Amendment to Certificate of Incorporation
The form of the Reverse Stock Split Amendment to the Certificate of
Incorporation is included as Appendix A to this Proxy Statement.
Federal Income Tax Consequences
The following summary of the federal income tax consequences of a
reverse stock split is based on current law, including the Internal Revenue Code
of 1986, as amended, and is for general information only. The tax treatment of a
shareholder may vary depending upon the particular facts and circumstances of
such shareholder, and the discussion below may not address all the tax
consequences for a particular shareholder. For example, foreign, state and local
tax consequences are not discussed below. Accordingly, each shareholder should
consult his or her tax advisor to determine the particular tax consequences to
him or her of a reverse stock split, including the application and effect of
federal, state, local and/or foreign income tax and other laws.
Generally, a reverse stock split will not result in the recognition of
gain or loss for federal income tax purposes. The adjusted basis of the new
shares of the Common Stock will be the same as the adjusted basis of the Common
Stock exchanged for such new shares. The holding period of the new, post-split
shares of the Common Stock resulting from implementation of the reverse stock
split will include the shareholder's respective holding periods for the
pre-split shares of the Common Stock exchanged for the new shares. This
treatment should also apply with respect to additional shares received for
fractional shares.
No Dissenters' Rights
The holders of shares of the Common Stock have no dissenters' rights of
appraisal under Delaware law, the Company's Certificate of Incorporation or the
Company's by-laws with respect to the proposed Amendment to the Company's
Certificate of Incorporation of the one-for-three reverse stock split.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be considered at the 2001 Annual
Meeting of Stockholders must be received at the principal executive offices of
the Company no later than March 23, 2001. Such proposals may be included in the
next year's proxy statement if they comply with certain rules and regulations
promulgated by the Securities and Exchange Commission.
12
<PAGE>
In accordance with Rule 14a-4(c) promulgated by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended,
the holders of proxies solicited by the Board of Directors in connection with
the 2001 Annual Meeting of Shareholders may vote such proxies in their
discretion on certain matters as more fully described in such rule, including
without limitation on any matter coming before the meeting as to which the
Company does not have notice on or before June 6, 2001.
COSTS OF SOLICITATION
The entire cost of soliciting proxies will be borne by Comtrex.
Arrangements may be made with brokerage houses and other custodians, nominees
and fiduciaries to send proxies and proxy materials to the beneficial owners of
stock, and reimbursement for expenses may be made. Proxies may be solicited in
person or by telephone or telegraph by directors, officers or regular employees
of Comtrex, none of whom will receive additional compensation therefor.
MANNER IN WHICH PROXIES WILL BE VOTED
All properly executed proxies received by the Board of Directors will
be voted. The Board proposes to vote all such proxies, unless otherwise
directed, for the approval of the proposed one-for- three reverse stock split.
The Board knows of no other matters which may be presented for action at the
meeting. However, if any other matter properly comes before the meeting, the
proxy holders will vote in accordance with their best judgment on such matter.
Stockholders are urged to vote, sign and return the enclosed form of
proxy promptly in the enclosed envelope.
By Order of the Board of Directors,
CHARLES A. HARDIN
Secretary
January 8, 2001
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<PAGE>
COMTREX SYSTEMS CORPORATION
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints JEFFREY C. RICE, with full power of
substitution, the proxy of the undersigned (the "Proxy") to represent the
undersigned at the Special Meeting of Stockholders of Comtrex Systems
Corporation (the "Company") to be held on Monday, February 12, 2001, or any
adjournment or postponement thereof, and to vote the number of shares of the
Common Stock of the Company which the undersigned would be entitled to vote if
personally present:
(1) One-for-Three Reverse Stock Split Proposal - The proposal to approve an
amendment to Comtrex Systems Corporation's Certificate of Incorporation,
allowing the Board of Directors to implement a one-for- three reverse stock
split of the then outstanding shares of the Company's Common Stock.
FOR /__/ AGAINST /__/ ABSTAIN /__/
(2) In his discretion, the Proxy is authorized to vote upon such other business
as may properly come before the meeting.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, the shares represented
hereby will be voted FOR the proposal listed above, and as the Proxy deems
advisable on such other matters as may properly come before the meeting. This
proxy may be revoked at any time prior to the time it is voted.
MARK HERE FOR ADDRESS CHANGE
AND NOTE AT LEFT /___/
MARK HERE IF YOU PLAN TO
ATTEND THE MEETING /___/
Whether or not you plan to attend the meeting in person, you are urged to sign
and return your proxy without delay in the return envelope provided for that
purpose which requires no postage if mailed in the United States.
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Signature(s) of Stockholder(s)
When signing the proxy, please date it and take care to have the signature
conform to the stockholder's name as it appears on this side of the proxy. If
shares are registered in the names of two or more persons, each person should
sign. Executors, administrators, trustees and guardians should so indicate when
signing.
Dated: , 2001
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<PAGE>
APPENDIX A
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
COMTREX SYSTEMS CORPORATION
TO: THE SECRETARY OF STATE
STATE OF DELAWARE
Pursuant to the provisions of Section 242 of the Delaware General
Corporation Law, this Certificate of Amendment is being filed in order to amend
the Certificate of Incorporation of COMTREX SYSTEMS CORPORATION, a Delaware
corporation (the "Corporation"), as set forth below:
1. The name of the corporation is COMTREX SYSTEMS CORPORATION.
2. The Certificate of Incorporation of the Corporation, as heretofore
amended, is hereby further amended to effect a one share for three shares
reverse stock split of the Company's issued and outstanding shares of common
stock, par value $0.001 per share.
3. To accomplish the foregoing, Article Fourth of the Certificate of
Incorporation is hereby amended by the addition of the following provision:
Simultaneously with the effective date of this Certificate of
Amendment, each three shares of Common Stock issued and outstanding
immediately prior to the effective date of the filing of this
Certificate of Amendment to the Corporation's Certificate of
Incorporation is hereby reclassified and changed into one fully paid
and nonassessable share of Common Stock, $0.001 par value, of the
Corporation, and each holder of record of a certificate for three or
more shares of Common Stock as of the close of business on the
effective date of the filing of this amendment to the
<PAGE>
Corporation's Certificate of Incorporation shall be entitled to
receive, as soon as practicable, upon surrender of such certificate,
a certificate or certificates representing one share of Common Stock
for each three shares of Common Stock represented by the certificate of
such holder, and any fractional shares resulting will be rounded up to
the next whole share. Until such time as the certificates representing
the Common Stock to be reverse split pursuant hereto shall have been
surrendered, the certificates representing the Common Stock shall
represent the shares of Common Stock issuable upon the reverse stock
split of such Common Stock.
4. The amendment of the certificate of incorporation herein certified
has been duly adopted in accordance with the provisions of Section 242(b) of the
General Corporation Law of the State of Delaware.
5. The amendment shall be effective upon the filing hereof.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment as of the ___th day of February, 2001.
COMTREX SYSTEMS CORPORATION
Attested: By:
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CHARLES A. HARDIN, Secretary JEFFREY C. RICE, President
