SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [_]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Lasergate Systems, Inc.
-----------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
LASERGATE SYSTEMS, INC.
2189 CLEVELAND STREET
SUITE 230
CLEARWATER, FLORIDA 33765
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Tuesday, February 17, 1998
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders
(the "Meeting") of LASERGATE SYSTEMS, INC., a Florida corporation (the
"Company"), will be held on Tuesday, February 17, 1998 at 2:00 P.M. at The
Holiday Inn Clearwater Central, 20967 U.S. 19 North, Clearwater, Florida, to
consider and act upon the following:
I. The election of two Class I Directors to serve until the
1999 Annual Meeting of Shareholders or until the
election and qualification of their successors and the
election of two Class II Directors to serve until the
2000 Annual Meeting of Shareholders or until their
successors are duly elected and qualified;
II. A proposal to adopt amendments to the Company's Articles
of Incorporation to increase the number of authorized
shares of common stock, par value $.03 per share (the
"Common Stock"), from 20,000,000 to 60,000,000 shares;
III. A proposal to adopt amendments to the Company's 1994
Stock Option Plan (the "1994 Plan") to increase the
number of shares of Common Stock which may be issued
thereunder from 58,333 to 900,000 shares and to
eliminate the non-employee Director formula option
grants and certain provisions relating thereto currently
set forth in the 1994 Plan;
IV. A proposal to approve the grant of stock options to
certain of the Company's Executive Officers; and
V. The transaction of such other business as may properly
come before the Meeting or any adjournments thereof.
<PAGE>
Only shareholders of record of Common Stock of the Company at the
close of business January 13, 1998 are entitled to receive notice of, to vote at
and to attend the Meeting. At least 10 days prior to the Meeting, a complete
list of the shareholders entitled to vote will be available for inspection by
any shareholder, for any purpose germane to the Meeting, during ordinary
business hours, at the offices of the Company, 2189 Cleveland Street, Suite 230,
Clearwater, Florida 33765.
You are cordially invited to attend the Meeting. Whether or not it
is your intention to attend the Meeting, you are urged to complete, sign and
date the enclosed form of proxy, and return it promptly in the enclosed reply
envelope. Returning your proxy does not deprive you of your right to attend the
Meeting and to vote your shares in person. This solicitation is being made on
behalf of the Company's Board of Directors.
By Order of the Board of Directors,
PHILIP P. SIGNORE
Secretary
Dated: January __, 1998
IMPORTANT
THE RETURN OF YOUR SIGNED PROXY AS PROMPTLY AS POSSIBLE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE MEETING. NO POSTAGE IS REQUIRED IF THE PROXY IS
RETURNED IN THE ENVELOPE ENCLOSED FOR YOUR CONVENIENCE AND MAILED IN THE UNITED
STATES.
<PAGE>
LASERGATE SYSTEMS, INC.
2189 CLEVELAND STREET
SUITE 230
CLEARWATER, FLORIDA 33765
------------------------------
PROXY STATEMENT
Annual Meeting of Shareholders
Tuesday, February 17, 1998
------------------------------
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of LASERGATE SYSTEMS, INC., a
Florida corporation (the "Company"), to be voted at the Annual Meeting of
Shareholders of the Company (the "Meeting") which will be held at The Holiday
Inn Clearwater Central, 20967 U.S. 19 North, Clearwater, Florida, on Tuesday,
February 17, 1998 at 2:00 P.M., local time, and any adjournment or adjournments
thereof, for the purposes set forth in the accompanying Notice of Annual Meeting
of Shareholders and in this Proxy Statement. The approximate date on which this
Proxy Statement and accompanying Proxy will first be sent or given to
shareholders is January 16, 1998.
A Proxy, in the accompanying form, which is properly executed, duly
returned to the Company and not revoked, will be voted in accordance with the
instructions contained therein and, in the absence of specific instructions,
will be voted in favor of all proposals and in accordance with the judgment of
the person or persons voting the proxies on any other matter that may be brought
before the Meeting. Each such Proxy granted may be revoked at any time
thereafter by writing to the Secretary of the Company prior to the Meeting, by
execution and delivery of a subsequent proxy or by attendance and voting in
person at the Meeting, except as to any matter or matters upon which, prior to
such revocation, a vote shall have been cast pursuant to the authority conferred
by such Proxy. The cost of soliciting proxies will be borne by the Company.
Following the mailing of the proxy materials, solicitation of proxies may be
made by Officers and employees of the Company, or anyone acting on their behalf,
by mail, telephone, telegram or personal interview.
Shareholders of record as of the close of business on January 13,
1998 (the "Record Date") will be entitled to notice of, and to vote at, the
Meeting or any adjournments thereof. As of the Record Date, there were issued
and outstanding 7,462,061 shares of common stock, par value $.03 per share (the
"Common Stock"). Each holder of Common Stock is entitled to one vote for each
share held by such holder. The presence, in person or by proxy, of the holders
of a majority of the shares entitled to vote at the Meeting will constitute a
quorum for the transaction of business. Proxies submitted which contain
abstentions or broker non-votes will be deemed present at the Meeting in
determining the presence of a quorum. The affirmative vote of the holders of a
majority of the votes cast at the Meeting at which a quorum is present will be
required for the election of
<PAGE>
Directors, for the amendment to the Company's Articles of Incorporation and for
the amendments to the 1994 Stock Option Plan (the "1994 Plan"). Shares of Common
Stock that are voted to abstain and shares which are subject to broker non-votes
with respect to any matter will not be considered cast with respect to that
matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information as of December 4,
1997 regarding the beneficial ownership of shares of Common Stock by (i) each
person (including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) who is known by the Company to be
the beneficial owner of more than five percent of the Common Stock, its only
class of voting securities (ii) each Director and nominee, (iii) each current
and former Executive Officer named in the Summary Compensation table herein
titled "Executive Compensation" and (iv) all Directors and Executive Officers of
the Company as a group.
<TABLE>
<CAPTION>
AMOUNT OF PERCENT OF
PRESENTLY ISSUED PRESENTLY ISSUED
AND OUTSTANDING AND OUTSTANDING
COMMON STOCK PLUS COMMON STOCK PLUS
AMOUNT AND PERCENT OF COMMON STOCK COMMON STOCK
NATURE PRESENTLY ISSUED ISSUABLE UPON ISSUABLE UPON
NAME AND ADDRESS OF BENEFICIAL AND OUTSTANDING CONVERSION OF CONVERSION OF
OF BENEFICIAL OWNER OWNERSHIP(1) COMMON STOCK SERIES G SHARES SERIES G SHARES (2)
- ------------------- ------------ ------------ --------------- -------------------
<S> <C> <C> <C> <C>
Jacqueline E. Soechtig 398,500(3) 5.1% 398,500(3) 1.0%
c/o Lasergate Systems, Inc.
2189 Cleveland Street
Suite 230
Clearwater, FL 33765
Bruce D. Barrington 92,500(4)(5) 1.2% 92,500(4)(5) *
c/o Lasergate Systems, Inc.
2189 Cleveland Street
Suite 230
Clearwater, FL 33765
John J. Chluski 95,827(4) 1.3% 95,827(4) *
c/o Lasergate Systems, Inc.
2189 Cleveland Street
Suite 230
Clearwater, FL 33765
Frank W. Swacker 52,500(6) * 52,500(6) *
c/o Lasergate Systems, Inc.
2189 Cleveland Street
Suite 230
Clearwater, FL 33765
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF PERCENT OF
PRESENTLY ISSUED PRESENTLY ISSUED
AND OUTSTANDING AND OUTSTANDING
COMMON STOCK PLUS COMMON STOCK PLUS
AMOUNT AND PERCENT OF COMMON STOCK COMMON STOCK
NATURE PRESENTLY ISSUED ISSUABLE UPON ISSUABLE UPON
NAME AND ADDRESS OF BENEFICIAL AND OUTSTANDING CONVERSION OF CONVERSION OF
OF BENEFICIAL OWNER OWNERSHIP(1) COMMON STOCK SERIES G SHARES SERIES G SHARES (2)
- ------------------- ------------ ------------ --------------- -------------------
<S> <C> <C> <C>
Eric T. Jager 176,500(7) 2.4% 176,500(7) *
c/o Lasergate Systems, Inc.
2189 Cleveland Street
Suite 230
Clearwater, FL 33765
James H. Moore 16 * 16 *
c/o Lasergate Systems, Inc.
2189 Cleveland Street
Suite 230
Clearwater, FL 33765
Glenn W. Phillips 0 * * *
c/o Lasergate Systems, Inc.
2189 Cleveland Street
Suite 230
Clearwater, FL 33765
Philip P. Signore 0 * * *
c/o Lasergate Systems, Inc.
2189 Cleveland Street
Suite 230
Clearwater, FL 33765
RBB Bank, AG 100,000 1.3% 32,755,549 81.6%
Burgring 16
8010 Graz
Austria
All Directors and Executive 815,843(8) 9.9% 815,843(8) 2.0%
Officers of the Company as a
group (10 persons)
</TABLE>
- -------------------
* Less than 1%.
(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them.
(2) Assumes full conversion of the Company's Series G Convertible Preferred
Stock into a total of 32,655,549 shares of Common Stock representing 81.4%
of the Company's Common Stock.
(3) Includes 375,000 shares of Common Stock which Ms. Soechtig has the right to
acquire pursuant to presently exercisable stock options.
(4) Includes 42,500 shares of Common Stock which each of Messrs. Barrington and
Chluski has the right to acquire pursuant to presently exercisable stock
options.
(5) Includes 50,000 shares of Common Stock owned by a trust of which Mr.
Barrington acts as trustee.
-3-
<PAGE>
(6) Includes 47,500 shares of Common Stock which Mr. Swacker has the right to
acquire pursuant to presently exercisable stock options.
(7) Includes (i) 124,000 shares of Common Stock owned by a mutual fund which
Mr. Jager manages and with respect to which Mr. Jager has voting power,
(ii) 10,000 shares of Common Stock owned by Mr. Jager's wife as to which
Mr. Jager disclaims beneficial ownership, and (iii) 42,500 shares of Common
Stock which Mr. Jager has the right to acquire pursuant to presently
exercisable stock options.
(8) Includes shares of Common Stock which such Directors and Executive Officers
have the right to acquire pursuant to presently exercisable stock options.
-4-
<PAGE>
POTENTIAL CHANGE IN CONTROL
During June 1996, faced with the prospect of having to dramatically
scale back its business in order to continue in operation, the Company sold
8,000 shares of Series F Convertible Preferred Stock (the "Series F Shares") to
an investment fund managed by, and in trust with, RBB Bank, AG ("RBB"), a
foreign bank. At that time, the Company had little working capital and the
Company's shipments to customers were falling behind schedule due to the
inability to place orders for product as a result of the Company having fully
utilized all credit extended to it by its vendors. In connection with the sale
of the Series F Shares, the Company paid a placement fee equal to 13.75% of the
proceeds and issued warrants to purchase 500,000 shares of the Company's Common
Stock at the average conversion price of the Series F Shares. Proceeds from the
offering were $5,172,500 net of commissions and offering expenses. At the time
of the investment, RBB was not affiliated with the Company or any of its
management.
On November 4, 1997, the Company sold 7,500 shares of Series G
Preferred Stock (the "Series G Shares") to RBB for $7,500,000 pursuant to an
exemption from the registration requirements of the Securities Act of 1933, as
amended, under Regulation S promulgated thereunder. Pursuant to the transaction,
the Company redeemed 7,945 shares of Series F Preferred Stock owned by RBB for
$6,000,000, leaving the Company with $1,447,500 of net proceeds after giving
effect to expenses of the offering. No sales commissions were paid. Each Series
G Share has a redemption value of $1.00 on or after November 1, 2000 and is
convertible into 4,354.0732 shares of Common Stock. However, requests for
conversion of only such number of Series G Shares as will result in the issuance
by the Company of a maximum of 8,000,000 shares of Common Stock will be honored
until the Company's Articles of Incorporation are amended to increase the number
of authorized shares of Common Stock as set forth in Proposal II below. If
Proposal II is adopted the Series G Shares could convert into 81.4% of the
Company's outstanding common stock assuming no outstanding warrants and options
are exercised, or 75.7% assuming all outstanding warrants and options are
exercised. As of December 4, 1997, there were 7,462,061 shares of the Company's
common stock outstanding with a closing bid on the NASDAQ SmallCap Market of
$0.25 per share.
Although RBB does not have any voting rights with respect to its
Series G Shares or any position on the Company's Board of Directors, if it were
to convert its Series G Shares into Common Stock, it would be in a position to
vote a majority of the Company's outstanding voting securities and thereby
effect a change in control.
-5-
<PAGE>
ACTION TO BE TAKEN AT THE MEETING
PROPOSAL I
ELECTION OF DIRECTORS
The Company's Articles of Incorporation and By-Laws provide for a
classified Board of Directors. The Board is divided into three classes
designated Class I, Class II and Class III. The nominees below are being
presented for election as Class I and Class II Directors to hold office until
the 1999 and 2000 Annual Meeting of Shareholders, respectively. The term of each
Class III Director is to expire at the 1998 Annual Meeting of Shareholders.
Unless instructed to the contrary, the persons named in the enclosed Proxy
intend to cast all votes pursuant to Proxies received in favor of the persons
listed under the heading "Nominees" below as Directors. The nominees, each of
whom presently serves as a Director, have indicated to the Company their
availability for election. In the event that the nominees should not continue to
be available for election, the holders of the Proxies may exercise their
discretion to vote for substitutes. Directors hold office until their respective
successors are elected and duly qualified, or until death, resignation or
removal. Officers hold office until the meeting of the Board of Directors
following each Annual Meeting of Shareholders and until their successors have
been chosen and qualified.
The following information is furnished with respect to the nominees
and each other continuing member of the Company's Board of Directors.
YEAR FIRST PRESENT POSITION
NAME AGE BECAME DIRECTOR CLASS WITH THE COMPANY
- ---- --- --------------- ----- ----------------
NOMINEES:
Bruce D. Barrington 54 1996 II Director
John J. Chluski 73 1996 II Director
Eric T. Jager 54 1997 I Director
Philip P. Signore 38 1996 I Vice President, Chief
Financial Officer,
Treasurer, Secretary
and Director
-6-
<PAGE>
YEAR FIRST PRESENT POSITION
NAME AGE BECAME DIRECTOR CLASS WITH THE COMPANY
- ---- --- --------------- ----- ----------------
DIRECTORS WHOSE
TERMS OF OFFICE
CONTINUE AFTER THE
MEETING:
Jacqueline E. 47 1994 III President, Chief
Soechtig Executive Officer and
Chairman of the Board
Frank W. Swacker 74 1995 III Vice Chairman of the
Board
BACKGROUND OF NOMINEES
BRUCE D. BARRINGTON has been a member of the Board of Directors of
the Company since November 1, 1996 and has also served since that time as the
Company's Chief Technology Advisor, a capacity in which he is able to contribute
to the direction of the Company's products. Since 1982, Mr. Barrington has
served as the Chairman and CEO of Top Speed Corporation (formerly Clarion
Software Corporation and prior thereto Barrington Systems, Inc.), a software
company which develops and markets a sophisticated line of software development
tools aimed at the Windows(R) environment. Mr. Barrington founded Top Speed
Corporation in 1982. From 1980 to 1983 Mr. Barrington served as a Director of
HBO & Company, a publicly-held software solutions provider to the health care
industry which he co-founded in 1973. From 1973 to 1980, Mr. Barrington served
as Vice President of Research & Development for HBO & Company. Previously, Mr.
Barrington was employed as a Manager of Hospital Systems Development for
McDonnel Douglas Automation Company from 1967 to 1973 and as a Systems Analyst
for Caterpillar Tractor Company from 1965 to 1967.
JOHN J. CHLUSKI has been a member of the Board of Directors of the
Company since November 1, 1996. Since 1988 Mr. Chluski has been an international
business consultant and advisor. He has served as an active Board Member of
several ITT subsidiaries and is presently a Director of ITT Composants (France).
Mr. Chluski is also a Director of Howmet S.A. (France), and serves as Advisor to
the Chairman of Marceau Investissements, a Paris-based investment fund, and
Advisor to Monitor Company, a global strategy consulting firm based in
Cambridge, Massachusetts. From 1972 to 1988, Mr. Chluski held several executive
management positions at ITT Corporation, including Group Executive-Engineered
Products-Europe, and Senior Vice President and Executive Representative of the
Chairman.
ERIC T. JAGER has been a member of the Board of Directors of the
Company since May 28, 1997. Mr. Jager is the Executive Vice President -
Investments of Bartlett & Company ("Bartlett") and President of Windcrest
Investment Management, a division of Bartlett involved in diversified
-7-
<PAGE>
portfolio management. Mr. Jager has served in these positions since 1983 and
prior thereto he served as a Senior Vice President, Investment Analyst and
Director of Investment Research at Eppler, Guerin & Turner, an investment
banking firm in Dallas, Texas. Mr. Jager is a Director of Nygaard Corporation,
Bartlett Futures, Scout Mutual Funds, Johnson County Business Tech Center and
Tech- Industry Consultants. Mr. Jager is also the Chairman of the Board of
Shawnee Mission Education Foundation and a Director and Co-Chairman of Kansas
Inc.
PHILIP P. SIGNORE has been the Company's Vice President - Finance,
Chief Financial Officer, Treasurer and Secretary since May 1996 and has been a
member of the Board of Directors since June 1996. Mr. Signore served as Chief
Financial Officer of Commercial Design Services, Inc., an office furniture
dealership, from March 1993 to May 1996. From July 1989 to March 1993, Mr.
Signore was the Operations Controller for Briggs Industries, Inc., a plumbing
fixtures manufacturer. Previously, Mr. Signore held various financial management
positions in the areas of financial planning and analysis while at Paradyne
Corporation from 1983 to 1988 as well as internal auditing at Moore McCormack
Resources from 1981 to 1983. He began his career working as a CPA at the
international accounting firm of Peat Marwick Mitchell & Co. from 1979 to 1981.
BACKGROUND OF CONTINUING DIRECTORS
JACQUELINE E. SOECHTIG has been a Director of the Company and the
Company's President and Chief Executive Officer since October 31, 1994. From
September 1994 until immediately prior to her employment by the Company, Ms.
Soechtig was a consultant to the Company. During the ten-month period prior
thereto, Ms. Soechtig purchased and operated a restaurant in Clearwater, Florida
together with her spouse. From February 1992 through December 1993, Ms. Soechtig
was the President and Chief Executive Officer of Precision Systems, Inc.
("PSI"), a company engaged in the production and sales of voice and call
processing systems. Prior to her employment with PSI, Ms. Soechtig served as
Vice President of Business Development for Sprint Corp. (May 1990 through
February 1992). She also held the position of Vice President of MCI
Telecommunications Corporation where she served in various sales, marketing and
technical capacities from May 1984 through May 1990. Both Sprint and MCI are
engaged in the telecommunications industry. Additionally, from 1970 to 1983, Ms.
Soechtig was employed by International Business Machines Corp. in various
technical and sales positions.
FRANK W. SWACKER has been a member of the Board of Directors of the
Company since May 3, 1995. Mr. Swacker has been engaged in the practice of law
for the past 46 years, more than the last five of such years as a sole
practitioner under the name of Swacker & Associates, P.C. Between 1968 and 1978,
he was the International Counsel for Allis-Chalmers Corporation in Milwaukee,
Wisconsin. Mr. Swacker has published articles focusing on international foreign
trade and the financial, antitrust and cross-cultural aspects of transnational
business and is the lead author of the 1996 two volume work entitled "World
Trade Without Barriers," a comprehensive treatise on the World Trade
Organization and dispute resolution. Additionally, he has advised the United
States House of Representatives on international trade treaties and has served
as Special Assistant Deputy
-8-
<PAGE>
Attorney General for the State of New York. Since 1960, Mr. Swacker has been a
member of the National Panel of Arbitrators of the American Arbitration
Association.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors has an Audit Committee and a Compensation
Committee. The Audit Committee recommends to the Board of Directors the
appointment of independent auditors to audit the Company's consolidated
financial statements, reviews the Company's internal control procedures and
advises the Company on tax and other matters connected with the growth of the
Company. The Audit Committee also reviews with management the annual audit and
other work performed by the independent auditors. The Compensation Committee
administers the Company's 1994 Plan Stock Option Plan and recommends to the
Board of Directors the nature and amount of compensation to be paid to the
Company's Executive Officers.
On June 28, 1996, three members of the Board of Directors who had
been designated to serve on the Board of Directors by the holders of the
Company's Series A Convertible Preferred Stock, resigned as Directors of the
Company in connection with the redemption of the Company's Series A Convertible
Preferred Stock. Although these directors provided no written reasons for their
resignations, it is believed that they were serving in part to protect the
interests of the holders of the Series A Preferred Stock. On the same day,
Philip P. Signore, the Company's Vice President and Chief Financial Officer was
appointed to the Board of Directors. As a result, there was only one
non-employee Director on the Board of Directors from June 28, 1996 until October
31, 1996. During this period, the duties normally performed by the audit
committee and compensation committee were assumed by the sole remaining
non-employee Director, Frank W. Swacker. On December 16, 1996, the Company
established new audit and compensation committees. The Audit Committee and
Compensation Committee currently consists of Messrs. Swacker, Barrington,
Chluski and Jager.
During the fiscal year ended December 31, 1996, the Board of
Directors of the Company held 18 meetings, the Audit Committee held one meeting
and the Compensation Committee held four meetings. Each Director attended at
least 75% of the aggregate number of meetings of the Board of Directors and the
committees, which were held during the period the Director served as a Director
during the fiscal year ended December 31, 1996.
REMUNERATION OF NON-EMPLOYEE DIRECTORS
Effective January 1, 1996, the Company commenced paying non-employee
Directors fees equal to $1,000 per meeting attended in person, and $500 per
meeting attended by telephone. The Company ceased paying such fees effective
September 6, 1996.
In addition, upon the initial election and upon each re-election of
an outside Director to serve a term as a Director of the Company, such Director
is entitled under the Company's 1994 Plan, to be granted a non-qualified stock
option to purchase 5,000 shares of Common Stock for each year of such term (the
"Formula Grants"), with 5,000 of such options to vest at the beginning of each
year
-9-
<PAGE>
of such term provided that the Director continues to serve in such capacity at
the time of the scheduled vesting. The exercise price of such options is set at
85% of market value at time of grant. During the fiscal year ended December 31,
1996, each of Messrs. Barrington and Chluski were granted options to purchase
5,000 shares under the Company's 1994 Plan at exercise prices of $.5578 per
share and $.425 per share respectively (85% of the market value at time of
grant). As a further inducement to their agreeing to serve on the Board, Messrs.
Barrington and Chluski were each granted additional options to purchase 37,500
shares outside of the 1994 Plan at average exercise prices of $.656 per share
and $.625 per share, respectively (the market value at time of grant). All such
options are exercisable for ten years. One of the proposed amendments to the
1994 Plan is to delete the Formula Grants.
-10-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain summary information
concerning compensation with respect to each person who served as the Company's
Chief Executive Officer during the fiscal year ended December 31, 1996 and each
of the Company's Executive Officers whose total cash compensation for the year
ended December 31, 1996 exceeded $100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
AWARDS PAYOUTS
------ -------
NAME AND SECURITIES
PRINCIPAL UNDERLYING ALL OTHER
POSITION YEAR SALARY $ BONUS $ OPTIONS(#) COMPENSATION
--------- ---- -------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Jacqueline E. Soechtig (1)(4) 1996 220,000 100,000 -- --
President and Chief 1995 220,000 20,170 -- --
Executive Officer 1994 54,347 -- 375,000 --
Glenn W. Phillips(2)(4) 1996 130,950 50,000 -- --
Vice President - Sales 1995 -- -- -- --
& Marketing 1994 -- -- -- --
James H. Moore, Jr. (3)(4) 1996 100,000 50,000 -- --
Vice President - 1995 100,000 -- -- --
Operations, Assistant 1994 -- -- -- --
Secretary
</TABLE>
- --------------
(1) Ms. Soechtig has been employed by the Company since October 31, 1994. Ms.
Soechtig's annual salary is currently $220,000. During the year ended
December 31, 1994, Ms. Soechtig was awarded stock options to purchase
375,000 shares of Common Stock, all of which are presently exercisable. In
addition, a $20,170 bonus payable in 1994 upon Ms. Soechtig's employment
with the Company was paid during 1995 and during the year ended December
31, 1996, Ms. Soechtig was awarded a bonus of $100,000.
(2) Mr. Phillips has been employed by the Company since January, 1996. Mr.
Phillips' annual salary is currently $150,000. During the year ended
December 31, 1996, Mr. Phillips was awarded a bonus of $50,000.
(3) Mr. Moore has been employed by the Company since January, 1995. Mr. Moore's
annual salary is currently $100,000. During the year ended December 31,
1996, Mr. Moore was awarded a bonus of $50,000.
(4) No formal meeting of the Compensation Committee was held during 1996, in
that two of its three members had resigned from the Board of Directors on
June 28, 1996, prior to the time at which 1996 performance was evaluated.
The continuing member, recognizing the accomplishments of the officers of
the Company, submitted a written recommendation to the Board of Directors
outlining cash and non-cash incentive pay recommendations for each officer
of the Company based on an evaluation of their performances and the
Company's performance. The recommendation was submitted to the Board of
Directors at its meeting on October 21, 1996, at which all of the directors
were present. The Board of Directors accepted the recommendation
unanimously, with Ms. Soechtig abstaining with respect to her compensation.
-11-
<PAGE>
No options were granted during the Company's 1996 fiscal year to the
current and former Executive Officers named in the Summary Compensation Table
above.
The following table sets forth certain information concerning the
number of shares of Common Stock acquired upon the exercise of stock options
during the year ended December 31, 1996 by, and the number and value at December
31, 1996 of shares of Common Stock subject to unexercised options held by, the
individuals listed in the Summary Compensation Table.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Value Options/SARs Options/SARs
Realized at FY-End (#) at FY-End ($)
Name On Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- --------------- ----- ------------------------- -------------------------
<S> <C> <C> <C>
Jacqueline E. Soechtig -- -- 375,000/0 0/0
</TABLE>
EMPLOYMENT AGREEMENT
Jacqueline E. Soechtig, President and Chief Executive Officer of the
Company, is a party to an employment agreement with the Company, which commenced
on October 31, 1994 for a term of three years. Ms. Soechtig's base salary for
the entire three-year term was $220,000 per annum. The agreement also provided
for incentive compensation in the form of bonuses that were paid in the amounts
of $20,170 and $100,000 for 1995 and 1996, respectively. Pursuant to the
agreement and as a signing bonus, Ms. Soechtig was paid $20,170 and was granted
ten-year stock options to purchase 375,000 shares of Common Stock, which are all
presently exercisable at an exercise price of $2.00 per share. Ms. Soechtig was
granted certain registration rights with respect to the shares of Common Stock
underlying all of such options. The fair value of the 375,000 shares of Common
Stock underlying Ms. Soechtig's options was determined by the Board of Directors
to be $5.00 per share at the time of the option grant considering various
factors such as restrictions placed on the underlying shares and their lack of
liquidity, as well as their quoted market price on October 31, 1994 of $13.50
per share. On July 30, 1997, the Board of Directors, unanimously approved a
resolution (with Ms. Soechtig abstaining) authorizing an amendment to the
employment agreement which extends the term of the agreement to October 31, 2000
and increases her base salary to $235,000.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Act"), as
amended, requires the Company's Executive Officers and Directors, and any
persons who own more than 10% of any class of the Company's equity securities
which are registered under the Act to file certain reports relating to their
ownership of such securities and changes in such ownership with the Securities
and Exchange Commission and NASDAQ, and to furnish the Company with copies of
such reports. To the Company's knowledge, based solely on a review of the copies
of such reports furnished to the Company, all Section 16(a) filing requirements
applicable to such Officers, Directors and owners of
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over 10% of the Company's equity securities registered under the Act, during the
year ended December 31, 1996, have been complied with except as follows: Bruce
D. Barrington (a current Director of the Company) and John J. Chluski (a current
Director of the Company) were each inadvertently late in filing a report upon
becoming a Director and in filing one report of transactions; Philip P. Signore
(a current Officer and Director of the Company) was inadvertently late in filing
a report upon becoming an Officer and a Director of the Company; and Frank W.
Swacker (a current Director of the Company) and Jacqueline E. Soechtig (a
current Officer and Director of the Company) were each inadvertently late in
filing one report of transactions. Fred R. Maglione (a former Officer of the
Company) was inadvertently late in filing a report upon the termination of his
employment with the Company. To the Company's knowledge, John P. Warnick (a
former Officer of the Company) did not file a report upon the termination of his
employment with the Company. To the Company's knowledge, Timothy E. Mahoney,
Lawrence W. Umstadter and Stewart L. Krug (former Directors of the Company) did
not file reports upon resigning as Directors of the Company.
1994 STOCK OPTION PLAN
The Company's 1994 Plan was adopted by the Board of Directors on
February 5, 1994 and approved by the Shareholders at the 1994 Annual Meeting of
Shareholders. The 1994 Plan was amended by the Board of Directors on March 23,
1995 and September 30, 1996 and was amended by the Shareholders at the 1995
Annual Meeting of Shareholders. The purpose of the 1994 Plan is to provide an
incentive to key employees (including Officers and Directors who are key
employees), non-employee Directors and consultants of the Company, and its
subsidiary corporations, and to offer an additional inducement in obtaining the
services of such individuals.
The 1994 Plan is administered by the Company's Board of Directors,
which may delegate its powers with respect to the administration of the 1994
Plan to a committee of the Board of Directors consisting of not less than two
Directors, each of whom must be a non-employee Director within the meaning of
regulations promulgated by the Securities and Exchange Commission. The Board of
Directors has delegated its powers with respect to the administration of the
1994 Plan to the Compensation Committee. The Compensation Committee has the
authority under the 1994 Plan to determine the terms of options granted under
the 1994 Plan, including, among other things, the individuals who shall receive
options, the times when they shall receive them, whether an incentive stock
option and/or non-qualified option shall be granted, the number of shares to be
subject to each option and the date or dates each option shall become
exercisable.
No options may be granted under the 1994 Plan after February 4,
2004. The Board of Directors, without further approval of the Shareholders of
the Company, may amend, suspend or terminate the 1994 Plan, in whole or in part,
at any time and from time to time in such respects as it deems advisable
(including without limitation to conform with applicable law or the regulations
or rulings thereunder), but may not without the approval of the Company's
shareholders make any alteration or amendment thereof which would (i) increase
the maximum number of shares of Common Stock for which options may be granted
under the 1994 Plan (except for anti-dilution adjustments) or (ii) materially
increase the benefits to participants under the 1994 Plan or (iii) change the
eligibility
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requirements for individuals entitled to receive options under the 1994 Plan. No
termination, suspension or amendment of the 1994 Plan shall, without the consent
of the holder of an existing option affected thereby, adversely affect the
option holders rights under such option. The power of the Committee to construe
and administer any options granted under the 1994 Plan prior to the termination
or suspension of the 1994 Plan nevertheless shall continue after such
termination or during such suspension.
During the fiscal year ended December 31, 1996, each of Messrs.
Barrington and Chluski were granted non-qualified stock options to purchase
5,000 shares under the Company's 1994 Plan at an exercise price of $.425 per
share (85% of the market value at time of grant). All such options are
exercisable for 10 years.
401(k) RETIREMENT PLAN
Effective July 1, 1995, the Company adopted the Lasergate Systems,
Inc. Profit Sharing 401(k) Plan (the "401(k) Plan") covering all eligible
employees. Effective January 1, 1996, the Company began using an employee
leasing company which offered a 401(k) Plan to the Company's employees, at which
time the Company's employees ceased making contributions to the 401(k) Plan. The
Company made no contributions to the 401(k) Plan during the fiscal years ended
1995 and 1996.
By using an employee leasing company, the Company transfers most
payroll expenses and liabilities to the leasing company because the employee
formally becomes an employee of the leasing company. These expenses and
liabilities include FICA and medicare taxes, federal and state unemployment
insurance, group health benefits and benefit administration, such as for 401(k)
plans, in exchange for a fee of approximately 10.9% of the payroll (this
arrangement excludes the Company's officers). Although the Company is permitted
to make contributions to the leasing company's 401(k) plan, it has not done so
and has no commitment to do so. However, the leasing company has agreed to make
matching contributions to each employee's 401(k) account equal to 50% of the
employee's deferral up to a maximum of 3% of such employee's gross wages for the
year. These contributions will be made on the last day of each calendar year,
beginning on December 31, 1998 for all employees who are still employed on the
last day of the year. It should be noted that employers cannot transfer all
employee-related liabilities to employee leasing companies. Employers can still
be held liable for, among other things, violations of OSHA regulations, civil
rights laws and Department of Labor wage and hour regulations.
COMPENSATION AND AUDIT COMMITTEES
As of January 1, 1996, the Compensation Committee and the Audit
Committee of the Board of Directors were each comprised of three non-employee
Directors of the Company. On June 28, 1996, three members of the Board of
Directors resigned as Directors of the Company (in connection with the
redemption of the Company's Series A Convertible Preferred Stock.) On the same
day, Philip P. Signore, the Company's Vice President and Chief Financial Officer
was appointed to the Board of Directors. As a result, there was only one
non-employee Director on the Board of Directors
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from June 28, 1996 until October 31, 1996. During this period, the duties
normally performed by the Audit Committee and the Compensation Committee were
assumed by the sole remaining non-employee Director, Frank W. Swacker. On
December 16, 1996, the Company established a new Audit Committee and a new
Compensation Committee. The Audit Committee and the Compensation Committee each
currently consists of Messrs. Swacker, Barrington, Chluski and Jager.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors, which is now
comprised of three non-employee Directors of the Company, determines, to the
extent not fixed pursuant to the terms of applicable employment agreements, the
compensation of the Chief Executive Officer, other employee members of the Board
of Directors, and all other employees whose annual compensation exceeds $50,000.
The compensation levels of such Officers, Directors and employees are subject to
the approval of the Board of Directors.
The Compensation Committee, being responsible for overseeing and
approving executive compensation and grants of stock options, is in a position
to appropriately balance the current cash compensation considerations with the
longer-range incentive-oriented growth outlook associated with stock options.
The main objectives of the Company's compensation structure include
rewarding individuals for their respective contributions to the Company's
performance, providing Executive Officers with a stake in the long-term success
of the Company and providing compensation programs and policies that will
attract and retain qualified executive personnel.
The Compensation Committee considers, among other things, the
performance of the Company, compensation levels in competing companies,
individual contributions to the Company and the length of service with the
Company. The Compensation Committee also reviews independent surveys of
executive compensation of similarly situated companies.
COMPENSATION COMMITTEE
Frank W. Swacker, Chairman
Bruce D. Barrington
John J. Chluski
Eric T. Jager
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PROPOSAL II
PROPOSAL TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
On October 30, 1997, the Board of Directors unanimously adopted a
resolution approving a proposal to amend Article III of the Company's Articles
of Incorporation to increase the number of shares of Common Stock which the
Company is authorized to issue from 20,000,000 to 60,000,000. The Board of
Directors determined that such amendment is advisable and directed that the
proposed amendment be considered at the Meeting. The amendment will not affect
the number of shares of preferred stock authorized, which is 2,000,000 shares,
par value $.03 per share.
PURPOSES AND EFFECTS OF INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK
The proposed amendment will increase the number of shares of Common
Stock which the Company is authorized to issue from 20,000,000 to 60,000,000.
The additional 40,000,000 shares will be a part of the existing class of Common
Stock and, if and when issued, will have the same rights and privileges as the
shares of Common Stock presently issued and outstanding. Each share of Common
Stock entitles the holder to one vote. The holders of Common Stock of the
Company are not entitled to preemptive rights or cumulative voting.
The following summary of the terms of the increase in the number of
authorized shares of Common Stock does not purport to be complete and is subject
to, and qualified in its entirety by reference to, the portion of the proposed
amendment to Article III of the Company's Articles of Incorporation which is set
forth under the heading "Proposed New Article III to the Company's Articles of
Incorporation" in Exhibit A to this Proxy Statement.
The Board of Directors believes that the adoption of the proposed
amendment is advantageous to the Company and its shareholders. Moreover, absent
approval of this Proposal II, pursuant to the Company's agreement (the
"Agreement") with RBB, there will be insufficient shares of Common Stock to
effect the conversion of the Series G Shares, held by RBB, into Common Shares,
and the Company will be required to pay RBB liquidated damages according to the
following liquidation schedule set forth in the Agreement (where "No. Days Late"
is defined as the number of days following October 31, 1997 until Proposal II is
effected):
No. Days Late Liquidated Damages
120-239 $375,000
240-360 $750,000
An additional $175,000 for each
120 days thereafter.
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The Company currently contemplates reserving 1,175,000 shares of the
additional Common Stock which it is seeking to authorize pursuant to this
proposal for issuance upon the exercise of options proposed to be granted to
certain of its Executive Officers as set forth in Proposal IV. Additionally, the
Company will be obligated to reserve 231,667 shares for issuance upon exercise
of options which have been granted pursuant to the 1994 Plan subject to
shareholder approval of Proposal III below.
During June 1996, the Company completed a private placement of 8,000
Series F Shares to an investment fund managed by, and in trust with, RBB. The
Company received $5,172,500, net of commissions and offering expenses from the
private placement and used $300,000 of the proceeds to pay off the notes payable
to related parties and $1,000,000 to redeem 95,950 shares of Series A
Convertible Preferred Stock held by the same related parties who held the
$300,000 in notes. The shares of Series A Convertible Preferred Stock were
potentially convertible into 2,636,126 shares of Common Stock had they not been
redeemed.
On November 4, 1997, the Company sold 7,500 shares of Series G
Preferred Stock (the "Series G Shares") to RBB for $7,500,000 pursuant to an
exemption from the registration requirements of the Securities Act of 1933, as
amended, under Regulation S promulgated thereunder. Pursuant to the transaction,
the Company redeemed 7,945 Series F shares owned by RBB for $6,000,000, leaving
the Company with $1,447,500 of net proceeds after giving effect to expenses of
the offering. No sales commissions were paid. Each Series G Share has a
redemption value of $1.00 on or after November 1, 2000 and is convertible into
4,354 shares of Common Stock.
Although RBB does not have any voting rights with respect to its
Series G Shares or any position on the Company's Board of Directors, if it were
to convert its Series G Shares into Common Stock, it would be in a position to
vote a majority of the Company's outstanding voting securities and thereby
effect a change in control.
The Company will be obligated to reserve a sufficient number of
shares of Common Stock for issuance upon the conversion of the 7,500 outstanding
shares of Series G Preferred Stock upon approval of the proposed amendment. The
Series G Shares are convertible into 32,655,549 shares of Common Stock. Of this
amount, only 8,000,000 shares of Common Stock are currently reserved for
issuance. If the issuances described above are made, the current shareholders of
the Company will experience a significant dilutive effect on their voting
rights.
Besides the issuances discussed above, the Company has no current
plans, understandings or agreements involving the issuance of any of the Common
Stock proposed to be authorized. The Company intends to seek and actively pursue
a possible relationship with a strategic partner, which might include an equity
investment in the Company and may review other financing opportunities. The
proposed amendment will provide additional authorized shares of Common Stock
that could be used from time to time, without further action or authorization by
the shareholders (except as may be required by law or by any stock exchange on
which the Company's securities may then be listed), for corporate purposes which
the Board of Directors may deem desirable, including, without
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limitation, private or public financings, acquisitions, stock splits, stock
dividends or other distributions, stock grants, stock options and employee
benefit plans.
The authority of the Board of Directors to issue Common Stock could
also potentially be used to discourage attempts by others to obtain control of
the Company through merger, tender offer, proxy contest or otherwise by making
such attempts more difficult or costly to achieve. The increase in authorized
Common Stock would also allow the Board of Directors to issue convertible shares
of Preferred Stock at conversion prices below the present fair market value of
the Common Stock. In addition to resulting dilution of the current shareholders'
ownership interests, this could have the effect of lowering the trading price of
the Company's Common Stock.
In the past, conversion prices of Convertible Preferred Stock have
been set at 65-75% of a five-day average market value of the Common Stock at
time of conversion. This was done in order to recognize a discount for a large
block of common shares that would likely be issued upon conversion of the
Preferred Stock.
At present, the Company is seeking one or more potential strategic
partners who can complement the Company's marketing and development efforts.
Although no assurance can be given that such a partner will invest in the
Company, management intends that such a strategic partner would purchase shares
of Common Stock or Convertible Preferred Stock. If Preferred Stock is issued,
the Company intends to seek a conversion price that is at least equal to the
price of its Common Stock. The conversion price of such stock, however, will be
subject to arms' length negotiation with the strategic partners or investors.
As of the Record Date, the Company had 7,462,061 shares of Common
Stock issued and 11,015,000 shares of Common Stock reserved for issuance upon
the exercise of certain options, warrants and the conversion of the Series G
Preferred Stock. If the proposed amendment is adopted, giving effect to the
potential conversion of the Series G Shares into shares of Common Stock, of
which only 8,000,000 shares of Common Stock have been reserved for that purpose,
there will be 41,522,939 authorized shares of Common Stock that are not
outstanding or reserved for issuance or held in the treasury of the Company. Of
this amount, 24,655,549 additional shares will be reserved for issuance upon
conversion of the Series G Preferred Stock into the maximum number of shares of
Common Stock discussed above, and 1,435,000 shares will be reserved for issuance
upon exercise of options which will be granted upon shareholder approval of
Proposals III and IV below. Assuming approval of this Proposal II by the
shareholders, this will leave 15,432,390 shares of Common Stock authorized which
are not outstanding or reserved for issuance.
In the event the Company's shareholders do not approve this
proposal, the Company will be required to pay liquidation damages to RBB, as set
forth above.
The Board of Directors believes that the adoption of this proposal
is advantageous to the Company as it will allow it to comply with its
contractual obligations to convert the Series G Shares
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upon request and will provide it with the flexibility to enter into strategic
alliances involving the issuance of stock and/or to raise additional capital
through the sale of such securities.
NO DISSENTER'S RIGHTS
Under Florida law, shareholders are not entitled to dissenter's
rights with respect to the proposed Amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS
PROPOSAL.
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PROPOSAL III
PROPOSAL TO AMEND THE 1994 STOCK OPTION PLAN
The Company's 1994 Plan was adopted by the Board of Directors on
February 5, 1994 and approved by the Shareholders at the 1994 Annual Meeting of
Shareholders. The 1994 Plan was amended by the Board of Directors on March 23,
1995 and September 30, 1996. As of December 4, 1997, no options had been
exercised and options to purchase 30,000 shares held by four optionees were
outstanding at a weighted average per share exercise price of $1.58; 28,333
shares are available for future grants under the 1994 Plan.
PROPOSED AMENDMENTS
On March 13, 1997, the Board of Directors unanimously adopted and
recommended for submission to shareholders for their approval at the Meeting,
amendments to the 1994 Plan (the "Amendments") to:
(i) Increase the aggregate number of shares of Common Stock for
which options may be granted under the 1994 Plan from 58,333 shares to 900,000
shares. The Board of Directors believes that the Plan could be instrumental in
attracting and retaining employees, Officers and consultants of outstanding
ability and that this objective will be furthered by providing additional shares
for future option grants; and
(ii) Delete the sections in the 1994 Plan that provide that (a) each
individual who becomes a non-employee Director shall on the date of the
Director's initial election and on the date of each re-election to the Board of
Directors be granted a non-qualified stock option to purchase 5,000 shares of
Common Stock for each year of the term to which the Director is elected or
re-elected at a price equal to 85% of the fair market value of the Common Stock
on the date of election or re-election determined in accordance with the
provision of the 1994 Plan; (b) such options be for a term of 10 years, and (c)
such options vest at the beginning of each year of such term provided that the
Director continues to serve in such capacity at the time of the scheduled
vesting. These provisions had been required in order for such option grants to
be exempt from the six-month short swing profit provisions of Section 16(b) of
the Act. Recent amendments to Rule 16b-3 promulgated under the Act no longer
require that the terms of such grants be specified in the Plan ("formula
grants") in order for the exemption to be available. The Board of Directors
believes that by deleting the provision for formula grants, the Company will
have greater flexibility in granting options to non-employee Directors which
will facilitate its attracting and retaining qualified non-employee Directors.
This proposal is intended to enable management to attract and retain
qualified employees at all levels. If this proposal is not approved by
shareholders and the Company continues to be unable to pay cash bonuses to its
executives and other employees, the Company may not be able to attract and
retain the executives and other employees necessary to accomplish the Company's
goals.
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The following is a description of the 1994 Plan which incorporates
the Amendments:
SHARES SUBJECT TO THE 1994 PLAN
The maximum number of shares as to which options may be granted
under the 1994 Plan (subject to adjustment as described below) is 58,333 shares
of the Company's Common Stock. One of the proposed amendments to the 1994 Plan
is to increase the number of shares for which options may be granted under the
1994 Plan to 900,000 shares. The closing bid price of the Company's Common Stock
on NASDAQ on December 4, 1997 was $0.25. Any shares subject to an option which
for any reason expires, is canceled, terminates unexercised or otherwise ceases
to be exercisable will again be available for grant under the 1994 Plan.
ADMINISTRATION
The 1994 Plan is to be administered by a committee (the "Committee")
which is required to consist of not less than two Directors, each of whom must
be a "non-employee Director" within the meaning of Rule 16b-3 promulgated under
the Act. The Board of Directors has designated the Compensation Committee of the
Board consisting of Messrs. Barrington, Chluski, Jager and Swacker to administer
the 1994 Plan.
ELIGIBILITY
All employees (including Officers and Directors who are employees),
consultants (who are neither employees nor Directors) and outside Directors of
the Company or any of its subsidiaries are eligible to receive options under the
1994 Plan.
OPTION GRANTS
Options may be granted by the Committee to eligible employees or
consultants in such numbers and at such times as the Committee shall determine.
OPTION CONTRACTS
Each grant of an option will be evidenced by a written contract
between the Company and the employee, consultant or outside Director receiving
the grant, containing such terms and conditions not inconsistent with the 1994
Plan as may be determined by the Committee (the "Contract").
TERMS AND CONDITIONS OF OPTIONS
The options granted under the 1994 Plan will be subject to, among
other things, the following terms and conditions:
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(a) Options may be granted for terms determined by the
Committee, provided, however, that the term of an incentive stock option ("ISO")
may not exceed 10 years (five years if the option holder owns (or is deemed to
own) stock possessing more than 10% of the voting power of the Company).
(b) The exercise price for each option granted will be
determined by the Committee, provided, however, that the exercise price of an
ISO may not be less than the fair market value of the Common Stock on the date
of grant (110% in the case of an ISO granted to an optionee who owns (or is
deemed to own) more than 10% of the voting power of the Company). With respect
to non-qualified stock options ("NQSO") granted to employees and consultants,
the exercise price may not be less than 25% of the fair market value on the date
of grant. The exercise price of options is payable in full upon exercise or, if
the Contract permits, in installments. Payment of the exercise price of an
option may be made in cash, certified check, shares of Common Stock or any
combination thereof, depending on the terms of the Contract.
(c) Options may not be transferred other than by will or by
the laws of descent and distribution, and may be exercised during the option
holder's lifetime only by him or his legal representatives.
(d) With respect to options granted to employees, if the
employment of such employee is terminated for any reason other than death or a
permanent and total disability, the option may be exercised, to the extent
exercisable by the holder at the time of termination of employment, within three
months thereafter, but in no event after expiration of the term of the option.
However, if such employment was terminated either for cause or without the
consent of the Company, such option shall terminate immediately. In the case of
the death of the optionee while employed (or within three months after
termination of employment or within one year after termination of employment by
reason of disability), his executor, administrator or other legal representative
or beneficiary may exercise the option, to the extent exercisable on the date of
death, within one year after such date, but in no event after the expiration of
the term of the option. An optionee whose employment was terminated by
disability may exercise his option, to the extent exercisable at the time of
such termination, within one year thereafter, but not after the expiration of
the term of the option.
(e) With respect to options granted to consultants, such
options may be exercised at any time during their term and shall not be affected
by a change in the optionee's relationship with the Company or its subsidiaries.
(f) The Company may withhold cash and/or shares of Common
stock having an aggregate value equal to the amount which the Company determines
is necessary to meet its obligation to withhold federal, state and local taxes
incurred by reason of the grant or exercise of an option, its disposition or the
disposition of shares acquired upon the exercise of the option.
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Alternatively, the Company may require the holder to pay the Company such
amount, in cash, promptly upon demand.
As to options granted to non-employee Directors:
(a) Prior to giving effect to the proposed amendments, NQSOs
granted to non- employee Directors vest at the beginning of each year of such
term provided that the Director continues to serve in such capacity at the time
of the scheduled vesting, has a term of ten years, and an exercise price equal
to 85% of the fair market value of the Common Stock on the date of the grant
and, once vested will not be affected by a change in the optionee's relationship
with the Company or its Subsidiaries. The selection of Directors for
participation in, and the amount, the price or the timing of, non-employee
Director Options shall not be amended more than once every six months, other
than to comport with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act or the rules thereunder. One of the proposed
amendments to the 1994 Plan is to delete the provisions described in this
paragraph (a).
(b) The term of a non-employee Director option shall not be
affected by the death or Disability of the optionee. In such case, the option
may be exercised at any time during its term by his executor, administrator or
other person at the time entitled by law to the optionee's rights under such
option.
(c) Options may not be transferred other than by will or by
the laws of descent and distribution, and may be exercised during the option
holder's lifetime only by the optionee or the optionee's legal representatives.
(d) The foregoing notwithstanding, in no case may options be
exercised later than the expiration date specified in the grant.
ADJUSTMENT IN EVENT OF CAPITAL CHANGES
Appropriate adjustments shall be made in the number and kind of
shares available under the 1994 Plan, in the number and kind of shares subject
to each outstanding option, in the maximum number and kind of shares that may be
granted to any employee in any one calendar year and in the exercise prices of
such options in the event of any change in the Common Stock by reason of any
stock dividend, recapitalization, merger in which the Company is the surviving
corporation, split-up, combination or exchange of shares or the like.
In the event of the Company's (a) liquidation or dissolution, (b)
merger in which the Company is not the surviving corporation or consolidation or
(c) any other capital reorganization in which more than 50% of the Company's
Common Stock are exchanged, any outstanding options shall terminate, unless
otherwise provided in the transaction.
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DURATION AND AMENDMENT OF THE AMENDED PLAN
No option may be granted pursuant to the 1994 Plan after February 4,
2004. The Board of Directors may at any time suspend, terminate or amend the
Amended Plan, provided, however, that, without the approval of the Company's
shareholders, no amendment may be made which would (a) increase the maximum
number of shares available for the grant of options (except the anti-dilution
adjustments described above), (b) otherwise materially increase the benefits
accruing to participants under the 1994 Plan or (c) change the eligibility
requirements for individuals who may receive options. If the Amendments are not
adopted by the Company's shareholders, the Company will not be able to award
options to purchase more than 58,333 shares of Common Stock under the 1994 Plan,
and the Company may be unable to attract and retain qualified non-employee
Directors.
FEDERAL INCOME TAX TREATMENT
The following is a general summary of the Federal income tax
consequences under current tax law of NQSOs and ISOs. It does not purport to
cover all of the rules, including special rules relating to optionees subject to
Section 16(b) of the Exchange Act and the exercise of an option with
previously-acquired shares, or the state or local income or other tax
consequences inherent in the ownership and exercise of stock options and the
ownership and disposition of the underlying shares.
An optionee will not recognize taxable income for federal income tax
purposes upon the grant of a NQSO or an ISO.
Upon the exercise of a NQSO, the optionee will recognize ordinary
income in an amount equal to the excess, if any, of the fair market value of the
shares acquired on the date of exercise over the exercise price thereof, and the
Company will generally be entitled to a deduction for such amount at that time.
If the optionee later sells shares acquired pursuant to the exercise of a NQSO,
he or she will recognize long-term or short-term capital gain or loss, depending
on the period for which the shares were held. Long-term capital gain is
generally subject to more favorable tax treatment than ordinary income or
short-term capital gain. The long-term capital gains rate is generally 28% for
shares held for more than 12 months and not more than 18 months and 20% for
shares held for more than 18 months.
Upon the exercise of an ISO, the optionee will not recognize taxable
income. If the optionee disposes of the shares acquired pursuant to the exercise
of an ISO more than two years after the date of grant and more than one year
after the transfer of the shares to him or her, the optionee will recognize
long-term capital gain or loss, subject to the holding periods described above,
and the Company will not be entitled to a deduction. However, if the optionee
disposes of such shares prior to the end of the
two-years-from-grant/one-year-after-transfer holding period, all or a portion of
the gain will be treated as ordinary income and the Company will generally be
entitled to deduct such amount.
-24-
<PAGE>
In addition to the Federal income tax consequences described above,
an optionee who exercised an ISO may be subject to the alternative minimum tax,
which is payable only to the extent it exceeds the optionee's regular tax
liability. For this purpose, upon the exercise of an ISO, the excess of the fair
market value of the shares over the exercise price is an adjustment which
increases the optionee's alternative minimum taxable income. In addition, the
optionee's basis in such shares is increased by such amount for purposes of
computing the gain or loss on the disposition of the shares for alternative
minimum tax purposes. If an optionee is required to pay an alternative minimum
tax, the amount of such tax which is attributable to deferral preferences
(including the ISO adjustment) is allowed as a tax credit against the optionee's
regular tax liability (net of other non-refundable credits) in subsequent years.
To the extent the credit is not used, it is carried forward. Holders of ISOs
should consult with their tax advisors concerning the applicability and effect
on them of the alternative minimum tax.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS
PROPOSAL.
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<PAGE>
PROPOSAL IV
PROPOSAL TO APPROVE GRANT OF OPTIONS TO EXECUTIVE OFFICERS
On March 13, 1997, the Board of Directors, with Ms. Soechtig
abstaining from the vote, unanimously approved a resolution to grant a stock
option to Ms. Soechtig, subject to shareholder approval of this proposal. The
option entitles Ms. Soechtig to purchase 575,000 shares of Common Stock , with
options to purchase 275,000 shares of Common Stock to vest on the date of the
Meeting and options to purchase 300,000 shares of Common Stock to vest over
three years -- 100,000 on each December 31, 1997, 1998 and 1999. The exercise
price per share would be the average of the highest and lowest sales prices of
the Common Stock of the Company on the last business day prior to the Meeting as
reported by NASDAQ (the "Fair Market Value"). If the Fair Market Value per share
is $.17 or less, all of the options proposed to be granted hereunder will be
incentive stock options. If the Fair Market Value is greater than $.17, the
number of options which will be incentive stock options will be such number as
results in the Fair Market Value (as of the day before the Meeting date) of the
shares issuable upon exercise of the stock options which first become
exercisable in any calendar year being $100,000. The balance of such options
will be non-qualified stock options.
Additionally, on March 13, 1997, the Board of Directors, with Philip
P. Signore, abstaining from the vote in respect of the grant of a stock option
to Mr. Signore, granted a stock option to each of, Mr. Signore and Mr. James H.
Moore, subject to shareholder approval of this proposal. The options entitle
Messrs. Signore and Moore each to purchase 300,000 shares of Common Stock, with
options to purchase 100,000 shares of Common Stock to vest on the date of the
Shareholders Meeting and options to purchase 200,000 shares of Common Stock to
vest over three years -- 66,667 on each December 31, 1997 and 1998 and 66,666 on
December 31, 1999. The exercise price per share would be the average of the
highest and lowest sales prices of the Common Stock of the Company on the last
business day prior to the Meeting as reported by NASDAQ. If the Fair Market
Value per share is $.33 or less, all of the options proposed to be granted
hereunder will be incentive stock options. If the Fair Market Value is greater
than $.33, the number of options which will be incentive stock options for each
Mr. Signore and Mr. Moore will be such number as results in the Fair Market
Value (as of the day before the Meeting date) of the shares issuable upon
exercise of the stock options which first become exercisable in any calendar
year being $100,000. The balance of such options will be non-qualified stock
options.
The proposed grant to each of Ms. Soechtig and Messrs. Signore and
Moore (the "Optionees") will be for a term of ten years. The option exercise
price may be paid in cash, by check or by any other form of consideration
permitted by law. Additionally, the Optionees were granted "piggyback"
registration rights with respect to the shares of Common Stock underlying such
options; such rights provide that the Company will include such shares in any
registration statement it files with the Securities and Exchange Commission.
In the event that the number of outstanding shares of Common Stock
is increased or decreased or changed into a different number or kind of shares
or securities by reason of any merger,
-26-
<PAGE>
share exchange, consolidation, reorganization, recapitalization,
reclassification, stock split, combination of shares, exchange of shares, stock
dividend or other distribution payable in capital stock, or other increase or
decrease in such shares effected without receipt of consideration by the
Company, an adjustment will be made to the remaining outstanding options so that
the proportional interest of each of the Optionees after such an event will be,
to the extent practicable, the same as before the event.
The tax consequences to the Company and to the optionees with
respect to these options are the same as those described under the caption
"Proposal to Amend the 1994 Stock Option Plan" above with respect to
non-qualified stock options.
This proposal is intended to enable the Company to reward the
performance of these executives and to provide them with incentive compensation
for the future which is linked to the performance of the Company. Without the
ability to pay these executives cash bonuses, if this proposal is not approved
by shareholders, the Company may not be able to retain these executives.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS
PROPOSAL.
-27-
<PAGE>
MISCELLANEOUS
VOTING REQUIREMENTS
Directors are elected by a plurality of the votes cast at the
Meeting at which a quorum is present (Proposal I). The affirmative vote of the
holders of a majority of the votes cast at the Meeting at which a quorum is
present will be required to approve the amendment to the Company's Articles of
Incorporation to increase the number of authorized shares of Common Stock to
60,000,000 (Proposal II), the amendments to the Company's 1994 Plan (Proposal
III) and the grant of options to certain of the Executive Officers (Proposal
IV). Abstentions and broker non-votes with respect to any matter are not
considered cast with respect to that matter.
INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors of the Company
selected Grant Thornton LLP to serve as the Company's independent auditors for
the year ended December 31, 1996 and for the year ending December 31, 1997.
Representatives of Grant Thornton LLP will be present at the Meeting.
SHAREHOLDER PROPOSALS
From time to time shareholders may present proposals for
consideration at a meeting which may be proper subjects for inclusion in the
proxy statement and form of proxy related to that meeting. Shareholder proposals
intended to be included in the Company's proxy statement and form of proxy
relating to the Company's 1998 Annual Meeting of Shareholders must be received
by the Company at its principal offices, 2189 Cleveland Street, Suite 230,
Clearwater, Florida 33765 by March 31, 1998. Any such proposals, as well as any
questions relating thereto, should be directed to the Secretary of the Company
at such address.
ADDITIONAL INFORMATION
The cost of solicitation of Proxies, including the cost of
reimbursing banks, brokers and other nominees for forwarding Proxy solicitation
material to the beneficial owners of shares held of record by them and seeking
instructions from such beneficial owners, will be borne by the Company. The
Company has engaged McCormick & Pryor, Ltd. ("McCormick") to solicit proxies and
has agreed to pay McCormick a fee of $3,000 plus their accountable expenses in
connection with this solicitation. Proxies may be also solicited without extra
compensation by certain Officers and regular employees of the Company. Proxies
may be solicited by mail, and if determined to be necessary, by telephone,
telegraph or personal interview.
-28-
<PAGE>
OTHER MATTERS
The Board of Directors does not intend to bring before the Meeting
any matters other than those specifically described above and knows of no
matters other than the foregoing to come before the Meeting. If any other
matters or motions properly come before the Meeting, it is the intention of the
persons named in the accompanying Proxy to vote such Proxy in accordance with
their judgment on such matters or motions, including any matters dealing with
the conduct of the Meeting.
By Order of the Board of Directors,
PHILIP P. SIGNORE
Secretary
Clearwater, Florida
January__, 1998
-29-
<PAGE>
LASERGATE SYSTEMS, INC.
ANNUAL MEETING OF SHAREHOLDERS - FEBRUARY 17, 1998
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints, as proxies for the undersigned,
Jacqueline E. Soechtig and Philip P. Signore and each of them, with full power
of substitution, to vote all shares of Common Stock of the undersigned in
Lasergate Systems, Inc. (the "Company") at the Annual Meeting of Shareholders of
the Company to be held at The Holiday Inn Clearwater Central, 20967 U.S. 19
North, Clearwater, Florida on February 17, 1998, at 2:00 P.M., local time (the
receipt of Notice of which meeting and the Proxy Statement accompanying the same
being hereby acknowledged by the undersigned), or at any adjournments thereof,
upon the matters described in the Notice of Annual Meeting and Proxy Statement
and upon such other business as may properly come before such meeting or any
adjournments thereof, hereby revoking any proxies heretofore given.
EACH PROPERLY EXECUTED PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE ON THE REVERSE SIDE HEREOF. IF NO SPECIFICATIONS ARE MADE,
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" THE LISTED NOMINEES,
"FOR" THE APPROVAL OF THE AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK, "FOR" THE APPROVAL OF THE
AMENDMENTS TO THE COMPANY'S 1994 STOCK OPTION PLAN AND "FOR" THE APPROVAL OF THE
GRANT OF STOCK OPTIONS TO THE COMPANY'S EXECUTIVE OFFICERS.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
A-1
<PAGE>
Please mark boxes [X] in blue or black ink.
Election of Directors:
FOR ALL NOMINEES [_] WITHHOLD AUTHORITY [_]
to vote for all nominees
(Bruce D. Barrington, John J. Chluski, Eric T. Jager
and Philip P. Signore)
(INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME ON THE LIST ABOVE.)
Approval of an amendment to the Company's Articles of Incorporation increasing
the number of shares of Common Stock, $.03 par value, authorized for issuance
from 20,000,000 to 60,000,000 shares of Common Stock.
FOR [_] AGAINST [_] ABSTAIN [_]
Approval of amendments to the Company's 1994 Stock Option Plan to (i) increase
the number of shares of Common Stock which may be issued thereunder from 58,333
to 900,000 shares of Common Stock and (ii) eliminate the non-employee Director
formula option grants and certain provisions relating thereto currently set
forth in the Company's 1994 Stock Option Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
Approval of the grant of options to certain of the Company's Executive Officers.
FOR [_] AGAINST [_] ABSTAIN [_]
NOTE: Please date and sign your name or names exactly as
set forth hereon. If signing as attorney, executor,
administrator, trustee or guardian, please indicate the
capacity in which you are acting. Proxies by
corporations should be signed by a duly authorized
Officer and should bear the corporate seal.
Dated: __________________________, 1998
_______________________________________
_______________________________________
Signature of Shareholder(s)
_______________________________________
Print Name(s)
Please Sign and Return the Proxy Promptly in the Enclosed Envelope.
A-2
EXHIBIT A
---------
PROPOSED NEW ARTICLE III TO THE
ARTICLES OF INCORPORATION
OF
LASERGATE SYSTEMS, INC.
ARTICLE III. CAPITAL STOCK
The total number of shares of all classes of stock which the Corporation
has authority to issue is Sixty Two Million (62,000,000), consisting of Sixty
Million (60,000,000) shares of Common Stock, par value $.03 per share (the
"Common Stock"), and Two Million (2,000,000) shares of Preferred Stock, par
value $.03 per share (the "Preferred Stock"). All or any part of the Common
Stock may be paid for in cash, in property, in formulas, copyrights, patents,
trade names, equipment, or in labor or services at a fair valuation to be fixed
by the incorporators or by the Board of Directors at a meeting called for said
purpose. All stock when issued shall be non-assessable. The stockholders of the
Corporation shall not, solely by virtue of being stockholders, have preemptive
rights to acquire the Corporation's stock, including unissued or treasury shares
of the Corporation or securities of the Corporation convertible into or carrying
a right to subscribe to or acquire shares of the Corporation's stock. The
Preferred Stock shall be issuable in series with such designations, terms,
limitations and relative rights and preferences as may be fixed from time to
time by the Board of Directors.
The designations, terms, limitations and relative rights and preferences
of the shares of Common Stock and Preferred Stock (unless otherwise fixed by the
Board of Directors) are as follows:
(I) COMMON STOCK
1. DIVIDENDS. Subject to the prior and superior right of the
Preferred Stock, the holders of outstanding shares of Common Stock (the "Common
Stock Holders") shall be entitled to receive dividends as, when and in the
amount declared by the Board of Directors, out of any funds legally available
therefor.
2. LIQUIDATION, DISSOLUTION AND WINDING UP. Subject to the prior
and superior right of the Preferred Stock, in the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, whether voluntary
or involuntary, the Common Stock Holders shall be entitled to receive, out of
the net assets of the Corporation, after payment or provision for payment of the
debts and other liabilities of the Corporation, that portion of the remaining
funds to be distributed. Such funds shall be paid to the Common Stock Holders on
the basis of the number of shares of
<PAGE>
Common Stock held by each of them. Neither the consolidation nor merger of the
Corporation into or with any other corporation nor the sale or transfer by the
Corporation of all or any part of its assets shall be deemed a liquidation,
dissolution or winding up of the affairs of the Corporation within the meaning
of the provisions of this Section (a)(2).
3. VOTING. Shares of Common Stock shall entitle the holder thereof
to one vote for each share held with respect to all matters voted on by the
stockholders of the Corporation.
4. REVERSE STOCK SPLIT. Effective 12:01 a.m. on June 23, 1994, each
twelve (12) shares of Common Stock then issued shall be automatically
reclassified into one share of Common Stock of the Corporation. There shall be
no fractional shares issued. In lieu thereof, each fraction of a share that
would otherwise be issued to holders of record thereof shall be entitled to
receive scrip upon the request of such holders. At such time as any shareholder
has sufficient scrip equal to a full share, such scrip may be exchanged with the
Company for a full share.
(II) PREFERRED STOCK
1. SERIES. The shares of Preferred Stock may be divided into and
issued in one or more series, and each series shall be so designated so as to
distinguish the shares thereof from the shares of all other series. All shares
of Preferred Stock shall be identical except in respect of particulars which may
be fixed by the Board of Directors as hereinafter provided pursuant to authority
which is hereby expressly vested in the Board of Directors. Each share of a
series shall be identical in all respects with all other shares of such series,
except as to the date from which dividends thereon shall be cumulative on any
series as to which dividends are cumulative. Shares of Preferred Stock of any
series which have been retired in any manner, including shares redeemed or
reacquired by the Corporation and shares which have been converted into or
exchanged for shares of any other class, or any series of the same or any other
class shall have the status of authorized but unissued shares of Preferred Stock
and may be reissued as shares of the series of which they were originally a part
or may be issued as shares of a new series or any other series of the same
class.
2. PROVISIONS. Before any shares of Preferred Stock of any series
shall be issued, the Board of Directors, pursuant to authority hereby expressly
vested in it, shall fix by resolution or resolutions the following provisions in
respect of the shares of each such series so far as the same are not
inconsistent with the provisions of this Article III applicable to all series of
Preferred Stock:
(a) the distinctive designations of such series and the
number of shares which shall constitute such series, which number may be
increased (except where otherwise provided by the Board of Directors in creating
such series) or decreased (but not below the number of shares thereof then
outstanding) from time to time by like action of the Board of Directors;
(b) the annual rate or amount of dividends, if any, payable
on shares of such series (which dividends would be payable in preference to any
dividends on Common Stock),
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<PAGE>
whether such dividends shall be cumulative or non-cumulative and the conditions
upon which and/or the dates when such dividends shall be payable;
(c) whether the shares of such series shall be redeemable
and, if so, the terms and conditions of such redemption, including the time or
times when and the price or prices at which shares of such series may be
redeemed;
(d) the amount, if any, payable on shares of such series in
the event of liquidation, dissolution or winding up of the affairs of the
Corporation;
(e) whether the shares of such series shall be convertible
into or exchangeable for shares of any other class, or any series of the same or
any other class, and, if so, the terms and conditions thereof, including the
date or dates when such shares shall be convertible into or exchangeable for
shares of any other class, or any series of the same or any other class, the
price or prices or the rate or rates at which shares such series shall be so
convertible or exchangeable, and the adjustments which shall be made, and the
circumstances in which such adjustments shall be made, in such conversion or
exchange prices or rates; and
(f) whether such series shall have any voting rights in
addition to those prescribed by law and, if so, the terms and conditions of
exercise of voting rights; and
(g) any other preferences and relative, participating,
optional or other special rights, and any qualifications, limitations and
restrictions thereof.
A. DESIGNATION OF THE SERIES. There shall be a series of Preferred
Stock designated as "Series G Preferred Stock." Each share of such series shall
be referred to herein as a "Series G Share." The authorized number of such
Series G Shares is eight thousand (8,000).
B. DIVIDENDS. The holders of record of Series G Preferred Stock
shall be entitled to receive, when and if declared by the Board of Directors of
the Corporation, out of funds legally available therefor, dividends paid in
cash, stock or otherwise. When dividends become so payable, the Board of
Directors of the Corporation shall declare such dividends and cause them to be
paid, to the full extent of any funds legally available therefor. In the event
that the Corporation shall pay on the Corporation's Common Stock, $.03 par value
per share, any dividend, whether in cash, property or otherwise, the Corporation
shall pay a dividend on the Series G Shares in an amount per share which is
equal to that which holders of the Series G Shares would have been entitled had
they converted such shares into Common Stock immediately prior to the payment of
such dividend.
C. LIQUIDATION PREFERENCE.
(i) In the event of any liquidation, dissolution or winding-up
of the Corporation, either voluntary or involuntary (a "Liquidation"), the
holders of shares of the Series G Preferred Stock then issued and outstanding
shall be entitled to be paid out of the assets of the Corporation available
-3-
<PAGE>
for distribution to its shareholders, whether from capital, surplus or earnings,
before any payment shall be made to the holders of shares of the Common Stock or
upon any other series of Preferred Stock of the Corporation with a liquidation
preference subordinate to the liquidation preference of the Series G Preferred
Stock, an amount equal to one thousand dollars ($1,000) per share. If, upon any
Liquidation of the Corporation, the assets of the Corporation available for
distribution to its shareholders shall be insufficient to pay the holders of
shares of the Series G Preferred Stock and the holders of any other series of
Preferred Stock with liquidation preference equal to the liquidation preference
of the Series G Preferred Stock the full amounts to which they shall
respectively be entitled, the holders of shares of the Series G Preferred Stock
and the holders of any other series of Preferred Stock with a liquidation
preference equal to the liquidation preference of the Series G Preferred Stock
shall receive all of the assets of the Corporation available for distribution
and each such holder of shares of the Series G Preferred Stock and the holders
of any other series of Preferred Stock with a liquidation preference equal to
the liquidation preference of the Series G Preferred Stock shall share ratably
in any distribution in accordance with the amounts due such shareholders. After
payment shall have been made to the holders of shares of the Series G Preferred
Stock of the full amount to which they shall be entitled, as aforesaid, the
holders of shares of the Series G Preferred Stock shall be entitled to no
further distributions thereon and the holders of shares of the Common Stock and
of shares of any other series of stock of the Corporation shall be entitled to
share, according to their respective rights and preferences, in all remaining
assets of the Corporation available for distribution to its shareholders.
(ii) A merger or consolidation of the Corporation with or into
any other corporation, or a sale, lease, exchange, or transfer of all or any
part of the assets of the Corporation which shall not in fact result in the
liquidation (in whole or in part) of the Corporation and the distribution of its
assets to its shareholders shall not be deemed to be a voluntary or involuntary
liquidation (in whole or in part), dissolution, or winding-up of the
Corporation.
D. CONVERSION OF SERIES G PREFERRED STOCK.
The holders of Series G Preferred Stock shall have the following
conversion rights:
(i) RIGHT TO CONVERT. Each share of Series G Preferred Stock
shall be convertible, on the Conversion Dates and at the Conversion Prices set
forth below, into fully paid and nonassessable shares of Common Stock.
(ii) MECHANICS OF CONVERSION. Each holder of Series G Preferred
Stock who desires to convert the same into shares of Common Stock shall provide
written notice ("Conversion Notice") via telecopy, hand delivery, or overnight
delivery service to the Corporation. The original Conversion Notice and the
certificate or certificates representing the Series G Preferred Stock for which
conversion is elected, shall be delivered to the Corporation by international
courier, duly endorsed. The date upon which a Conversion Notice is properly
received by the Corporation shall be a "Notice Date."
-4-
<PAGE>
The Corporation shall use all reasonable efforts to issue and deliver
within three (3) business days after the Notice Date, to such holder of Series G
Preferred Stock at the address of the holder on the stock books of the
Corporation, a certificate or certificates for the number of shares of Common
Stock to which the holder shall be entitled as aforesaid; provided that the
original shares of Series G Preferred Stock to be converted are received by the
transfer agent or the Corporation within three (3) business days after the
Notice Date and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date. If the
original shares of Series G Preferred Stock to be converted are not received by
the transfer agent or the Corporation within three (3) business days after the
Notice Date, the Conversion Notice shall become null and void.
(iii) CONVERSION DATES. The Series G Preferred Stock shall
become convertible into shares of Common Stock at any time commencing forty-five
(45) days after the last day on which there is an original issuance of the
Series G Preferred Stock; provided, however, that only such number of shares
shall be converted as will together with any shares of Series F Preferred Stock
which are converted after such date, result in the issuance of a maximum of
8,000,000 shares of Common Stock, until the date on which the Corporation's
Articles of Incorporation are amended so as to provide for the authorization of
such number of shares of Common Stock as shall be necessary (after giving effect
to all issued and reserved shares of Common Stock) in order to give effect to
conversion of all remaining outstanding shares of Series F and Series G
Preferred Stock, (the "Amendment"). This shall be the "Conversion Date."
(iv) CONVERSION PRICE. Each share of Series G Preferred Stock
shall be convertible into the number of shares of Common Stock according to the
following formula:
N x 1,000
---------
.22967
N = the number of shares of the Series G Preferred
Stock for which conversion is being elected.
(v) FRACTIONAL SHARES. No fractional share shall be issued upon
the conversion of any shares, share or fractional share of Series G Preferred
Stock. All shares of Common Stock (including fractions thereof) issuable upon
conversion of shares (or fractions thereof) of Series G Preferred Stock by a
holder thereof shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the closing bid price of the Corporation's Common Stock on the
Notice Date Multiplied by such fraction.
(vi) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times after the Amendment reserve and keep available
out of its authorized but unissued shares of
-5-
<PAGE>
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series G Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all then
outstanding shares of the Series G Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series G
Preferred Stock, the Corporation shall use its best efforts to take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
(vii) ADJUSTMENT TO CONVERSION PRICE.
(a) If, prior to the conversion of all shares of Series
G Preferred Stock, the number of outstanding shares of Common Stock is increased
by a stock split, stock dividend, or other similar event, the Conversion Price
shall be proportionately reduced, or if the number of outstanding shares of
Common Stock is decreased by a combination or reclassification of shares, or
other similar event, the Conversion Price shall be proportionately increased.
(b) If, prior to the conversion of all shares of Series
G Preferred Stock, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock of the Corporation shall be changed into the same or a
different number of shares of the same or another class or classes of stock or
securities of the Corporation or another entity, then the holders of Series G
Preferred Stock shall thereafter have the right to purchase and receive upon
conversion of shares of Series G Preferred Stock, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such shares of stock and/or
securities as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore purchasable and
receivable upon the conversion of shares of Series G Preferred Stock held by
such holders had such merger, consolidation, exchange of shares,
recapitalization or reorganization not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holders of the Series G Preferred Stock to the end that the provisions
hereof (including, without limitation, provisions for adjustment of the
Conversion Price and of the number of shares issuable upon conversion of the
Series G Preferred Stock) shall thereafter be applicable, as nearly as may be
practicable in relation to any shares of stock or securities thereafter
deliverable upon the exercise hereof. The Corporation shall not effect any
transaction described in this subsection unless the resulting successor or
acquiring entity (if not the Corporation) assumes by written instrument the
obligation to deliver to the holders of the Series G Preferred Stock such shares
of stock and/or securities as, in accordance with the foregoing provisions, the
holders of the Series G Preferred Stock may be entitled to purchase.
(c) If any adjustment under this subsection would create
a fraction share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon conversion shall be the next higher number
of shares.
-6-
<PAGE>
E. REDEMPTION OF SERIES G PREFERRED STOCK.
(i) At any time on or after November 1, 2000, the Corporation
may redeem, at its option, from any source of funds legally available therefor,
the Series G Preferred Stock as a whole. The Corporation shall effect such
redemption by paying in cash in exchange for each outstanding share of Series G
Preferred Stock a sum equal to $1.00 per share of Preferred Stock (the
"Redemption Price").
(ii) At least 30 but no more than 40 days prior to the date
fixed for redemption pursuant hereto by the Corporation (the "Redemption Date"),
written notice of the redemption to be effected shall be transmitted by the
Corporation to each holder of record of outstanding Series G Shares (at the
close of business on the business day next preceding the day on which notice is
given), at the address last shown on the records of the Corporation for such
holder (the "Redemption Notice"). The Redemption Notice shall be mailed by the
Corporation to each holder via United States mail, first class postage or
international air mail postage, as applicable, prepaid, and the Corporation
shall transmit a copy of such notice to each holder via a recognized courier
service (such as Federal Express of DHL) that guarantees delivery of such notice
within a maximum of seven (7) days from deposit of such notice with such courier
service. The Redemption Notice shall specify the Redemption Date. On or after
the Redemption Date each holder of Series G Preferred Stock shall surrender to
the Corporation the certificate or certificates representing such shares at the
principal executive office of the Corporation and in the manner designated in
the Redemption Notice, and thereupon the Redemption Price of such share shall be
payable to the order of the person whose name appears on such certificate as the
owner thereof and each surrendered certificate shall be canceled.
(iii) Any shares of Preferred Stock specified for redemption
shall continue to be convertible during the period from the date of the
Redemption Notice through the day before the Redemption Date in accordance with
the conversion provisions hereof.
F. VOTING. Except as otherwise provided by the General Corporation
Law of the State of Florida, the holders of the Series G Preferred Stock shall
have no voting power whatsoever, and no holder of Series G Preferred Stock shall
vote or otherwise participate in any proceeding in which actions shall be taken
by the Corporation or the shareholders thereof nor be entitled to notification
as to any meeting of the Board of Directors or the shareholders.
G. PROTECTIVE PROVISIONS. So long as shares of Series G Preferred
Stock are outstanding, the Corporation shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of at
least a majority of the then outstanding shares of Series G Preferred Stock:
(a) alter or change the rights, preferences or
privileges of the shares of Series G Preferred
Stock so as to affect adversely the Series G
Preferred Stock;
(b) create any new class or series of stock having a
preference over the Series G Preferred Stock
with respect to dividends, to payments upon
Liquidation (as provided for in Section B of
this Designation) or to redemption; or
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<PAGE>
(c) do any act or thing not authorized or
contemplated by this Designation which would
result in taxation of the holders of shares of
the Series G Preferred Stock under Section 305
of the Internal Revenue Code of 1986, as amended
(or any comparable provision of the Internal
Revenue Code as hereafter from time to time
amended).
H. STATUS OF CONVERTED STOCK. In the event any shares of Series G
Preferred Stock shall be converted as contemplated by this Designation, the
shares so converted shall be canceled, shall return to the status of authorized
but unissued Preferred Stock of no designated class or series, and shall not be
issuable by the Corporation as Series G Preferred Stock.
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EXHIBIT B
---------
PROPOSED NEW ARTICLE III TO THE
ARTICLES OF INCORPORATION
OF
LASERGATE SYSTEMS, INC.
ARTICLE III. CAPITAL STOCK
The total number of shares of all classes of stock which the Corporation
has authority to issue is Sixty Two Million (62,000,000), consisting of Sixty
Million (60,000,000) shares of Common Stock, par value $.03 per share (the
"Common Stock"), and Two Million (2,000,000) shares of Preferred Stock, par
value $.03 per share (the "Preferred Stock"). All or any part of the Common
Stock may be paid for in cash, in property, in formulas, copyrights, patents,
trade names, equipment, or in labor or services at a fair valuation to be fixed
by the incorporators or by the Board of Directors at a meeting called for said
purpose. All stock when issued shall be non-assessable. The stockholders of the
Corporation shall not, solely by virtue of being stockholders, have preemptive
rights to acquire the Corporation's stock, including unissued or treasury shares
of the Corporation or securities of the Corporation convertible into or carrying
a right to subscribe to or acquire shares of the Corporation's stock. The
Preferred Stock shall be issuable in series with such designations, terms,
limitations and relative rights and preferences as may be fixed from time to
time by the Board of Directors.
The designations, terms, limitations and relative rights and preferences
of the shares of Common Stock and Preferred Stock (unless otherwise fixed by the
Board of Directors) are as follows:
(I) COMMON STOCK
1. DIVIDENDS. Subject to the prior and superior right of the
Preferred Stock, the holders of outstanding shares of Common Stock (the "Common
Stock Holders") shall be entitled to receive dividends as, when and in the
amount declared by the Board of Directors, out of any funds legally available
therefor.
2. LIQUIDATION, DISSOLUTION AND WINDING UP. Subject to the prior
and superior right of the Preferred Stock, in the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, whether voluntary
or involuntary, the Common Stock Holders shall be entitled to receive, out of
the net assets of the Corporation, after payment or provision for payment of the
debts and other liabilities of the Corporation, that portion of the remaining
funds to be distributed. Such funds shall be paid to the Common Stock Holders on
the basis of the number of shares of
<PAGE>
Common Stock held by each of them. Neither the consolidation nor merger of the
Corporation into or with any other corporation nor the sale or transfer by the
Corporation of all or any part of its assets shall be deemed a liquidation,
dissolution or winding up of the affairs of the Corporation within the meaning
of the provisions of this Section (a)(2).
3. VOTING. Shares of Common Stock shall entitle the holder thereof
to one vote for each share held with respect to all matters voted on by the
stockholders of the Corporation.
4. REVERSE STOCK SPLIT. Effective 12:01 a.m. on June 23, 1994, each
twelve (12) shares of Common Stock then issued shall be automatically
reclassified into one share of Common Stock of the Corporation. There shall be
no fractional shares issued. In lieu thereof, each fraction of a share that
would otherwise be issued to holders of record thereof shall be entitled to
receive scrip upon the request of such holders. At such time as any shareholder
has sufficient scrip equal to a full share, such scrip may be exchanged with the
Company for a full share.
(II) PREFERRED STOCK
1. SERIES. The shares of Preferred Stock may be divided into and
issued in one or more series, and each series shall be so designated so as to
distinguish the shares thereof from the shares of all other series. All shares
of Preferred Stock shall be identical except in respect of particulars which may
be fixed by the Board of Directors as hereinafter provided pursuant to authority
which is hereby expressly vested in the Board of Directors. Each share of a
series shall be identical in all respects with all other shares of such series,
except as to the date from which dividends thereon shall be cumulative on any
series as to which dividends are cumulative. Shares of Preferred Stock of any
series which have been retired in any manner, including shares redeemed or
reacquired by the Corporation and shares which have been converted into or
exchanged for shares of any other class, or any series of the same or any other
class shall have the status of authorized but unissued shares of Preferred Stock
and may be reissued as shares of the series of which they were originally a part
or may be issued as shares of a new series or any other series of the same
class.
2. PROVISIONS. Before any shares of Preferred Stock of any series
shall be issued, the Board of Directors, pursuant to authority hereby expressly
vested in it, shall fix by resolution or resolutions the following provisions in
respect of the shares of each such series so far as the same are not
inconsistent with the provisions of this Article III applicable to all series of
Preferred Stock:
(a) the distinctive designations of such series and the
number of shares which shall constitute such series, which number may be
increased (except where otherwise provided by the Board of Directors in creating
such series) or decreased (but not below the number of shares thereof then
outstanding) from time to time by like action of the Board of Directors;
(b) the annual rate or amount of dividends, if any, payable
on shares of such series (which dividends would be payable in preference to any
dividends on Common Stock),
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<PAGE>
whether such dividends shall be cumulative or non-cumulative and the conditions
upon which and/or the dates when such dividends shall be payable;
(c) whether the shares of such series shall be redeemable
and, if so, the terms and conditions of such redemption, including the time or
times when and the price or prices at which shares of such series may be
redeemed;
(d) the amount, if any, payable on shares of such series in
the event of liquidation, dissolution or winding up of the affairs of the
Corporation;
(e) whether the shares of such series shall be convertible
into or exchangeable for shares of any other class, or any series of the same or
any other class, and, if so, the terms and conditions thereof, including the
date or dates when such shares shall be convertible into or exchangeable for
shares of any other class, or any series of the same or any other class, the
price or prices or the rate or rates at which shares such series shall be so
convertible or exchangeable, and the adjustments which shall be made, and the
circumstances in which such adjustments shall be made, in such conversion or
exchange prices or rates; and
(f) whether such series shall have any voting rights in
addition to those prescribed by law and, if so, the terms and conditions of
exercise of voting rights; and
(g) any other preferences and relative, participating,
optional or other special rights, and any qualifications, limitations and
restrictions thereof.
A. DESIGNATION OF THE SERIES. There shall be a series of Preferred
Stock designated as "Series G Preferred Stock." Each share of such series shall
be referred to herein as a "Series G Share." The authorized number of such
Series G Shares is eight thousand (8,000).
B. DIVIDENDS. The holders of record of Series G Preferred Stock
shall be entitled to receive, when and if declared by the Board of Directors of
the Corporation, out of funds legally available therefor, dividends paid in
cash, stock or otherwise. When dividends become so payable, the Board of
Directors of the Corporation shall declare such dividends and cause them to be
paid, to the full extent of any funds legally available therefor. In the event
that the Corporation shall pay on the Corporation's Common Stock, $.03 par value
per share, any dividend, whether in cash, property or otherwise, the Corporation
shall pay a dividend on the Series G Shares in an amount per share which is
equal to that which holders of the Series G Shares would have been entitled had
they converted such shares into Common Stock immediately prior to the payment of
such dividend.
C. LIQUIDATION PREFERENCE.
(i) In the event of any liquidation, dissolution or winding-up
of the Corporation, either voluntary or involuntary (a "Liquidation"), the
holders of shares of the Series G Preferred Stock then issued and outstanding
shall be entitled to be paid out of the assets of the Corporation available
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<PAGE>
for distribution to its shareholders, whether from capital, surplus or earnings,
before any payment shall be made to the holders of shares of the Common Stock or
upon any other series of Preferred Stock of the Corporation with a liquidation
preference subordinate to the liquidation preference of the Series G Preferred
Stock, an amount equal to one thousand dollars ($1,000) per share. If, upon any
Liquidation of the Corporation, the assets of the Corporation available for
distribution to its shareholders shall be insufficient to pay the holders of
shares of the Series G Preferred Stock and the holders of any other series of
Preferred Stock with liquidation preference equal to the liquidation preference
of the Series G Preferred Stock the full amounts to which they shall
respectively be entitled, the holders of shares of the Series G Preferred Stock
and the holders of any other series of Preferred Stock with a liquidation
preference equal to the liquidation preference of the Series G Preferred Stock
shall receive all of the assets of the Corporation available for distribution
and each such holder of shares of the Series G Preferred Stock and the holders
of any other series of Preferred Stock with a liquidation preference equal to
the liquidation preference of the Series G Preferred Stock shall share ratably
in any distribution in accordance with the amounts due such shareholders. After
payment shall have been made to the holders of shares of the Series G Preferred
Stock of the full amount to which they shall be entitled, as aforesaid, the
holders of shares of the Series G Preferred Stock shall be entitled to no
further distributions thereon and the holders of shares of the Common Stock and
of shares of any other series of stock of the Corporation shall be entitled to
share, according to their respective rights and preferences, in all remaining
assets of the Corporation available for distribution to its shareholders.
(ii) A merger or consolidation of the Corporation with or into
any other corporation, or a sale, lease, exchange, or transfer of all or any
part of the assets of the Corporation which shall not in fact result in the
liquidation (in whole or in part) of the Corporation and the distribution of its
assets to its shareholders shall not be deemed to be a voluntary or involuntary
liquidation (in whole or in part), dissolution, or winding-up of the
Corporation.
D. CONVERSION OF SERIES G PREFERRED STOCK.
The holders of Series G Preferred Stock shall have the following
conversion rights:
(i) RIGHT TO CONVERT. Each share of Series G Preferred Stock
shall be convertible, on the Conversion Dates and at the Conversion Prices set
forth below, into fully paid and nonassessable shares of Common Stock.
(ii) MECHANICS OF CONVERSION. Each holder of Series G Preferred
Stock who desires to convert the same into shares of Common Stock shall provide
written notice ("Conversion Notice") via telecopy, hand delivery, or overnight
delivery service to the Corporation. The original Conversion Notice and the
certificate or certificates representing the Series G Preferred Stock for which
conversion is elected, shall be delivered to the Corporation by international
courier, duly endorsed. The date upon which a Conversion Notice is properly
received by the Corporation shall be a "Notice Date."
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<PAGE>
The Corporation shall use all reasonable efforts to issue and deliver
within three (3) business days after the Notice Date, to such holder of Series G
Preferred Stock at the address of the holder on the stock books of the
Corporation, a certificate or certificates for the number of shares of Common
Stock to which the holder shall be entitled as aforesaid; provided that the
original shares of Series G Preferred Stock to be converted are received by the
transfer agent or the Corporation within three (3) business days after the
Notice Date and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date. If the
original shares of Series G Preferred Stock to be converted are not received by
the transfer agent or the Corporation within three (3) business days after the
Notice Date, the Conversion Notice shall become null and void.
(iii) CONVERSION DATES. The Series G Preferred Stock shall
become convertible into shares of Common Stock at any time commencing forty-five
(45) days after the last day on which there is an original issuance of the
Series G Preferred Stock; provided, however, that only such number of shares
shall be converted as will together with any shares of Series F Preferred Stock
which are converted after such date, result in the issuance of a maximum of
8,000,000 shares of Common Stock, until the date on which the Corporation's
Articles of Incorporation are amended so as to provide for the authorization of
such number of shares of Common Stock as shall be necessary (after giving effect
to all issued and reserved shares of Common Stock) in order to give effect to
conversion of all remaining outstanding shares of Series F and Series G
Preferred Stock, (the "Amendment"). This shall be the "Conversion Date."
(iv) CONVERSION PRICE. Each share of Series G Preferred Stock
shall be convertible into the number of shares of Common Stock according to the
following formula:
N x 1,000
---------
.22967
N = the number of shares of the Series G Preferred
Stock for which conversion is being elected.
(v) FRACTIONAL SHARES. No fractional share shall be issued upon
the conversion of any shares, share or fractional share of Series G Preferred
Stock. All shares of Common Stock (including fractions thereof) issuable upon
conversion of shares (or fractions thereof) of Series G Preferred Stock by a
holder thereof shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the closing bid price of the Corporation's Common Stock on the
Notice Date Multiplied by such fraction.
(vi) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times after the Amendment reserve and keep available
out of its authorized but unissued shares of
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<PAGE>
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series G Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all then
outstanding shares of the Series G Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series G
Preferred Stock, the Corporation shall use its best efforts to take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
(vii) ADJUSTMENT TO CONVERSION PRICE.
(a) If, prior to the conversion of all shares of Series
G Preferred Stock, the number of outstanding shares of Common Stock is increased
by a stock split, stock dividend, or other similar event, the Conversion Price
shall be proportionately reduced, or if the number of outstanding shares of
Common Stock is decreased by a combination or reclassification of shares, or
other similar event, the Conversion Price shall be proportionately increased.
(b) If, prior to the conversion of all shares of Series
G Preferred Stock, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock of the Corporation shall be changed into the same or a
different number of shares of the same or another class or classes of stock or
securities of the Corporation or another entity, then the holders of Series G
Preferred Stock shall thereafter have the right to purchase and receive upon
conversion of shares of Series G Preferred Stock, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such shares of stock and/or
securities as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore purchasable and
receivable upon the conversion of shares of Series G Preferred Stock held by
such holders had such merger, consolidation, exchange of shares,
recapitalization or reorganization not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holders of the Series G Preferred Stock to the end that the provisions
hereof (including, without limitation, provisions for adjustment of the
Conversion Price and of the number of shares issuable upon conversion of the
Series G Preferred Stock) shall thereafter be applicable, as nearly as may be
practicable in relation to any shares of stock or securities thereafter
deliverable upon the exercise hereof. The Corporation shall not effect any
transaction described in this subsection unless the resulting successor or
acquiring entity (if not the Corporation) assumes by written instrument the
obligation to deliver to the holders of the Series G Preferred Stock such shares
of stock and/or securities as, in accordance with the foregoing provisions, the
holders of the Series G Preferred Stock may be entitled to purchase.
(c) If any adjustment under this subsection would create
a fraction share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon conversion shall be the next higher number
of shares.
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<PAGE>
E. REDEMPTION OF SERIES G PREFERRED STOCK.
(i) At any time on or after November 1, 2000, the Corporation
may redeem, at its option, from any source of funds legally available therefor,
the Series G Preferred Stock as a whole. The Corporation shall effect such
redemption by paying in cash in exchange for each outstanding share of Series G
Preferred Stock a sum equal to $1.00 per share of Preferred Stock (the
"Redemption Price").
(ii) At least 30 but no more than 40 days prior to the date
fixed for redemption pursuant hereto by the Corporation (the "Redemption Date"),
written notice of the redemption to be effected shall be transmitted by the
Corporation to each holder of record of outstanding Series G Shares (at the
close of business on the business day next preceding the day on which notice is
given), at the address last shown on the records of the Corporation for such
holder (the "Redemption Notice"). The Redemption Notice shall be mailed by the
Corporation to each holder via United States mail, first class postage or
international air mail postage, as applicable, prepaid, and the Corporation
shall transmit a copy of such notice to each holder via a recognized courier
service (such as Federal Express of DHL) that guarantees delivery of such notice
within a maximum of seven (7) days from deposit of such notice with such courier
service. The Redemption Notice shall specify the Redemption Date. On or after
the Redemption Date each holder of Series G Preferred Stock shall surrender to
the Corporation the certificate or certificates representing such shares at the
principal executive office of the Corporation and in the manner designated in
the Redemption Notice, and thereupon the Redemption Price of such share shall be
payable to the order of the person whose name appears on such certificate as the
owner thereof and each surrendered certificate shall be canceled.
(iii) Any shares of Preferred Stock specified for redemption
shall continue to be convertible during the period from the date of the
Redemption Notice through the day before the Redemption Date in accordance with
the conversion provisions hereof.
F. VOTING. Except as otherwise provided by the General Corporation
Law of the State of Florida, the holders of the Series G Preferred Stock shall
have no voting power whatsoever, and no holder of Series G Preferred Stock shall
vote or otherwise participate in any proceeding in which actions shall be taken
by the Corporation or the shareholders thereof nor be entitled to notification
as to any meeting of the Board of Directors or the shareholders.
G. PROTECTIVE PROVISIONS. So long as shares of Series G Preferred
Stock are outstanding, the Corporation shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of at
least a majority of the then outstanding shares of Series G Preferred Stock:
(a) alter or change the rights, preferences or
privileges of the shares of Series G Preferred
Stock so as to affect adversely the Series G
Preferred Stock;
(b) create any new class or series of stock having a
preference over the Series G Preferred Stock
with respect to dividends, to payments upon
Liquidation (as provided for in Section B of
this Designation) or to redemption; or
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<PAGE>
(c) do any act or thing not authorized or
contemplated by this Designation which would
result in taxation of the holders of shares of
the Series G Preferred Stock under Section 305
of the Internal Revenue Code of 1986, as amended
(or any comparable provision of the Internal
Revenue Code as hereafter from time to time
amended).
H. STATUS OF CONVERTED STOCK. In the event any shares of Series G
Preferred Stock shall be converted as contemplated by this Designation, the
shares so converted shall be canceled, shall return to the status of authorized
but unissued Preferred Stock of no designated class or series, and shall not be
issuable by the Corporation as Series G Preferred Stock.
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