SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES 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 Rule 14a-11(c) or Rule 14a-12
LASERGATE SYSTEMS, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/X/ 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:
Common Stock, par value $.03 per share, of Lasergate Systems, Inc.
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(2) Aggregate number of securities to which transaction applies:
15,299,393 shares of Common Stock based on the number of shares
outstanding on June 30, 1999.
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(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): The
filing fee of $309.74 was calculated pursuant to Exchange Act Rule
0-11(c)(1), and is the product of multiplying (A) 1/50 of 1% by an
amount equal to (B) the sum of (x) the product of 15,299,393 shares
of Common Stock by, $0.10 per share (to be paid to Registrant's
shareholders), and (y) $18,750, the aggregate amount anticipated to
be paid to certain persons holding options and warrants to purchase
shares of Common Stock in consideration of the cancellation of such
options and warrants.
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$1,548,689.30
------------
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(5) Total fee paid:
$309.74
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Total fee paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
LASERGATE SYSTEMS, INC.
2189 CLEVELAND STREET, SUITE 230
CLEARWATER, FLORIDA 33765
(727) 803-1574
November ___, 1999
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Lasergate Systems, Inc. to be held at 2189 Cleveland Street, Suite 230,
Clearwater, Florida on Monday, December 15, 1999 at 10:00 a.m.
At the special meeting, you will be asked to consider and vote upon the
approval of the Agreement and Plan of Merger, dated as of June 21, 1999, as
amended October 20, 1999, by and among Tickets.com, Inc., Advantix Acquisition
Corp. and Lasergate Systems, Inc., as it may be amended from time to time,
providing for the merger of Advantix Acquisition, a wholly-owned subsidiary of
Tickets.com , with and into Lasergate, with Lasergate as the surviving
corporation. Pursuant to the proposed merger, you will be entitled to receive
$0.10 in cash, without interest, for each of your shares of common stock of
Lasergate. The accompanying proxy statement explains the proposed merger and
provides specific information concerning the special meeting. Please read these
materials carefully.
The Board of Directors of Lasergate has unanimously approved the merger
agreement and declared the merger agreement advisable. The Board believes that
the terms and provisions of the merger agreement and the proposed mergers are
fair to and in the best interests of Lasergate's shareholders. Therefore, THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE APPROVAL OF THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. In reaching its
decision, the Board considered, among other things, the written opinion of
Raymond James & Associates, Inc. that, as of June 21, 1999, the $0.10 per share
cash consideration to be received by Lasergate's shareholders in the proposed
merger was fair to Lasergate's shareholders from a financial point of view.
The proposed merger is an important decision for Lasergate and its
shareholders. The proposed merger cannot occur unless, among other things, the
merger agreement is approved by the affirmative vote of the holders of a
majority of all outstanding shares of common stock of Lasergate. Whether or not
you plan to attend the special meeting, I urge you to sign, date and promptly
return the enclosed proxy card to ensure that your shares will be voted at the
special meeting. Failure to return an executed proxy card will constitute, in
effect, a vote against approval of the merger agreement and the transactions
contemplated thereby.
On behalf of the Board, I urge you to consider the enclosed materials
carefully and recommend you vote "FOR" approval of the merger agreement and the
transactions contemplated thereby.
Sincerely,
David A. Riley
Chairman of the Board of Directors
<PAGE>
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
This proxy statement and proxy are being mailed to Lasergate's shareholders
beginning about November ____, 1999.
<PAGE>
LASERGATE SYSTEMS, INC.
2189 CLEVELAND STREET, SUITE 230
CLEARWATER, FLORIDA 33765
(727) 803-1574
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Date: December 15, 1999
Time: 10:00 a.m.
Place: 2189 Cleveland Street, Suite 230, Clearwater, Florida
A special meeting of the shareholders of Lasergate Systems, Inc. is being
held for the following purposes:
- To consider and vote upon the Agreement and Plan of Merger, dated
as of June 21, 1999, as amended October 20, 1999, by and among
Tickets.com, Inc., Advantix Acquisition Corp. and Lasergate
Systems, Inc., as it may be amended from time to time, and the
transactions contemplated thereby, including the merger of
Advantix Acquisition with and into Lasergate, with Lasergate as
the surviving corporation and with shareholders of Lasergate
entitled to receive $0.10 in cash, without interest, for each
share of Lasergate's common stock.
- To consider any other matters that may properly be brought before
the special meeting or any adjournment(s) or postponement(s)
thereof.
Only shareholders of record on October 25, 1999 are entitled to notice of,
and to vote at, the special meeting. During the ten day period prior to the
special meeting, any shareholder may examine a list of Lasergate's shareholders
of record, for any purpose related to the special meeting, during ordinary
business hours at the offices of Lasergate: 2189 Cleveland Street, Suite 230
Clearwater, Florida 33765
Shareholders of Lasergate who do not vote in favor of the merger agreement
will have the right to dissent and to seek appraisal of the fair value of their
shares if the merger is completed and they comply with the Florida law
procedures explained in the accompanying proxy statement.
The merger is described in the accompanying proxy statement, which you are
urged to read carefully. A copy of the Agreement and Plan of Merger is attached
as ANNEX A to the accompanying proxy statement.
By Order of the Board of Directors
David A. Riley
Secretary
Clearwater, Florida
November __, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER............................................................................1
SUMMARY...........................................................................................................4
The Parties..................................................................................................4
The Special Meeting..........................................................................................4
Special Factors..............................................................................................5
The Merger Agreement.........................................................................................5
The Merger Consideration.................................................................................5
Conditions to the Merger.................................................................................5
Termination of the Merger Agreement......................................................................6
Acquisition Proposals....................................................................................6
Fees and Expenses........................................................................................6
Dissenters'Rights of Appraisal...............................................................................6
INFORMATION CONCERNING THE SPECIAL MEETING........................................................................7
Time, Place and Date.........................................................................................7
Purpose of the Special Meeting...............................................................................7
Record Date; Voting at the Meeting; Quorum...................................................................7
Required Vote................................................................................................8
Voting and Revocation of Proxies.............................................................................8
Action to be Taken at the Special Meeting....................................................................8
Proxy Solicitation...........................................................................................9
SPECIAL FACTORS...................................................................................................9
Background of the Merger.....................................................................................9
Recommendation of the Board of Directors....................................................................13
Opinion of Financial Advisor to the Board...................................................................15
Comparable Companies Analysis...........................................................................17
Precedent Transaction Analysis..........................................................................17
Premium Analysis........................................................................................18
Opinion of Raymond James & Associates...................................................................18
Tickets.com's and Advantix Acquisition's Purpose and Reason for the Merger..................................19
Certain Effects of the Merger...............................................................................19
Plans for Lasergate After the Merger........................................................................20
Conduct of the Business of Lasergate if the Merger is not Consummated.......................................20
Accounting Treatment........................................................................................20
Regulatory Requirements; Third Party Consents...............................................................20
Material Federal Income Tax Consequences of the Merger......................................................21
Treatment of Holders of Common Stock....................................................................21
Backup Withholding......................................................................................22
Fees and Expenses...........................................................................................22
Interest of Certain Persons in Merger.......................................................................23
THE MERGER AGREEMENT.............................................................................................23
The Merger; Merger Consideration............................................................................23
The Exchange Agent; Payment for Shares of Common Stock......................................................24
Transfers of Common Stock...................................................................................25
Treatment of Stock Options and Warrants.....................................................................25
Representations and Warranties..............................................................................26
Covenants...................................................................................................27
Additional Agreements.......................................................................................29
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Conditions..................................................................................................29
Termination.................................................................................................31
Fees and Expenses...........................................................................................32
Amendment/Waiver............................................................................................33
DISSENTERS'RIGHTS OF APPRAISAL...................................................................................33
MARKET PRICE INFORMATION; DIVIDEND INFORMATION...................................................................36
BUSINESS OF LASERGATE............................................................................................37
General.....................................................................................................37
Product Strategy............................................................................................38
Admits for Windows(R).......................................................................................38
Access Control..............................................................................................40
Select-a-Seat...............................................................................................41
Product Servicing and Administration........................................................................42
Research and Development....................................................................................43
Marketing...................................................................................................43
Customers...................................................................................................44
Competition.................................................................................................44
Product Features and Capabilities...........................................................................45
Pricing.....................................................................................................45
Service and Support.........................................................................................45
Product Availability........................................................................................45
Technology..................................................................................................45
Corporate Structure and Other...............................................................................46
Production and Suppliers....................................................................................46
Personnel...................................................................................................46
Intellectual Property.......................................................................................46
Property....................................................................................................47
Legal Proceedings...........................................................................................47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................48
General.....................................................................................................48
Results of Operations.......................................................................................49
Liquidity and Capital Resources.............................................................................51
Year 2000 Computer Issues...................................................................................51
Financial Statements........................................................................................52
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................................................52
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS........................................................54
INDEPENDENT AUDITORS.............................................................................................55
SHAREHOLDER PROPOSALS............................................................................................55
OTHER BUSINESS...................................................................................................55
AVAILABLE INFORMATION............................................................................................55
CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS........................F-1
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998..............................FF-1
ANNEX A -- Agreement and Plan of Merger, dated as of June 21, 1999, by and among
Tickets.com , Inc., Advantix Acquisition Corp. and Lasergate Systems, Inc.,
and amendment dated October 20, 1999............................................................A-1
ANNEX B -- Opinion of Raymond James & Associates Inc.......................................................B-1
ANNEX C -- Sections 607.1301 - 607.1320 of the Florida Business Corporation Act Relating to Dissenters'
Rights..........................................................................................C-1
</TABLE>
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<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT IS THE PROPOSED TRANSACTION?
A: Tickets.com, Inc., a privately-owned corporation based in Newport Beach,
California ("Tickets.com") will acquire Lasergate Systems, Inc.
("Lasergate") by merging Advantix Acquisition Corp. ("Advantix
Acquisition"), a wholly-owned subsidiary of Tickets.com, into Lasergate
with Lasergate as the surviving corporation.
Q: WHO ARE TICKETS.COM AND ADVANTIX ACQUISITION?
A: Tickets.com is a Delaware corporation formed in January 1995. Tickets.com
has pending with the SEC a registration statement for an initial public
offering of its common stock, which may be commenced and be concluded
prior to our special meeting. Tickets.com is engaged in the sale of
entertainment tickets, event information and related products and
services through retail outlets, call centers, interactive voice response
systems and the internet. Advantix Acquisition is a wholly-owned
subsidiary of Tickets.com.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: Shareholders of Lasergate (other than Tickets.com or its wholly-owned
subsidiaries, or shareholders who dissent and seek appraisal of the fair
value of their shares) will be entitled to receive $0.10 in cash, without
interest, for each share of Lasergate's common stock. If you own stock
options or public warrants of Lasergate, you will be entitled to receive,
for each stock option or public warrant, the difference between $0.10 and
the exercise price of such stock option or public warrant. If the
exercise price of such stock option or public warrant is equal to or
greater than $0.10, then you are not entitled to receive any money for
your stock options or public warrants.
Q: WHAT CHOICE DO I HAVE?
A: Your basic choice is whether to receive the cash Tickets.com proposes to
give you when the merger is completed; or to take action to pursue your
Florida law appraisal rights to have a court determine the value of your
shares of Lasergate common stock.
Q: WHY IS THE BOARD OF DIRECTORS RECOMMENDING THAT I VOTE FOR THE MERGER
AGREEMENT?
A: In the opinion of Lasergate's Board of Directors (the "Lasergate Board"
or the "Board"), the terms and provisions of the merger agreement and the
proposed merger are fair to and in the best interests of Lasergate's
shareholders, and the Board has accordingly unanimously approved the
merger agreement and declared it advisable. To review the background
and reasons for the merger in greater detail, see pages 9 to 20.
Q: HOW DID THE BOARD OF DIRECTORS MAKE SURE THE PRICE PER SHARE I WILL
RECEIVE IN THE PROPOSED MERGER IS FAIR TO ME?
A: The Board selected and retained legal and financial advisors to assist it
in the negotiation of the merger, and received an opinion from its
financial advisor, on which the Board relied, that as of the date of the
opinion the $0.10 per share you will receive in the proposed merger is
fair to you from a financial point of view.
<PAGE>
Q: WHAT ARE THE DISADVANTAGES TO ME OF MERGING LASERGATE WITH ADVANTIX
ACQUISITION?
A: Following the proposed merger, the holders of Lasergate's common stock
will no longer benefit from the earnings or growth of Lasergate.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE MERGER AGREEMENT?
A: The holders of a majority of all outstanding shares of Lasergate's common
stock must vote to approve the merger agreement. RBB Bank, AG currently
is the record holder of approximately 51% of Lasergate's common stock in
the aggregate, which it has agreed to vote in favor of the merger
agreement.
Q: WHAT DO I NEED TO DO NOW?
A: Please mark your vote on, sign, date and mail your proxy card in the
enclosed return envelope as soon as possible, so that your shares may be
represented at the special meeting.
Q: WHAT RIGHTS DO I HAVE IF I OPPOSE THE MERGER?
A: Shareholders who oppose the merger may dissent and seek appraisal of the
fair value of their shares, but only if they comply with all of the
Florida law procedures explained on pages 33 to 35 and in ANNEX C to this
proxy statement.
Q: WHO CAN VOTE ON THE MERGER?
A. All shareholders of record as of the close of business on October 25,
1999 will be entitled to notice of, and to vote at, the special meeting
to approve the merger agreement and the transactions contemplated
thereby.
Q: SHOULD I SEND MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, we will send you a transmittal form
and written instructions for exchanging your share certificates for cash.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A: Your broker will ONLY vote your shares if you provide instructions on how
to vote. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. Just send in a written revocation or another signed proxy card with
a later date to Lasergate Systems, Inc., c/o David A. Riley, Secretary,
2189 Cleveland Street, Suite 230, Clearwater, Florida 33765,
before the special meeting or simply attend the special meeting and vote
in person.
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Q: WHAT IF I DO NOT WISH TO ACCEPT THE CASH TICKETS.COM PROPOSES TO GIVE ME?
A: If you object to the merger and do not wish to accept the cash described
above in exchange for the shares of Lasergate's common stock you own when
the merger is completed, you have the right to dissent from the merger
and have the fair value of your shares appraised by a court and the
amount determined by the court will be paid to you in cash by Lasergate.
IF YOU WISH TO EXERCISE THIS RIGHT, YOU MUST SUBMIT A WRITTEN DEMAND TO
LASERGATE , BEFORE THE VOTE IS TAKEN, ON OR BEFORE DECEMBER 15, 1999.
YOU MUST ALSO SATISFY THE OTHER REQUIREMENTS OUTLINED UNDER "DISSENTERS'
RIGHTS OF APPRAISAL" BEGINNING ON PAGE 33. FAILURE TO TAKE ANY OF THE
REQUIRED STEPS ON A TIMELY BASIS MAY RESULT IN THE LOSS OF YOUR APPRAISAL
RIGHTS.
Q: WHERE SHOULD I SEND MY WRITTEN DEMAND FOR APPRAISAL?
If you do not wish to accept the cash described above in exchange for the
Lasergate shares you own when the merger is completed, you must send your
written demand for appraisal of your shares to: Lasergate Systems, Inc.,
2189 Cleveland Street, Suite 230, Clearwater, Florida 33765, Attention:
David Riley, President.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working toward completing the merger as quickly as possible. If
the merger agreement is approved and the other conditions to the merger
are satisfied, we expect to complete the merger shortly after the
special meeting.
Q: WHAT ARE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO ME?
A: The cash you receive for your shares generally will be taxable for U.S.
federal income tax purposes. To review the federal income tax
consequences to shareholders in greater detail, see pages 21 to 22.
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETING?
A: We do not expect that any other matters will be voted upon at the special
meeting.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have more questions about the merger or would like additional
copies of this proxy statement, you should contact Steven H. Noble, III,
Chief Financial Officer of Lasergate at (727) 803-1574.
3
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE
IN THIS PROXY STATEMENT. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION
THAT IS IMPORTANT TO YOU, AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION CONTAINED ELSEWHERE IN THIS PROXY STATEMENT, INCLUDING THE ANNEXES
TO IT, AND IN THE DOCUMENTS INCORPORATED BY REFERENCE. TO UNDERSTAND THE
PROPOSED MERGER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE TERMS OF THE
PROPOSED MERGER, YOU SHOULD READ CAREFULLY THIS ENTIRE PROXY STATEMENT,
INCLUDING THE ANNEXES TO IT, AND THE DOCUMENTS INCORPORATED BY REFERENCE.
THE PARTIES
LASERGATE SYSTEMS, INC. Lasergate designs, develops, markets, sells and
services software and systems for admission control and revenue accounting at
general admission and reserved seating facilities worldwide, including amusement
parks, theme parks, museums, ski resorts, sports arenas and multi-purpose
arenas. The principal office and business address of Lasergate is 2189 Cleveland
Street, Suite 230, Clearwater, Florida 33765.
For additional information concerning Lasergate, see "Business of
Lasergate," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Available Information."
TICKETS.COM, INC. Tickets.com was incorporated in Delaware in January 1995
as The Entertainment Express, Inc. However, Tickets.com did not commence
business operations until May 1996 when it acquired Hill Acts and Entertainment
Systems, Inc. In December 1996, it changed its name to Advantix, Inc., and in
May 1999 it changed its name to Tickets.com, Inc. As of the date of this proxy
statement, Tickets.com has pending with the SEC a registration statement for an
initial public offering of its common stock, which may be commenced and
concluded prior to our special meeting. Tickets.com is a leading source of
entertainment tickets, event information and related product and services.
Tickets.com sells tickets through retail outlets, call centers, interactive
voice response systems and the Internet. At http://www.tickets.com, consumers
can obtain information on thousands of events and entertainment organizations,
purchase tickets and shop for related products and services. The principal
office and business address of Tickets.com is c/o 555 Anton Boulevard, 12th
Floor, Costa Mesa, California 92626. The telephone number of Tickets.com is
(714) 327-5400.
ADVANTIX ACQUISITION CORP. Advantix Acquisition was incorporated in
Delaware in January 1999 by Tickets.com in connection with the proposed merger
and is a wholly-owned subsidiary of Tickets.com. Advantix Acquisition has not
been engaged in any business activities other than those in connection with the
Merger. The principal office and business address of Advantix Acquisition is c/o
John M. Markovich, Executive Vice President, 4675 MacArthur Court, Suite 1400,
Newport Beach, California 92660. The telephone number of Advantix Acquisition is
(949) 862-5410.
THE SPECIAL MEETING (SEE PAGES 7 TO 9)
A special meeting of shareholders of Lasergate will be held at 10:00 a.m.
on December 15, 1999 at 2189 Cleveland Street, Clearwater, Florida. At the
special meeting, you will be asked to consider and vote on a proposal to approve
the merger agreement described in this proxy statement.
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<PAGE>
Only holders of shares of Lasergate common stock who are holders at the
close of business on the record date, October 25, 1999, will be entitled to
notice of, and to vote at, the special meeting. On the record date, there were
15,299,393 shares of common stock outstanding and entitled to vote held by
approximately 1,976 shareholders of record. Each share of common stock is
entitled to one vote per share.
Florida law requires that the holders of a majority of the voting power of
all outstanding shares of Lasergate common stock vote to approve the merger
agreement. RBB Bank, AG currently is the record holder of 7,837,332 shares of
Lasergate common stock in the aggregate, representing approximately 51% of the
outstanding shares of common stock as of the record date. RBB Bank entered into
an agreement with Tickets.com, dated January 24, 1999, which provides among
other things, that it will vote all of its shares in favor of the merger
agreement and transactions contemplated thereby.
SPECIAL FACTORS (SEE PAGES 9 TO 23)
There are a number of factors that you should consider in connection with
voting your shares. They include:
- the background of the merger;
- the factors considered by the Board;
- the opinion of the financial advisor to the Board;
- the recommendation of the Board;
- the purpose and effect of the merger;
These factors, in addition to several other factors to be considered in
connection with the merger, are described in this proxy statement. For a
detailed discussion of each of these factors, see pages 9 to 23.
THE MERGER AGREEMENT (SEE PAGES 23 TO 33)
THE MERGER CONSIDERATION. If the merger is completed, you will be entitled
to receive $0.10 per share in cash for each share of Lasergate common stock you
own, without interest.
CONDITIONS TO THE MERGER. A number of conditions must be satisfied before
any of Lasergate, Tickets.com or Advantix Acquisition is obligated to complete
the merger, including, among others, the following:
- the merger must be approved by a majority of the voting power held
by the shareholders of Lasergate; and
- there must be no legal or judicial restraints or prohibitions
preventing completion of the merger.
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<PAGE>
Additional conditions involving compliance with representations, warranties
and covenants must be satisfied by Lasergate or waived by Tickets.com or
Advantix Acquisition before either Tickets.com or Advantix Acquisition is
obligated to complete the merger.
Additional conditions involving compliance with representations, warranties
and covenants must be satisfied by Tickets.com and Advantix Acquisition or
waived by Lasergate before Lasergate is obligated to complete the merger.
TERMINATION OF THE MERGER AGREEMENT. Lasergate and Tickets.com may agree at
any time (including any time after the special meeting) to terminate the merger
agreement. In addition, either Lasergate or Tickets.com may terminate the merger
agreement without the agreement of the other party under certain circumstances.
ACQUISITION PROPOSALS. In the merger agreement, Lasergate agrees not to
solicit, initiate or encourage any acquisition proposal for 20% or more of
Lasergate's assets or common stock. In addition, Lasergate agrees not to engage
in any discussions or provide access to information about Lasergate with respect
to any acquisition proposal for 20% or more of Lasergate's assets or stock
except under certain circumstances.
Under the terms of the merger agreement, the Board is not permitted to
engage in negotiations with respect to an acquisition proposal, withdraw or
modify its recommendation of the merger and the merger agreement or approve,
declare advisable or recommend an acquisition proposal other than the merger,
except under certain circumstances.
FEES AND EXPENSES. Under certain circumstances, Lasergate will pay
Tickets.com a termination or "break up" fee equal to $250,000. For a more
detailed discussion of the circumstances under which a termination or "break up"
fee may be payable to Tickets.com by Lasergate, see pages 32 to 33.
DISSENTERS' RIGHTS OF APPRAISAL (SEE PAGES 33 TO 35)
Any shareholder who does not wish to accept $0.10 per share cash
consideration in the merger has the right under Florida law to have his, her or
its shares appraised by a court of law. This "right of appraisal" is subject to
a number of restrictions and technical requirements. Generally, in order to
exercise appraisal rights, among other things:
- you must NOT vote in favor of the merger agreement; and
- you must make a written demand for appraisal in compliance with
Florida law BEFORE the vote on the merger agreement.
Merely voting against the merger agreement will not preserve your right of
appraisal under Florida law. ANNEX C to this proxy statement contains the
Florida statute relating to your right of appraisal. Failure to follow all of
the steps required by this statute will result in the loss of your right of
appraisal.
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INFORMATION CONCERNING THE SPECIAL MEETING
TIME, PLACE AND DATE
This proxy statement is furnished in connection with the solicitation by
the Lasergate Board of proxies from the holders of shares of common stock, par
value $.03 per share, of Lasergate for use at a Special Meeting of Shareholders
(the "Special Meeting") to be held at 10:00 a.m. on December 15, 1999, at 2189
Cleveland Street, Clearwater, Florida, or at any adjournment(s) or
postponement(s) thereof, pursuant to the enclosed Notice of Special Meeting of
Shareholders.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, the shareholders of Lasergate will be asked to
consider and vote upon the approval of the agreement and plan of merger by and
among Tickets.com, Advantix Acquisition and Lasergate, dated as of June 21,
1999, as amended October 20, 1999 (the "Merger Agreement"), and the transactions
contemplated thereby, including the merger (the "Merger"). A copy of the Merger
Agreement and amendment are attached to this proxy statement as ANNEX A.
Pursuant to the Merger Agreement, each outstanding share of common stock (other
than (1) common stock held in the treasury of Lasergate or by any of its wholly
owned subsidiaries, (2) common stock held by Tickets.com or Advantix
Acquisition, or (3) common stock held by shareholders who exercise and perfect
their rights under Florida law to dissent from the Merger and seek an appraisal
of the fair value of their shares ("Dissenting Shareholders")) will be converted
into $0.10 cash consideration (the "Merger Consideration").
None of the Board members have or will have any continuing equity interest
in Tickets.com or Lasergate after the Merger. Hereinafter, Lasergate,
post-merger, will be referred to as the "Surviving Corporation." The Board
unanimously approved the Merger Agreement, concluded that the terms and
provisions of the Merger Agreement are advisable and that the Merger Agreement
and the transactions contemplated thereby, including the Merger, are fair to and
in the best interests of the holders of common stock (other than Tickets.com,
Advantix Acquisition and their affiliates), and approved a recommendation that
the shareholders of Lasergate approve the Merger Agreement and the transactions
contemplated thereby, including the Merger. The Board considered a number of
factors, including the opinion of Raymond James & Associates, Inc. ("Raymond
James & Associates"), the financial advisor to the Board, that, as of the date
of such opinion and based upon and subject to various considerations,
assumptions and limitations stated therein, the $0.10 per share cash
consideration to be received by the shareholders of Lasergate in the Merger was
fair to the shareholders of Lasergate (other than Tickets.com or Advantix
Acquisition and their affiliates) from a financial point of view. A copy of
Raymond James & Associates' opinion is attached as ANNEX B to this proxy
statement. See "Special Factors--Recommendation of the Board of Directors" and
"Special Factors--Opinion of Financial Advisor to the Board."
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE
MERGER.
RECORD DATE; VOTING AT THE MEETING; QUORUM
The Board has fixed the close of business on October 25, 1999 as the record
date (the "Record Date") for the special meeting. Only shareholders of record as
of the close of business on October 25, 1999 will be entitled to notice of and
to vote at the special meeting.
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As of the close of business on the Record Date, Lasergate had outstanding
15,299,393 shares of common stock, held of record by approximately 1,976
registered holders. Holders of the common stock are entitled to one vote per
share. The presence in person or by proxy of the holders of not less than a
majority of the voting power of the outstanding common stock entitled to vote at
the Special Meeting constitutes a quorum. In determining the presence of a
quorum at the Special Meeting, abstentions are counted and broker or nominee
non-votes (instances where brokers or nominees are prohibited from exercising
discretionary authority for beneficial owners who have not returned a proxy) are
not.
REQUIRED VOTE
Under Florida law, the Merger Agreement must be approved by the affirmative
vote of the holders of a majority of the voting power of the outstanding shares
of common stock. The affirmative vote of approximately 7,649,697 shares of
common stock will be necessary to satisfy this voting requirement. RBB Bank
currently is the record holder of 7,837,332 shares of common stock in the
aggregate, representing approximately 51.0% of the outstanding shares of common
stock as of the Record Date. RBB Bank has entered into a Stock Purchase
Agreement dated January 24, 1999 (the "Purchase Agreement") with Tickets.com,
which provides, among other things, that it will vote its shares in favor of the
Merger Agreement and the transactions contemplated thereby. Approval of the
Merger is not required of shareholders of Tickets.com, Advantix Acquisition or
their affiliates.
Because Florida law requires the Merger Agreement to be approved by the
affirmative vote of the holders of a majority of the voting power of the
outstanding shares of Lasergate common stock, failure to return an executed
proxy card or to vote in person at the Special Meeting or abstaining from the
vote will constitute, in effect, a vote against approval of the Merger Agreement
and the transactions contemplated thereby for purposes of Florida law.
Similarly, broker non-votes will have the same effect as a vote against approval
of the Merger Agreement and the transactions contemplated thereby.
VOTING AND REVOCATION OF PROXIES
The enclosed proxy card is solicited on behalf of the Board. The giving of
a proxy does not preclude the right to vote in person should any shareholder
giving the proxy so desire. Shareholders have an unconditional right to revoke
their proxy at any time prior to its exercise, either by filing with Lasergate's
Secretary at Lasergate's principal executive offices a written revocation or a
duly executed proxy bearing a later date or by voting in person at the Special
Meeting. Attendance at the Special Meeting without casting a ballot will not, by
itself, constitute revocation of a proxy. Any written notice revoking a proxy
should be sent to Lasergate Systems, Inc., c/o David A. Riley, Secretary, 2189
Cleveland Street, Suite 230, Clearwater, Florida 33765.
ACTION TO BE TAKEN AT THE SPECIAL MEETING
All shares of common stock represented at the Special Meeting by properly
executed proxies received prior to or at the Special Meeting, unless previously
revoked, will be voted at the Special Meeting in accordance with the
instructions on the proxies. Unless contrary instructions are indicated, proxies
will be voted "FOR" the approval of the Merger Agreement and the transactions
contemplated thereby. As explained below in the section entitled "Dissenters'
Rights of Appraisal," a vote in favor of the Merger Agreement means that the
shareholder owning those shares will not have the right to dissent and seek
appraisal of the fair value of such shareholder's shares. Lasergate does not
know of any
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matters, other than as described in the Notice of Special Meeting of
Shareholders, which are to come before the Special Meeting. If any other matters
are properly presented at the Special Meeting for action, including, among other
things, consideration of a motion to adjourn such meeting to another time and/or
place (including, without limitation, for the purpose of soliciting additional
proxies or allowing additional time for the satisfaction of conditions to the
Merger), the persons named in the enclosed proxy card and acting thereunder
generally will have discretion to vote on such matters in accordance with their
best judgment. Notwithstanding the foregoing, the persons named in the enclosed
proxy card will not use their discretionary authority to use proxies voting
against the Merger to vote in favor of adjournment or postponement of the
Special Meeting. The Merger is also subject to a number of additional
conditions. See "The Merger Agreement--Conditions."
PROXY SOLICITATION
The cost of preparing, assembling and mailing this proxy statement, the
Notice of Special Meeting of Shareholders and the enclosed proxy card will be
borne by Lasergate. Lasergate is requesting that banks, brokers and other
custodians, nominees and fiduciaries forward copies of the proxy material to
their principals and request authority for the execution of proxies. Lasergate
may reimburse such persons for their expenses in so doing. In addition to the
solicitation of proxies by mail, the directors, officers and employees of
Lasergate and its subsidiaries may, without receiving any additional
compensation, solicit proxies by telephone, telefax, telegram or in person.
No person is authorized to give any information or make any representation
not contained in this proxy statement, and if given or made, such information or
representation should not be relied upon as having been authorized.
LASERGATE SHAREHOLDERS SHOULD NOT SEND ANY CERTIFICATES REPRESENTING SHARES
OF COMMON STOCK WITH THEIR PROXY CARD. IF THE MERGER IS CONSUMMATED, THE
PROCEDURE FOR THE EXCHANGE OF CERTIFICATES REPRESENTING SHARES OF COMMON STOCK
WILL BE AS SET FORTH IN THIS PROXY STATEMENT. SEE "THE MERGER AGREEMENT--THE
EXCHANGE AGENT, PAYMENT FOR SHARES OF COMMON STOCK" AND "THE MERGER
AGREEMENT--TRANSFERS OF COMMON STOCK."
SPECIAL FACTORS
BACKGROUND OF THE MERGER
During June 1996 Lasergate completed a private placement of its securities
subject to Regulation S promulgated under the Securities Act of 1933, as amended
(the "Securities Act"). In that transaction, RBB Bank acquired for approximately
60 independent holders, each of whom is an Austrian national, an aggregate of
8,000 shares of Lasergate's Series F Preferred Stock. The investors paid
$6,000,000 in cash, before commissions and offering expenses, for these
securities. The sources of funds for the purposes were the personal funds of the
respective independent purchasers.
On November 4, 1997, Lasergate sold 7,500 shares of its Series G Preferred
Stock (the "Preferred Stock") to holders of the Series F Preferred Stock in a
transaction pursuant to Regulation S under the Securities Act for $7,500,000. In
the transaction, Lasergate redeemed 7,945 shares of Series F Preferred Stock for
$6,000,000, providing Lasergate with $1,447,500 of net proceeds after the
expenses
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of the offering. The sources of the additional funds provided by the
investors were their respective personal funds. The shares of the Preferred
Stock had no voting rights as such. The shares of Lasergate's common stock into
which such shares were convertible have identical voting rights with all other
shares of Lasergate's common Stock. The 7,500 shares of the Preferred Stock
issued to the purchasers thereof were by their terms immediately convertible
into 32,655,549 shares of Lasergate's common stock (the "Conversion Shares")
after a period of 40 days. Notwithstanding this provision of the Preferred
Stock, Lasergate failed to obtain authorization from its shareholders to
increase the number of its authorized but unissued shares of common stock, and,
accordingly, sufficient additional Conversion Shares were not reserved for
issuance upon conversion of all shares of the Preferred Stock. The Conversion
Shares and the Preferred Shares are referred to herein as the "Underlying
Shares."
On April 11, 1998, RBB Bank converted 1,800 shares of the Preferred Stock
into 7,837,332 shares of Lasergate's common stock, the maximum number of
Conversion Shares which at the time had been authorized for issuance.
In July 1998 certain clients of RBB Bank, including certain beneficial
holders of the Underlying Shares, loaned $300,000 to Lasergate by purchasing
Lasergate's $300,000 secured promissory note due July 31, 2000. Lasergate
granted RBB Bank a first security interest in certain computer source code used
by Lasergate in its business and related intangible property to secure the
repayment of the promissory note.
From time to time during the second half of 1998, RBB Bank discussed the
prospects of Lasergate with representatives of Tickets.com. On January 8, 1999,
Tickets.com sent a letter to Lasergate stating that Tickets.com was prepared to
make an offer to purchase all outstanding shares of Lasergate's common stock at
$0.10 per share payable in cash and to close the transaction by January 31,
1999, subject to completion of standard due diligence. Tickets.com also stated
in its letter that, upon Lasergate's agreement to consider its offer,
Tickets.com was prepared to loan $250,000 to Lasergate so that Lasergate could
meet its immediate cash needs. Tickets.com requested that Lasergate respond to
its letter by January 11, 1999. Lasergate did not so respond.
On January 24, 1999, following periodic individual consultations between
RBB Bank and the beneficial owners of the Underlying Shares, RBB Bank received
separate oral authorizations from the beneficial owners to agree to sell all of
their shares to Tickets.com at its offered price, or the equivalent value in
securities of Tickets.com, and to facilitate a transaction that permitted
Tickets.com to acquire all of the outstanding securities of Lasergate in
addition to the beneficial owners' shares. Concurrently, Tickets.com proceeded
to enter into discussions with Lasergate with a view to the acquisition of
Lasergate by a cash merger that would pay each holder of common stock of
Lasergate $0.10 per share.
On January 24, 1999 Tickets.com and RBB Bank entered into the Purchase
Agreement providing for the sale of the Underlying Shares to Tickets.com at a
closing to be held not later than May 15, 1999, or such later date as RBB Bank
and Tickets.com would agree. The Purchase Agreement was later amended by the
First Amendment to Purchase Agreement, dated as of June 21, 1999, between RBB
Bank and Tickets.com.
The Purchase Agreement provided that RBB Bank would support the Merger and
vote the Underlying Shares in favor thereof and that Tickets.com would purchase
the Underlying Shares from RBB Bank if Lasergate did not approve the Merger by
January 31, 1999. The purchase price to be paid by Tickets.com was (i) $0.10
cash for each Underlying Share that is a share of common stock and (ii)
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170.081 shares of Tickets.com common stock for each Underlying Share that is a
Preferred Share. If Tickets.com had not consummated a registered public offering
of its stock on or before May 15, 1999, or such later date as Tickets.com and
RBB Bank agree, then, notwithstanding any other provision of the Purchase
Agreement, the purchase price would be (i) for each Underlying Share that is a
share of common stock, $0.10 in cash, and (ii) for each Underlying Share that is
a Preferred Share, $0.10 in cash for each share of Lasergate's common stock into
which such Underlying Share would be convertible at closing.
Additionally, RBB Bank and Tickets.com agreed in the Purchase Agreement
that if the Board of Lasergate had not approved the Merger on or before January
31, 1999, RBB Bank would, as soon as possible thereafter, take all appropriate
or necessary actions, including without limitation making all appropriate
filings with the Securities and Exchange Commission, to elect a majority of the
members of Lasergate's Board, that the members of Lasergate's Board would
include David A. Riley and Stephen Fryer, or other individuals acceptable to
Tickets.com, and that David A. Riley would be named as Lasergate's business
manager. RBB Bank agreed not to, and agreed to cause Lasergate not to, take
action inconsistent with the purposes of the Purchase Agreement or the Merger or
otherwise detrimental to Tickets.com.
On January 28, 1999, after learning that Lasergate was taking steps to file
a petition under Chapter 11 of the Bankruptcy Act and had ceased discussions
with Tickets.com regarding additional credit lines and the Merger, and after
receiving sufficient authorizations from the holders of the Underlying Shares
and their representatives to take such steps, RBB Bank executed and delivered to
Lasergate a written consent in lieu of meeting, which consent purportedly
removed all members of Lasergate's Board. Acting with the same authority, on
January 28, 1999 RBB Bank executed and delivered to Lasergate a written demand
for Lasergate to provide RBB Bank or its representatives with the record of
shareholders required to be maintained under Florida corporate law so that RBB
Bank could comply with the provision of Florida corporate law that requires that
a written consent signed by fewer than all shareholders of record to be sent to
all shareholders of record who did not execute such consent and a separate
written demand for Lasergate to call a meeting of its shareholders for purposes
of electing a Board.
On January 29, 1999, counsel to Lasergate sent a letter that purported to
reject the removal of Lasergate's Board as well as RBB Bank's demands for the
record of holders and for the meeting.
In January 1999, Lasergate retained Raymond James & Associates to render
an opinion to the Board as to the fairness, from a financial point of view, of
the consideration to be received by Lasergate's shareholders in the merger
proposed by Tickets.com on January 7, 1999. At an April 9, 1999 Board meeting,
Raymond James & Associates gave its oral opinion that, as of such date and based
upon and subject to various qualifications and assumptions with respect to its
opinion, the proposed merger was fair from a financial point of view to the
Lasergate shareholder.
On February 8, 1999 RBB Bank commenced a legal proceeding (the "Removal
Action") against Lasergate and its Board in the Circuit Court of Pinellas
County, seeking to remove Lasergate's Board. Thereafter, Lasergate and its
directors interposed certain defenses and counterclaims against RBB Bank in that
case.
On June 18, 1999, Lasergate's Board voted to approve the proposed Merger
Agreement among Lasergate, Tickets.com and Advantix Acquisition, after
determining that the Merger was in the best interest of Lasergate's
shareholders. The Board's approval was subject to receipt of a written opinion
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from Raymond James & Associates confirming its oral opinion delivered to the
Board on April 9, 1999. Lasergate's Board also recommended that the shareholders
of Lasergate accept the Merger and vote to adopt and approve the Merger
Agreement. The Merger Agreement, as executed effective June 21, 1999, included
substantially the same terms and conditions, including the price of $0.10 per
share in cash, that Tickets.com had proposed in January 1999.
On June 21, 1999, Raymond James & Associates subsequently updated its
analysis and gave its written opinion that as of June 21, 1999, the proposed
Merger was fair from a financial point of view to the Lasergate shareholders,
subject to various qualifications and assumptions described in its opinion.
Immediately thereafter, RBB Bank and Lasergate entered into a Settlement
and Release Agreement (the "Settlement Agreement") settling the Removal Action.
Pursuant to the Settlement Agreement, Lasergate delivered inducement letters
from each of Lasergate's directors containing mutual releases pursuant to which
each of RBB Bank, Lasergate and Tickets.com released the directors, and each of
the directors generally released RBB Bank, Lasergate and Tickets.com from
claims, liabilities and obligations. The inducement letters provided for the
resignation of the three directors and, in the case of Jacqueline Soechtig, the
former chief executive officer of Lasergate, the termination of her employment
as well. The parties agreed to dismiss the Removal Action with prejudice.
The Settlement Agreement also provided that, as a material condition to RBB
Bank's obligations set forth in that agreement, immediately after approving the
transactions contemplated by the Merger Agreement and recommending that
Lasergate's shareholders accept the Merger and adopt and approve the Merger
Agreement, Lasergate's Board members would (i) appoint David A. Riley as
Lasergate's President and Chief Executive Officer, (ii) fill two existing
vacancies with David A. Riley and Steven H. Noble III and (iii) then resign from
Lasergate's Board. The three individuals who comprised Lasergate's Board
immediately prior to June 21, 1999 so acted, and Mr. Riley and Mr. Noble, having
been so appointed, thereafter constituted Lasergate's Board.
Also on June 21, 1999, RBB Bank and Tickets.com, Inc. entered into the
First Amendment to Purchase Agreement, amending the Purchase Agreement in
several material respects. First, notwithstanding that the consummation of the
transactions contemplated by the Purchase Agreement was initially to have
occurred on or prior to May 15, 1999, Tickets.com agreed to purchase all of the
Preferred Shares within three business days after Lasergate executed the Merger
Agreement. Second, Tickets.com agreed to pay either 170.081 shares of
Tickets.com common stock or $435.00 in cash for each outstanding Preferred
Share, at the option of the holder of each of the Preferred Shares. Third, the
parties agreed that Tickets.com would purchase the shares of common stock held
by RBB Bank as part of the Merger under the Merger Agreement and not as a
separate transaction under the Purchase Agreement. All other provisions
contained in the Purchase Agreement remained in full force and effect.
On June 28, 1999, RBB Bank sold and delivered the Preferred Shares to
Tickets.com and Tickets.com paid $754,290 and issued 674,541 shares of its
common stock pursuant to the First Amendment.
Periodically during the first quarter of 1999, the Board had discussions
with several companies who had indicated an interest in a possible transaction
with Lasergate. One such company, a publicly traded hospitality and
entertainment company and a licensee of Lasergate's SELECT-A-SEAT system,
submitted a proposal to the Lasergate Board on or about February 17, 1999,
proposing to acquire, in a future tender offer, all of the issued and
outstanding shares of common stock of Lasergate at a price of $.13 per share,
payable in cash and/or shares of the offeror's stock. Upon acceptance of the
proposal, Lasergate was to receive an initial loan of $225,000 and $80,000
bi-weekly thereafter until the closing of the proposed transaction. The proposal
was subject to certain terms and conditions, including the condition that 80% of
Lasergate's outstanding common stock be available if a tender offer were made.
On or about March 17, 1999 the company withdrew its proposal stating that the
80% availability requirement had not been met. However, later in March 1999, the
company entered into an agreement with Lasergate which, for a fee of
approximately $500,000, the company acquired from Lasergate a perpetual license
to use the SELECT-A-SEAT product in an expanded territory. The agreement also
gave the licensee the right to develop and modify the software for use in any
form of commerce that the licensee chooses to develop.
Lasergate also entered into discussions with a Canadian ticketing company
who submitted a proposal in the first quarter of 1999, but withdrew the proposal
in April 1999. However, that company submitted another written proposal to
Lasergate's Board on June 18, 1999. Under that proposal, that company offered to
purchase a controlling interest in Lasergate by buying from Lasergate 4,000,000
shares of common stock and 9,900 shares of a new
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Series H preferred stock for a purchase price of $1.5 million in cash and the
Canadian company technology, which it valued at $9,000,000 and proposed to
license to Lasergate. The 9,900 shares of Series H preferred stock would have
been convertible into 66,003,300 shares of Lasergate common stock, and each
share of Series H preferred stock would have senior voting and control rights
equal to 10,000 shares of common stock. The proposal also included severance
packages for the officers and directors of Lasergate comprised of cash and stock
of the Canadian company.
The proposed transaction was subject to certain conditions, including
completion of due diligence; the negotiation of the form, terms and preferences
of the proposed new Series H preferred stock, execution of a technology
licensing agreement between the Canadian company and Lasergate, and an increase
in Lasergate's number of authorized common shares to allow for conversion of all
existing Series G and new Series H preferred stock (which increase in authorized
capital would have required the approval of Lasergate's shareholders).
In addition, the Canadian company informed the Board that the sources of
the $1.5 million in cash would be a rights offering and subsequent private
placement to be conducted by the Canadian company.
The Board reviewed the offer and past due diligence it had conducted with
respect to the Canadian company. The Board determined not to proceed with
discussions with the Canadian company primarily because the Board believed that
the Canadian company was undercapitalized and therefore could not sustain its
offer.
RECOMMENDATION OF THE BOARD OF DIRECTORS
Effective June 21, 1999, Lasergate's Board unanimously concluded that the
terms and provisions of the Merger Agreement and the transactions contemplated
thereby, including the Merger, are advisable and fair to and in the best
interests of Lasergate's shareholders, approved the Merger Agreement and the
Merger, declared the Merger Agreement and the Merger advisable and recommended
that the shareholders approve the Merger Agreement and the transactions
contemplated thereby, including the Merger.
In approving the Merger Agreement and the Merger, and in declaring the
Merger Agreement advisable and the transactions contemplated thereby, including
the Merger, to be fair to and in the best interests of Lasergate's shareholders,
the Board considered the following factors, each of which, in the opinion of the
Board, supported its determination.
- LIMITATIONS AS A PUBLIC COMPANY. The Board considered the fact
that Lasergate's limited trading volume, institutional sponsorship
and public float, small market capitalization, and diminishing
research attention from market analysts, had adversely affected
the trading markets for, and the value of, Lasergate's common
stock. In recent years, Lasergate's failure to demonstrate
consistent profitability and revenue growth highlighted
Lasergate's inability to generate and sustain a rate of growth
generally expected by the public equity markets for small
capitalization companies. The Board also considered its
discussions with Raymond James & Associates, Inc. with respect to
these market and trading considerations. The Board concluded that
in the circumstances then existing, the $0.10 per share cash
consideration to be received by shareholders pursuant to the
Merger Agreement was preferable to continuing to hold shares in
the public company. Accordingly, the Board concluded that
shareholder value was not likely to be maximized were Lasergate to
remain a public company.
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- FINANCIAL PERFORMANCE AND FUTURE PROSPECTS. The Board considered
Lasergate's history of operating losses that have accumulated to
$20,506,100 as of December 31, 1998, Lasergate's related results
of operations for the three month period ending March 31, 1999,
and the precarious financial condition of Lasergate. The Board
also considered the impact that these factors had and could have
on the value of Lasergate's shares in the future and Lasergate's
overall value as a going concern.
- OPINION OF RAYMOND JAMES & ASSOCIATES. The Board received the
financial presentation of Raymond James & Associates and Raymond
James & Associates' oral opinion delivered at the April 9, 1999
meeting of the Board (which was subsequently confirmed in writing)
to the effect that, as of the date of its opinion and based upon
and subject to the matters stated in its opinion, the Merger
Consideration was fair to Lasergate's shareholders from a
financial point of view. THE FULL TEXT OF RAYMOND JAMES &
ASSOCIATES' WRITTEN OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN
BY RAYMOND JAMES & ASSOCIATES, IS ATTACHED AS ANNEX B TO THIS
PROXY STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE.
SHAREHOLDERS ARE URGED TO, AND SHOULD, READ THE OPINION OF RAYMOND
JAMES & ASSOCIATES CAREFULLY. In addition, the presentation of and
the factors considered by Raymond James & Associates in its
fairness opinion as discussed under "Special Factors--Opinion of
Financial Advisor to the Board" supported the Board's
determination.
- COMPARISON TO OTHER PROPOSALS. The Board evaluated the viability
of various indications of interest and the HTN proposal received
by the Board during the process, and the relative strength of the
Tickets.com proposal when compared to HTN's proposal and other
indications of interest. The Board concluded that the Tickets.com
proposal was stronger than any other indication of interest or
proposal in substantially all respects, and specifically in the
amount and cash nature of the purchase price being offered, and
Tickets.com's ability to sustain its offer. Accordingly, the Board
believed that it was not likely that any party other than
Tickets.com would propose and complete a transaction on terms more
favorable to Lasergate's shareholders than the Merger.
- REGULATORY APPROVALS. The Board considered that there are
relatively few regulatory approvals required to consummate the
Merger, and the favorable prospects for receiving those approvals.
- AVAILABILITY OF DISSENTERS' RIGHTS. The Board considered that
dissenters' rights of appraisal will be available to the holders
of common stock under Florida law.
- LOSS OF EQUITY INTEREST. The Board considered the fact that if the
Merger Agreement is approved, the holders of the common stock will
not participate in the future growth of Lasergate. Because of the
risks and uncertainties associated with Lasergate's future
prospects, the Board concluded that the Merger was preferable to
enabling the holders of such stock to have a speculative potential
future return.
- INTERESTS OF CERTAIN PARTIES. The Board considered that RBB Bank
is the holder of record of a majority of the outstanding shares of
Lasergate's common stock, and that RBB Bank was in favor of and
recommended the Merger.
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The foregoing discussion of the information and factors discussed by the
Board is not meant to be exhaustive, but includes all material factors
considered by the Board to support their decision to recommend the approval of
the Merger Agreement and to determine that the transactions contemplated thereby
are fair to, and in the best interests of, Lasergate and the holders of
Lasergate's common stock. The Board did not assign relative weights or
additional quantifiable values to the above factors; rather, the Board viewed
its position and recommendations as being based on the totality of the
information presented to and considered by the members.
THE BOARD BELIEVES THAT THE MERGER IS ADVISABLE AND IS FAIR TO AND IN THE
BEST INTERESTS OF LASERGATE AND THE HOLDERS OF COMMON STOCK AND UNANIMOUSLY
RECOMMENDS APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY TO LASERGATE'S SHAREHOLDERS.
OPINION OF FINANCIAL ADVISOR TO THE BOARD
Lasergate retained Raymond James & Associates to render an opinion to
Lasergate's Board as to the fairness, from a financial point of view, of the
consideration to be received by the holders of the outstanding common stock of
Lasergate in connection with the merger of Tickets.com with Lasergate. Raymond
James & Associates rendered its written opinion that as of June 21, 1999, the
consideration to be received by Lasergate is fair, from a financial point of
view, to the holders of Lasergate's outstanding common stock.
The full text of the written opinion of Raymond James & Associates, dated
June 21, 1999, which sets forth assumptions made, matters considered and limits
on the scope of review undertaken, is attached hereto as ANNEX B and is
incorporated by reference herein. Shareholders are urged to read this opinion in
its entirety. Raymond James & Associates' opinion, which is addressed to the
Lasergate Board, is directed only to the fairness of the consideration paid to
Lasergate's common shareholders from a financial point of view. Raymond James &
Associates' opinion does not constitute a recommendation to any Lasergate common
shareholder as to whether such common shareholder should vote his or her shares
in favor of a merger with Tickets.com. Nor does the Raymond James & Associates'
opinion address any other aspect of the proposed Merger or any related
transaction. Raymond James & Associates did not determine the amount of such
consideration but merely evaluated the consideration to be paid from a financial
point of view. Raymond James & Associates consents to the summarization of its
opinion in, and attachment of its opinion to, this proxy statement. The summary
of the opinion of Raymond James & Associates set forth in this proxy statement
is qualified in its entirety by reference to the full text of such opinion.
In connection with Raymond James & Associates' review of the proposed
consideration to be paid and the preparation of its opinion, Raymond James &
Associates has, among other things:
1. reviewed the financial terms and conditions of the Merger as
contained in the Merger Agreement dated June 21, 1999;
2. reviewed the audited financial statements of Lasergate for the
years ended December 31, 1996 and 1997;
3. reviewed the unaudited interim financial statements of
Lasergate for the periods ending March 31, June 30, September
30 and December 31, 1998;
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4. reviewed certain internal financial forecasts and projections
prepared by the management of Lasergate for Lasergate;
5. reviewed certain other publicly available financial
information;
6. held discussions with senior management of Lasergate regarding
past and current operations and the financial condition and
prospects of Lasergate; and
7. conducted other such financial studies and analyses as Raymond
James & Associates deemed relevant and necessary for the
purposes of this opinion, including a review of (a) historical
and projected revenues, operating earnings and net income of
Lasergate and certain other publicly held companies in
businesses it believed to be comparable to Lasergate; (b) the
current and projected financial position and results of
operations of Lasergate; and (c) the general condition of the
securities markets.
As described in its opinion, Raymond James & Associates assumed and relied
upon the accuracy and completeness of all information supplied or otherwise made
available to Raymond James & Associates by Lasergate or any other third party
and did not attempt to verify independently any such information. In addition,
Raymond James & Associates did not make or receive any independent evaluation or
appraisal of any of the assets or liabilities (contingent or otherwise) of
Lasergate nor has Raymond James & Associates been furnished with any such
evaluation or appraisal. Raymond James & Associates assumed that the financial
forecasts, estimates, projections, and other information provided to it by
Lasergate have been prepared in good faith on reasonable bases reflecting the
best currently available estimates and judgments of the management team of
Lasergate. Raymond James & Associates relied upon Lasergate to advise it
promptly if any such information previously provided to or discussed with
Raymond James & Associates became inaccurate or was required to be updated
during the period of its review.
Raymond James & Associates' opinion was based on economic, market, and
other conditions as in effect on, and the information available to it as of, the
date of its opinion, June 21, 1999.
THE FULL TEXT OF THE WRITTEN OPINION OF RAYMOND JAMES & ASSOCIATES DATED
JUNE 21, 1999, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX B TO THIS PROXY STATEMENT
AND IS INCORPORATED HEREIN BY REFERENCE. SHAREHOLDERS OF LASERGATE ARE URGED TO
READ THE OPINION IN ITS ENTIRETY. RAYMOND JAMES & ASSOCIATES' WRITTEN OPINION IS
ADDRESSED TO THE BOARD, IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT
OF VIEW, OF THE CONSIDERATION TO BE PAID PURSUANT TO THE MERGER AGREEMENT AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER OF LASERGATE AS TO HOW
SUCH SHAREHOLDER SHOULD VOTE AT THE SPECIAL MEETING. THE OPINION DOES NOT
ADDRESS LASERGATE'S UNDERLYING BUSINESS DECISION TO PROCEED WITH OR EFFECT THE
MERGER. THE SUMMARY OF THE OPINION OF RAYMOND JAMES & ASSOCIATES SET FORTH IN
THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION. COPIES OF THE WRITTEN OPINION ARE ALSO AVAILABLE FOR INSPECTION
AND COPYING AT THE PRINCIPAL EXECUTIVE OFFICES OF LASERGATE DURING REGULAR
BUSINESS HOURS BY ANY INTERESTED SHAREHOLDER OF LASERGATE, OR A REPRESENTATIVE
WHO HAS BEEN SO DESIGNATED IN WRITING, AND MAY BE INSPECTED AND COPIED, OR
OBTAINED BY MAIL, BY
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WRITTEN REQUEST DIRECTED TO CORPORATE SECRETARY, LASERGATE, 2189 CLEVELAND
STREET, SUITE 230, CLEARWATER, FLORIDA 33765.
In delivering the opinion to the Board on June 21, 1999, Raymond James &
Associates prepared and delivered to the Board certain written materials
containing various analyses material to the opinion. The following summarizes
the material financial analyses presented by Raymond James & Associates to the
Lasergate Board at its meeting on April 9, 1999, and as updated as of June 21,
1999, the date on which the Merger Agreement was finalized and executed. These
financial analyses were considered by Raymond James & Associates in rendering
the opinion described below. This summary is not a complete description of the
analyses underlying the opinion of Raymond James & Associates or of information
presented at meetings between Raymond James & Associates and representatives of
Lasergate held in advance of the Lasergate Board meeting to consider and
evaluate the Merger.
COMPARABLE COMPANIES ANALYSIS.
Raymond James & Associates presented to the Lasergate Board a summary
financial comparison of Lasergate to five public software companies Raymond
James & Associates deemed to be reasonably comparable to Lasergate. The
comparable companies consisted of: Altris Software, Inc., IFS International,
Inc., International Microcomputer Software, Inc., Radiant Systems, Inc. and
Timeline, Inc.
Raymond James & Associates compared the ratio of enterprise value to
revenue for these comparable companies to the same ratio for Lasergate. Raymond
James & Associates calculated this ratio for the comparable companies by
utilizing the latest trailing twelve months financial statistics that have been
publicly reported, and used Lasergate's unaudited interim financial statements
for the period ended December 31, 1998 to calculate this ratio for Lasergate.
PRECEDENT TRANSACTION ANALYSIS.
Raymond James & Associates presented to the Lasergate Board a summary of a
precedent transaction analysis which compared the ratio of enterprise value to
revenue for the proposed Merger to the same ratio calculated for twelve
selected precedent company combinations completed from January 1, 1995 to June
20, 1999. The precedent combination transactions consisted of:
Easel Corp. combining with VMARK Software, Inc.
Altai, Inc. combining with PLATINUM Technology, Inc.
Technalysis Corp. combining with CompuWare Corp.
Software Publishing Corp. combining with Allegro New Media
CompuRAD, Inc. combining with Lumisys, Inc.
DBA Systems, Inc. combining with Titan Corp.
Peerless Group, Inc. combining with Jack Henry & Associates,
Inc.
Cayenne Software, Inc. combining with Sterling Software, Inc.
Red Brick Systems, Inc. combining with Informix Corp.
Precision Systems, Inc. combining with Anshutz Digital Media,
Inc.
Expert Software, Inc. combining with Activision, Inc.
PulsePoint Communications, Inc. combining with Unisys Corp.
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Raymond James & Associates calculated revenue and enterprise value by
utilizing the financial statistics for the trailing twelve month period reported
prior to the consummation of the precedent company combinations. Raymond James &
Associates calculated this ratio for Lasergate by using Lasergate's unaudited
interim financial statements for the period ended December 31, 1998.
PREMIUM ANALYSIS.
Raymond James & Associates presented to the Lasergate Board an analysis of
the premiums paid over the stock price of acquired companies in selected merger
transactions of comparable size which were completed, based on stock prices one
day, one week and four weeks prior to the announcement of the transaction. This
analysis demonstrated that, on average, the acquired company received a 14.4%,
13.5% and 17.4% premium over its stock price one day, one week and four weeks
prior to the announcement of the transaction, respectively.
OPINION OF RAYMOND JAMES & ASSOCIATES.
During the April 9, 1999 meeting of the Lasergate Board, Raymond James &
Associates gave its oral opinion that, as of such date and based upon and
subject to various qualifications and assumptions described with respect to its
opinion, the proposed merger was fair from a financial point of view to the
Lasergate shareholders. Raymond James & Associates subsequently updated its
analysis and gave its written opinion that as of June 21, 1999, (the date on
which the Merger Agreement was signed), the proposed Merger was fair from a
financial point of view to the Lasergate shareholders, subject to various
qualifications and assumptions described in its opinion.
The summary set forth above does not purport to be a complete description
of the analyses of data underlying Raymond James & Associates' opinion or its
presentation to the Lasergate Board. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to a partial analysis or
summary description. Raymond James & Associates believes that its analyses must
be considered as a whole and that selecting portions of its analyses, without
considering the analyses taken as a whole, would create an incomplete view of
the process underlying the analyses set forth in its opinion. In addition,
Raymond James & Associates considered the results of all such analyses and did
not assign relative weights to any of the analyses, so the ranges of valuations
resulting from any particular analysis described above should not be taken to be
Raymond James & Associates' view of the actual value of Lasergate.
In performing its analyses, Raymond James & Associates made numerous
assumptions with respect to industry performance, general business, economic and
regulatory conditions and other matters, many of which are beyond the control of
Lasergate. The analyses performed by Raymond James & Associates are not
necessarily indicative of actual values, trading values or actual future results
which might be achieved, all of which may be significantly more or less
favorable than suggested by such analyses. Such analyses were prepared solely as
part of Raymond James & Associates' analysis of the fairness of the financial
terms and conditions of the Merger to the Lasergate shareholders from a
financial point of view and were provided to the Lasergate Board. The analyses
do not purport to be appraisals or to reflect the prices at which businesses or
securities might be sold. In addition, as described above, the opinion of
Raymond James & Associates was one of many factors taken into consideration by
the Lasergate Board in making its determination to approve the proposed Merger.
Consequently, the analyses described above should not be viewed as determinative
of the opinion of the Lasergate Board or
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Lasergate's management with respect to the value of Lasergate. Lasergate placed
no limits of the scope of the analysis performed, or opinion expressed, by
Raymond James & Associates.
In connection with the Merger, Lasergate contracted with Raymond James &
Associates to provide the fairness opinion summarized above. Lasergate retained
Raymond James & Associates because of Raymond James & Associates'
qualifications, expertise, and reputation. Raymond James & Associates is
actively involved in the investment banking business and regularly undertakes
the valuation of investment securities in connection with public offerings,
private placements, business combinations and similar transactions. Through
negotiation, Lasergate and Raymond James & Associates determined that Lasergate
would pay Raymond James & Associates a fee of $150,000 upon the consummation of
the proposed Merger, reimburse Raymond James & Associates for its reasonable
out-of-pocket expenses and indemnify Raymond James & Associates against certain
liabilities and expenses relating to or arising out of its engagement, including
certain liabilities under the federal securities laws. In the ordinary course of
business, Raymond James & Associates may trade in the securities of Lasergate
for its own account and for the accounts of its customers and, accordingly, may
at any time hold a long or short position in such securities.
TICKETS.COM'S AND ADVANTIX ACQUISITION'S PURPOSE AND REASON FOR THE MERGER
The purpose of Tickets.com and Advantix Acquisition in proceeding with the
Merger is to acquire the entire equity interest of Lasergate in a cash
transaction providing fair value to Lasergate's unaffiliated shareholders. The
Merger was motivated largely by Lasergate's history of losses and its financial
condition.
CERTAIN EFFECTS OF THE MERGER
If the Merger is consummated, the holders of Lasergate's common stock will
no longer have any interest in, and will not be shareholders of, Lasergate and,
therefore, will not benefit from any future earnings or growth of Lasergate or
from any increases in the value of Lasergate and will no longer bear the risk of
any decreases in value of Lasergate. Instead, each shareholder (other than the
Lasergate, Tickets.com, Advantix Acquisition and Dissenting Shareholders) will
have the right to receive upon consummation of the Merger $0.10 in cash for each
share of common stock such shareholder holds without interest. The benefit to
the holders of common stock of the transaction is the payment of a premium, in
cash, above the market value for such stock prior to the announcement of the
transaction. This cash payment assures that all shareholders will receive the
same amount for their shares, rather than taking the risks associated with
attempting to sell their shares in the open market. The detriment to such
holders is their inability to participate as continuing shareholders in the
possible future growth of Lasergate. If the Merger is consummated, the
shareholders of Tickets.com will indirectly hold the entire equity interest in
Lasergate and will therefore be the sole beneficiaries of any future earnings or
growth of Lasergate and any increases in value of Lasergate. However, such
shareholders will bear the risk of any decreases in value of Lasergate.
The common stock is currently registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). As a result of the Merger, the common
stock will no longer be quoted on the OTC Bulletin Board, the registration of
the common stock under the Exchange Act will be terminated, Lasergate will be
relieved of the obligation to comply with the proxy rules of Regulation 14A
under Section 14 of the Exchange Act, and its officers, directors and beneficial
owners of more than 10% of the common stock will be relieved of the reporting
requirements and "short-swing" trading provisions under Section 16 of the
Exchange Act. Further, Lasergate will no longer be subject to
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periodic reporting requirements of the Exchange Act and will cease filing
information with the Securities and Exchange Commission (the "SEC").
Accordingly, less information will be required to be made publicly available
than presently is the case.
The certificate of incorporation and bylaws of Advantix Acquisition will be
the certificate of incorporation and bylaws of the Surviving Corporation, with
the exception that the name of the Surviving Corporation shall become Lasergate
Systems, Inc., until thereafter amended.
PLANS FOR LASERGATE AFTER THE MERGER
Tickets.com expects that, except as described in this proxy statement, the
business and operations of Lasergate as the surviving corporation of the Merger
(the "Surviving Corporation") will be continued substantially as they are
currently being conducted by Lasergate and its subsidiaries. However,
Tickets.com expects that it may, from time to time, evaluate and review the
Surviving Corporation's businesses, operations and properties and make such
changes as are deemed appropriate.
Except as described in this proxy statement, none of Tickets.com, Advantix
Acquisition or Lasergate has any present plans or proposals involving Lasergate
or its subsidiaries which relate to or would result in an extraordinary
corporate transaction such as a merger, reorganization, liquidation, sale or
transfer of a material amount of assets, or any material change in the present
dividend policy, indebtedness or capitalization, or any other material change in
Lasergate's corporate structure or business. However, Tickets.com will review
proposals or may propose the acquisition or disposition of assets or other
changes in the Surviving Corporation's business, corporate structure,
capitalization, management or dividend policy which it considers to be in the
best interests of the Surviving Corporation and its shareholders.
CONDUCT OF THE BUSINESS OF LASERGATE IF THE MERGER IS NOT CONSUMMATED
If the Merger is not consummated, the Board expects to seek to retain
Lasergate's current management team, although there can be no assurance it will
be successful in doing so. Although there are no plans in such circumstances to
operate Lasergate's business in a manner substantially different than currently
operated, Lasergate does not currently have any further funding alternatives and
will most likely invoke bankruptcy proceedings unless another strategic funding
partner can be located, which cannot be assured.
ACCOUNTING TREATMENT
The Merger will be accounted for in accordance with the purchase method of
accounting under U.S. generally accepted accounting principles.
REGULATORY REQUIREMENTS; THIRD PARTY CONSENTS
Lasergate does not believe that any material federal or state regulatory
approvals, filings or notices are required by Lasergate in connection with the
Merger other than:
- such approvals, filings or notices required pursuant to federal
and state securities laws; and
- the filing of the certificate of merger with the Secretary of
State of the State of Florida.
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Based upon Tickets.com's currently anticipated capital structure, the
parties are not required to file a Pre-merger Notification under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), because Advantix Acquisition does not satisfy the "size of person"
jurisdictional test of the HSR Act insofar as Tickets.com is its "ultimate
parent" and does not have a regularly prepared balance sheet or assets of
$10,000,000 or more, excluding the cash that will be used to consummate the
Merger.
Lasergate does not believe any material third party consents will be
required by Lasergate in connection with the Merger.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion is a summary of the material federal income tax
consequences expected to result to shareholders whose shares of common stock are
converted to cash in the Merger. This summary does not purport to be a complete
analysis of all potential tax effects of the Merger. For example, the summary
does not consider the effect of any applicable state, local or foreign tax laws.
In addition, the summary does not address all aspects of federal income taxation
that may affect particular shareholders in light of their particular
circumstances and is not intended for shareholders (including insurance
companies, tax-exempt organizations, financial institutions or broker-dealers,
shareholders who hold their common stock as part of a hedge, straddle or
conversion transaction, shareholders who acquired their common stock pursuant to
the exercise of an employee stock option or otherwise as compensation, and
shareholders who are not citizens or residents of the United States or that are
foreign corporations, foreign partnerships or foreign estates or trusts as to
the United States) that may be subject to special federal income tax rules not
discussed below. The following summary also does not address holders of stock
options or warrants. The following summary assumes that shareholders have held
their common stock as "capital assets" (generally, property held for investment)
under the Internal Revenue Code of 1986, as amended (the "Code").
This summary is based on the current provisions of the Code, applicable
Treasury Regulations, judicial authority and administrative rulings and
practice. There can be no assurance that the Internal Revenue Service ("IRS")
will not take a contrary view. No ruling from the IRS has been or will be sought
with respect to any aspect of the transactions described herein. Future
legislative, judicial or administrative changes or interpretations could alter
or modify the statements and conclusions set forth herein, and any such changes
or interpretations could be retroactive and could affect the tax consequences to
shareholders. It cannot be predicted at this time whether any current proposed
tax legislation will be enacted or, if enacted, whether any tax law changes
contained therein would affect the tax consequences to shareholders.
EACH SHAREHOLDER IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO
THE PARTICULAR TAX CONSEQUENCES TO IT OF THE TRANSACTIONS DESCRIBED HEREIN,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS,
AND OF CHANGES IN APPLICABLE TAX LAWS.
TREATMENT OF HOLDERS OF COMMON STOCK
The conversion of common stock in the Merger will be fully taxable to
shareholders. Accordingly, a shareholder who, pursuant to the Merger, converts
such holder's common stock into cash will recognize a gain or loss equal to the
difference between (1) the amount of cash received in the Merger and (2) such
shareholder's tax basis in the common stock. Generally, a shareholder's tax
basis in
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his common stock will be equal to such shareholder's costs therefor. In the case
of a shareholder who is an individual, such capital gain or loss will be taxable
at a maximum capital gains rate of 20% if the holder held the common stock for
more than one year at the time of the Merger.
For federal income tax purposes, the Surviving Corporation will be deemed
to be the source of a portion of the cash consideration issued in the Merger
(including the proceeds from debt used to fund the Merger that is assumed by the
Surviving Corporation in the Merger). Therefore, to the extent that cash
received by a shareholder is from such source, the receipt of cash in exchange
for such shareholder's common stock in the Merger will be treated as a
redemption of common stock for federal income tax purposes. If a shareholder's
interest in Lasergate will terminate as a result of the Merger, taking into
account the constructive ownership rules of Section 318 of the Code, then the
shareholder will continue to receive sale or exchange treatment as described in
the preceding paragraph. If a shareholder's interest in the Surviving
Corporation, taking into account the constructive ownership rules of Section 318
of the Code, is not terminated as a result of the Merger, then the shareholder
will recognize gain or loss as described above only if the deemed redemption is
either "not essentially equivalent to a dividend" or "substantially
disproportionate" within the meaning of Section 302 of the Code. Whether or not
a shareholder qualifies for sale or exchange treatment under these provisions
depends on the shareholder's individual facts and circumstances. Shareholders
are urged to consult their tax advisors with respect to the potential
applicability of these provisions.
BACKUP WITHHOLDING
A shareholder whose common stock is converted to cash pursuant to the
Merger may be subject to backup withholding at the rate of 31% with respect to
the gross proceeds from the conversion of such common stock unless such
shareholder (1) is a corporation or other exempt recipient and, when required,
establishes this exemption or (2) provides its correct taxpayer identification
number, certifies that it is not currently subject to backup withholding and
otherwise complies with applicable requirements of the backup withholding rules.
A shareholder who does not provide the Surviving Corporation with its correct
taxpayer identification number may be subject to penalties imposed by the IRS.
Any amount withheld under these rules will be creditable against the
shareholder's federal income tax liability.
The Surviving Corporation will report to shareholders and to the IRS the
amount of any reportable payments (including payments made to shareholders
pursuant to the Merger) and any amount withheld pursuant to the Merger.
EACH SHAREHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE
PARTICULAR TAX CONSEQUENCES OF THE TRANSACTIONS DESCRIBED HEREIN, INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAW.
FEES AND EXPENSES
Whether or not the Merger is consummated and except as otherwise provided
herein, all fees and expenses incurred in connection with the Merger will be
paid by the party incurring such fees and expenses, except that Lasergate will
pay for all costs and expenses relating to the printing and mailing of this
proxy statement.
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Under the terms of the Merger Agreement, Lasergate will pay Tickets.com
$250,000 if the Merger Agreement is terminated under certain circumstances. See
"The Merger Agreement--Fees and Expenses."
Estimated fees and expenses (rounded to the nearest thousand) to be
incurred by Lasergate or Tickets.com in connection with the Merger and related
transactions are as follows:
Board's Financial Advisor's Fees(1)....................... $150,000
SEC Filing Fees........................................... 306
Legal and Accounting Fees and Expenses.................... 100,000
Printing and Solicitation Fees and Expenses............... 35,000
Board Fees................................................ -0-
Other expenses............................................ 5,000
--------
Total................................................... 290,306
========
- ---------------
(1) See "Special Factors--Opinion of Financial Advisor to the Board."
To the extent not paid prior to the Effective Time by Tickets.com or
Lasergate, all such fees and expenses will be paid by the Surviving Corporation
if the Merger is consummated. If the Merger is not consummated, each party will
bear its respective fees and expenses, except as otherwise provided in the
Merger Agreement. See "The Merger Agreement--Fees and Expenses."
INTEREST OF CERTAIN PERSONS IN MERGER
In connection with the signing of the Merger Agreement in June 1999, Frank
Swacker and John Chulski (each a director of Lasergate at the time) resigned
from the Lasergate Board and entered into one year consulting agreements and
non-compete agreements, which extend three months after expiration of the
consulting agreements. The consulting agreements call for payments to each
former director of $50,000, payable in monthly installments of $4,167. Also in
connection with the Merger Agreement, RBB Bank entered into an agreement with
Jacqueline Soechtig, Lasergate's former President and Chief Executive Officer,
pursuant to which RBB Bank will pay her $200,000 and give her 10,000 shares of
Tickets.com common stock. Further, RBB Bank granted Ms. Soechtig the opportunity
to purchase 20% (up to 20,000 shares) of Tickets.com common stock that
Tickets.com allocates to RBB Bank in its initial public offering ("IPO") at the
IPO price, of which the first 10,000 shares will be purchased by RBB Bank at its
sole cost. This consideration is in lieu of the amount that would have been
otherwise due Ms. Soechtig in accordance with the "change of control" provisions
included in her employment agreement with Lasergate.
THE MERGER AGREEMENT
The following is a summary of the material provisions of the Merger
Agreement, a copy of which is attached as ANNEX A to this proxy statement. Such
summary is qualified in its entirety by reference to the full text of the Merger
Agreement.
THE MERGER; MERGER CONSIDERATION
The Merger Agreement provides that the Merger will become effective at such
time as is specified in a certificate of merger filed with the Secretary of
State of the State of Florida (the "Effective Time"). If the Merger is approved
at the Special Meeting by the holders of a majority of all outstanding shares of
common stock, and the other conditions to the Merger are satisfied or waived, it
is currently anticipated that the Merger will become effective as soon as
practicable after the Special Meeting; however, there can be no assurance as to
the timing of the consummation of the Merger or that the Merger will be
consummated.
At the Effective Time, Advantix Acquisition will be merged with and into
Lasergate, the separate corporate existence of Advantix Acquisition will cease
and Lasergate will continue as the Surviving Corporation. In the Merger and at
the Effective Time:
- each share of common stock of Lasergate issued and outstanding
immediately prior to the Effective Time (other than common stock
held by Lasergate or Tickets.com, or any of their wholly-owned
subsidiaries, or Dissenting Shareholders) will, by virtue of the
Merger and without any
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action on the part of the holder thereof, be converted into and
become the right to receive the Merger Consideration;
- each share of preferred stock of Lasergate issued and outstanding
immediately prior to the effective time (other than preferred
stock held by Lasergate or Tickets.com, or any of their wholly-
owned subsidiaries, or Dissenting Shareholders) will, by virtue of
the Merger and without any action on the part of the holder
thereof, remain issued and outstanding;
- each share of common stock of Lasergate issued and outstanding
immediately prior to the Effective Time that is owned by Lasergate
or Tickets.com, or any of their wholly-owned subsidiaries, will
automatically be canceled, retired and cease to exist and no
payment will be made with respect thereto;
- each share of common stock of Advantix Acquisition issued and
outstanding immediately prior to the Effective Time will be
converted into and become one share of common stock of the
Surviving Corporation and will constitute the only outstanding
shares of capital stock of the Surviving Corporation;
- Dissenting Shareholders who do not vote to approve the Merger
Agreement and who otherwise strictly comply with the provisions of
the Florida Business Corporation Act regarding statutory appraisal
rights have the right to seek a determination of the fair value of
their shares of common stock and payment in cash therefor in lieu
of the Merger Consideration. See "Dissenters' Rights of
Appraisal;" and
- each certificate representing shares of common stock of Lasergate
that has been converted to cash under the terms of the Merger
Agreement (a "Certificate") will, after the Effective Time,
evidence only the right to receive, upon the surrender of such
certificate, an amount of cash per share equal to the Merger
Consideration.
THE EXCHANGE AGENT, PAYMENT FOR SHARES OF COMMON STOCK
On or before the closing date of the Merger (the "Closing Date"),
Tickets.com will enter into an agreement with a bank, trust company or other
exchange agent selected by Tickets.com and reasonably acceptable to Lasergate
(the "Exchange Agent"). As of the Effective Time, Tickets.com will deposit or
cause to be deposited with the Exchange Agent, cash in the amount equal to the
aggregate Merger Consideration (such amount being hereinafter referred to as the
"Exchange Fund") for the benefit of holders of shares of the common stock,
options and warrants (other than common stock held by Dissenting Shareholders
and shares to be canceled without consideration pursuant to the Merger
Agreement).
As soon as reasonably practicable following the Effective Time, the
Exchange Agent will mail to each holder of record of shares of common stock that
have been converted pursuant to the Merger Agreement, a letter of transmittal
and instructions for use in surrendering Certificates in exchange for the Merger
Consideration. No shareholder should surrender any Certificates until the
shareholder receives the letter of transmittal and other materials for such
surrender. Upon surrender of a Certificate for cancellation to the Exchange
Agent, together with a letter of transmittal, duly executed, and such other
customary documents as may be required pursuant to the instructions, the holder
of such Certificate will be entitled to receive in exchange therefor the Merger
Consideration into which the number of shares of
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common stock previously represented by such Certificate(s) shall have been
converted pursuant to the Merger Agreement, without any interest thereon, and
the Certificates so surrendered will be canceled.
If payment of the Merger Consideration is to be made to a person other than
the person in whose name the Certificate surrendered is registered, it will be a
condition of payment that the Certificate so surrendered will be properly
endorsed (together with signature guarantees on such Certificate) or otherwise
be in proper form for transfer and that the person requesting such payment pay
to the Exchange Agent any transfer or other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
thereof or establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not applicable.
SHAREHOLDERS SHOULD NOT SEND THEIR CERTIFICATES NOW AND SHOULD SEND THEM
ONLY PURSUANT TO INSTRUCTIONS SET FORTH IN THE LETTERS OF TRANSMITTAL TO BE
MAILED TO SHAREHOLDERS PROMPTLY AFTER THE EFFECTIVE TIME. IN ALL CASES, THE
MERGER CONSIDERATION WILL BE PROVIDED ONLY IN ACCORDANCE WITH THE PROCEDURES SET
FORTH IN THIS PROXY STATEMENT AND SUCH LETTERS OF TRANSMITTAL.
Twelve months after the Effective Time, the Exchange Agent will deliver to
Tickets.com or otherwise at the direction of Tickets.com any portion of the
Exchange Fund that remains undistributed to or unclaimed by the holders of
Certificates (including the proceeds of any investments thereof), and any
holders of Certificates who have not theretofore complied with the
above-described procedures to receive payment of the Merger Consideration may
look only to Tickets.com for payment of the Merger Consideration to which they
are entitled.
TRANSFERS OF COMMON STOCK
After the Effective Time, the stock transfer books of Lasergate will be
closed, and there will be no further transfers of Certificates on the records of
Lasergate or its transfer agent. If, after the Effective Time, Certificates are
presented to the Exchange Agent, Tickets.com or the Surviving Corporation, they
will be canceled and exchanged for the Merger Consideration as provided above
and pursuant to the terms of the Merger Agreement (subject to applicable law in
the case of Dissenting Shareholders).
TREATMENT OF STOCK OPTIONS AND WARRANTS
Prior to the Effective Time, Lasergate will use its commercially reasonable
efforts to cancel and cause the surrender of all outstanding stock options and
warrants to acquire common stock. The effect of the Merger shall be to terminate
all stock options and warrants prior to the Effective Time.
In settlement of the surrender and cancellation of each option, each holder
of an option that is exercisable at the Effective Time will be entitled to
receive an amount in cash (the "Option Consideration"). The Option Consideration
is equal to the product of (1) the excess, if any, of the Merger Consideration
over the per share exercise price of such stock option, multiplied by (2) the
aggregate number of shares of common stock then subject to such stock option,
subject to any required withholding of taxes. In the event that the Merger
Consideration is less than or equal to the exercise price of the stock option,
the holder thereof will receive no Option Consideration.
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In settlement of the surrender and cancellation of each warrant, each
holder of a warrant that is exercisable at the Effective Time will be entitled
to receive an amount in cash (the "Warrant Consideration"). The Warrant
Consideration is equal to the product of (1) the excess, if any, of the Merger
Consideration over the per share exercise price of such warrant, multiplied by
(2) the aggregate number of shares of common stock then subject to such warrant,
subject to any required withholding of taxes. In the event that the Merger
Consideration is less than or equal to the exercise price of the warrant, the
holder thereof will receive no Warrant Consideration.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains limited representations and warranties of
Tickets.com, Advantix Acquisition and Lasergate.
The representations of Tickets.com and Advantix Acquisition relate to,
among other things:
- their respective organization and qualification to do business,
capitalization, ownership, and authority to enter into the Merger
Agreement;
- the absence of a conflict of the Merger Agreement and the
transactions contemplated thereby, with laws applicable to, and
material agreements of, Tickets.com and Advantix Acquisition;
- the consents and filings required with respect to the Merger
Agreement and the transactions contemplated thereby; and
- the accuracy of the information in the unaudited balance sheet
dated December 31, 1998 provided to Lasergate by Tickets.com.
The representations of Lasergate relate to, among other things:
- the organization and qualification to do business of Lasergate and
its subsidiaries;
- the capitalization and indebtedness of Lasergate and its
subsidiaries;
- Lasergate's authority to enter into the Merger Agreement;
- the absence of a conflict of the Merger Agreement and the
transactions contemplated thereby with laws applicable to and
material agreements of Lasergate and its subsidiaries;
- the consents and filings required with respect to the Merger
Agreement and the transactions contemplated thereby;
- filings made with the SEC;
- the absence of changes in the business of Lasergate;
- undisclosed liabilities and litigation;
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- employee benefit plans, other benefit plans and employee matters;
- the opinion of Raymond James & Associates;
- the action of the Board approving the Merger Agreement and the
transactions contemplated thereby;
- the required vote of the shareholders of Lasergate with respect to
the proposed Merger;
- tax returns and audits;
- material contracts and insurance;
- subsidiaries;
- real property, intellectual property, and tangible personal
property; and
- environmental matters.
COVENANTS
Lasergate has agreed to operate, and cause each of its subsidiaries to
operate, their respective businesses in the ordinary and usual course prior to
the Effective Time. In this regard, Lasergate has agreed that it will not,
without the written consent of Tickets.com, engage in certain types of
transactions. Specifically, Lasergate has agreed that prior to the Effective
Time, Lasergate will not, and will not permit any of its subsidiaries to, among
other things:
- declare or pay dividends (other than dividends by Lasergate's
subsidiaries in the ordinary course of business consistent with
past practice);
- split, combine or reclassify its capital stock;
- repurchase, redeem or acquire any of its capital stock;
- issue, sell, grant, pledge or otherwise encumber any of its
securities (other than issuance of common stock upon exercise of
stock options which were issued in the ordinary course pursuant to
Lasergate's benefit plans, except for the conversion of any
Preferred Stock);
- amend its articles of incorporation or bylaws;
- acquire any equity interest in or substantial portion of the
assets of any other person;
- make material capital expenditures or commitments in excess of
$5,000;
- sell, lease, license, encumber or otherwise dispose of any
material assets (subject to certain ordinary course and legal
allowances);
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- incur additional material indebtedness or enter into any leases
(subject to certain ordinary course allowances); or
- take any action that could reasonably be expected to result in any
of the representations or warranties set forth in the Merger
Agreement to be untrue.
Lasergate has also agreed not to do the following without the prior written
consent of Tickets.com, which consent will not be unreasonable withheld or
delayed:
- enter into, adopt, amend or terminate any employee benefit plan or
any other agreement or arrangement with any of its directors or
officers;
- increase in any manner the compensation or fringe benefits of any
director, officer or employee;
- pay any benefit not required by any plan or arrangement in effect
as of the date of the Merger Agreement; or
- enter into any agreement or arrangement to do any of the foregoing
other than amendments to any benefit plan required to maintain
qualified status under applicable laws.
In addition, Lasergate shall not, nor shall it authorize or permit any of
its directors, officers or employees or any investment banker, financial
advisor, attorney, accountant, or other representative retained by it or any of
its subsidiaries to, solicit, initiate, or encourage (including by way of
furnishing information), or take any other action to facilitate, any inquiries
or the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Takeover Proposal, or agree to or endorse any Takeover Proposal.
"Takeover Proposal" means any tender or exchange offer, proposal for a merger,
consolidation, or other business combination involving Lasergate or any of its
subsidiaries taken as a whole, or any proposal or offer to acquire in any manner
the entire or more than a 20% equity interest in, or all of, or more than 20%
of, the assets of Lasergate, or one of the or any of its subsidiaries taken as a
whole; other than the transactions contemplated by the Merger Agreement or
transactions in the ordinary course of business of Lasergate. Lasergate shall
immediately advise Tickets.com orally and as soon as practicable in writing of
any such inquiries or proposals, including all relevant details. However,
Lasergate shall not be obligated to take any of the actions set forth above,
other than notifying Tickets.com of any inquiry or proposal, if the Board,
acting upon advice of counsel determines that such actions or inactions would be
contrary to their legal or fiduciary obligations as directors of Lasergate and
Tickets.com is notified promptly of such action.
Lasergate has also affirmatively agreed to:
- confer with reasonable frequency with Tickets.com, report on
operational matters, and promptly advise Tickets.com of any
change, event or circumstance that could reasonably be expected to
have a material adverse effect on Lasergate;
- provide Tickets.com copies of all fillings made with any
governmental entity in connection with the Merger Agreement;
- make all required periodic filings with the SEC as soon as
practicable but no later than the Closing Date.
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Lasergate also agreed to, and has completed the following:
- appointed individuals designated by RBB Bank to fill vacancies
on the Board, and immediately thereafter accepted the
resignations of Jacqueline E. Soechtig, Frank W. Swacker and
John J. Chluski from the Board;
- accepted the election of Jacqueline E. Soechtig to terminate
her employment pursuant to her employment agreement;
- accepted the resignations of Alfred P. Jones as Secretary,
James H. Moore, Jr. as Assistant Secretary and Cliff Soechtig
as an employee and officer of Lasergate; and
- appointed David A. Riley as President, Chief Executive Officer
and Secretary of Lasergate.
ADDITIONAL AGREEMENTS
Lasergate and Tickets.com have made further agreements regarding, among
other things:
- Voting of all shares of Lasergate common stock owned by
Tickets.com or any of its subsidiaries
in favor of the approval of the Merger Agreement;
- Cooperation in the preparation of required governmental
filings, in obtaining required permits and regulatory
approvals, and in the release of public announcements;
- Granting of access to information and maintaining
confidentiality; and
- Indemnification of officers and directors following the
Effective Time and maintaining liability insurance for such
officers and directors for six years following the Effective
Time.
Pursuant to its agreement with Tickets.com, after the execution of the
Merger Agreement Lasergate executed and delivered to Tickets.com a secured
promissory note and security agreement, whereupon Tickets.com loaned Lasergate
$600,000 (the "Loan Proceeds"). $325,000 of the Loan Proceeds was allocated
towards payment of certain accounts payable, $100,000 of the Loan Proceeds was
used for the repayment of loans made by RBB to Lasergate during June 1999, and
the remainder of the Loan Proceeds was used for payment of immediate working
capital needs of Lasergate. Thereafter and from time to time until the Closing
Date, Tickets.com agreed to loan Lasergate up to approximately $400,000 in
installments, as needed, to fund ongoing working capital needs of Lasergate.
CONDITIONS
The respective obligations of Tickets.com and Advantix Acquisition and of
Lasergate to consummate the Merger are subject to the following conditions,
among others:
- the approval of the Merger Agreement by the affirmative vote of
the holders of a majority of all outstanding shares of common
stock of Lasergate;
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- all authorizations, consents, orders, or approvals of, or
declarations or filings with, or expirations of waiting periods
imposed by, any governmental entity, the failure to obtain of
which would have a material adverse effect on Tickets.com and its
subsidiaries or the Surviving Corporation, in each case taken as a
whole, shall have been filed, occurred, or been obtained; and
- the absence of any governmental action or order which makes the
Merger illegal or otherwise prohibits consummation of the Merger.
The obligations of Tickets.com to effect the Merger are subject to the
following additional conditions, unless waived by Tickets.com:
- the representations and warranties of Lasergate being true and
correct as of the Effective Time as though made on and as of the
Effective Time, except where, among other things, the failure to
be true and correct, individually or in the aggregate, would not
have a material adverse effect on Lasergate (without giving effect
to qualifications as to materiality contained within such
representations and warranties);
- Lasergate having performed or complied with all of its obligations
and covenants required to be performed by Lasergate under the
Merger Agreement at or prior to the Effective Time, except where
the failure to so perform or comply would not have a material
adverse effect on Lasergate;
- Neither the Board nor any committee thereof shall have amended,
modified, rescinded, or repealed the resolutions adopted by such
Board on June 18, 1999 and shall not have adopted any other
resolutions in connection with the Merger Agreement and the
transactions contemplated thereby inconsistent with such
resolutions; and
- Lasergate shall have obtained the consent or approval of any
person whose consent or approval shall be required under any
agreement or instrument in order to permit the consummation of the
transactions contemplated by the Merger Agreement except those
which the failure to obtain would not, individually or in the
aggregate, have a material adverse effect on Tickets.com and its
Subsidiaries taken as a whole, with or without including its
ownership of the Surviving Corporation after the Merger.
The obligations of Lasergate to effect the Merger are also subject to the
following additional conditions, unless waived by Lasergate:
- the representations and warranties of Tickets.com being true and
correct as of the Effective Time as though made on and as of the
Effective Time, except where, among other things, the failure to
be true and correct, individually or in the aggregate, would not
have a material adverse effect on Tickets.com (without giving
effect to qualifications as to materiality contained within such
representations and warranties); and
- Tickets.com having performed or complied with all its obligations
and covenants required to be performed by it under the Merger
Agreement at or prior to the Effective Time, except where the
failure to so perform or comply would not have a material adverse
effect on Tickets.com.
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TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after the approval of the proposed Merger by the
shareholders of Lasergate, by the mutual written consent of Lasergate and
Tickets.com (acting through their respective boards of directors), or by either
Lasergate or Tickets.com if:
- the Effective Time shall not have occurred on or before October
31, 1999 (which date was extended to January 31, 2000 by
amendment) (provided that such termination will not be available
to any party whose failure to fulfill any obligation under the
Merger Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date
unless such failure has been outside the control of such party
using its reasonable efforts);
- there shall be any statute, law, ordinance, rule, or regulation
that makes consummation of the Merger illegal or otherwise
prohibited or if any court of competent jurisdiction or
governmental entity shall have issued an order, decree, or ruling
or taken any other action restraining, enjoining, or otherwise
prohibiting the Merger and such order, decree, ruling, or other
action shall have become final and nonappealable, except such as
have been sought by or on behalf of Tickets.com; or
- the shareholders' meeting of Lasergate is held and the
shareholders shall have failed to adopt the Merger Agreement at
such meeting (including any adjournment or postponement thereof).
Lasergate may also terminate the Merger Agreement at any time prior to the
Effective Time, whether before or after the approval of the proposed Merger by
the shareholders of Lasergate, if:
- upon a breach by Tickets.com of any representation, warranty,
covenant or obligation, in each case, as set forth in the Merger
Agreement, which would have a material adverse effect on
Tickets.com (without giving effect to qualifications as to
materiality contained within such representations and warranties);
however, if such breach is curable by Tickets.com through the
exercise of its commercially reasonable efforts and Tickets.com
continues to exercise its commercially reasonable efforts,
Lasergate may not terminate the Merger Agreement under this
provision for a period of 30 days after Lasergate's delivery to
Tickets.com of written notice setting forth in reasonable detail
the circumstances giving rise to such breach; or
- the Lasergate Board decides to accept an offer for, or to enter
into a definitive agreement for a Takeover Proposal, and provides
one business day's prior written notice to Tickets.com setting
forth, in reasonable detail, the identity of the person proposing
the Takeover Proposal and the terms and conditions of such
Takeover Proposal, if, as a result of an unsolicited proposal for
such Takeover Proposal, the Lasergate Board, after advice of
Lasergate's independent counsel (who may be Lasergate's regularly
engaged independent legal counsel), determines in good faith that
their legal or fiduciary duties under applicable law require that
such Takeover Proposal be accepted; provided, however, that any
termination of this Agreement by Lasergate pursuant to this
provision shall not be effective until Lasergate has made payment
of any fees required by the Merger Agreement.
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Tickets.com may also terminate the Merger Agreement at any time prior to
the Effective Time, whether before or after the approval of the proposed Merger
by the shareholders of Lasergate, if:
- the Lasergate Board withdraws, modifies or changes its
recommendation of the Merger Agreement;
- the Lasergate Board recommends to the shareholders of Lasergate
that they approve a Takeover Proposal other than the proposed
Merger;
- a tender offer or exchange offer which would result in a person
owning 20% or more of Lasergate's common stock is commenced and
the Lasergate Board, within ten days of such commencement, either
fails to recommend against such offer or takes no position with
respect to acceptance of such offer by Lasergate's shareholders;
or
- there occurs a breach by Lasergate of any representation,
warranty, covenant or obligation, in each case, as set forth in
the Merger Agreement, which would have a material adverse effect
on Lasergate (without giving effect to qualifications as to
materiality contained within such representations and warranties);
however, if such breach is curable by Lasergate through the
exercise of its commercially reasonable efforts and Lasergate
continues to exercise its commercially reasonable efforts,
Tickets.com may not terminate the Merger Agreement under this
provision for a period of 30 days after Tickets.com's delivery to
Lasergate of written notice setting forth in reasonable detail the
circumstances giving rise to such breach.
FEES AND EXPENSES
Whether or not the Merger is consummated and except as otherwise provided
in the Merger Agreement, all fees and expenses incurred in connection with the
Merger will be paid by the party incurring such fees and expenses.
Under the terms of the Merger Agreement, Lasergate will pay Tickets.com a
fee of $250,000 if the Merger Agreement is terminated:
- by either Lasergate or Tickets.com because the Effective Time
shall not have occurred on or before October 31, 1999, (which date
was extended to January 31, 2000 by amendment), and a Takeover
Proposal shall have been consummated within 12 months of the date
of the Merger Agreement;
- by Tickets.com because the Lasergate Board withdraws, modifies or
changes its recommendation of the Merger Agreement, the Lasergate
Board recommends to the shareholders of Lasergate that they
approve a Takeover Proposal other than the proposed Merger, or a
tender offer or exchange offer which would result in a person
owning 20% or more of Lasergate's common stock is commenced and
the Lasergate Board, within ten days of such commencement, either
fails to recommend against such offer or takes no position with
respect to acceptance of such offer by Lasergate's shareholders;
- by Lasergate because the Lasergate Board decides to accept an
offer for, or to enter into a definitive agreement for a Takeover
Proposal, and provides one business day's prior written notice to
Tickets.com setting forth, in reasonable detail, the identity of
the person proposing the Takeover Proposal and the terms and
conditions of such Takeover Proposal, if, as a result of an
unsolicited proposal for such Takeover Proposal, the Lasergate
Board, after advice of Lasergate's independent counsel (who may be
Lasergate's regularly engaged independent legal counsel),
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determines in good faith that its legal or fiduciary duties
under applicable law require that such Takeover Proposal be
accepted; provided, however, that any termination of this
Agreement by Lasergate pursuant to this provision shall not be
effective until Lasergate has made payment of any fees required
by the Merger Agreement; or
- by Tickets.com because there shall have occurred a break of a
representation, warranty, covenant or obligation made by
Lasergate, in each case, as set forth in the Merger Agreement,
which would have a material adverse effect on Lasergate (without
giving effect to qualifications as to materiality contained within
such representations and warranties); however, if such breach is
curable by Lasergate through the exercise of its commercially
reasonable efforts and Lasergate continues to exercise its
commercially reasonable efforts, Tickets.com may not terminate the
Merger Agreement under this provision for a period of 30 days
after Tickets.com's delivery to Lasergate of written notice
setting forth in reasonable detail the circumstances giving rise
no Takeover Proposal is consummated within 12 months of the date
of the Merger Agreement.
AMENDMENT/WAIVER
Before or after approval of the Merger Agreement by the shareholders, the
Merger Agreement may be amended by the written agreement of the parties thereto;
provided, however, after any such shareholder approval has been obtained, no
amendment may be made which under applicable law requires the approval of the
shareholders of Lasergate if such approval has not been obtained.
At any time prior to the Effective Time, the parties to the Merger
Agreement may extend the time for performance of any of the obligations or other
acts of the other parties to the Merger Agreement, waive any inaccuracies in the
representations and warranties contained in the Merger Agreement or in any
document delivered pursuant to the Merger Agreement, or waive compliance with
any agreements or conditions contained in the Merger Agreement. Any extension or
waiver will be valid only if set forth in writing and signed by the party making
such extension or waiver.
DISSENTERS' RIGHTS OF APPRAISAL
Under Sections 607.1301 through 607.1320 of the Florida Business
Corporation Act ("FBCA"), any holder of common stock who does not wish to accept
the Merger Consideration may dissent from the Merger and elect to have the fair
value of such shareholder's shares of common stock (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) judicially
determined and paid to such shareholder in cash, together with a fair rate of
interest, if any, provided that such shareholder complies with the provisions of
Sections 607.1301 through 607.1320.
The following discussion is not a complete statement of the law pertaining
to appraisal rights under the FBCA, and is qualified in its entirety by the full
text of Sections 607.1302 through 607.1320, which are provided in their entirety
as ANNEX C to this proxy statement and incorporated herein by reference. This
discussion and Sections 607.1302 through 607.1320 of the FBCA should be reviewed
carefully by any holder who wishes to exercise statutory dissenters' rights or
wishes to preserve the right to do so, since failure to comply with the required
procedures will result in the loss of such rights.
Only a holder of record of shares of common stock issued and outstanding
immediately prior to the Effective Time is entitled to assert appraisal rights
for the shares of common stock registered in that
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holder's name. A demand for appraisal should be executed by or on behalf of the
shareholder of record, fully and correctly, as such shareholder's name appears
on such stock certificates, should specify the shareholder's name and mailing
address, the number of shares of common stock owned and that such shareholder
intends thereby to demand appraisal of such shareholder's common stock. If the
shares are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, execution of the demand should be made in that capacity.
If the shares are owned of record by more than one person as in a joint tenancy
or tenancy in common, the demand should be executed by or on behalf of all
owners. An authorized agent, including one or more joint owners, may execute a
demand for appraisal on behalf of a shareholder; however, the agent must
identify the record owner or owners and expressly disclose the fact that, in
executing the demand, the agent is acting as agent for such owner or owners. A
record holder such as a broker who holds shares as nominee for several
beneficial owners may exercise appraisal rights with respect to the shares held
for one or more beneficial owners while not exercising such rights with respect
to the shares held for one or more beneficial owners; in such case, the written
demand should set forth the number of shares as to which appraisal is sought,
and where no number of shares is expressly mentioned the demand will be presumed
to cover all shares held in the name of the record owner. Shareholders who hold
their shares in brokerage accounts or other nominee forms and who wish to
exercise appraisal rights are urged to consult with their brokers to determine
the appropriate procedures for the making of a demand for appraisal by such
nominee. A person having a beneficial interest in shares of common stock held of
record in the name of another person, such as a broker or nominee, must act
promptly to cause the record holder to follow properly the steps summarized
below and in timely manner to perfect appraisal rights.
The shares of common stock with respect to which Dissenting Shareholders
exercise their dissenters' rights are referred to herein as "Dissenting Shares."
Shares of Lasergate common stock must satisfy each of the following requirements
to qualify as Dissenting Shares under the FBCA: (i) the shares of common stock
must have been outstanding on the Record Date; (ii) the shares of common stock
must not have been voted in favor of the Merger; (iii) the holder of such shares
of common stock must make a written demand that Lasergate repurchase such shares
of common stock at fair value (determined as of the close of business on the day
prior to the Shareholders' Authorization Date, as defined below, excluding any
appreciation or depreciation as a consequence of the proposed Merger); and (iv)
the holder of such shares of common stock must deposit certificates for the
certificated shares with Lasergate. Neither a vote by proxy or in person against
the Merger nor an abstention constitutes a demand for or a waiver of dissenters'
rights under the FBCA.
Before the "Shareholders' Authorization Date" (defined in Section
607.1301(3) as the date on which the shareholders' vote authorizing the Merger
was taken), Lasergate must send to each shareholder a copy of Sections 607.1301
through 607.1320 of the FBCA, which are provided in their entirety in Annex C.
Shareholders who want to assert their dissenters' rights must deliver notice of
intent to demand payment to Lasergate before the Shareholders' Authorization
Date, and must not vote their shares in favor of the Merger.
Within ten (10) days following the Shareholders' Authorization Date,
Lasergate must mail to each of its shareholders who filed a notice to demand
payment, other than those voting in favor of the proposed action, a written
notice of the shareholders' approval of the Merger. Within twenty (20) days
after the date Lasergate sends notice of the Merger approval, Dissenting
Shareholders must file a written notice of their election to dissent and a
demand for payment of the fair value of their Dissenting Shares, and must
simultaneously deposit the certificates for these shares with Lasergate.
Shareholders who fail to file an election to dissent within the twenty (20) day
period are bound by the terms of the Merger.
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Within ten (10) days after the expiration of the twenty (20) day period, or
within ten (10) days after the Merger is effectuated, whichever is later, but in
no case later than ninety (90) days after the Shareholders' Authorization Date,
Lasergate must make a written offer to Dissenting Shareholders to pay fair value
for each of the Dissenting Shares, accompanied by a balance sheet and a profit
and loss statement. If the Dissenting Shareholder accepts Lasergate's offer
within thirty (30) days of the offer, payment of the agreed upon value shall be
made within ninety (90) days of Lasergate's offer or the consummation of the
Merger, whichever is later. Upon payment of the agreed upon value, the
Dissenting Shareholder shall cease to have any interest in the Dissenting
Shares. The Dissenting Shares may then be held by Lasergate as authorized but
unissued shares, or may be disposed of pursuant to the Merger Agreement.
However, if Lasergate fails to offer to pay fair value to a Dissenting
Shareholder within the period specified above, or if it makes an offer that any
Dissenting Shareholder fails to accept within thirty (30) days after the offer
is made, Lasergate: (i) must, within thirty (30) days after receipt of written
demand for court action from any Dissenting Shareholder (provided such demand is
given within sixty (60) days after the date on which the Merger was
effectuated); or (ii) may, if no written demand for court action is received by
Lasergate from a Dissenting Shareholder within sixty (60) days after the date on
which the Merger is effectuated, file an action requesting that a Circuit Court,
for Pinellas County, Florida, determine the fair value of the Dissenting Shares.
If Lasergate fails to institute court action, a Dissenting Shareholder may do so
in the name of Lasergate, and all holders of Dissenting Shares who have not
agreed upon fair value must be made parties.
Within ten (10) days of a judicial determination of fair value, Lasergate
must pay each Dissenting Shareholder the fair value as determined by the court.
Costs and expenses of a judicial determination of fair value are determined by
the court and shall be assessed against the corporation, but all or any part of
such costs and expenses may be apportioned and assessed as the court deems
equitable against any or all of the Dissenting Shareholders who are parties to
the proceeding, to whom Lasergate has made an offer to pay for the Dissenting
Shares, if the court finds the actions of such Dissenting Shareholders in
failing to accept such offer arbitrary, vexatious or not in good faith.
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MARKET PRICE INFORMATION; DIVIDEND INFORMATION
Lasergate's common stock had been quoted by NASDAQ until it was delisted on
October 17, 1998. Since that date, Lasergate's common stock has been traded on
the OTC/Bulletin Board market under the symbol LSGT. The following table shows
the per share high and low bid prices of the common stock on the OTC Bulletin
Board as reported in published financial sources for the periods indicated in
1999, and the per share high and low sales prices as quoted by NASDAQ for the
periods indicated in 1998 and 1997.
HIGH LOW
---- ---
FISCAL YEAR ENDING DECEMBER 31, 1999 (Bid Prices)
Fourth Quarter, through November , 1999.............
Third Quarter......................................... 15/100 1/25
Second Quarter........................................ 19/100 1/20
First Quarter......................................... 3/10 9/100
FISCAL YEAR ENDING DECEMBER 31, 1998 (Sale Prices)
Fourth Quarter........................................ 15/100 81/100
Third Quarter......................................... 3/32 1/32
Second Quarter........................................ 5/32 1/8
First Quarter......................................... 1/8 3/32
FISCAL YEAR ENDING DECEMBER 31, 1997 (Sale Prices)
Fourth Quarter........................................ 1/2 1/8
Third Quarter......................................... 7/16 7/32
Second Quarter........................................ 15/32 7/32
First Quarter......................................... 3/4 9/32
On February 2, 1999, the last full trading day prior to the public
announcement of Tickets.com's unsolicited offer to Lasergate, the high and low
bid prices of the common stock on the OTC Bulletin Board were 29/100 and 9/50,
respectively, and the closing bid price was 1/10. On June 23, 1999, the last
full trading day prior to the day on which the execution of the Merger Agreement
was publicly announced, the closing bid price for the common stock on the OTC
Bulletin Board was 1/10. On October ____, 1999, the latest practicable date
prior to the printing of this proxy statement, the closing bid price for the
common stock on the OTC Bulletin Board was $____. The market price for common
stock is subject to fluctuation and shareholders are urged to obtain current
market quotations.
The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.
As of October 25, 1999 there were approximately 1,976 record holders of
Lasergate's common stock.
Lasergate has never paid any dividends on its common stock and does not
anticipate paying dividends on its common stock in the event the Merger is not
consummated. The terms of the Company's Preferred Stock provide that dividends
are payable on those shares when and if declared by the Lasergate Board. In
addition, whenever Lasergate pays any dividend, in cash, property or otherwise
on its common stock, it must pay a dividend on shares of the Preferred Stock in
an amount per share equal to that which holders of the Preferred Stock would
have received had they converted their share into shares of common stock.
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BUSINESS OF LASERGATE
GENERAL
Lasergate is engaged in the development, assembly, marketing, servicing,
installation, and sales of computerized admission control and revenue accounting
systems. These products include a reserved seating ticketing system, general
admission ticketing system and an access control solution which are marketed to
ticketing operations at a variety of entertainment venues. Lasergate's products
are generally marketed to the facility based entertainment industry and are used
at many types of facilities, including amusement parks, theme parks, ski
resorts, multi-purpose stadiums and arenas, performing arts theaters, museums,
casinos, aquariums, and zoos in the United States, Canada, and certain countries
outside of North America.
Lasergate developed an access control system that employs applications of
various technologies to automate and verify admission to attractions and to
provide revenue control and accountability, while reducing fraud inherent in
situations involving cash transactions when proper controls are not implemented.
These technologies include proximity or radio frequency identification (RFID)
scanning, laser (bar code) scanning, and reading magnetic stripe data. The
system creates a detailed record of and permits individual charges for both
overall facility admission and access to each of its attractions or events. The
access control system is designed to interface with any of Lasergate's general
admission ticketing systems, thus providing a seamless solution.
In March, 1997, Lasergate introduced its newest version of the general
admission ticketing product called ADMITS FOR WINDOWS(R), A WINDOWS NT(R)
ticketing system. The system provides computerized point-of-saLE general
admission tickets, including timed admission tickets and/or wristband tickets
for amusement and water parks. Lasergate has discontinued the sale and support
of its previous general admission products, ADMITS GOLD and ADMITS PLATINUM.
Lasergate markets its VIDEO IMAGING SEASON PASS system, in conjunction with
the ADMITS FOR WINDOWS(R) product. This system allows the venue to issue
on-the-spot personalized credentials for season passes, membership cards, and
employee cards. Producing a personalized credential involves bringing together
information, a photo image, a bar code, and some fixed text onto a medium for
tamper-proof, durable use by a customer, employee, or member.
Lasergate's reserved seating ticketing product, "SELECT-A-SEAT," allows the
customer to sell tickets and assigns individual seats for a particular
performance or for a series of performances. The SELECT-A-SEAT system controls
individual box office ticket sales and optionally has the capability of taking
telephone and mail order reservations, group reservations, remote outlet sales
and season subscription sales.
Lasergate has installed general admission ticketing systems in over 200
facilities including:
Sun Valley, a ski and golf resort in Sun Valley, Idaho
World of Coca Cola, Atlanta, Georgia and Las Vegas,
Blackpool Pleasure Beach, Ltd., Blackpool, England
Regal Cinemas Fun Centers Art Gallery of Ontario
National Science Center
Museum of African American History, Detroit, Michigan
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Lasergate's SELECT-A-SEAT system is used by over 80 facilities including:
Contemporary Group (providing tickets for the St. Louis Blues),
St. Louis, Missouri
Current installations vary from systems which provide for simple general
admission tickets to those which allow access by patrons to an entertainment
facility, to systems which provide for more complex arrangements, such as
tickets of decrementing value, (the point or monetary value of the ticket
decreases with each use), which permit limited access to individual events and
attractions within a park. Individually bar-coded tickets are printed by the
ADMITS FOR WINDOWS(R) system and authorized for use by the holder upon printing.
Relevant data concerning the remaining value and restrictions of the ticket are
available from the access control system each time the bar code is read and
processed. With bar codes, no information is actually contained in the bar code,
but instead is held by the ADMITS FOR WINDOWS(R) system in individual records
identified by the unique bar code. The bar code is scanned by a laser scanner
and, if the bar code is valid, the access control system releases a turnstile.
This validation process, in conjunction with proprietary processing and storage
features, permits the ADMITS FOR WINDOWS(R) system to utilize many printing
point-of-sale stations and turnstiles at individual attractions to process
simultaneous information at all locations.
PRODUCT STRATEGY
Lasergate's product strategy is focused on integrating leading edge
hardware and software technologies into a cohesive family of products that
provide users with the flexibility and control to positively impact their
business results.
Lasergate began selling the next generation of its general admission
ticketing system, ADMITS FOR Windows(R), in 1996. It is A WINDOWs(R) version
that includes ticketing, access control, concession sales, reporting and
advanced reservations as well as other features currently under development
designed to meet the many needs of WINDOWS(R) based clients. Lasergate continues
to sell, install and support its Select-a-Seat product which is designed for
reserved seating venues.
ADMITS FOR WINDOWS(R)
ADMITS FOR WINDOWS(R) is A WINDOWs(R) based point-of-sale (POS) system that
integrates technologies that enhance ticketing and access control operation. The
system can be used to issue tickets, wristbands or receipts and provide access
control both for general admission or timed admission events. A minimum
configuration for an Admits for Windows(R) for Windows system presently consists
of the following basic components: a personal computer, a printer, and
Lasergate's ADMITS FOR WINDOWS(R) ticketing software. It may also have optional
peripherals, including but not limited to: touch screen monitor; specialized
keyboards; ticket, wristband or receipt printer; credit card reader; and a
customer display, as well as third party software for specialized applications.
ADMITS FOR WINDOWS(R) is designed to handle the diverse needs of a
ticketing office including cash control, ticket printing, event set-up and
financial reporting. It can also include point-of-sale software for gift shops
and concession stands, as well as access control using turnstiles and proximity
or radio frequency identification (RFID) scanning or laser (bar code) scanning.
ADMITS FOR WINDOWS(R) is protected by a registered copyright. Lasergate relies
upon this copyright as well as a combination of contract and trade secret laws
to protect its proprietary interest in such software (See "Intellectual
Property"). Lasergate believes that the proprietary nature of the ADMITS FOR
WINDOWS (R) system is a result of the
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inter-relationship of these components and the increased number of functions
that this relationship provides, as well as the software which links them,
rather than the components themselves. Additional software systems could
include, but are not limited to, credit card processing, season pass capability,
access control, capacity ticketing, and additional products provided by third
parties, such as fund raising. ADMITS FOR WINDOWS(R) can be a stand-alone POS
device or multiple POS stations networked together, selling from one common
inventory of available events. Using the WINDOWS(R) platform, ADMITS FOR
WINDOWS(R) delivers a superior price/performance ticketing and access control
solution.
The ADMITS FOR WINDOWS(R) product architecture uses a layered approach that
provides the user with a relatively powerful set of user definable configuration
options in addition to a high level of integrity of operations. Lasergate
deploys this product architecture to enhance performance and provide customers
with application and programming flexibility. The configuration layer of the
architecture provides software development tools for custom configurations. By
developing this configuration layer, Lasergate has given the end user the
ability to configure systems more effectively and efficiently with less risk and
expense of software modifications.
Lasergate's ADMITS FOR WINDOWS(R) computer software system provides general
admission ticketing for facilities that desire the flexibility of offering
tickets that can be printed for a variety of applications, with and without bar
codes. It ranges from simple entry fees to timed admission and tickets of
decrementing value.
Unlike other forms of admission control, which can be subject to tampering,
Lasergate's access control system maintains the records for each ticket holder
on the system computer and only recognizes those tickets produced by ADMITS FOR
WINDOWS(R). This makes counterfeiting nearly impossible and prevents ticket
holders from manipulating the value of their ticket. While competitors offer
systems which supply many of the same features as ADMITS FOR WINDOWS(R)
Lasergate believes that the large number of features and flexibility of its
system gives Lasergate a competitive advantage in marketing its products (See
"Competition.").
Scanners can be directly linked to ADMITS FOR WINDOWS(R) software
to read bar-coded tickets produced by the ADMITS FOR WINDOWS(R) software.
Scanners can be hand-held or integrated with access control equipment.
The price for the ADMITS FOR WINDOWS(R) system varies widely
depending on the complexity of the system desired, the kinds of additional
features added to the system, and the number of people expected to use the
system, which affects the number of entry points and the equipment required.
ADMITS FOR WINDOWS (R) FEATUREs. ADMITS FOR WINDOWs(R) systems are
adaptable to allow a facility to meet its ticketing requirements. Applications
range from ticketing for simple general admission to a facility to more complex
ticketing, such as season passes, tickets which admit the holder to certain or
all rides and/or areas of the park and discount tickets which may only be used
at certain times of the day or on certain days. ADMITS FOR WINDOWS(R) systems
are menu driven, allowing individuals without computer skills to operate them.
The Systems are also flexible, allowing facility personnel to modify the charge
(i.e., apply a coupon or discount, give consideration to the age of the ticket
holder, etc.) to the ticket holder for a given ride or attraction. A ticket or
card can be printed at one of several locations and can include the name of the
facility. The type of ticket and any other information specified by the facility
may also be included. Tickets can be designed in the form of paper tickets for
single day use, laminated plastic cards with photographs for season pass use, or
wristbands for use by children or in water parks.
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Facilities are able to utilize the ability of the ADMITS FOR WINDOWS(R)
system to generate a wide variety of ticket types and to easily change the value
of a ticket-type to enhance revenues. For example, an amusement park can lower
the points needed to enter an attraction during low-usage periods to equalize
patron traffic and generate more revenue during low-use time periods. Similarly,
a park can offer commercial sponsorship for various attractions during specific
time periods, attracting advertising income. The system's flexibility permits
numerous variations of ticketing strategies to encourage facility attendance and
increase usage.
ACCESS CONTROL
BACKGROUND. Bar codes, which have been available for use since the 1970's,
consist of a series of lines or bars printed on paper or plastic. By varying the
width of the bars and spaces between the bars, a bar code provides an item, such
as a ticket, with a unique identity. Lasergate also utilizes magnetic stripe and
proximity chip technologies providing equally unique characteristics.
Lasergate's technology, through its admission and access control system,
reduces fraud and labor costs while enhancing accountability and profitability.
Within the United States alone, the entertainment and recreation industries
encompass tens of thousands of facilities adaptable to Lasergate's systems.
Included are family entertainment centers, fairgrounds, stadiums, water parks,
amusement parks, arenas, zoos, aquariums, museums, ice skating facilities, movie
theaters and convention centers.
Use of bar codes and standard scanning equipment or radio frequency
hand-held scanners permits the access control system to closely monitor general
attendance at both amusement/theme park facilities as well as ski resorts. By
determining the validity of each ticket based on its identification number
encoded in its barcode or proximity chip, these scanning devices reduce the
possibility of admission from counterfeit tickets.
FEATURES. Lasergate's access control system, which is an optional feature
with the ADMITS FOR WINDOWS(R) family of products, integrates the scanning
technology of bar codes and proximity chips with laser scanners placed in
turnstiles, and hand-held or stationary proximity readers. Lasergate believes
the proprietary nature of the access control system is the inter-relationship of
the components, as well as the software that links them, rather than the
components themselves. To gain entry to a facility or an individual attraction,
the bar code or chip on or in the card or ticket is scanned by a laser scanner
located at the point of entry. The ticket holder can scan the ticket in any
direction. After it is processed, if the ticket is valid, the access control
system responds with an audible signal and, if desired, opens a turnstile. If
the ticket holder does not pass through the turnstile, the ticket retains its
prior value. In facilities where tickets decrease in value as used, display
devices may be placed throughout the facility to simply read the ticket value so
that a holder can determine the remaining value of a ticket.
Facility personnel can thus access a summary of cash receipts, attendance
and other statistical information about admissions as it is occurring. The
computer can be programmed to generate a summary of the day's activity,
including the cash and credit card transactions, the number of patrons entering
the facility and individual attractions and other statistical information. Such
data, along with summary weekly, monthly or annual data, assists facilities in
managing their business and can highlight irregularities in ticket collections.
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SELECT-A-SEAT
Lasergate's reserved seating software system is called SELECT-A-SEAT.
SELECT-A-SEAT is a broad in-house computerized box office management,
reservation and event marketing system. For reserved seating as well as general
admission sales. SELECT-A-SEAT has 75 installations servicing over 150
facilities, which are selling in excess of 40 million tickets annually in the
United States, Canada, Malaysia, and Singapore. The software can be used for
distribution and control of admission tickets for theaters, professional sports
teams, university athletic departments, multi-purpose arenas, racetracks,
casinos, concert halls, performing arts organizations, museums and IMAX
theaters.
SELECT-A-SEAT maintains an inventory of available seats in a facility,
including section, row and seat information. At the time of sale, the system
prints tickets for a customer with the pertinent performance information as well
as the seating location. SELECT-A-SEAT displays a series of prompts on a
computer screen, leading the ticket seller through the selling process. Once a
ticket sale is completed, all pertinent performance records are updated and
inventory is simultaneously depleted. SELECT-A-SEAT controls reserved seating
and general admission box office sales, telephone and mail order reservations,
group reservations, remote outlet sales, and season subscription ticket sales.
The SELECT-A-SEAT season ticketing program provides for rapid, efficient and
simple entry of season ticket purchases or account data, seat assignment,
payment posting, account verification, financial auditing, seat status auditing,
ticket printing and client invoicing.
In addition to ticket sales and revenue control, SELECT-A-SEAT stores a
database of ticket buyers. Facilities can maintain such information as name,
address, purchase and payment history, and demographic information such as age,
performance preference and source of account.
When selling tickets, SELECT-A-SEAT displays a series of prompts on a
computer screen, leading the ticket seller through the selling process. Tickets
are held in the system, unavailable for other sales, while a transaction is in
process. Once a ticket sale is completed, all pertinent performance records are
updated and inventory is immediately depleted. Any unsold tickets held for that
transaction are made available again.
The SELECT-A-SEAT season ticketing program provides for fast, efficient and
simple entry of season purchase or account data, seat assignment, payment
posting, account verification, financial auditing, seat status auditing, ticket
printing and client invoicing.
In addition to being a comprehensive ticket and revenue control system,
SELECT-A-SEAT is an important marketing tool. It stores parking, novelty
purchases, and tracks buyer characteristics such as show preference and
advertising response. Demographic and biographic information about a ticket
buyer or prospective ticket buyer is stored in SELECT-A-SEAT.
The SELECT-A-SEAT system is also purchased by entrepreneurs and
governmental agencies to set up regional or citywide ticket distribution
networks as an alternative to a national service bureau. The SELECT-A-SEAT
system is an alternative to a national service bureau, allowing facilities to
control their own ticket inventory, maintain reasonable service charges, and
retain service charge revenue. Lasergate has sold and installed SELECT-A-SEAT
Systems that sell tickets where the event is held, as well as over the telephone
and through remote ticket distribution points. When organizations purchase
SELECT-A-SEAT, tickets sold over the telephone and at remote sales locations can
carry a per ticket service charge, which the owner of the system retains.
Therefore, many organizations will purchase SELECT-A-SEAT to be used as a source
of generating additional revenue for the facility as well as controlling
inventory and ticket sales.
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In addition to ticket and revenue control functions, SELECT-A-SEAT can be
used to store various characteristics of each individual patron, such as car
parking preferences, novelty purchases made, performance preferences and past
responses to various forms of advertising. These characteristics, combined with
demographic and biographic data, give system owners a powerful tool for direct
mailings.
SELECT-A-SEAT offers features specifically designed to meet the needs of
various market niches such as performing arts venues, large stadiums, citywide
ticket bureaus and professional sports teams.
The price of SELECT-A-SEAT varies depending on the modules purchased and
the number of concurrent users provided for, ranging from a price of $7,000 for
a single terminal box office to $600,000 for multi-terminal access and modules
to support season tickets, telephone orders, reporting and credit card
authorizations. To date, most of the Select-a-Seat systems installed were sold
for prices ranging from approximately $35,000 to $200,000.
PRODUCT SERVICING AND ADMINISTRATION
Lasergate has developed a number of common procedures for producing and
servicing each of its products, as explained below.
ASSEMBLY AND TESTING. Lasergate purchases components for its systems, such
as the computer equipment and circuit boards, turnstiles, metal housings, laser
scanners and ticket printers from a variety of carefully selected sources and
assembles and integrates critical components with its proprietary software. Many
of the components are enhanced by off-the-shelf hardware readily available from
numerous sources. However, all subsections and unique operating environments are
fully integrated and all Lasergate software is tested for proper operation and
delivery of the highest quality product possible.
INSTALLATION AND TRAINING. Lasergate's technicians install each of its
systems, providing any customization required and overseeing the placement of
all equipment. The purchaser is responsible for installation of cabling to link
each component to the central computer. Low-voltage cables are dedicated to the
system and are not expensive or difficult to install. This cabling method allows
both new and existing purchasers to easily install Lasergate's systems and
allows existing installations to expand their existing systems as their business
grows. Lasergate also provides interfaces into various local area networks
(LAN's) and fiber-optics systems.
Lasergate provides initial training for the administrators and/or facility
personnel of each system at each installation and provides a user manual.
Lasergate encourages training of personnel at the supervisory level and
encourages these individuals to train the end users that operate Lasergate's
system within the customer's environment. Additional training is available
either at the installation site or Lasergate's headquarters at the option and
expense of the purchaser.
WARRANTY MAINTENANCE AND SERVICING. Lasergate offers a 90-day warranty for
its software products. After the end of the warranty period, Lasergate offers
its customers maintenance and servicing for an annual fee. Lasergate provides
for telephone response to calls for assistance during certain business hours and
days, or available around the clock, seven days a week for certain additional
charges. Also provided are standard updates to the system purchased, user guides
and repair or replacement (at customer expense) of hardware components.
Lasergate's customer support staff is often able to diagnose and correct
problems through computer link-up from Lasergate's headquarters to each site.
If more
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extensive modifications are required or if a facility requires training for
additional personnel, Company personnel will make additional site visits for a
fee.
As of September 30, 1999, Lasergate has accrued $473,775 to provide for
costs which may be incurred to fix software errors ("bugs").
RESEARCH AND DEVELOPMENT
Lasergate's engineers are engaged in developing enhancements and
applications for its technology. Such applications are intended to create new
products for Lasergate's markets and to enhance product competitiveness.
Lasergate's technical staff will concentrate their efforts on completing the
technology necessary for such new installations, although there can be no
assurance that it will be able to develop or market such new products or
applications.
MARKETING
Lasergate's overall marketing strategy is focused on a distribution model
that provides for direct distribution. Its products are segmented to address
requirements targeted at specific entertainment venues which include
amusement/theme parks, ski resorts, stadiums and arenas, performing arts
theaters, museums, aquariums and zoos and regional ticketing networks.
Lasergate has traditionally marketed its products and services through a
direct sales channel. Marketing efforts take place principally at selected
industry trade shows which are aligned with the above defined vertical markets,
at regional seminars which focus on application solutions, through targeted
direct mail campaigns and by advertising in trade periodicals. Qualified leads,
generated as a result of these marketing efforts, and high profile, target
accounts selected from the above vertical markets, provide the basis upon which
the direct sales organization pursues new opportunities. Additionally, some new
prospects have been attracted by the positive impressions created through
discussions with or visits to existing customer installations.
Lasergate views its installed base as a very important source of new leads
and, in fact, it has led to substantial business in 1998. Lasergate intends to
continue to explore these references and use its installed base as a basis for
obtaining new business.
Lasergate markets products that typically require substantial customization
in order to meet the customers' particular requirements. While Lasergate has
reduced the cost of installing, customizing and servicing (maintaining) the
customized software, these costs have remained higher than desired. With this in
mind, in June 1996, Lasergate initiated an internal assessment of its marketing
and product management strategies to determine whether its software could be
modified in order to provide a broader range of product options to its customers
without incurring substantial customization costs.
As a result of the assessment, Lasergate concluded that its principal
application components for ticketing, revenue management and access control will
continue to provide significant benefits to its customers and prospects;
however, rather than continue to market products that require substantial
customization, it will design and offer products in a modular fashion that allow
the user to define how the software is set up or configured for a particular
site through a table-driven set of parameters selected by the user. This new
model will consist of a primary product with optional pre-developed modules
and a
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configuration layer to meet specific customer needs that would require limited
or no customization by Lasergate. Additionally, the implementation of this
project will afford Lasergate an opportunity to employ the same development tool
(a high level, Rapid Application Development language) for each module that will
provide a high degree of consistency and efficiency in the product development
process. Although no assurances can be given, management expects that applying
Lasergate's proprietary technology in this fashion will provide a more effective
means of delivering business solutions to the entertainment industry.
This modular concept was implemented in Lasergate's new ADMITS FOR
WINDOWS(R) product which was introduced in May, 1997. For most of 1997, the
additional costs of introducing the new product more than offset any cost
savings achieved, but Lasergate has begun to achieve cost reductions as a result
of this development effort and new product introduction in areas of product
development and customer support. In addition, the product has a new appearance
that is more user friendly and allows the user to modify a configuration layer
(without access to the source code), which can remain in place when updating the
product to a new revision level. As a result, Lasergate expects its new products
to be more competitive in the market.
CUSTOMERS
The Company has sold its products to a variety of customers. Listed below
are examples of installations:
ADMITS FOR WINDOWS(R) AT SUN VALLEY SKI RESORT, SUN VALLEY, IDAHO. The
ADMITS FOR WINDOWS(R) at Sun Valley Ski Resort includes 27 point-of-sale
stations for lift ticket sales, six video ID stations for season passes, and 6
radio frequency ski lift scanning stations for access control. It processes over
400,000 tickets per year.
ADMITS FOR WINDOWS(R) AT ART GALLERY OF ONTARIO, ONTARIO, CANADA. The
ADMITS FOR WINDOWs(R) system at the Art Gallery of Ontario ("AGO") was installed
in the first quarter of 1997. It includes 12 point-of-sale stations for main
ticketing, group sales and back office ticketing applications. The system has
enabled AGO to implement an Art Card which provides bar coded access control
through 6 entry points utilizing custom ticket stock imprinted with selected
artwork.
Due to the length of time it takes for Lasergate to purchase, customize and
install certain of its products, there may occasionally be a backlog of orders
for equipment. As of December 31, 1998 and December 31, 1997, Lasergate's
backlog was $133,242 and $893,000 respectively. The backlog represented sales to
numerous sites with purchase prices ranging from approximately $90,000 to
$196,000. Management believes the backlog was less than the prior year because
of the transition in sales from legacy products to the new product. As is common
within the software industry, some prospective customers refused to consider a
system that did not have a lengthy history of performance at sizable
installations within their market segment. In 1998, American Skiing Company
(owner of multiple U.S. ski resorts) represented 18.5% of Lasergate's sales.
Regal Cinemas represented 16.4% of total sales.
COMPETITION
Lasergate faces significant competition from different sources. This
competitive activity can be analyzed by the following areas: product features
and capabilities, price, service/support, product availability, technology, and
corporate structure.
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PRODUCT FEATURES AND CAPABILITIES
ADMITS FOR WINDOWS(R). There are several companies in the United States
offering basic computerized ticketing capabilities which are similar to those
Lasergate offers through its ADMITS FOR WINDOWS(R) systems. They include, among
others, PACER CATS and Gateway Ticketing Systems. While those firms have
automated ticketing programs similar to that of Lasergate, and have resources
substantially greater than those of Lasergate, Lasergate believes ADMITS FOR
WINDOWS(R) competes effectively with these companies on the basis of pricing and
ease of installation, use and maintenance.
SELECT-A-SEAT. Lasergate's SELECT-A-SEAT reserved seating system competes
against companies such as Ticketmaster, Inc. Those companies have resources
substantially greater than Lasergate. Lasergate believes that it competes
effectively both in pricing and over all functionality of its SELECT-A-SEAT
system and that it has a competitive advantage in that the SELECT-A-SEAT
software will operate with a wide variety of hardware products that a customer
might already own.
ACCESS CONTROL. The primary competing technology for Lasergate's access
control system is magnetic strips, such as those located on the back of most
credit cards and many forms of paper tickets as well as various forms of bar
code readers. Competitors in this arena include VGS, Gateway Ticketing Systems
and recently Ticketmaster.
PRICING
There is significant and consistent competitive pressure to adjust and
modify pricing, particularly for hardware components. The ADMITS FOR WINDOWS
product, with its differentiated feature set continues to command a premium
price, however as the product matures and as competitors develop their
competitive offerings, the price will need to be reduced. The SELECT-A-SEAT
product is market priced, however, Lasergate has made the decision to forgo any
further improvement to the product.
SERVICE AND SUPPORT
The majority of Lasergate's competitors have established customer service
centers, help desks, and technical support services. The ability to provide
highly reliable, well skilled support staffs generally extends the competitive
position of each company. Lasergate has deployed these functions to support
customer needs, and is able to remain competitive in the general admissions
market.
PRODUCT AVAILABILITY
Currently, Lasergate distributes its products through its direct sales
channel, and although this remains to be an effective method, reserved seat
customers have recently expressed alternative buying preferences. Lasergate's
major competitors have responded quickly to these preferences by deploying
on-line ticketing through the Internet. Although this method of distribution is
unrefined, it has captured the interest of many, and has created significant
discussion in the market. Lasergate has recognized the value of the distribution
channel and intends to develop its own offering.
TECHNOLOGY
Lasergate's products are developed and implemented using industry standard
methodologies and products. The open product architecture provides customers the
ability to access the database from, and
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to integrate with third party packages. This capability provides Lasergate a
competitive advantage over many competitors.
CORPORATE STRUCTURE AND OTHER
Lasergate is publicly held, and as such is required to disclose all
activities, financial and otherwise. At times, this has been a disadvantage,
allowing competitors to obtain and publicize information in ways that have
created concern among prospective customers.
Lasergate generally enters into non-disclosure agreements related to its
proprietary technologies and trade secrets with its employees and with those
companies and individuals with which it has contractual agreements.
PRODUCTION AND SUPPLIERS
Lasergate produces each of its systems by enhancing, integrating and
assembling various components readily available from numerous suppliers. A few
components, such as metal housings and circuit boards are specially manufactured
for Lasergate to its specifications and ordered from one or more suppliers.
Lasergate's major suppliers are BOCA Systems, Inc., Peak Technologies, Brady
Signmark, Alvarado Manufacturing Co., Indiana Cash Drawer Corporation, and
Jetstar, Inc. The other products Lasergate offers are primarily software.
Lasergate typically assembles and tests its software at its headquarters
and installs it along with appropriate hardware on-site for its various
customers.
PERSONNEL
In order to reduce its overhead costs, Lasergate entered into an
agreement effective December 16, 1996, with a firm that provides all
administrative services relating to payroll, personnel and employee benefits (an
employee leasing agreement). Management continues to hire, dismiss, set pay
rates, and supervise the employees.
As of December 31, 1998, Lasergate employed (or employee leased) 24
individuals, including 4 in management, 4 in engineering, 4 in operations, 6 in
sales and marketing, 4 in finance and accounting and 2 support staff personnel.
Lasergate retained one individual as a contract employee and another individual
who served as a part-time consultant.
Lasergate generally enters into non-disclosure agreements with its
employees. None of its employees is represented by a union or covered by a
collective bargaining agreement. Lasergate believes its relations with its
employees are excellent.
INTELLECTUAL PROPERTY
Lasergate holds a copyright for the software comprising the SELECT-A-SEAT
system and has service marks for the names SELECT-A-SEAT and Lasergate Systems,
Inc. as well as for the SELECT-A-SEAT and LSi logos. Lasergate believes that its
copyright and service marks provide it with a competitive advantage and are
valuable assets.
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Lasergate has obtained a copyright for its new ADMITS FOR WINDOWS(R)
product. There can be no assurance that a copyright will afford sufficient
protection for Lasergate's products. In addition, Lasergate may not have the
resources necessary to enforce its rights with respect to any of its copyrights,
trade secrets, service marks or prospective filings since this can sometimes
involve protracted legal battles.
As referred to above, Lasergate has service marks for the names
SELECT-A-SEAT and Lasergate Systems, Inc.; ADMITS FOR WINDOWS(R) is a product of
Lasergate. All other brands and products mentioned in this report are trademarks
of their respective holder(s).
Lasergate regards certain features of its internal operations, software and
documentation as proprietary. Lasergate relies on a combination of contract,
copyright, service mark and trade secret laws as well as other measures to
protect its proprietary information. Lasergate generally enters into
confidentiality agreements with each of its employees and customers and, where
appropriate, with certain vendors, in which each party agrees not to use
Lasergate's proprietary intellectual property for purposes other than those for
the benefit of Lasergate. In addition, Lasergate safeguards its technology
through security measures such as passwords and codes. Policing unauthorized use
of Lasergate's information and technology is difficult, and there can be no
assurance that these safeguard measures will be successful or that Lasergate
will have the financial resources necessary to enforce its proprietary rights.
Trade secret laws in the computer technology area are rapidly developing and,
should Lasergate's proprietary products be appropriated, it may seek to enforce
its rights.
While Lasergate's competitiveness may be affected by its ability to protect
its proprietary information, it believes that because of the rapid pace of
technological change in the computer software industry, trade secret and
copyright protection are less significant competitive factors than the know-how,
ability and experience of its employees, frequent product enhancements and the
timeliness and quality of support services. While competitors may be able to
develop software products with similar capabilities, Lasergate believes that a
competitor would have to devote substantial resources to develop products that
can compete effectively with Lasergate's products. Accordingly, although
Lasergate deems its proprietary interest in its service marks and copyright to
be important, it does not believe that its failure or inability to protect that
interest would have a material adverse effect on its business. The competitive
advantage derived from the technology involved in each of Lasergate's products
is a result of the inter-relationships of the components and the variety of
features that they are able to provide when integrated, and the software that
links them, rather than the individual components themselves.
PROPERTY
In November 1997, Lasergate leased approximately 10,160 square feet of
office space in Clearwater, Florida. The lease expires on November 30, 2002.
Lasergate has the right under its written lease agreement to one five-year
renewal of the lease at prevailing market rates. Lasergate also has a right of
first refusal for additional office space in the same office complex as space
becomes available. Until December 1999, the rent payable will increase from
$9,094 per month to $10,245 per month.
LEGAL PROCEEDINGS
On or about June 27, 1997, a class action was commenced in the United
States district Court for the Eastern District of New York (CV 97-3775) by
Andrew Petit and Michael A. Lepera, on behalf of themselves individually, and on
behalf of all others similarly situated against INTER ALIA, Lasergate, Sterling
Foster, & Co., Inc. ("Sterling Foster"), Lasergate's former underwriter, counsel
for Sterling
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<PAGE>
Foster and certain issuer defendants for whom Sterling Foster acted as
underwriter. The Complaint alleges that in connection with an offering of
Lasergate's securities which became effective on October 17, 1994, Sterling
Foster engaged in a campaign to inflate the price of Lasergate's stock, to
create a short position at the inflated price and then cover the short position
with shares from shareholders who had been secretly released from "lock-up"
agreements. With respect to Lasergate, the Complaint alleges that it failed to
disclose in its Registration Statement that prior to the date the offering
became effective, Sterling Foster had secretly agreed to release certain
shareholders from "lock-up" agreements for the purpose of selling their shares
to Sterling Foster at reduced prices. The Plaintiffs' claims allege that
Lasergate violated Sections 11 and 12 (2) of the Securities Act of 1933,
Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder and Section 349 of the New York General Business Law, as well as
making negligent misrepresentations. Since the Complaint was filed, it has been
amended twice, but the allegations against Lasergate have remained the same. On
August 5, 1999, Lasergate moved to dismiss the Second Amended and Consolidated
Class Action Complaint in its entirety. Lasergate believes that it has defenses
to these claims and intends to vigorously defend itself in this action.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Due to the Lasergate's net loss for 1998 of $799,713, and its excess of
current liabilities over current assets of $2,239,682 and its history of
operating losses that accumulated to $20,506,100 at December 31, 1998,
Lasergate's independent certified public accountants have qualified their
accountants' report dated August 31, 1999, on Lasergate's 1998 financial
statements as to a going concern uncertainty. The following commentary within
Management's Discussion and Analysis addresses Lasergate's plans with regard to
these matters and subsequent events that have a direct bearing on these matters.
Lasergate's operations for 1998 were adversely affected by tight cash
flows. This resulted in 1998 staff reductions that, in turn, have resulted in
Lasergate not being able to effectively develop new software product releases or
achieve the software revenues that its 1998 strategic plan envisioned. This
resulted in Lasergate not being able to sustain 1998 revenues to the level
achieved in 1997 as potential customers could not be provided assurance that
development and/or support of new and current products would continue. To help
fund its operations during 1998, it was necessary for Lasergate to borrow
$300,000 from RBB Bank, an entity acting as an agent representative for various
common shareholders owning approximately 51% of the outstanding common stock and
owning all of the outstanding Preferred Stock. This debt obligation is in
default as of August 31, 1999. Lasergate has also delayed payments on its vendor
obligations, further compounding its ability to produce revenues.
During the 1998 fourth quarter and through May 30, 1999, Lasergate's
primary focus had been that of pursuing financing alternatives to remain in
existence. In January 1999, Lasergate's management contemplated a bankruptcy
filing as Lasergate's reduced operations, without additional funding, could not
continue to adequately support its obligations. Discussions with several
potential suitors since January 1999 resulted in Lasergate signing the Merger
Agreement. Subsequent to the signing of the Merger Agreement, Tickets.com
advanced Lasergate $1,433,000, which Lasergate has used to support its
operations and
48
<PAGE>
had a remaining cash balance of approximately $70,000 at August 31, 1999. On
September 16, 1999 Lasergate received an additional advance of $350,000 from
Tickets.com to sustain operations through October, 1999, at which time Lasergate
believes that it's new ADMITS FOR WINDOWS(R) product (Admit 9.2) will be
completed and ready for market. If the Merger Agreement is not consummated,
Lasergate does not currently have any further funding alternatives and will most
likely invoke bankruptcy proceedings, unless another strategic funding partner
can be located, which can not be assured.
RESULTS OF OPERATIONS: SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS
ENDED JUNE 30, 1998
REVENUES:
Revenues were $1,197,442 and $1,977,998 for the six months ended June 30,
1999 and 1998, respectively, representing a decrease of $780,556 or 39%. Product
sales represented $135,222 and $1,644,516 for the six months ended June 30, 1999
and 1998, respectively, and revenue from maintenance and support of customers
represented $260,872 and $333,482 for the six months ended June 30, 1999 and
1998 respectively.
COST OF REVENUES:
Cost of revenues were $640,034 and $1,138,206 in the six months ended June
30, 1999 and 1998, respectively, representing a $498,172, or 44% decrease. The
ratio of cost-of-revenues to revenues is a function of whether the sales or
services are hardware or software intensive. Hardware sales result in lower
gross margins as hardware is not developed by the Company, but acquired for
customers, as is a small portion of software. Sales of the Company's software
provide the Company with significantly higher gross margins.
DEVELOPMENT COSTS:
Development costs were $0 and $44,828 for the six months ended June 30,
1999 and 1998, respectively, representing a decrease of $44,828, or 199%. This
decrease is due to the fact that the Company did not have available funds to
continue development efforts. As of October 10, 1999, development efforts are
underway to finalize the Admits 9.2 product before the end of the year.
SELLING, GENERAL AND ADMINISTRATIVE:
Selling, general and administrative expenses were $1,774,037 and $1,444,200
for the six months of 1999 and 1998, respectively, representing a $329,837 or
23% increase. The increase in SG&A expense is primarily attributable to
additional expense related to the proposed merger agreement, including severance
and other costs.
NET LOSS:
Net loss increased to $1,213,502 ($0.079 a share) for the six months ended
June 30, 1999 from $640,320 ($0.06 a share) for the six months ended June 30,
1998.
RESULTS OF OPERATIONS: 1998 COMPARED TO 1997
REVENUES
Revenues decreased to $3,013,311 in 1998 from $4,917,536 in 1997,
representing a 39% decrease. Revenues consisted of system sales and
installations of $2,522,659 in 1998 and $4,470,626 in 1997, and maintenance and
support of $490,652 in 1998 and $446,910 in 1997. The decrease in system
revenues is primarily due to Lasergate's financial and operating situation
described above. The increase in maintenance revenues is primarily due to a
larger installed customer base (which includes 1997 installations for 1998).
COST OF REVENUES
Cost of revenues in 1998 and 1997 included the costs associated with the
hardware and software acquired for Lasergate's customers, the full costs
associated with the engineering and installation of the systems, the full costs
associated with the provision of customer support, and the amortization of
capitalized software.
Cost of revenues decreased to $1,747,923 from $3,809,442. This 54% decrease
was primarily the result of the 39% decrease in sales. Warranty provisions for
1998 totaled $78,250 and warranty work charged against the allowance in 1998
totaled $158,973. As a percentage of revenues, cost of revenues in 1998
represented 58% of revenues compared to 77% of revenues in 1997. This decline is
a result of increased margins on significant sales to American Skiing Company in
1997 which did not re-occur in 1998 and an increase in software sales relative
to hardware sales in 1998 versus 1997.
Although the sales mix for hardware versus software has decreased during
1998, it should be noted that the ratio of cost of revenues-to-revenues is also
a function of whether the sales or services are hardware or software intensive.
Hardware sales result in lower gross margins as hardware is not developed by
Lasergate, but acquired for customers, as is a small portion of software. Sales
of Lasergate's software and related systems development activities provide
Lasergate greater gross margins.
DEVELOPMENT COSTS
Development costs decreased to $38,040 in 1998 from $445,365 in 1997, a
decrease of $407,325. As a percentage of revenues, development costs decreased
from 9% in 1997 to 1% in 1998. Development costs for 1998 do not include
$341,380 of capitalized costs or $158,973 of costs charged to the warranty
allowance. Development costs for 1997 do not include $318,650 of capitalized
costs or $123,578 of costs charged to the warranty allowance. By adding these
amounts back to development costs, gross spending on development activities can
be calculated. Gross spending decreased from $887,593 in 1997 to $538,393 in
1998, a decrease of 39%. This decrease, as well as the decrease in
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<PAGE>
development costs expensed as a percent of revenue, was primarily due to
decreased staffing and consulting costs.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses decreased to $2,046,011 in
1998 from $3,396,415 in 1997, representing a 40% decrease. As a percentage of
revenues, these expenses were 68% in 1998 and 69% in 1997, which reflects
minimal cost reductions in 1998 relative to revenue volume. The principal
components of the decrease in selling, general and administrative, in 1998 as
compared to 1997 are described below:
General and administrative expenses decreased to $1,200,246 in 1998 from
$2,186,182 in 1997, representing a 45% decrease. The principal components of the
decrease are decreases in compensation of $445,000, legal fees of $267,000, and
bad debt expense of $110,000. In addition, 1997 includes a write off of customer
lists totaling $230,000.
Sales and marketing expenses decreased to $845,765 in 1998 from $1,210,233
in 1997, representing a 30% decrease. This decrease was primarily attributable
to reduced sales commissions and trade show and advertising expense.
INCOME TAXES
Lasergate currently has a substantial net operating loss carry forward for
which Lasergate has not recognized a tax benefit due to the uncertainty related
to when and how much of the tax benefits will be ultimately realized (See Note 7
to the financial statements).
NET LOSS
Net loss decreased to $799,713 in 1998 from $2,923,069 in 1997. Lasergate's
operations were affected by various factors as discussed above.
NET LOSS PER SHARE
In March 1997, the SEC announced its position on accounting for the
issuance of convertible preferred stock with a non-detachable conversion feature
that is deemed "in the money" at the date of issue (a "beneficial conversion
feature"). Lasergate's preferred stock has such features. As a result, Lasergate
has recognized the intrinsic value of beneficial conversion features of
preferred stock as dividends to preferred shareholders. The accounting described
herein for the intrinsic value of beneficial conversion features does not affect
the financial statements, including the reported net loss and shareholders'
equity (including retained earnings), with the exception that the reported net
loss per common share has been increased by the amount of the preferred
dividends. After recognizing dividends of $475,570 for 1997 and $0 for 1998, the
net loss per common share is $(.06) for 1998 and $(.46) for 1997.
NEW ACCOUNTING PRONOUNCEMENT ADOPTED
In 1998 Lasergate adopted SOP 97-2, "Software Revenue Recognition."
Adoption of this pronouncement did not have a material impact on Lasergate's
financial statements.
50
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Lasergate used cash for operating activities of $795,186 in the six months
ended June 30, 1999 and $64,970 in the six months ended June 30, 1998.
Lasergate used cash of $218,918 in 1998 and $2,520,099 in 1997 for
operating activities. From its inception in October 1985 through June 30, 1999,
Lasergate has incurred cumulative losses of $21,719,602, with a loss of
$1,213,502 for the six months ended June 30 1999. Lasergate's net loss in the
six months ended June 30, 1999 was primarily due to a substantial decrease in
sales because Lasergate's Admits 9.2 product was not ready to market. To some
extent the net loss was also attributable to increased operating costs due to
severance payments to former employees in the approximate amount of $173,000.
Lasergate's net loss in 1998 was $799,713 and was due primarily to
expenditures related to the factors referred to under the caption "Results of
Operations: 1998 Compared to 1997" above. Included in the net loss for 1998 were
non-cash expenses totaling $237,983, which included (i)
depreciation/amortization expenses of $360,673, and (ii) a decrease in the
allowance for doubtful accounts of $122,690. Cash generated from items
classified as current assets totaled $711,171 which consisted primarily of
decreases in accounts receivable and inventories. These sources of cash were
offset primarily by decreases in accounts payable and accrued warranty costs.
Lasergate used cash in investing activities in the amount of $74,025 in the
six months ended June 30, 1999 and $211,879 in the six months ended June 30,
1998, which was used for capitalized software development costs.
Lasergate used cash in investing activities in the amount of $394,273 and
$456,611 in 1998 and 1997, respectively, which was used for additions to
property, equipment, and software costs.
Lasergate was provided cash by financing activities of $825,000 in the six
months ended June 30, 1999 and $0 in the six months ended June 30, 1998. In the
six months ended June 30, 1999, cash from financing activities was provided by
loans from Tickets.com.
Lasergate was provided cash by financing activities of $294,381 in 1998 and
$1,442,447 in 1997. In 1998, cash from financing activities was primarily
provided by loans from a related party. In 1997, cash from financing activities
was primarily provided by Lasergate's sale of 7,500 shares of Preferred Stock to
RBB Bank for $7,500,000 pursuant to an exemption from the registration
requirements of the Securities Act, as amended, under Regulation S promulgated
thereunder. Pursuant to the transaction, Lasergate redeemed 7,945 shares of
Lasergate's Series F Preferred Stock owned by RBB Bank for $6 million leaving
Lasergate with $1,447,500 of net proceeds after giving effect to expenses of the
offering. No sales commissions were paid.
Lasergate's ability to continue operations is entirely dependent upon its
ability to receive further funding. While no assurances can be made, Lasergate
believes that the Merger Agreement will be consummated by the end of December
1999. On September 16, 1999 Lasergate received an additional advance of $350,000
from Tickets.com to sustain operations through October, 1999, at which time it
believes that the Admit 9.2 product will be completed and ready for market. If
the Merger Agreement is not consummated, Lasergate does not currently have any
further funding alternatives and will most likely invoke bankruptcy proceedings,
unless another strategic funding partner can be located, which can not be
assured.
YEAR 2000 COMPUTER ISSUES
Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field. Beginning in January
2000, these date code fields will need to distinguish twenty-first century dates
from twentieth century dates. As a result, computer systems and/or software used
by many companies may need to be upgraded to comply with such "Year 2000"
requirements. Significant uncertainty exists in the software industry concerning
the
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<PAGE>
potential effects associated with such compliance. Although Lasergate's current
products (its new WINDOWS(R) products and the current version of its reserved
seat product, SELECT-A-SEAT) are designed to be Year 2000 compliant, some legacy
products are not Year 2000 compliant. These legacy products are few in number
and each customer has been notified that these products are not Year 2000
compliant and that Lasergate will no longer support these products in the
future. All licenses for these non-compliant products have expired or will
expire prior to December 31, 1999. As of August 1999 management believes all
Year 2000 issues have been addressed for the currently supported products and in
addition has taken all reasonable steps to ensure the software products used
internally and for development purposes are Year 2000 compliant.
FINANCIAL STATEMENTS
Lasergate's audited financial statements for the years ended December 31,
1997 and December 31, 1998 appear at page F-1 following page 56 of this proxy
statement. Lasergate's unaudited financial statements for the six months ended
June 30, 1998 and June 30, 1999 appear at page FF-1, following the audited
financial statements.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of September 30,
1999, except as otherwise indicated, concerning the beneficial ownership of
Lasergate's common stock by: (1) 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 Lasergate to be the beneficial owner of more than 5% of the
outstanding shares of common stock, its only class of voting securities; (2)
each director of Lasergate; (3) Lasergate's current Chief Executive Officer, the
former Chief Executive Officer and executive officers whose salaries and bonuses
for 1998 exceeded $100,000; and (4) all of Lasergate's current directors and
executive officers as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
NUMBER OF SHARES APPROXIMATE
OF COMMON STOCK PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS (1) (2)
------------------------------------ ------------------ -------------
<S> <C> <C>
RBB Bank, AG 7,837,332 (3) 51%
Burgring 16
8010, Graz
Austria
Tickets.com, Inc. 24,818,217 (4) 62%
555 Anton Blvd. 12th Floor
Coast Mesa, CA 92660
Jacqueline Soechtig (5) 23,500 *
James H. Moore (5) 16 *
David A. Riley 0 *
Steven H. Noble 0 *
Directors and Officers as a Group (2) 0 *
</TABLE>
52
<PAGE>
- ----------------------
* Under one percent
(1) There were 15,299,393 shares of common stock outstanding as of June 30,
1998, which is the date of the most recent Quarterly Report which Lasergate
has filed with the SEC. Lasergate does not believe that the number of
shares currently outstanding is materially different.
(2) For purposes hereof, a person is deemed to be the beneficial owner of
securities that can be acquired by such person within 60 days from the date
hereof, upon the exercise of warrants or options or conversion of
convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that any warrants, options or convertible securities
that are held by such person (but not those held by any other person) and
which are exercisable or convertible within 60 days from the date hereof,
have been exercised or converted.
(3) RBB Bank disclaims beneficial ownership of these shares since it holds
these shares as nominee for its clients who are the beneficial owners of
the shares.
(4) On June 28, 1999 Tickets.com acquired 5,700 shares of the Preferred Stock
from RBB Bank. The preferred shares are convertible into 24,818,217 shares
of common stock.
(5) Neither Ms. Soechtig nor Mr. Moore has acted as a director or officer of
Lasergate since June 21, 1999.
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<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement contains or incorporates by reference certain
forward-looking statements and information relating to Lasergate that are based
on the beliefs of management as well as assumptions made by and information
currently available to Lasergate. Forward-looking statements include statements
concerning plans, objectives, goals, strategies, future events or performance,
and underlying assumptions and other statements which are other than statements
of historical facts, including statements regarding the completion of the
proposed Merger. When used in this document, the words "anticipate," "believe,"
"estimate," "expect," "plan," "intend," "project," "predict," "may," and
"should" and similar expressions, are intended to identify forward-looking
statements. Such statements reflect the current view of Lasergate with respect
to future events, including the completion of the Merger, and are subject to
numerous risks, uncertainties and assumptions. Many factors could cause the
actual results, performance or achievements of Lasergate to be materially
different from any future results, performance or achievements that may be
expressed or implied by such forward-looking statements, including, among
others:
- delays in receiving required regulatory and other approvals;
- the failure of shareholders to approve the Merger Agreement;
- general economic or market conditions;
- changes in business strategy;
- availability of financing on acceptable terms to fund future
growth;
- competitive conditions in Lasergate's markets;
- various other factors, both referenced and not referenced in this
proxy statement.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected, planned or
intended. Lasergate does not intend, or assume any obligation, to update
54
<PAGE>
these forward-looking statements to reflect actual results, changes in
assumptions or changes in the factors affecting such forward-looking statements.
INDEPENDENT AUDITORS
The firm of Grant Thornton LLP has served as Lasergate's independent
auditors since 1993. The consolidated financial statements of Lasergate for the
periods ended December 31, 1997 and 1998 included in this proxy statement, have
been audited by Grant Thornton LLP, independent auditors, as stated in their
reports appearing herein. It is expected that representatives of Grant Thornton
LLP will be present at the special meeting, both to respond to appropriate
questions of shareholders of Lasergate and to make a statement if they so
desire.
SHAREHOLDER PROPOSALS
If the Merger is consummated, there will be no public shareholders of
Lasergate and no public participation in any future meetings of shareholders of
Lasergate. However, if the Merger is not consummated, Lasergate's public
shareholders will continue to be entitled to attend and participate in
shareholders' meetings. Pursuant to Rule 14a-8 under the Exchange Act
promulgated by the SEC, any shareholder of Lasergate who wishes to present a
proposal at the next Annual Meeting of Shareholders of Lasergate (in the event
the Merger is not consummated), and who wishes to have such proposal included in
Lasergate's proxy statement for that meeting, must have delivered a copy of such
proposal to Lasergate at 2189 Cleveland Street, Suite 230, Clearwater, Florida
33765, Attention: Corporate Secretary, so that it was received no later than
March 31, 2000.
OTHER BUSINESS
The Board does not know of any other matters to be presented for action at
the special meeting other than as set forth in this proxy statement. If any
other business should properly come before the Special Meeting, the persons
named in the enclosed proxy card intend to vote thereon in accordance with their
best judgment on the matter.
AVAILABLE INFORMATION
No person is authorized to give any information or to make any
representations, other than as contained in this proxy statement, in connection
with the Merger Agreement or the Merger, and, if given or made, such information
or representations may not be relied upon as having been authorized by
Lasergate, Tickets.com or Advantix Acquisition. The delivery of this proxy
statement shall not, under any circumstances, create any implication that there
has been no change in the information set forth herein or in the affairs of
Lasergate since the date hereof.
Lasergate is currently subject to the information requirements of the
Exchange Act and in accordance therewith files periodic reports, proxy
statements and other information with the SEC relating to its business,
financial and other matters. Copies of such reports, proxy statements and other
information may be copied (at prescribed rates) at the public reference
facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549 and at the following
55
<PAGE>
Regional Offices of the SEC: 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and Seven World Trade Center, Suite 1300, New York, New York
10048. For further information concerning the SEC's public reference rooms, you
may call the SEC at 1-800-SEC-0330. Some of this information may also be
accessed on the World Wide Web through the SEC's Internet address at
"http://www.sec.gov."
By Order of the Board of Directors
David A. Riley
Secretary
Clearwater, Florida
November __, 1999
56
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
LASERGATE SYSTEMS, INC.
AND SUBSIDIARIES
December 31, 1998 and 1997
F-1
<PAGE>
TABLE OF CONTENTS
PAGE
----
Report of Independent Certified Public Accountants.................. F-3
Consolidated Balance Sheets as of December 31, 1998 and 1997........ F-4
(Audited)
Consolidated Statements of Operations for the Years
Ended December 31, 1998 and 1997 (Audited)........................ F-5
Consolidated Statement of Stockholders' Equity for the
Years Ended December 31, 1998 and 1997 (Audited).................. F-6
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1998 and 1997 (Audited)........................ F-7
Notes to Consolidated Financial Statements for the.................. F-9
Years Ended December 31, 1998 and 1997
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Lasergate Systems, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Lasergate
Systems, Inc. and Subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating an overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lasergate Systems, Inc. and
Subsidiaries at December 31, 1998 and 1997, and the results of their operations
and their cash flows for the years then ended, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company incurred a net loss of $799,713 during the year ended December 31,
1998 and as of that date, the Company has current liabilities in excess of
current assets of $2,239,682 and an accumulated deficit of $20,506,100. The
Company's operating loss history and financial condition raise substantial doubt
about the Company's ability to continue as a going concern. The Company has
historically relied on net proceeds from public and private offerings and loans
and advances from related parties to fund its operations. Management believes
that additional monies from these sources or from strategic corporate
partnerships will be necessary to fund its operations in 1999. Management's
plans in regard to these matters and subsequent events that have a direct
bearing on these matters are described in Notes 3 and 14. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ GRANT THORNTON LLP
----------------------
GRANT THORNTON LLP
Tampa, Florida
August 31, 1999, except for paragraph 3 of Note 3
and paragraph 9 of Note 14 as to which the date
is September 16, 1999
F-3
<PAGE>
Lasergate Systems, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
<TABLE>
<CAPTION>
1998 1997
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 71,952 $ 390,762
Accounts receivable, net of allowance for doubtful accounts of $35,000 and
$157,690 109,537 455,001
Note receivable, current portion 65,210 50,251
Inventories 21,697 232,192
Prepaid expenses 44,948 30,838
------------ ------------
Total current assets 313,344 1,159,044
------------ ------------
Note receivable, long-term portion -- 59,091
Property and equipment, net 232,718 305,509
Systems and software costs, net of amortization of $1,713,754 and $1,611,753 714,871 475,491
Goodwill, net of amortization of $531,546 and $398,557 2,116,727 2,249,716
Other assets, net 16,637 19,137
------------ ------------
Total assets $ 3,394,297 $ 4,267,988
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable, bank $ 317,956 $ 23,575
Accounts payable, trade 920,157 780,271
Deferred revenues 421,197 356,471
Accrued warranty costs 473,775 554,497
Accrued expenses 419,941 912,190
------------ ------------
Total liabilities 2,553,026 2,627,004
Stockholders' equity:
Preferred stock, $.03 par value, 2,000,000 shares authorized, 5,700 and 7,500
shares issued and outstanding at December 31, 1998 and 1997, respectively 171 225
Common stock, $.03 par value, 20,000,000 shares authorized, 15,299,393 and
7,462,061 issued and outstanding at December 31, 1998 and 1997, respectively 458,982 223,862
Additional paid-in capital 20,888,218 21,123,284
Accumulated deficit (20,506,100) (19,706,387)
------------ ------------
Total stockholders' equity 841,271 1,640,984
------------ ------------
Total liabilities and stockholders' equity $ 3,394,297 $ 4,267,988
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
Lasergate Systems, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revenues $ 3,013,311 $ 4,917,536
Operating expenses:
Cost of revenues 1,747,923 3,809,442
Development 38,040 445,365
Selling, general and administrative 2,046,011 3,396,415
Write down of customer list -- 230,208
------------ ------------
Operating loss (818,663) (2,963,894)
Interest income 18,950 40,825
------------ ------------
Loss before income taxes (799,713) (2,923,069)
Income taxes -- --
Net loss $ (799,713) $ (2,923,069)
============ ============
Dividends to preferred stockholders (intrinsic value of beneficial conversion
features - see Note 9) -- (475,570)
------------ ------------
Net loss available to common stockholders $ (799,713) $ (3,398,639)
============ ============
Net loss per common share - basic and diluted $ (.06) $ (.46)
============ ============
Weighted Average Common Stock Outstanding - basic and diluted 13,152,179 7,454,938
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
Lasergate Systems, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK COMMON
--------------- ------------ ADDITIONAL STOCK
PAR PAR PAID-IN SUBJECT TO ACCUMULATED
SHARES VALUE SHARES VALUE CAPITAL PUT OPTION DEFICIT
------ ----- ------ ----- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 8,000 $ 240 7,362,061 $220,862 $ 19,818,769 $(140,000) $(16,783,318)
Conversion of Series F preferred
to common stock (55) (2) 100,000 3,000 (2,998) -- --
Issuance of Series G preferred stock;
net of $52,500 of offering costs 7,500 225 -- -- 7,922,845 -- --
Preferred stock dividend, Series G
(intrinsic value of beneficial
conversion features) -- -- -- -- (475,570) -- --
Redemption of Series F preferred
stock (7,945) (238) -- -- (5,999,762) -- --
Cancellation of Put Option -- -- -- -- (140,000) 140,000 --
Net Loss -- -- -- -- -- -- (2,923,069)
------ ----- ---------- -------- ------------ --------- ------------
BALANCE, DECEMBER 31, 1997 7,500 225 7,462,061 223,862 21,123,284 -- (19,706,387)
Conversion of Series G preferred to
common stock (1,800) (54) 7,837,332 235,120 (235,066) -- --
Net Loss -- -- -- -- -- -- (799,713)
------ ----- ---------- -------- ------------ --------- ------------
BALANCE, DECEMBER 31,1998 5,700 $ 171 15,299,393 $458,982 $ 20,888,218 $ -- $(20,506,100)
====== ===== ========== ======== ============ ========= ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
Lasergate Systems, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(799,713) $(2,923,069)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization 360,673 436,621
Write-down of customer list -- 230,208
(Decrease) increase in allowance for doubtful accounts (122,690) 10,566
Decrease (increase) in:
Accounts receivable, trade 468,154 403,364
Note receivable 44,132 (109,460)
Inventories 210,495 22,709
Prepaid expenses (14,110) 10,246
Other 2,500 87,051
Increase (decrease) in:
Accounts payable and accrued expenses (352,363) (118,868)
Accrued warranty costs (80,722) (16,422)
Deferred revenue 64,726 (553,045)
--------- -----------
Net cash used in operating activities (218,918) (2,520,099)
--------- -----------
Cash flows from investing activities:
Net additions to property, equipment, and software costs (52,893) (137,762)
Capitalized software development costs (341,380) (318,649)
--------- -----------
Net cash used in investing activities (394,273) (456,411)
--------- -----------
Cash flows from financing activities:
Proceeds from secondary public or private offering, net of offering costs -- 7,447,500
Redemption of preferred stock -- (6,000,000)
Proceeds from loans - related party 300,000 --
Repayment of loans (5,619) (5,053)
--------- -----------
Net cash provided by financing activities 294,381 1,442,447
--------- -----------
Net decrease in cash and cash equivalents (318,810) (1,534,063)
--------- -----------
Cash and cash equivalents, beginning of year 390,762 1,924,825
--------- -----------
Cash and cash equivalents, end of year $ 71,952 $ 390,762
========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
Lasergate Systems, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS- CONTINUED
Year ended December 31,
1998 1997
---- ----
Supplemental Disclosure of Cash Flow Information
INTEREST AND INCOME TAXES PAID:
Interest $1,274 $2,810
Income taxes - -
NON-CASH INVESTING AND FINANCING ACTIVITIES:
1997
- ----
The Company recognized $475,570 of preferred dividends for 1997 based on the
intrinsic value of beneficial conversion features (see Note 9).
The Company cancelled its obligation to issue common stock of $140,000 in
connection with a legal settlement.
1998
- ----
The Company converted 1,800 shares of Series "G" preferred shares into 7,837,332
shares of common stock (See Note 9).
The accompanying notes are an integral part of these statements.
F-8
<PAGE>
NOTE 1 - DESCRIPTION OF BUSINESS
Lasergate Systems, Inc. (the "Company") was organized and incorporated in the
State of Florida in 1985. The Company is engaged in the development, assembly,
marketing, servicing and installation of admission control and revenue
accounting systems for both general admission and reserved seating. These
systems are used primarily at amusement parks, theme parks, water parks,
museums, aquariums, zoos, casinos, ski resorts, night clubs, theaters,
professional and university athletic and multi-purpose arenas, and other public
facilities, including state, county and local fairs, movie theaters, race tracks
and golf courses. The Company's customers are primarily located in the United
States and Canada.
The Company introduced a new product in 1997, Admits for Windows(R), which
represented 74% and 89% of product revenues in 1998 and 1997, respectively, with
Select-a-Seat representing 26% and 11% of product revenue in 1998 and 1997,
respectively.
In June 1999, the Company entered into a proposed Agreement and Plan of Merger
(see Note 14).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant inter-company
accounts and transactions have been eliminated.
USE OF ESTIMATES IN FINANCIAL STATEMENTS
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. These
estimates are a major factor in providing for warranty costs, valuation of
intangibles, and certain taxes that are further described herein. While actual
results could differ from those estimates, management does not expect the
variances, if any, to have a material effect on the financial statements.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
ACCOUNTS RECEIVABLE, NET
Accounts receivable are reported net of allowance for doubtful accounts. At
least quarterly, management reviews the collection status of its accounts and
provides an appropriate allowance, if necessary. Based on these reviews,
management believes that its accounts at December 31, 1998 and 1997 are
reasonably stated.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost being
determined principally by the use of the first-in, first-out method.
IMPAIRMENT OF LONG-LIVED ASSETS
F-9
<PAGE>
Long-lived assets and identifiable intangibles, excluding systems and software
costs, held and used by an entity along with goodwill are reviewed by management
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If the sum of the expected
future cash flows (undiscounted and without interest) is less than the carrying
amount of the asset, an impairment loss is recognized. Measurement of that loss
would be based on the fair value of the asset.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is being provided using
the straight-line method over the estimated economic useful lives (3-5 years)
for financial statement and income tax purposes.
SYSTEMS AND SOFTWARE COSTS
Systems and software costs represent the capitalized software costs (at full
cost) of software development for the Company's new ADMITS FOR WINDOWS(R)
product plus $200,000 of remaining acquisition costs for old products (Admits,
Delta, and Select-a-Seat) which was estimated to be the value of a detailed
product plan for the new products (the Company did not incur any costs for a
detailed product plan - it was able to use the old products to serve that
purpose). Such costs are amortized on a product-by-product basis. The annual
amortization expense is the greater of the amount computed using the ratio that
current gross revenues for each product bear to the total of current and
anticipated future gross revenues for that product or the straight-line method
over the remaining estimated economic life (6 years) of the product.
All development costs are capitalized once technological feasibility has been
achieved on a product until the product is released for general sale, at which
time only the costs of development of significant additions to a product's
features and functions are capitalized. Technological feasibility is determined
on a project-by-project basis.
The Company believes that its software development costs provide future benefit
in excess of net capitalized costs; however, this is dependent on the degree of
future market acceptance of currently released products and the degree of future
market acceptance of new software releases. This also may be dependent upon the
Company obtaining adequate levels of financing to support effective development
efforts.
Amortization of system and software costs in 1998 and 1997 was $102,000 and
$95,014, respectively, and is included in Cost of Revenues.
CUSTOMER LISTS/SUPPORT CONTRACTS AND GOODWILL
Remaining intangibles, other than systems and software costs (see above), that
were recognized in connection with the Company's acquisition of GIS and Delta in
1995 and 1994, respectively, relate to customer list and support contracts, and
goodwill. Such costs have been and are being amortized using the straight-line
method over their respective estimated useful lives: systems and software costs
(see above) and goodwill--twenty (20) years. Amortization expense (exclusive of
software) for 1998 and 1997 was $132,989 and $214,447, and is included in
selling, general and administrative expenses. Management reviews, at least on a
quarterly basis, whether or not any impairment has occurred with respect to such
acquired intangibles that could warrant an adjustment to the carrying values. As
a result of this review, during 1997 the remaining net balance of customer list
and support contracts of approximately $230,000 was written off. Undiscounted
cash flow projections associated with the acquired business is the primary focal
point in the assessment and analysis for potential impairment. During 1998 and
1997, no impairment was identified exclusive of the write down of the customer
lists and support contracts discussed above.
F-10
<PAGE>
With respect to determining whether goodwill ($2,116,727 at December 31, 1998)
has suffered impairment, the Company's undiscounted cash flow forecast over the
next 16 years (estimated remaining useful life of goodwill) assumed that
revenues increase 12% per year, cost of revenues as a percent of revenues remain
at 58%, development costs remain at 14% of revenues, and selling, general, and
administration expense increase 6% per year. Based on these assumptions, the
Company believes that goodwill does not need to be adjusted for impairment at
December 31, 1998; however, future obtainment of these assumptions is contingent
upon the Company's ability to obtain adequate funding to support operations and
development activities (see "Systems and Software Costs" above).
WARRANTY COSTS AND WARRANTY LIABILITY (ALLOWANCE)
The Company provides for warranty costs each month as a percentage of sales in
order to more closely match these costs with the associated revenue. The total
provision during 1998 was $78,250 or 2.6% of sales, and charges against the
allowance amounted to $158,973. The warranty liability at December 31, 1998 is
$473,775 which management believes is sufficient to cover all known and unknown
warranty costs that will be incurred in the future to satisfy customers for
sales through December 31, 1998.
Provisions for the warranty allowance are classified as cost of revenues.
FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1998 and 1997, the carrying amount of cash and cash equivalents,
accounts receivable, notes receivable, accounts payable and accrued expenses,
and notes payable, approximate fair value because of the short-term maturities
of these assets and liabilities.
REVENUE RECOGNITION
Revenues from the sale of equipment, which have been predominately under
short-term contracts during the periods presented herein, are recognized upon
the acceptance of the system by the customer provided that no significant vendor
or post-contract support obligations remain outstanding and collection of the
resulting receivable is probable. Revenues from special sales sold under
evaluation periods are recognized at the end of this period. Revenues from the
sale of equipment and software licenses with a planned installation period
exceeding ninety days are accounted for using the percentage of completion
method.
Revenues from post contract customer support and maintenance are recognized
ratably over the maintenance period if collectibility is probable.
Revenues include product sales and service revenues. Service revenues represent
approximately 33% and 9%, respectively, of total revenues in 1998 and 1997.
Deferred revenues include customer deposits and advanced billings in accordance
with contract terms of $421,197 and $356,471 at December 31, 1998 and 1997,
respectively.
Cost of revenues includes the costs associated with the hardware and software
acquired for the Company's customers, the estimated full costs associated with
the engineering and installation (mostly software customization) of the system,
and amortization of capitalized software. Cost of revenues also includes the
estimated full cost related to support and maintenance. The Company believes
that the estimated full costs are reasonably stated and classified in all
material respects.
Effective January 1, 1998, the Company adopted the AICPA Accounting Standards
Executive Committee's SOP 97-2, "Software Revenue Recognition," which supercedes
SOP 91-1. This SOP retains the same basic revenue recognition criteria of SOP
91-1; however, with respect to bundled
F-11
<PAGE>
contracts, a new criterion for allocation of contract fee is
introduced--"vendor-specific objective evidence of fair value." In addition,
further guidance is given as to revenue recognition issues when elements of a
contract are not all delivered, including services and post-contract customer
support. Adoption of this pronouncement did not have a material impact on the
Company's financial statements.
INCOME TAXES
Under the liability method specified in Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes," deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax basis of assets and liabilities as measured by the enacted tax
rates which will be in effect when these differences reverse.
NET LOSS PER COMMON SHARE
Net loss per common share is based on the weighted average number of shares
outstanding during the periods. All common stock equivalents (options and
warrants - see Note 9) and the effect of the all convertible securities (see
Note 9) were not included in the calculation of net loss per share because they
were anti-dilutive. The net loss used in the calculation is the net loss
available to common stockholders, which reflects preferred stock dividends for
1997 (intrinsic value of beneficial conversion features-see Note 9).
ACCOUNTING FOR STOCK BASED COMPENSATION
For employee stock awards, as allowed by SFAS No. 123, the Company has elected
to continue using the accounting method promulgated by the Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," to measure
compensation. As a result, SFAS No. 123 pro forma disclosures are required in
these financial statements (See Note 9).
NOTE 3 - OPERATIONAL AND FUNDING MATTERS
The Company incurred a net loss of $799,713 for the year ended December 31, 1998
and as of that date, current liabilities in excess of current assets of
$2,239,682 and a history of operating losses that have accumulated to
$20,506,100. In view of these matters, recoverability of a major portion of the
recorded asset amounts shown in the accompanying balance sheet is dependent upon
continued operation of the Company, which in turn is dependent upon the
Company's ability to succeed in its future operations or obtain additional
equity or debt funding. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary should the
Company be unable to continue in existence.
The Company's operations for 1998 have been adversely affected by tight cash
flows. This has resulted in 1998 staff reductions that, in turn, have resulted
in the Company not being able to effectively develop new software product
releases or achieve the software revenues that its 1998 strategic plan
envisioned. This has resulted in the Company not being able to sustain 1998
revenues to the level achieved in 1997 as potential customers could not be
provided assurance that development and/or support of new and current products
will continue. It was necessary that the Company borrow $300,000 from RBB bank
(see Note 6), an entity acting as an agent representative for various common
stockholders owning approximately 52% of the outstanding common stock and owning
all of the outstanding Series "G" preferred shares, to help fund its operations
during 1998. This debt obligation is in default as of August 31, 1999. The
Company has also delayed payments on its vendor obligations, further compounding
its ability to produce revenues.
F-12
<PAGE>
During the 1998 fourth quarter and through May 1999, the Company's primary focus
has been that of pursuing financing alternatives to remain in existence. In
January 1999, Company management contemplated a bankruptcy filing as its reduced
operations, without additional funding, could not continue to adequately support
its obligations. Discussion with several potential suitors since January 1999
resulted in the Company signing a proposed Agreement and Plan of Merger in June
1999 (see Note 14) with Tickets.com and Advantix Acquisition Corporation.
Subsequent to the signing of this Agreement, Tickets.com had advanced the
Company $1,430,000, which the Company has used to support its operations and had
a remaining cash balance of approximately $70,000 at August 31, 1999. On
September 16, 1999, the Company received an additional advance of $350,000 from
Tickets.com to sustain operations through October 1999, at which time it
believes that the Admit 9.2 product will be completed and ready for market.
While Tickets.com has the ability to provide further funding, there can be no
assurances that such future funding will occur, that the Agreement and Plan of
Merger will be consummated, or, if not consummated, that the Company will not
invoke liquidation proceedings on the Company.
NOTE 4 - INVENTORIES
Inventories as of December 31, consist of the following:
1998 1997
---- ----
Installations-in-process $11,697 $104,930
Parts and systems 10,000 127,262
------- --------
$21,697 $232,192
======= ========
During fourth quarter 1998, an adjustment of $70,000 was made to write inventory
down to its estimated net realizable value.
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, consist of the following:
1998 1997
---- ----
Furniture and equipment $503,122 $452,171
Purchased software 11,869 10,269
Test equipment 45,665 45,323
-------- --------
560,656 507,763
Less accumulated depreciation 327,938 202,254
-------- --------
$232,718 $305,509
======== ========
Depreciation expense was $125,684 and $137,513 for 1998 and 1997.
NOTE 6 - NOTES PAYABLE
1998 1997
---- ----
Note payable to bank, due August 23, 2001, bears
interest at 10%, collateralized by equipment $ 17,956 $19,137
Note payable to bank (related party), due July 30,
1999, bears interest at 10%, collateralized by
Admits Source code. Currently in default. 300,000 -
-------- -------
F-13
<PAGE>
$317,956 $19,137
======== =======
NOTE 7 - INCOME TAXES
The Company has a net operating loss (NOL) for income tax purposes of
approximately $16,200,000 at December 31, 1998, which begins to expire in the
year 2000. The deferred tax benefit is determined based on the difference
between the financial reporting and tax bases of assets and liabilities as
measured by the enacted tax rate which will be in effect when these differences
are realized. The Company cannot reasonably predict when it can utilize the NOL
carry forward and, therefore, the Company has recognized an equivalent valuation
allowance against the deferred tax benefit.
The principal types of temporary differences and their related tax effects that
give rise to the deferred tax assets are as follows:
DECEMBER 31,
-------------
1998 1997
---- ----
Net operating loss carry forward (1) $ 6,009,000 $ 5,385,000
Compensation related to stock options 415,000 415,000
Bad debt allowance, employee vacation
pay and other accruals 141,000 320,000
Warranty cost 175,000 205,000
Basis difference in intangible assets (93,000) 33,000
----------- -----------
6,647,000 6,358,000
Less valuation allowance (6,647,000) (6,358,000)
----------- -----------
$ - $ -
=========== ============
(1) Certain transactions involving the beneficial ownership of the Company have
occurred which resulted in a stock ownership change for purposes of Section
382 of the Internal Revenue Code of 1986, as amended. Consequently, a
portion of the Company's net operating loss carryforward is subject to
limitation on their utilization against future income.
The Company's computed effective tax rate differs from the Federal statutory tax
rate as follows:
1998 1997
---- ----
Federal statutory rate 34% 34%
Effect of net operating losses (NOL) or NOL carryforward (34)% (34)%
--- ---
Effective tax rate, after the effect of NOL 0% 0%
=== ===
NOTE 8 - COMMITMENTS AND CONTINGENCIES
OPERATING LEASE
The Company leases its office and warehouse facility as well as some office
equipment under operating leases.
Future minimum payments under these operating leases are as follows:
1999 $125,051
2000 134,861
2001 132,192
2002 118,803
2003 -
--------
$510,907
========
F-14
<PAGE>
Total lease payments for the years ended December 31, 1998 and 1997 were
$105,687 and $167,620, respectively.
LEGAL PROCEEDINGS
On June 15, 1995, the Company's founder and former President and Chief Executive
Officer, Donald Turner, commenced an action against the Company in the Circuit
Court for Pinellas County, Florida, Civil Division. Mr. Turner alleges, among
other things, that he was wrongfully terminated from his employment and sought
damages that, in the aggregate, exceeded $1,000,000. The Company settled this
case in 1998 for a total amount of $312,500, of which $150,000 was paid by two
individuals who were formerly affiliated with the Company. Primarily as a result
of settling this case, the Company reversed its previously recorded legal
accrual by approximately $180,000 during the fourth quarter of 1998.
On or about June 27, 1997, a class action was commenced in the United States
district Court for the Eastern District of New York (CV 97-3775) by Andrew Petit
and Michael A. Lepera, on behalf of themselves individually, and on behalf of
all others similarly situated against INTER ALIA, the Company, Sterling Foster,
& Co., Inc. ("Sterling Foster"), the Company's former underwriter, counsel for
Sterling Foster and certain issuer defendants for whom Sterling Foster acted as
underwriter. The Complaint alleges that in connection with an offering of the
Company's securities which became effective on October 17, 1994, Sterling Foster
engaged in a campaign to inflate the price of the Company's stock, to create a
short position at the inflated price, and then cover the short position with
shares from stockholders who had been secretly released from "lock-up"
agreements. With respect to the Company, the Complaint alleges that it failed to
disclose in its Registration Statement that prior to the date the offering
became effective, Sterling Foster had secretly agreed to release certain
stockholders from "lock-up" agreements for the purpose of selling their shares
to Sterling Foster at reduced prices. The Plaintiffs' claims allege that the
Company violated Sections 11 and 12 (2) of the Securities Act of 1933, Sections
10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder and Section 349 of the New York General Business Law, and made
negligent misrepresentations. In 1999, the plaintiff amended the complaint and
the Company resubmitted a new motion to dismiss the complaint in its entirety.
The Company believes that it has defenses to these claims and intends to
continue vigorously defending itself in this action.
The Company is also involved in other legal actions. Management does not believe
that the ultimate resolution of these and the above matters will have a material
effect on the Company's financial position.
OTHER MATTERS
Management has executed voluntary disclosure agreements with several states
regarding its sales tax reporting obligations. Management believes the reported
sales tax liability as of December 31, 1998, is reasonably adequate.
NOTE 9 - STOCKHOLDERS' EQUITY
COMMON STOCK
The Company has 20,000,000 authorized shares of Common Stock, of which
18,608,560 are either issued and outstanding or reserved for options and
warrants.
F-15
<PAGE>
PREFERRED STOCK
The Company's articles of incorporation authorize a total of 2,000,000 shares of
preferred stock. The Company's Board of Directors has established and authorized
the Series G convertible preferred stock that is presently outstanding.
G
---
Total authorized shares
December 31, 1998 8,000
December 31, 1997 8,000
Outstanding shares
December 31, 1998 5,700
December 31, 1997 7,500
Outstanding share amounts
December 31, 1998 $171
December 31, 1997 $225
The series G preferred stock contains specific provisions as to conversion into
shares of common stock and liquidation values. The shares are nonvoting and
participate equally as to dividends declared with the Company's common stock.
None of the preferred stock above has mandatory redeemable provisions.
As of December 31, 1998, 5,700 shares of Series G preferred stock are
outstanding which can convert into 24,818,217 Common Shares.
On October 30, 1997, the Board of Directors authorized a new series of
convertible preferred stock, par value $.03, designated as Series G Convertible
Preferred Stock ("Series G Shares"). The authorized number of such shares is
8,000. Each share has a face value of $1,000 and is convertible into 4,354
shares of Common Stock (a conversion price of $0.22967 per Common Share).
On November 4, 1997, the Company sold 7,500 shares of Series G Preferred Stock
to RBB Bank, AG ("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. The Series G Shares are convertible into
32,655,549 common shares. Pursuant to the transaction, the Company redeemed
7,945 shares of the Company's Series F Preferred Stock for $6 million, leaving
the Company with $1,447,500 of net proceeds after giving effect to expenses of
the offering. No sales commissions were paid.
In april 1998, the Company converted 1,800 shares of the Series G preferred
stock into 7,837,332 shares of common stock.
Under the terms of the subscription agreement, the Company will pay a
penalty of 5% of the face value of outstanding Series G Shares ($375,000) if
stockholders have not approved an increase in the authorized number of Common
Shares in an amount sufficient to allow for conversion of all Series G Shares
within 120 days of the subscription agreement (by March 4, 1998). An additional
penalty of 10% will be incurred for each 120 days beyond March 4, 1998, until
stockholders approve an increase in the authorized number of Common Shares in an
amount sufficient to allow for conversion of all Series G Shares. Such penalties
shall be payable in cash. If sufficient cash is not available to legally pay the
penalty, the Company will issue a note payable to the Series G holders in the
amount of the penalty bearing interest at a rate of 20% per annum.
F-16
<PAGE>
As of December 31, 1998, no penalties had been accrued or paid. In connection
with the June 1999 signing of a Settlement and Release Agreement between the
Company and RBB (see Note 14), the penalties described in the preceding
paragraph have been permanently terminated.
For discussion of Series G shares see Issuance of Stock--Private Placements.
PREFERRED STOCK DIVIDENDS
In March 1997, the Securities and Exchange Commission (SEC) announced its
position on accounting for the issuance of convertible preferred stock with a
non-detachable conversion feature that is deemed "in the money" at the date of
issue (a "beneficial conversion feature"). The beneficial conversion feature is
initially recognized and measured by allocating a portion of the preferred stock
proceeds equal to the intrinsic value of that feature to additional paid-in
capital. The intrinsic value is calculated at the date of issue as the
difference of the conversion price and the quoted market price of the Company's
common stock, into which the security is convertible, multiplied by the number
of shares into which the security is convertible. The discount resulting from
the allocation of proceeds to the beneficial conversion feature is treated as a
dividend and is recognized as a return to the preferred stockholders over the
minimum period in which the preferred stockholders can realize that return (i.e.
from the date the securities are issued to the date they are first convertible).
The accounting for the beneficial conversion feature requires the use of an
unadjusted quoted market price (i.e. no valuation discounts allowed) as the fair
value used in order to determine the intrinsic value dividend. However, since
the proceeds of some series of preferred stock have been used to redeem
previously issued preferred stock, the intrinsic value is reduced by the amount
of any previously recognized dividend on the redeemed shares. The intrinsic
value of dividends to preferred stockholders are added to the net loss before
calculating the net loss per common share. The intrinsic value of beneficial
conversion features to preferred stockholders was $475,570 for 1997.
RESERVATION AND AUTHORIZATION OF COMMON STOCK
The 5,700 outstanding Series G Shares are convertible into 24,818,217 common
shares, but only approximately 163,000 common shares are reserved for such
conversion. The Board of Directors plans to recommend to the Company's
stockholders at the 1999 Annual Meeting of Stockholders that they approve an
amendment to the Company's Articles of Incorporation to increase the number of
authorized shares of common stock. Upon approval of this amendment by the
stockholders of the Company, the Company will reserve approximately 24,655,000
additional shares to allow for the possibility of the conversion of the
remaining outstanding Series G shares.
STOCK OPTION PLANS
The Company's 1994 Stock Option Plan (the "Plan) permits the grant of options
that may be either incentive stock options (ISO's) or non-qualified stock
options (NQSO's). The total number of shares of common stock for options that
may be granted under the plan may not exceed 58,333 subject to adjustment, as
defined. The Compensation/Stock Option Committee of the Board of Directors is
authorized to determine the number of options to be granted, the number of
shares that will be subject to any option and the exercise price. The exercise
price for non-qualified stock options may not be less than 25% of the fair
market value of the common stock on the date of grant. At the 1995 annual
meeting of stockholders, stockholders approved changes to the Plan that
authorized grants of 5,000 options per term year at an exercise price of 85% of
the market value for each outside Director. The options vest at the rate of
5,000 shares per year at the beginning of each term year. grants of 5,000
options were made during 1997 to three outside directors. A total of 40,000
options have been granted under the Plan. The Compensation/Stock Option
Committee of the Board of Directors did not grant any stock options under
F-17
<PAGE>
the Plan during 1998, and upon the signing of the Proposed Agreement and Plan of
Merger (see Note 14), no such grants will subsequently occur.
NON-QUALIFIED STOCK OPTIONS
In 1997, the Company granted an additional 37,500 options outside of the Plan to
these individuals as an inducement for them to join the Board in addition to
grants made under the Plan. These options are exercisable for 10 years at
exercise prices ranging from $.28125 to $.65625 and were immediately vested. In
order to compensate another director at the same rate as all other non-employee
directors, this director was granted an option to purchase 37,500 shares outside
of the 1994 Stock Option Plan at an exercise price of approximately $.28 (100%
of the market value at time of grant) during 1997.
In October 1994, the Board of Directors authorized the grant of 375,000
non-qualified stock options at an exercise price of $2.00 per share, which were
granted to the Company's President and Chief Executive Officer in connection
with a three year employment agreement. Of the total options granted, 125,000
were granted as a signing bonus effective October 31, 1994 and were immediately
exercisable since their issuance was not contingent on future services as are
the remaining 250,000 options. Accordingly, compensation expense of $375,000
representing the difference between the fair value of $5.00 per share
(determined by the Board of Directors considering various factors such as
restrictions, etc.) and the exercise price, was recorded in the consolidated
statement of operations for 1994. In addition, the corresponding obligation to
issue (grant) common stock options also has been reflected in the balance sheet
as of December 31, 1994. Of the remaining balance of 250,000 options, 125,000
options vested on October 31, 1995 and 125,000 options vested on October 31,
1996.
The Company granted options to purchase 120,000 shares of common stock to an
executive officer for services rendered during 1996. During 1997, 20,000 of
these options were cancelled. The remaining options grant the right to purchase
100,000 shares at an exercise price of $0.66 and are exercisable until one year
after registration of the underlying stock (the underlying stock has not been
registered as of August 30, 1999).
A summary of the status of the Company's outstanding stock options as of
December 31, 1998 and 1997, and changes during the years ending on those dates,
is presented below:
WEIGHTED AVERAGE
EXERCISE
SHARES PRICE
------ ----------------
Options outstanding, December 31, 1996 601,000 $1.59
Options granted 90,000 $0.27
Options canceled or forfeited (26,000) $1.00
------- -----
Options outstanding, December 31, 1997 665,000 $1.41
Options granted - $ -
Options canceled or forfeited - $ -
------- -----
Options outstanding, December 31, 1998 665,000 $1.41
======= =====
The following table summarizes information concerning currently outstanding and
exercisable stock options:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
RANGE OF REMAINING WEIGHTED
EXERCISE NUMBER CONTRACT LIFE AVERAGE
PRICES OUTSTANDING (YEARS) EXERCISE
-------- ----------- ------------- --------
<S> <C> <C> <C> <C>
Outstanding Options: $0.24 - 0.66 275,000 6.1 0.52
$2.00 - 2.76 390,000 5.7 2.03
</TABLE>
F-18
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Exercisable Options: $0.24 - 0.66 275,000 6.1 0.52
$2.00 - 2.76 390,000 5.7 2.03
</TABLE>
The Company has adopted only the disclosure provisions of Financial Accounting
Standard No. 123, "Accounting for Stock-Based Compensation," as it relates to
employment awards. It applies APB Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations in accounting for its plans and does
not recognize compensation expense for its stock-based compensation plans other
than for restricted stock. If the Company had elected to recognize compensation
expense based upon the fair value at the grant date for awards under these plans
consistent with the methodology prescribed by SFAS 123, the Company's net loss
available to common stockholders would be increased to the pro forma amounts
indicated below for the years ended December 31:
1998 1997
---- ----
Net loss available to common
stockholders As reported $749,713 $3,398,639
Pro forma 749,713 3,416,889
Loss per common share As reported $ .06 $ .46
Per forma $ .06 $ .46
The fair value of each option grant is estimated on the date of grant using the
Binomial options-pricing model with the following weighted-average assumptions
used for grants in 1997: no dividend yield; expected volatility of approximately
128%; risk-free interest rate of approximately 6%, and expected life of
approximately 2.5 years. There were no options granted during 1998.
The weighted average fair value of options granted during 1997 was $.20.
WARRANTS
In connection with the secondary public offering completed in October 1994, the
Company issued 1,840,000 redeemable warrants to purchasers of the Company's
common stock. These redeemable warrants were immediately detachable and
separately tradable from the common stock with which they were issued. Each
redeemable warrant expires on October 16, 1999, and entitles the holder,
commencing one year from the effective date of the offering, to purchase one
share of the Company's common stock for $5.50, the exercise price. The
redeemable warrants are subject to redemption commencing one year after the
effective date at a price of $.05 per redeemable warrant subject to the
occurrence of certain events, as defined, including a reduction of the price per
share of common stock to less than the redemption price.
In connection with the private placement of Series F Convertible Preferred Stock
completed in June 1996, the Company issued 500,000 warrants to the placement
agent. These warrants expire on September 30, 2001, and entitle the holder to
purchase one share of the Company's common stock at an exercise price of the
average conversion price of the Series F Convertible Preferred Stock ($0.55),
with anti-dilution provisions which reduce the exercise price to the average
conversion price of any subsequent issuance of convertible preferred stock
(Series G = $0.22967). In 1997, Series G Preferred Stock was issued with a
conversion price of $0.22967. Accordingly, the exercise price of these warrants
was reduced to $0.22967. In 1996, the estimated fair value of these warrants for
the placement agent services rendered, based on SFAS No. 123 provisions is
approximately $190,000, determined by using a binomial option-pricing model with
assumed volatility of 122%, risk-free rate of 6.0%, and expected holding period
of three years. A SFAS No. 123 valuation of these warrants in 1997 based upon
the new exercise price did not result in a higher fair value than $190,000 and,
accordingly, this amount has not been revalued. For financial statement
purposes, the value of the services (compensation) is reflected as a reduction
to the proceeds received from the related private placement and, accordingly, a
reduction to paid-in capital. In addition, the value assigned to the warrants is
reflected as an addition to paid-in
F-19
<PAGE>
capital (Stockholders' Equity). Because the reduction and increase to
paid-incapital are offsetting amounts of $190,000, the Company has chosen not to
reflect them separately in the Statement of Stockholders' Equity.
In 1998, the Company issued 300,000 warrants in connection with the $300,000
promissory note (see Note 6). The warrants have an exercise price of $.09375.
The fair value of the warrants was not significant.
A summary of the status of the Company's outstanding warrants as of December 31,
1998 and 1997, and changes during the years ending on those dates, is presented
below:
WEIGHTED AVERAGE
EXERCISE
SHARES PRICE
------ ----------------
Warrants outstanding, December 31, 1996 2,621,067 $4.87
Warrants granted - -
Warrants canceled or forfeited (276,900) 9.06
--------- --------
Warrants outstanding, December 31, 1997 2,344,167 4.37
Warrants granted 300,000 0.09375
Warrants canceled or forfeited (4,167) 4.50
--------- --------
Warrants outstanding, December 31, 1998 2,640,000 $3.88
========= ========
The following table summarizes information concerning currently outstanding and
exercisable warrants:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
RANGE OF REMAINING WEIGHTED
EXERCISE NUMBER CONTRACT LIFE AVERAGE
PRICES OUTSTANDING (YEARS) EXERCISE
-------------- ----------- ------------- --------
<S> <C> <C> <C> <C>
Outstanding Warrants: $.09375 - $.23 800,000 5.3 0.18
$5.50 1,840,000 0.8 5.50
Exercisable Warrants: $.09375 - $.23 800,000 5.3 0.18
$5.50 1,840,000 0.8 5.50
</TABLE>
If the June 1999 proposed Agreement and Plan of Merger (see Note 14) is
executed, all outstanding stock options and all of the outstanding warrants are
to be canceled on or before the Agreement's effective date.
NOTE 10 - SALES TO MAJOR CUSTOMERS
In 1998, two customers, American Skiing and Regal Cinemas represented 19% and
17% of the Company's revenues, respectively.
In 1997, one customer, American Skiing Company represented 54% of revenues.
NOTE 11 - EMPLOYEE BENEFITS
Effective July 1, 1995, the Lasergate Systems, Inc. Profit Sharing 401(k) Plan
was established covering substantially all employees. The Company made no
contribution to the Plan during 1998 or 1997.
F-20
<PAGE>
Since 1996, the Company has utilized an employee-leasing firm that provides all
administrative services relating to payroll, personnel and employee benefits.
Management continues to hire, dismiss, set pay rates, and supervise the
employees.
NOTE 12 - RELATED PARTY TRANSACTIONS
During 1998, the Company made cash payment of $30,000 to an outside Director of
the Company for extensive business consulting services and accrued an additional
$59,000 for legal services performed which have not been paid as of August 30,
1999. The total balance due the Director at December 31, 1998 was $119,900. The
Company also paid $39,000 to a relative of the Chief Executive Officer for
consulting and travel expense reimbursements during the year.
During 1997, the Company paid $156,630 to a vendor in which an outside director
had a substantial financial interest for programming services, paid $36,000 to a
relative of the chief executive officer for consulting services, and accrued
$50,000 for services performed by an outside director.
See also Note 6.
NOTE 13 - YEAR 2000 ISSUE
The Year 2000 issue relates to limitations in computer systems and applications
that may prevent proper recognition of the Year 2000. The potential effect of
the Year 2000 issue on the Company's operations will not be fully determinable
until the Year 2000 and thereafter. If the Year 2000 modifications are not
properly completed by the Company or entities with which the Company conducts
business, the Company's revenues and financial condition could be adversely
impacted.
NOTE 14 - SUBSEQUENT EVENTS
AGREEMENT AND PLAN OF MERGER
On June 21, 1999, the Company entered into a proposed Agreement and Plan of
Merger (the "Agreement") with Tickets.com, Inc., and Advantix Acquisition
Corporation (Advantix). It is the intention of the Agreement that LSI and
Advantix will merge together and become a wholly-owned subsidiary of
Tickets.com. The proposed merger is subject to LSI stockholder approval and the
stockholders have not yet voted on this matter. In connection with this the
Agreement, Tickets.com agrees to cause all of its shares of LSI common stock to
be voted in favor of the approval of the proposed merger. Tickets.com and RBB
signed a contract whereby RBB has agreed to vote all of its shares of LSI common
stock in favor of the proposed merger. RBB is the representative agent for
approximately 52% of the outstanding voting shares.
Under the Agreement, the holders of each share of LSI common stock will receive
$.10 per share.
Also under the Agreement, LSI is to terminate its stock option plan immediately
before the effective date and will issue no further stock options or any other
securities convertible into common stock. In addition, LSI will cancel all
outstanding options and all outstanding warrants at or before the Closing of the
Merger (see Note 9). In exchange for cancellation of these equity instruments,
each holder is to receive cash consideration equal to $.10 less the exercise
price for each option or warrant held. The consideration to be paid on these
equity instruments upon cancellation is not expected to exceed $2,000.
In connection with the signing of the Agreement, former executives (including
the President/CEO and Chairman of the Board) and the former board of directors
resigned and two new individuals became President/CEO and CFO and were appointed
to the Board of Directors (which consists of these two members as of August 31,
1999). In addition, two of the former board members signed 1 year consulting
agreements and non-compete agreements extending three months after the end of
the consulting agreements calling for Company to make payments totaling $50,000
each.
F-21
<PAGE>
Six employees signed severance agreements that call for the severance amounts in
case of involuntary termination or voluntary termination on or before August 16,
1999 totaling $250,000. As of August 31, 1999, a total of $140,000 has been paid
under these severance agreements. In addition, a former executive received
$70,000 upon the signing of an inducement letter in connection with his
resignation.
Also in connection with the Merger documents, RBB will pay the former President
and CEO $200,000 and give her 10,000 shares of Tickets.com common stock. In
addition, the former President and CEO is granted the opportunity to purchase
20% (up to 20,000 shares) of Tickets.com common stock that Tickets.com allocates
to RBB in its initial public offering (IPO) at the IPO price, of which the first
10,000 shares will be purchased by RBB at its sole cost. This consideration is
in lieu of the amount that would be due this individual in accordance with
"Change in Control of Company" provisions included in her employment agreement.
No amounts relating to the above three paragraphs have been accrued for at
December 31, 1998.
Also in connection with the signing of the Agreement, a Settlement and Release
Agreement (the Release) was signed between LSI and RBB Bank (see Note 10) that
forever forgives each party for any damages or claims that the parties may have
had against each other. This included a legal proceeding entitled RBB BANK, A.G.
V. LASERGATE SYSTEMS, INC., ET AL, which was filed in june 1999 and had been
pending in the circuit court of Pinellas County, Florida. The Release does not
relieve LSI's $300,000 promissory note obligation to RBB (see Note 6).
LOAN PROCEEDS RECEIVED FROM TICKETS.COM
In 1999, the Company has received $1,430,000 through August 31, 1999 from
Tickets.com to support the Company's ongoing operations evidenced by
uncollateralized demand note payables. On September 16, 1999, the Company
received an additional advance of $350,000 from Tickets.com to sustain
operations through October 1999.
ADDITIONAL COMPENSATION TO THE FORMER PRESIDENT/CEO
In 1999, prior to the signing of the Agreement and Merger described above, the
board approved approximately $150,000 payable to the former President/CEO for
accumulated unpaid vacation, fringe benefits, and related compensation prior to
1999. This entire amount has been accrued for in the 1998 financial statements.
As of August 31, 1999, the Company has paid approximately $114,000 of this
total.
SERIES G PREFERRED SHARES TRANSFER (UNAUDITED)
On June 28, 1999, RBB bank sold and delivered 5,700 Series G Preferred shares
(see Note 9) to Tickets.com in exchange for $754,290 cash and 674,541 shares of
Tickets.com common stock.
MANAGEMENT BONUSES
On april 22, 1999, the Board of Directors approved Company payment of management
bonuses totaling $120,000, which management states has all been paid as of
August 31, 1999. The bonuses were for management's efforts in seeking a
strategic partner and for prior service with payment contingent upon the signing
of the Agreement and Plan of Merger. Accordingly, these bonuses have not been
accrued at December 31, 1998.
SALE OF LICENSE AGREEMENT (UNAUDITED)
In March 1999, the Company sold a license agreement to a third party in exchange
for $600,000 in cash, which has been received. The license agreement allows the
third party to exclusively use the Company's Select-a-Seat software (and source
code) at any location or in any form of commerce within the States of Washington
and Montana. In addition, the third party has non-exclusive use of the software
(and source
F-22
<PAGE>
code) in the States of Alaska, Oregon, Idaho and Utah, and in the provinces of
British Columbia, Alberta, and Saskatchewan.
F-23
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
PREPARED BY LASERGATE SYSTEMS, INC.
LASERGATE SYSTEMS, INC.
AND SUBSIDIARIES
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
FF-1
<PAGE>
TABLE OF CONTENTS
onsolidated Balance sheets as of June 30, 1999
(unaudited) and December 31, 1998 FF-3
Consolidated Statements of Operations
(unaudited) for the three months and six months
ended June 30, 1999 and 1998 FF-4
Consolidated Statements of Cash Flows
(unaudited) for the six months ended
June 30, 1999 and 1998 FF-5
Notes to Financial Statements (unaudited) FF-6
FF-2
<PAGE>
LASERGATE SYSTEMS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30 December 31,
1999 1998
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 24,565 $ 71,952
Accounts receivable, net of allowances 293,273 109,537
of $3,900 and $35,000
Note receivable, current portion 70,677 65,210
Inventories 61,890 21,697
Prepaid expenses 38,931 44,948
------------ ------------
Total current assets $ 489,336 $ 313,344
Property and equipment, net 148,559 232,718
Systems and software costs, net of amortization
of $1,764,753 and $1,713,754 737,887 714,871
Goodwill, net of amortization of $598,041 and $531,546 2,050,234 2,116,727
Other assets, net 16,637 16,637
------------ ------------
Total Assets 3,442,653 3,394,297
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable 1,139,782 317,956
Accounts payable, trade 845,653 920,157
Deferred revenues 959,990 421,197
Accrued warranty costs 469,044 473,775
Accrued expenses 400,415 419,941
------------ ------------
Total current liabilities 3,814,884 2,553,026
------------ ------------
Total liabilities 3,814,884 2,553,026
Stockholders' equity:
Preferred stock, $.03 par value,
2,000,000 shares authorized,
5,700 shares issued and
outstanding at June 30, 1999
and December 31, 1998, respectively 171 171
Common stock, $.03 par value,
20,000,000 shares authorized,
15,299,393 issued and outstanding
at June 30, 1999 and
December 31, 1998 458,982 458,982
Additional paid-in capital 20,888,218 20,888,218
Accumulated deficit (21,719,602) (20,506,100)
------------ ------------
Total stockholder's equity (372,231) 841,271
Total liabilities and Stockholder's Equity $ 3,442,653 $ 3,394,297
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
FF-3
<PAGE>
LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $ 298,313 $ 762,669 $ 1,197,442 $ 1,977,998
Operating Expenses:
Cost of revenues 403,094 415,442 640,034 1,138,206
Development -- 18,934 -- 44,828
Selling, general and administrative 1,129,713 662,365 1,774,037 1,444,200
------------ ------------ ------------ ------------
Operating Loss (1,234,494) (334,072) (1,216,629) (649,236)
Other income (expense) 1,826 5,857 3,127 8,916
------------ ------------ ------------ ------------
Net Loss $ (1,232,668) $ (328,215) $ (1,213,502) $ (640,320)
------------ ------------ ------------ ------------
Net loss per common share (.081) (0.02) (.079) (0.06)
Weighted Average Common Stock Outstanding 15,299,393 14,438,148 15,299,393 10,969,375
</TABLE>
The accompanying notes are an integral part of these statements.
FF-4
<PAGE>
LASERGATE SYSTEMS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED,
----------------------------
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
Cash flow from operating activities:
Net Loss $(1,213,502) $ (640,320)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation of property and equipment 84,168 84,462
Amortization of intangibles 117,494 117,494
Increase (decrease) in provision for doubtful accounts (31,100) (10,396)
Decrease (increase) in:
Accounts receivables, trade (152,635) 337,639
Inventories (40,193) 122,348
Prepaid Expenses 6,017 (4,117)
Notes receivable plus accrued expenses (5,467) (5,187)
Increase (decrease) in:
Accounts payable and accrued expenses (94,030) (68,425)
Accrued product cost (4,731) (4,737)
Deferred revenue 538,793 6,269
----------- -----------
Net cash used in operating activities (795,186) (64,970)
----------- -----------
Cash flow from investing activities:
(Additions) to, disposal of, property and equipment (9) (7,696)
Capitalized software development cost (74,016) (204,183)
----------- -----------
Net cash used in investing activities 74,025 (211,879)
----------- -----------
Cash flows from financing activities: 825,000 --
Repayment of loans, other loan proceeds (3,176) (1,353)
----------- -----------
Net increase (decrease) in cash and cash equivalents (47,387) (278,202)
Cash and cash equivalents, beginning of period 71,952 390,762
----------- -----------
Cash and cash equivalents, end of period $ 24,565 $ 112,560
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
FF-5
<PAGE>
LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
NOTE 1 - FINANCIAL STATEMENT PRESENTATION AND OTHER INTERNAL PRESENTATION
INTERIM PRESENTATION
The interim consolidated financial statements of Lasergate Systems, Inc. (the
"Company") are unaudited and should be read in conjunction with the consolidated
financial statements and notes thereto in its Form 10-KSB, for the year ended
December 31, 1998. In the opinion of management, the accompanying consolidated
financial statements (with all explanations contained in these Notes) contain
all adjustments necessary for a fair presentation for the results of operations
for this interim period. Interim results are not necessarily indicative of the
results for a full fiscal year.
OPERATIONAL AND FUNDING MATTERS AND REPORTING BASIS
The Company's financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. In the Company's Annual Report on Form 10-KSB, for
the year ended December 31, 1998, the Company's auditors qualified their opinion
as to a going concern. The information contained in Note 3 to the Financial
Statements included in the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1998 remains current related to the status of certain of
the Company's operational and funding matters and, accordingly, should be
referred to in conjunction with this Form 10-QSB.
For the six months ended June 30, 1999, the Company had a loss of $1,213,502 and
used cash in operating activities of $795,186. From its inception in March, 1985
through June 30, 1999, the Company has an accumulated deficit of $21,719,602. In
recent years the Company has relied upon proceeds from private and public
placements of equity securities (some of which were converted to stock) and
loans in order to fund its operations.
In view of the matters described in the preceding paragraphs, recoverability of
a major portion of the recorded asset amounts shown in the Company's balance
sheet is dependent upon continued operation of the Company, which in turn is
dependent upon the Company's ability to succeed in its future operations. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue in existence.
REVENUE RECOGNITION
Revenues from the sale of equipment and software licenses, which have been
predominately under short-term contracts during the periods presented herein,
are recognized upon the acceptance of the system by the customer provided that
no significant vendor or post-contract support obligations remain outstanding
and collection of the resulting receivable is probable. Revenues from special
sales sold under evaluation periods are recognized at the end of this period.
Revenues from the sale of equipment and software licenses with a planned
installation period exceeding 90 days are accounted for using the percentage of
completion method.
Revenues from post contract customer support and maintenance are recognized
ratably over the maintenance period if collectibility is probable.
CLASSIFICATION OF EXPENSES
Cost of revenues includes the costs associated with the hardware and software
acquired for the Company's customers and the estimated direct costs associated
with the engineering (mostly software customization) and installation of the
system. Cost of revenues also includes the estimated direct cost related to the
support and maintenance of the Company's service contracts and amortization of
capitalized software development costs.
FF-6
<PAGE>
NET INCOME (LOSS) PER COMMON SHARE
The net income (loss) per common share amount is based on the weighted average
number of common shares outstanding during the period.
NOTE 2 - SYSTEMS AND SOFTWARE COSTS
Systems and software costs represent the capitalized software costs (at full
cost) of software development for the Company's new Admits for Windows(R)
product plus $200,000 of remaining acquisition costs for old products (Admits,
Delta, and Select-a-Seat) which was estimated to be the value of a detailed
product plan for the new products (the Company did not incur any costs for a
detailed product plan - it was able to use the old products to serve that
purpose). Such costs are amortized on a product-by -product basis.
All development costs are capitalized once technological feasibility has been
achieved on a product until the product is released for general sale, at which
time only the costs of development of significant additions to a product's
features and functions are capitalized. Technological feasibility is determined
on a project-by-project basis.
NOTE 3 - PRODUCT COST LIABILITY (WARRANTY ALLOWANCE)
An accrued warranty allowance of $469,044 has been provided to cover the cost of
enhancements to be made (free of charge) to systems installed in prior periods
and to provide for Year 2000 compliance of legacy products. Management has
reviewed warranty costs incurred within the past year, and believes this
provision is a conservative estimate of these costs but will continue to monitor
them to ensure they are provided for on a current basis in order to match the
cost with associated revenue.
NOTE 4 - LEGAL PROCEEDINGS
On or about June 27, 1997, a class action was commenced in the United States
District Court for the Eastern District of New York (CV97-3775) by Andrew Petit
and Michael A. Lepera, on behalf of themselves individually, and on behalf of
all others similarly situated against INTER ALIA, the Company, Sterling Foster,
& Co., Inc. ("Sterling Foster"), the Company's former underwriter, counsel for
Sterling Foster and certain issuer defendants for whom Sterling Foster acted as
underwriter. The Complaint alleges that in connection with an offering of the
Company's securities which became effective on October 17, 1994, Sterling Foster
engaged in a campaign to inflate the price of the Company's stock, to create a
short position at the inflated price and then cover the short position with
shares from stockholders who had been secretly released from "lock-up"
agreements. With respect to the Company, the Complaint alleges that it failed to
disclose in its Registration Statement that prior to the date the offering
became effective, Sterling Foster had secretly agreed to release certain
stockholders from "lock-up" agreements for the purpose of selling their shares
to Sterling Foster at reduced prices. The Plaintiffs' claims allege that the
Company violated Sections 11 and 12(2) of the securities Act of 1933, Sections
10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder and Section 349 of the New York General Business law, as well as
making negligent misrepresentations. Since the Complaint was filed, it has been
amended twice, but the allegations against the Company have remained the same.
On August 5, 1999 the Company moved to dismiss The Second Amended and
Consolidated Class Action Complaint in its entirety. The Company believes that
it has defenses to these claims and intends to vigorously defend itself in this
action.
NOTE 5 - NOTES PAYABLE
On July 31, 1998 the Company borrowed $300,000 from RBB Bank, AG. The loan is
payable in one (1) year at an interest rate of 10% per annum. The loan also
included issuance of 300,000 stock warrants, which have an exercise price of
$.09375 per share, and is secured by Admits source code. The loan is currently
in default.
On June 23, 1999, the Company borrowed $800,000 from Tickets.com. The loan is
payable on demand, but not prior to August 31, 1999. It bears interest at the
rate of 10% per annum.
<PAGE>
ANNEX A
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TICKETS.COM, INC.,
ADVANTIX ACQUISITION CORP.
AND
LASERGATE SYSTEMS, INC.
DATED AS OF
JUNE 21, 1999
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<PAGE>
TABLE OF CONTENTS
-----------------
A - (i)
<PAGE>
EXHIBITS
--------
Exhibit 4.9 Consulting Agreement
Exhibit 7.10(i) Promissory Note
Exhibit 7.10(ii) Security Agreement
SCHEDULE
Schedule 4.1 Organization
Schedule 4.5 Outstanding Accounts Receivable, Accounts Payable and other
Liabilities
Schedule 4.6 LSi Certain Changes
Schedule 4.7 LSi Undisclosed Liabilities
Schedule 4.8 LSi Employee Benefit Plans
Schedule 4.9 Other LSi Benefit Plans
Schedule 4.10 LSi Litigation
Schedule 4.14 LSi Tax Returns and Audits
Schedule 4.15 LSi Material Contracts
Schedule 4.16 LSi Insurance
Schedule 4.17 LSi Subsidiaries
Schedule 4.20 LSi Intellectual Property
Schedule 4.21 LSi Tangible Personal Property
Schedule 4.22 LSi Employees and Independent Contractors
Schedule 6.1(a) Ordinary Course of Business
A - (ii)
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of June 21,
1999, by and among Tickets.com, Inc., a Delaware corporation ("Tickets.com"),
Advantix Acquisition Corp. (the "Company") and Lasergate Systems, Inc., a
Florida corporation ("LSi").
BACKGROUND
The boards of directors of Tickets.com and LSi deem it advisable and
in the best interests of their respective stockholders to consummate, and have
approved, the business combination transaction provided for in this Agreement,
in which the Company will merge with and into LSi and will become a wholly-owned
subsidiary of Tickets.com (the "Merger"). Accordingly, in consideration of the
mutual representations, warranties, covenants, and agreements set forth below,
the parties to this Agreement agree as follows:
TERMS
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. When used in this Agreement, the following
terms shall have the meanings specified below, which apply to both the singular
and the plural forms of such terms:
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, codes,
amounts paid in settlement, or Liabilities.
"AFFILIATE" means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the Person specified.
"AGREEMENT" has the meaning set forth in the preface of this
Agreement.
"ARTICLES OF MERGER" has the meaning set forth in Section 2.1.
"CASH CONSIDERATION" has the meaning set forth in Section 3.1(a).
"CERTIFICATES" has the meaning set forth in Section 3.3(b).
"CLOSING" has the meaning set forth in Section 2.2.
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"CLOSING DATE" has the meaning set forth in Section 2.2.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the preface of this Agreement.
"CONFIDENTIAL INFORMATION" means any information concerning the
operations, businesses and affairs of any of the parties to this Agreement, as
the context may require, that is not already generally available to the public.
Without limiting the foregoing, "Confidential Information" shall include
marketing and sales information, customer and account lists and pricing
information, internal forecasts and projections, employee information and
information relating to any confidential process, technique or procedure, any
trade secrets and the names, addresses, or other information relating to any
customer or supplier.
"CONSTITUENT CORPORATIONS has the meaning set forth in Section 2.3.
"CURRENT POLICY" has the meaning set forth in Section 7.8.
"DISSENTING SHARES" has the meaning set forth in Section 3. 1 (a).
"D & O INSURANCE" has the meaning set forth in Section 7.8.
"EFFECTIVE TIME" has the meaning set forth in Section 2. 1.
"ERISA" mean the Employee Retirement Income Security Act of 1914,
as amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE AGENT" has the meaning set forth in Section 3.3(a).
"EXCHANGE FUND" has the meaning set forth in Section 3.3 (a).
"FBCA" means the Florida Business Corporation Act, as amended.
"FINDER'S FEES" has the meaning set forth in Section 7.5.
"GOVERNMENTAL ENTITY" has the meaning set forth in Section 4.4.
"INDEMNIFIED PROPERTY" has the meaning set forth in Section 7.8.
"INTELLECTUAL PROPERTY" means all (a) patents, patent applications,
patent disclosures, and improvements thereto, (b) trademarks, service marks,
trade dress, logos, trade names, and corporate names and registrations and
applications for registration thereof, (c) copyrights, whether or not
registered, copyright registrations and applications for copyright registration,
and works of authorship, including operating manuals, (d) computer software,
data, and documentation, (e) trade secrets and confidential business
information, including ideas, formulae, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
research and development information, drawings, specifications, designs, plans,
proposals, technical data, financial, marketing, and business data, pricing and
cost information, business and marketing plans, and customer, employee, and
supplier lists and information, (f) other proprietary rights, and (g) copies and
tangible embodiments thereof (in whatever form or medium).
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<PAGE>
"IRS" means the United States Internal Revenue Service.
"KNOWLEDGE" with respect to an entity means to the knowledge of its
executive officers.
"LIABILITIES" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LSi" has the meaning set forth in the preface of this Agreement.
"LSi BENEFIT PLANS" has the meaning set forth in Section 4.8(a).
"LSi" COMMON STOCK" means the shares of common stock, par value $0.03
per share, of LSi.
"LSi ERISA AFFILIATE" has the meaning set forth in Section 4.8(a).
"LSi FINANCIAL STATEMENTS" has the meaning set forth in Section 4.5.
"LSi PERMITS" has the meaning set forth in Section 4.11.
"LSi PREFERRED STOCK" means the shares of Series G preferred stock of
LSI.
"LSi SEC DOCUMENTS has the meaning set forth in Section 4.5.
"LSi SHAREHOLDERS" means the holders of shares of LSi Common Stock.
"LSi STOCK OPTION PLAN" means the 1994 Stock Option Plan of LSi.
"LSi SUBSIDIARIES" means all of the Subsidiaries of LSi.
"MATERIAL ADVERSE EFFECT" means such event, change, or effect is
materially adverse to the properties, assets (including intangible assets),
liabilities (including contingent liabilities), or businesses of such entity and
its Subsidiaries taken as a whole.
"MERGER" has the meaning set forth in the background section of this
Agreement.
"MOST RECENT LSI SEC DOCUMENTS" means the Form 10-KSB for the period
ending December 31, 1997 the Schedule 14A filed January 30, 1998 and the Form
10-QSB filed on November 16, 1998.
"OPTION CONSIDERATION" has the meaning set forth in Section 3.2(c).
"OPTIONS" means any outstanding option validly issued pursuant to the
LSI Stock Option Plan or otherwise.
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<PAGE>
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"PUBLIC WARRANTS" means any outstanding warrants issued pursuant to
the Warrant Agreement between LSi and American Securities Transfer, Inc.,
dated October 25, 1994.
"RBB" means RBB Bank, AG.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHAREHOLDERS' MEETING" has the meaning set forth in Section 7. l(b).
"SUBSIDIARY" means, with respect to any party, any corporation, or
other organization, whether incorporated or unincorporated, of which (a) such
party or any other Subsidiary of such party is a general partner (excluding
partnerships whose general partnership interests held by such party or any
Subsidiary of such party do not have a majority of the voting interest in such
partnership) or (b) at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its Subsidiaries.
"SURVIVING CORPORATION" has the meaning set forth in Section 2.3.
"TAKEOVER PROPOSAL" means any tender or exchange offer, proposal for a
merger, consolidation, or other business combination involving LSi or any of its
Subsidiaries taken as a whole, or any proposal or offer to acquire in any manner
the entire or more than a 20% equity interest in, or all of, or more than 20%
of, the assets of LSi, one of the or any of its Subsidiaries taken as a whole;
other than the transactions contemplated by this Agreement or transactions in
the Ordinary Cause of Business of LSi.
"TAXES" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code (beta)
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto.
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<PAGE>
"TERMINATING TICKETS.COM BREACH" has the meaning set forth in Section
9.i
"TERMINATING LSI BREACH" has the meaning set forth in Section 9.1(g).
"TERMINATION FEE" has the meaning set forth in Section 9.4(a).
"TICKETS.COM" has the meaning set forth in the preface of this
Agreement.
"UNDERWRITER'S WARRANTS" means any outstanding warrants issued
pursuant to the Underwriter's Warrant Agreement between LSi and Sterling Foster
& Co. Corporation.
"VOTING DEBT" has the meaning set forth in Section 4.2.
"WARRANT CONSIDERATION" has the meaning set forth in Section 3.2(d).
ARTICLE II
THE MERGER
Section 2.1 EFFECTIVE TIME OF THE MERGER. Subject to the provisions
of this Agreement, articles of merger (the "Articles of Merger") shall be duly
prepared, executed, and acknowledged by the Company and LSi as required and will
be delivered to the Secretary of State of Florida for filing, in accordance with
the FBCA as soon as practicable on or after the Closing. The Merger will become
effective at such time as is provided in the Articles of Merger (the "Effective
Time").
Section 2.2 CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") will take place as soon as practicable after the
satisfaction or waiver of all of the conditions to the Merger (the "Closing
Date"), at the offices of Holland & Knight LLP, 400 North Ashley Drive, Suite
2300, Tampa, Florida 33602, unless another date or place is agreed to in writing
by the parties.
Section 2.3 EFFECTS OF THE MERGER.
(a) At and after the Effective Time (i) LSi will continue as the
surviving corporation of the Merger (the "Surviving Corporation"); (ii) the
separate existence of the Company will cease and the Company will be merged with
and into LSi (the Company and LSi are sometimes referred to in this Agreement as
the "Constituent Corporations"); (iii) the Merger will have all of the effects
provided by the Articles of Merger and applicable law: (iv) the articles of
incorporation of the Company in effect immediately before the Effective Time
shall be the articles of incorporation of the Surviving Corporation, with the
exception that the name of the Surviving Corporation shall become Lasergate
Systems, Inc.; and (v) the bylaws of the Company as in effect immediately before
the Effective Time shall be the bylaws of the Surviving Corporation.
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<PAGE>
(b) At and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, immunities, and franchises, of a public as
wen as of a private nature, and be subject to all the restrictions,
disabilities, and duties, of each of the Constituent Corporations; and all the
singular rights, privileges, immunities, and franchises of each of the
Constituent Corporations, and an property, real, personal, and mixed, and all
debts due to either of the Constituent Corporations on whatever account,
including subscriptions to shares and all other choses in action, and all and
every other interest of or belonging to or due to each of the Constituent
Corporations, shall be taken and deemed to be transferred to and vested in the
Surviving Corporation, and all property, rights, privileges, powers, and
franchises, and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the Constituent
Corporations, and the title to any real estate vested by deed or otherwise in
either of the Constituent Corporations shall not revert or be in any way
impaired; but all rights of creditors and all hens upon any property of either
of the Constituent Corporations shall be preserved unimpaired, and all debts,
Liabilities, and duties of the Constituent Corporations shall attach to the
Surviving Corporation, and may be enforced against it to the same extent as if
such debts and Liabilities had been incurred by it.
Section 2.4 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
board of directors of the Surviving Corporation shall have three members, all of
whom will be chosen by Tickets.com, until their successors shall have been duly
elected or appointed and qualified or until their earlier death, resignation, or
removal in accordance with the Surviving Corporation's articles of incorporation
and bylaws. The officers of LSi at the Effective Time shall, from and after the
Effective Time, be the officers of the Surviving Corporation until their
successors shall have been duly appointed and qualified or until their earlier
death, resignation, or removal in accordance with the Surviving Corporation's
articles of incorporation and bylaws.
ARTICLE III
EXCHANGE OF SECURITIES
Section 3.1 EXCHANGE OF CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any further action on the part of the
Constituent Corporations or the holders of any shares of capital stock of the
Constituent Corporations:
(a) EXCHANGE OF LSI COMMON STOCK. At the Effective Time, the holders
of each issued and outstanding share of LSi Common Stock (other than shares to
be cancelled pursuant to Section 3.1(c) and excluding shares owned by holders
who have properly exercised their rights of appraisal within the meaning of the
FBCA (the "Dissenting Shares")), shall be entitled to receive $0.10 for each
share of LSi Common Stock (the "Cash Consideration").
(b) LSI PREFERRED Stock. At the Effective Time, the holders of each
issued and outstanding share of LSi Preferred Stock (other than shares to be
cancelled pursuant to Section 3.1(c) and excluding shares owned by holders who
have properly exercised their rights of appraisal within the meaning of the
FBCA) shall remain outstanding.
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<PAGE>
(c) CANCELLATION OF LSI COMMON STOCK. Each share of LSi Common Stock
and LSi Preferred Stock that is owned by LSi as treasury stock and each share of
LSi Common Stock and LSi Preferred Stock owned by Tickets.com, or any other
wholly-owned Subsidiary of Tickets.com, shall be cancelled and retired and shall
cease to exist, and no other consideration shall be delivered in exchange
therefor. All shares of LSi Common Stock, when converted pursuant to this
Section 3.1, shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the Cash Consideration in consideration
therefor upon the surrender of such certificate pursuant to Section 3.3.
Section 3.2 STOCK OPTIONS AND WARRANTS.
(a) LSi will (i) terminate the LSi Stock Option Plan and any other
option plan immediately before the Effective Time, without prejudice to the
rights of the holders of the outstanding Options issued pursuant to the LSi
Stock Option Plan, (ii) grant no additional Options after the date of this
Agreement under the LSi Option Plan, and (iii) grant no other Options, warrants,
rights, convertible securities or other agreements or commitments pursuant to
which LSi is required to issue any shares of its capital stock or any securities
convertible into or exchangeable for its capital stock.
(b) LSi will, at or before the Closing, cancel and cause the surrender
of all outstanding Options, regardless of whether the Options are then
exercisable.
(c) In settlement of the surrender and cancellation of each Option,
each holder of an Option that is exercisable at the Effective Time will be
entitled to receive an amount in cash (the "Option Consideration"), without
interest, equal to the product of (i)(A) the Cash Consideration, minus (B) the
exercise price per share of the LSi Common Stock under the Option, multiplied by
(ii) the number of shares of the LSi Common Stock covered by such Option;
provided, however, that LSi shall withhold any applicable federal and state
withholding Taxes. All Options shall be surrendered and cancelled at the Closing
and, upon such surrender and cancellation, Tickets.com will instruct the
Exchange Agent (as defined below) to promptly pay the Option Consideration on
the business day following the Closing. On or prior to the Closing, LSi shall
use its commercially reasonable efforts to take all actions (including, without
limitation, commercially reasonable efforts to obtain the necessary consents
from each holder of an Option) required to effect the matters set forth in this
Section 3.2, and to the surrender and cancellation of all of such holder's
Options and those necessary to effect the surrender, cancellation and settlement
of Options pursuant to this Section 3.2. In the event that the Cash
Consideration is less than or equal to the exercise price of the Option, the
holders will receive no Option Consideration or any other Cash Consideration.
The effect of the Merger shall be to terminate all Options prior to the
Effective Time.
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<PAGE>
(d) (i) At the Effective Time, the holders of each issued and
outstanding Public Warrant shall be entitled to receive an amount in cash (the
"Warrant Consideration"), without interest, equal to the product of (i)(A) the
Cash Consideration, minus (B) the exercise price of each Public Warrant,
multiplied by (ii) the number of shares of the LSi Common Stock covered by such
Public Warrant; provided, however LSi shall withhold any applicable federal and
state withholding Taxes. In the event that the Cash Consideration is less than
or equal to the exercise price of the Public Warrant, the holders will receive
no Warrant Consideration or any other Cash Consideration. The effect of the
Merger shall be to terminate all Warrants prior to the Effective Time.
(ii) At the Effective Time, each issued and outstanding Underwriter's
Warrant shall remain outstanding.
Section 3.3 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. At the Effective Time, Tickets.com shall deposit
with Imperial Bank or such other bank or trust company designated by Tickets.com
and reasonably acceptable to LSi (the "Exchange Agent"), for the benefit of the
holders of shares of LSi Common Stock, Options and Public Warrants, to the
extent applicable, for exchange in accordance with this Article III, through the
Exchange Agent, cash in exchange for outstanding shares of LSi Common Stock,
Options and Public Warrants payable pursuant to Sections 3.1 and 3.2 (the
"Exchange Fund"). On or prior to the Closing, Tickets.com, LSi and the Exchange
Agent shall enter into an exchange agreement in form and substance reasonably
acceptable to each of them reflecting the terms of this Article III.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Tickets.com will instruct the Exchange Agent to mail to each
holder of record of a certificate or certificates that immediately before the
Effective Time represented outstanding shares of LSi Common Stock (the
"Certificates") whose shares were converted pursuant to Section 3.1 into the
right to receive the Cash Consideration, (i) a letter of transmittal (which
shall specify that delivery shall be effected and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates or affidavits of
loss in lieu thereof, to the Exchange Agent and shall be in such form and have
such other provisions as Tickets.com and LSi may reasonably specify, and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Cash Consideration. Upon surrender of a Certificate for cancellation to
the Exchange Agent together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive the Cash Consideration
in exchange therefor, and the Certificate so surrendered shall immediately be
cancelled. In the event of a transfer of ownership of LSi Common Stock that is
not registered in the transfer records of LSi, the Cash Consideration may be
issued to a transferee if the Certificate representing such LSi Common Stock is
presented to the Exchange Agent, accompanied by an documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer Taxes have
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<PAGE>
been paid. Until surrendered as contemplated by this Section 3.3, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive the Cash Consideration upon such surrender as
contemplated by this Section 3.3.
(c) NO FURTHER OWNERSHIP RIGHTS IN LSI COMMON STOCK. The Cash
Consideration issued upon the surrender for exchange of shares of LSi Common
Stock in accordance with the terms of this Agreement shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of LSi
Common Stock, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of LSi Common
Stock that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be cancelled and exchanged as provided in this Article
III. All rights of holders of Options and Public Warrants shall be terminated at
the Effective Time, subject to the rights, if any, of the holders thereof to
receive only the Cash Consideration set forth in Section 3.2 of this Agreement,
if any.
(d) TERMINATION OF EXCHANGE FUND. Any part of the Exchange Fund that
remains undistributed to the holders of LSi Common Stock, Options or Public
Warrants for one year after the Effective Time shall be delivered to
Tickets.com, upon demand, and any holders of LSi Common Stock, Options or Public
Warrants who by such time have not complied with this Article III shall
thereafter look only to Tickets.com for payment of the Cash Consideration,
Option Consideration and Warrant Consideration.
(e) NO LIABILITY. Neither Tickets.com, the Company nor LSi shall be
liable to any holder of shares of LSi Common Stock, Options or Public Warrants
for the Cash Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat, or similar law.
(o) DISSENTING SHARES. Any Dissenting Shares shall be converted into
the right to receive from the Surviving Corporation such cash consideration as
may be determined to be due with respect to each such Dissenting Share pursuant
to Section 607.1302 of the FBCA; provided, however, that shares of LSi Common
Stock or LSi Preferred Stock that are Dissenting Shares at the Effective Time of
the Merger and are held by a holder who shall, after the Effective Time of the
Merger, withdraw his demand for appraisal or lose his right of appraisal as
provided in the Section 607.1302 of the FBCA, shall be deemed to be converted,
as of the Effective Time of the Merger, into the right to receive the Cash
Consideration (or retain the LSi Preferred Stock, as the case may be) in
accordance with the procedures specified in the other provisions of this Article
III. LSi will give Tickets.com (i) prompt notice of any written demands for
appraisal, withdrawals of demands for appraisal and any other instruments served
pursuant to Section 607-1302 of the FBCA received by LSi and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under Section 607.1302 of the FBCA. LSi will not voluntarily make
any payment with respect to any demands for appraisal and will not, except with
the prior written consent of Tickets.com,
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<PAGE>
settle or offer to settle any such demands. It is understood and agreed that the
obligation to make any payment under Section 607.1302 of the FBCA shall be a
joint obligation of Tickets.com and the Surviving Corporation.
Section 3.4 CERTAIN ADJUSTMENTS. If between the date of this Agreement
and the Effective Time, the outstanding shares of LSi Common Stock are changed
into a different number of shares by reason of any reorganization,
reclassification, recapitalization, split-up, combination, or exchange of
shares, or any dividend payable in stock or other securities shall be declared
thereon with a record date within such period, the Cash Consideration shall be
adjusted accordingly to provide to the holders of LSi Common Stock, Options or
Public Warrants the same economic effect as contemplated by this Agreement prior
to such reclassification, reorganization, recapitalization, split-up,
combination, exchange, or dividend.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF LSI
LSi represents and warrants to Tickets.com and the Company as follows:
Section 4.1 ORGANIZATION. Except as set forth in Schedule 4.1, each of
LSi and the LSi Subsidiaries is: (a) a corporation duly organized, validly
existing and with active status or in good standing under the laws of their
respective jurisdictions of incorporation and (b) has all the requisite
corporate power and authority and all necessary governmental approvals to own,
lease, and operate its properties and to carry on its businesses as now being
conducted, except where the failure to be so organized, existing, and in good
standing or to have such power, authority, and governmental approvals would not
have a Material Adverse Effect on LSi. Each of LSi and the LSi Subsidiaries is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased, or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and be
in good standing would not in the aggregate have a Material Adverse Effect on
LSi. Schedule 4.1 lists the dates of all board and shareholder resolutions since
January 1, 1998 and LSi has provided to Tickets.com copies of all resolutions
listed in Schedule 4.l. There are no other resolutions other than those listed
on Schedule 4.1.
Section 4.2 CAPITALIZATION. As of the date of this Agreement, the
authorized capital stock of LSi consists of (a) 20,000,000 shares of LSi Common
Stock of which, as of May 31, 1998, 15,299,393 shares were issued and
outstanding, and (b) 2,000,000 shares of LSi Preferred Stock, of which, as of
May 31, 1998, 5,700 shares were issued and outstanding. As of the date of this
Agreement, 58,333 shares of LSi Common Stock were reserved for issuance upon
exercise of outstanding Options pursuant to the LSi Stock Option Plan, and
1,800,000 shares were reserved for issuance in connection with outstanding
Public Warrants and Underwriter's Warrants. The exercise price of all
outstanding Public Warrants is $5.50 per share and the exercise prices of
outstanding Options range from $.10 to $5.50 per share. All of the outstanding
shares of LSi capital stock are, duly authorized, validly issued, fully paid and
nonassessable, and free of any preemptive rights. No bonds, debentures, notes,
or other indebtedness having the right to vote
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<PAGE>
(or convertible into securities having the right to vote) ("Voting Debt") of LSi
are issued or outstanding. Except as described above, there are no existing
options, warrants, calls, subscriptions, or other rights, agreements, or
commitments of any character relating to the issued or unissued capital stock or
Voting Debt of LSi, or obligating LSi to issue, transfer, or sell or cause to be
issued, transferred, or sold any shares of capital stock or Voting Debt of, or
other equity interests in, LSi, or securities convertible into or exchangeable
for such shares or equity interests or obligating LSi to grant, extend, or enter
into any such option, warrant, can, subscription or other right, agreement, or
commitment. As of the date of this Agreement, there are no outstanding
contractual obligations of LSi to repurchase, redeem, or otherwise acquire any
shares of capital stock of LSi.
Section 4.3 AUTHORITY. LSi has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement (other than, with respect to the
Merger, the approval and adoption of this Agreement by the holders of a majority
of the outstanding shares of LSi Common Stock). The execution, delivery, and
performance of this Agreement and the consummation of the Merger and of the
other transactions contemplated by this Agreement have been duly authorized by
all necessary corporate action on the part of LSi and no other corporate
proceedings on the part of LSi are necessary to authorize this Agreement or to
consummate the transactions so contemplated (other than, with respect to the
Merger, the approval and adoption of this Agreement by the holders of a majority
of the outstanding shares of LSi Common Stock). This Agreement has been duly
executed and delivered by LSi and, assuming this Agreement constitutes a valid
and binding obligation of Tickets.com, constitutes a valid and binding
obligation of LSi enforceable against LSi in accordance with its terms, subject
to bankruptcy, solvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
or relating to general equity principles.
Section 4.4 CONSENTS AND APPROVALS, NO VIOLATIONS. Except for filings,
permits, authorizations, consents, and approvals as may be required under, and
other applicable requirements of the Exchange Act, the Securities Act, the FBCA,
the laws of other states in which LSi is qualified to do or is doing business
and state takeover laws, and foreign laws, neither the execution, delivery, or
performance of this Agreement by LSi nor the consummation by LSi of the
transactions contemplated by this Agreement, nor compliance by LSi with any of
the provisions of this Agreement will (a) conflict with or result in any breach
of any provision of the articles of incorporation or the bylaws of LSi; (b)
require any filing with, or authorization, consent, permit, or approval of, any
court, arbitral tribunal, administrative agency or commission, or other
governmental or other regulatory authority or agency (a "Governmental Entity"),
except where the failure to obtain such authorizations, consents, permits, or
approvals or to make such filings, would not have a Material Adverse Effect on
LSi; (c) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation, or acceleration) under, any of the terms,
conditions, or provisions of any note, bond, mortgage, indenture, lease,
license, contract, option, warrant, agreement, or other instrument or obligation
to which LSi is a party or by which it or its properties or assets may be bound;
or (d) violate any order, writ, injunction, decree, statute, rule,
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or regulation applicable to LSi, or its properties or assets, except as they
relate to (c) or (d), for violations, breaches, or defaults that would not,
individually or in the aggregate, have a Material Adverse Effect on LSi.
Section 4.5 SEC REPORTS AND FINANCIAL STATEMENTS. LSi has filed with
the SEC, and has made available to Tickets.com true and complete copies of, all
forms, reports, schedules, statements, and other documents required to be filed
by it since October, 1994, under the Exchange Act or the Securities Act (as such
documents have been amended since the time of their filing, and including any
such documents filed subsequent to the date of this Agreement, collectively, the
"LSi SEC Documents"). The LSi SEC Documents, including without limitation any
financial statements and schedules included in such documents, at the time filed
(the "LSi Financial Statements") (subject to and taking into account any and all
amendments filed thereto, as of, or prior to, the date of this Agreement), (a)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements in such documents, in light of the circumstances under which they
were made, not misleading; and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be, and the applicable rules and regulations of the SEC. The LSi Financial
Statements included in the LSi SEC Documents (subject to and taking into account
any and all amendments filed as of or prior to the date of this Agreement)
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect to such documents, have been prepared from and in accordance with the
books and records of LSi in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes to the LSi Financial Statements or, in the case of
the unaudited statements, as permitted by the accounting rules applicable to
reports on Form 10-Q or Form 10-QSB under the Exchange Act) and fairly present
(subject, in the case of the unaudited statements, to normal, recurring audit
adjustments) the consolidated financial position of LSi as of the dates of the
LSi Financial Statements and the consolidated results of their operations and
cash flows for the periods then ended. Additionally, the December 31, 1998
unaudited balance sheet of LSi provided to Tickets.com is true and correct in an
material respects as of such date and LSi has set forth in Schedule 4.5 a list
of all outstanding accounts receivable, accounts payable and other liabilities
(including accrued expenses) as of May 31, 1999. In addition, Schedule 4.5 lists
all monies owed to each of Jacqueline E. Soechtig, Chff Soechtig, Frank W.
Swacker and John J. Chluski.
Section 4.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the
Most Recent LSi SEC Documents or in Schedule 4.6, there have been no events,
changes, or effects having, individually or in the aggregate, a Material Adverse
Effect on LSi (including, without limitation, any threatened or actual loss of
customers), which would have a Material Adverse Effect on LSi.
Section 4.7 NO UNDISCLOSED LIABILITIES. Except as and to the extent
set forth in the Most Recent LSi SEC Documents and except as set forth in
Schedule 4.7, LSi has no material
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Liabilities that were not reflected on the LSi Financial Statements (including
the notes thereto), except for Liabilities that arose in the Ordinary Course of
Business since December 31, 1998.
SECTION 4.8 EMPLOYEE BENEFIT PLANS.
(a) Schedule 4.8 sets forth a complete and accurate list of each
pension, retirement, profit sharing, deferred compensation, stock option, stock
purchase, bonus, medical, welfare, disability, severance or termination pay,
insurance or incentive plan, and each other employee benefit plan, program,
agreement or arrangement, whether funded or unfunded, sponsored, maintained or
contributed to or required to be contributed to by LSi or any of the LSi
Subsidiaries or by any trade or business, whether or not incorporated, that
together with LSi would be deemed a "single employer" within the meaning of
Section 4001 of ERISA (an "LSi ERISA Affiliate"), for the benefit of any
employee or terminated employee of LSi or any LSI ERISA Affiliate (the "LSi
Benefit Plans").
(b) Neither LSi nor any LSi ERISA Affiliate participates
currently or has ever participated in, or is required currently or has ever been
required to contribute to or otherwise participate in any "multi-employer plan,"
as defined in Sections 3(37)(A) and 4001(a)(3) of ERISA and Section 414(f) of
the Code.
(c) Complete and accurate copies of each of the LSi Benefit Plans
and related trusts have been furnished to Tickets.com. To the extent not yet
furnished to Tickets.com, there shall be furnished to Tickets.com within five
days of the date of this Agreement, with respect to each of the LSi Benefit
Plans, the most recent financial statement and the most recent actuarial report
prepared with respect to any of such LSi Benefit Plans that is funded, the most
recent IRS determination letter, the most recent Summary Plan Description and
the most recent Annual Report together with a statement setting forth any such
material documents which cannot be furnished, and any such documents furnished
and the nature of the documents which cannot be furnished shall be reasonably
satisfactory to Tickets.com.
(d) With respect to each LSi Benefit Plan intended to be
"qualified" within the meaning of Section 401(a) of the Code, a determination
letter from the IRS has been received to the effect that LSi Benefit Plan is
qualified under Section 401 of the Code and any trust maintained pursuant to
such plan is exempt from federal income taxation under Section 501 of the Code,
and nothing has occurred or will occur through the Effective Time (including,
without limitation, the transactions contemplated by this Agreement) which would
cause the loss of such qualification or exemption or the imposition of any
material penalty or tax liability.
(e) All contributions required by each LSi Benefit Plan or by law
with respect to all periods through the Effective Time shall have been made by
such date (or provided for by LSi by adequate reserves on the LSi Financial
Statements) and no excise or other taxes have been incurred or are due and owing
with respect to LSi Benefit Plan because of any failure to comply with the
minimum funding standards of ERISA and the Code.
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(f) No "accumulated funding deficiency", as defined in Section
302 of ERISA, has been incurred with respect to any LSi Benefit Plan, whether or
not waived.
(g) No "reportable event" of the type set forth in Section 4043
of ERISA has occurred and is continuing with respect to any LSi Benefit Plan.
(h) There are no material violations of ERISA or the Code with
respect to the filing of applicable reports, documents, and notices regarding
any LSi Benefit Plan with the Secretary of Labor, Secretary of the Treasury, or
the Pension Benefit Guaranty Corporation or furnishing such documents to
participants or beneficiaries, as the case may be.
(i) No claim, lawsuit, arbitration, or other action has been
threatened, asserted, or instituted against any LSi Benefit Plan, any trustee or
fiduciaries of such plan, LSi, or any of the assets of any trust maintained
under any LSi Benefit Plan, which would have a Material Adverse Effect on LSi.
(j) All amendments required to bring any LSi Benefit Plan into
conformity in all material aspects with any of the applicable provisions of
ERISA and the Code have been duly adopted and filed with the appropriate agency
as required.
(k) Any bonding required with respect to any LSi ERISA Plan in
accordance with applicable provisions of ERISA has been obtained and is in full
force and effect.
(1) Each LSi Benefit Plan has been operated and administered in
accordance with its terms in all material respects and the material terms and
the provisions of ERISA and the Code (including rules and regulations
thereunder) applicable thereto and in practice is tax qualified under Sections
401(a) and 501 of the Code.
(m) All required material information filings for each LSi
Benefit Plan have been timely filed, including, without limitation, all Form
5500 filings.
(n) LSi has not incurred nor reasonably expects to incur, any
material liability to the Pension Benefit Guaranty Corporation.
(o) No "prohibited transaction," as such term is defined in
Section 4975 of the Code and Section 406 of ERISA, has occurred with respect to
any LSi Benefit Plan (and the transactions contemplated by this Agreement will
not constitute or directly or indirectly result in such a "prohibited
transaction") which could subject LSi or its successors, or any officer,
director
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or employee of any of the foregoing, or any trustee, administrator or other
fiduciary, to a material tax or penalty on prohibited transactions imposed by
either Section 502 of ERISA or Section 4975 of the Code.
(p) No LSi Benefit Plan is under audit by the IRS or the
Department of Labor.
(q) The present value, determined on a termination basis, of all
accrued benefits, vested and unvested, under each LSi Benefit Plan, determined
using the actuarial valuation assumptions and methods (including interest rates)
contained in the most recent actuarial report for such LSi Benefit Plan, does
not exceed the assets thereof allocable to such benefits.
(r) No welfare benefit plan (within the meaning of Section 3(l)
of ERISA) provides for continuing benefits or coverage for any participant or
beneficiary of a participant after such participant's termination of employment,
except as may be required by the Consolidated Omnibus Budget Reconciliation Act
of 1985 or by Sections 601 through 608 of ERISA, or Sections 162 and 4980B of
the Code at the expense of the participant or the beneficiary of the
participant.
(s) LSi does not currently maintain or contribute to any
severance pay plan.
(t) No individual shall accrue or receive any additional
benefits, service, or accelerated rights to payment of benefits under any LSi
Benefit Plan as a result of the actions contemplated by this Agreement.
(u) LSi has complied with all of the requirements of the
Consolidated Omnibus Budget Reconciliation Act of 1985, Sections 601 through 608
of ERISA, and Sections 162 and 4980B of the Code.
Section 4.9 OTHER BENEFIT PLANS. Except as: (a) disclosed in the Most
Recent LSi SEC Documents or in Schedule 4.9, and (b) provided for in this
Agreement, as of the date of this Agreement, LSi is not a party to any oral or
written (i) consulting agreement not terminable on 60 days or less notice; (ii)
union or collective bargaining agreement; (iii) agreement with any executive
officer or other key employee of LSi providing for contingent benefits or the
alteration of terms, based upon the occurrence of a transaction involving LSi of
the nature contemplated by this Agreement, or agreement concerning any executive
officer of LSi providing any term of employment or compensation guarantee
extending for a period longer than one year and for the payment of in excess of
$50,000 per year (except for an Employment Agreement with Jacqueline E.
Soechtig, dated March 7, 1995 and consulting agreements with Frank W. Swacker
and John J. Chluski in the form attached to this Agreement as Exhibit 4.9); or
(iv) agreement or plan, including any stock option plan, stock appreciation
right plan, restricted stock plan, or stock purchase plan, providing for
increased benefits or the accelerated vesting of the benefits by the occurrence
of any of the transactions contemplated by this Agreement, or the calculation of
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the value of any of the benefits on the basis of any of the transactions
contemplated by this Agreement.
Section 4.10 LITIGATION. Except as disclosed in the Most Recent LSi
SEC Documents or Schedule 4.10, there is no suit, claim, action, proceeding, or
investigation pending or, to the knowledge of LSi, threatened against LSi before
any Governmental Entity that, individually or in the aggregate, is likely to
have a Material Adverse Effect on LSi or would prevent LSi from consummating the
transactions contemplated by the Agreement. Except as disclosed in the Most
Recent LSi SEC Documents, LSi is not subject to any outstanding order, writ,
injunction, or decree that, insofar as can be reasonably foreseen, individually
or in the aggregate, in the future would have a Material Adverse Effect on LSi
or would prevent LSi from consummating the transactions contemplated by this
Agreement.
Section 4.11 COMPLIANCE WITH APPLICABLE LAW. Each of LSi and the LSi
Subsidiaries hold all permits, licenses, variances, exemptions, orders, and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "LSi Permits"), except where the failure to hold such
permits, licenses, variances, exemptions, orders, and approvals would not,
individually or in the aggregate, have a Material Adverse Effect on LSi. Each of
LSi and the LSi Subsidiaries is in material compliance with the terms of LSi
Permits except where the failure to hold such permits, licenses, variances,
exemptions, orders, and approvals would not, individually or in the aggregate,
have a Material Adverse Effect on LSi. Except as disclosed in the LSi SEC
Documents filed prior to the date of this Agreement, the businesses of each of
LSi and the LSi Subsidiaries is in material compliance with all laws,
ordinances, and regulations of any Governmental Entity, except where a failure
to comply would not have a Material Adverse Effect on LSi. No investigation or
review by any Governmental Entity with respect to LSi or any of the LSi
Subsidiaries is pending or, to the Knowledge of LSi, threatened, nor has any
Governmental Entity indicated in writing an intention to conduct any
investigation or review, which investigation or review could have a Material
Adverse Effect on LSi.
Section 4.12 OPINION OF FINANCIAL ADVISOR. LSi has received the
opinion of Raymond James & Associates, Inc., to the effect that, as of such
date, the consideration to be received in the Merger by the LSi Shareholders is
fair to such shareholders from a financial point of view. Subject to approval by
Raymond James & Associates, Inc., a copy of the opinion will be delivered to
Tickets.com within five days of the date of this Agreement.
Section 4.13 BOARD ACTION, VOTE REQUIRED.
(a) As of the date of this Agreement and subject to the last
sentence of Section 6.l(e), the board of directors of LSi has determined that
the transactions contemplated by this Agreement are in the best interests of LSi
and the LSi Shareholders and has resolved to recommend to such shareholders that
they vote in favor of such transactions.
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(b) The affirmative vote of a majority of the LSi Shareholders is
the only vote of the holders of any class or series of LSi's securities
necessary to approve this Agreement and the transactions contemplated by this
Agreement.
Section 4.14 TAX RETURNS AND AUDITS. Except as set forth in Schedule
4.14, each of LSi and the LSi Subsidiaries has duly filed all federal, state,
local, and foreign Tax returns required to be filed by it, has correctly and
fully reflected the taxable income required to be shown thereon, and to the
Knowledge of LSi has duly paid or made adequate provision for the payment of all
Taxes, including state income and payroll and sales Taxes, that have been
incurred or are due and payable pursuant to such returns or pursuant to any
assessment with respect to Taxes in such jurisdictions, whether or not in
connection with such returns. There are no circumstances or pending questions
relating to potential Tax Liabilities or claims asserted for Taxes or
assessments of LSi or any of the LSi Subsidiaries that, if adversely determined,
could result in a Tax Liability that would have a Material Adverse Effect on LSi
for any period prior to, including, or beginning after the Closing or on LSi's
present practices in computing or reporting Taxes excluding any claims that
might arise from the transactions contemplated by this Agreement. LSi is not
subject to, and has no Knowledge of, a pending or a threatened (in writing)
local, state or federal Tax audit or inquiry.
Section 4.15 MATERIAL CONTRACTS. Schedule 4.15 lists all material
contracts, agreements, licenses and written arrangements to which LSi or any of
the LSi Subsidiaries is a party or by which any of their assets are bound,
required to be filed with the SEC. To the Knowledge of LSi and the LSi
Subsidiaries, no party to any contract listed on the LSi's SEC Documents plans
to terminate any such contract with either entity or the Surviving Corporation,
the termination of which would have a Material Adverse Effect on LSi and the LSi
Subsidiaries taken as a whole or the Surviving Corporation and its Subsidiaries
taken as a whole. With respect to each such written arrangement: (i) the written
arrangement is legal, valid, binding, enforceable against LSi, and in full force
and effect, assuming the other parties thereto have duly executed and delivered
such arrangements and had the necessary power and authority to enter into such
written arrangements when executed and delivered; (ii) the written arrangement
will continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing, subject to bankruptcy,
solvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights or to general
equity principles, and in full force and effect, assuming, if applicable, that
required consents to assignment are obtained; (iii) to LSi is Knowledge, no
party is in material breach or default, and no event has occurred that with
notice or lapse of time or both would constitute a material breach or default,
or permit termination, modification, or acceleration under the written
arrangement; and (iv) to LSi is Knowledge, no party has repudiated any provision
of the written arrangement.
Section 4.16 INSURANCE. Except as set forth in Schedule 4.16, LSi has
customary insurance coverages for companies of its size in its industry
(including
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liability, property, business risk, employee health, group life,
director/officer liability, and bond insurance and surety arrangements),
currently in effect, to which LSi is a party, a named insured, or otherwise the
beneficiary of coverage. With respect to each insurance policy currently in
effect: (a) the policy is legal, valid, binding, and enforceable and in full
force and effect, assuming the other parties thereto have duly executed and
delivered such policy and had the necessary power and authority to enter into
such policy when executed and delivered; (b) the policy will continue to be
legal, valid, binding, and enforceable and in full force and effect identical
terms until the Closing, except to the extent terminated in the on 1 Ordinary
Course of Business; (c) LSi is not in material breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred that, with notice or the lapse of time or both, would constitute such a
material breach or default or permit termination, modification, or acceleration
under the policy; and (d) to LSi's Knowledge, no party to the policy has
repudiated any provision thereof LSi has not received any notification of a
reservation of rights from any of its insurers regarding any open material
claim.
Section 4.17 SUBSIDIARIES. Except as set forth in the LSi SEC
Documents or in Schedule 4.17, LSi has no Subsidiaries. LSi owns all of the
outstanding securities of all of its Subsidiaries.
Section 4.18 REAL PROPERTY. LSi owns no real property. The LSi SEC
Documents list all parcels of real property leased by LSi. With respect to each
parcel of leased real property, the lease or sublease is legal, valid, binding,
and enforceable, subject to bankruptcy, solvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights or to general equity principles, and in full
force and effect. To LSi's knowledge, all leased facilities have received all
approvals of Governmental Entities (including licenses and permits) required in
connection with the occupancy or operation thereof, except for any approval, the
failure of which to obtain, individually or in the aggregate, would not have a
Material Adverse Effect on LSi.
Section 4.19 ENVIRONMENTAL AND EMPLOYEE SAFETY MATTERS. Except for
such matters that, individually or in the aggregate, are not reasonably likely
to have a Material Adverse Effect on LSi or the LSi Subsidiaries, to the
Knowledge of LSi, each of LSi and the LSi Subsidiaries has complied with all
laws (including rules and regulations thereunder) of all federal, state, local,
and foreign governments (and an agencies thereof) concerning the environment,
public health and safety, and employee health and safety, and no charge,
complaint, action, suit, proceeding, hearing, investigation, claim, demand, or
notice has been filed or commenced against any of them alleging any failure to
comply with any such law or regulation. To the Knowledge of LSi, LSi and the LSi
Subsidiaries have no Liability, and there is no basis for such Liability, under
any law (or rule or regulation thereunder) of any federal, state, local, or
foreign government (or agencies thereof), concerning release or threatened
release of hazardous substances or pollution or protection of the environment.
Section 4.20 INTELLECTUAL PROPERTY
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(a) Except as set forth in Schedule 4.20, to the Knowledge of
LSi, LSi owns or has the right to use all Intellectual Property necessary for
the operation of its business and those of the LSi Subsidiaries as presently
conducted. All such Intellectual Property will be owned or available for use by
the Surviving Corporation on identical terms and conditions immediately on and
after the Closing, subject to the filing of customary assignments with the
United States Patent and Trademark Office. LSi has taken all reasonable actions
to protect each such item of Intellectual Property.
(b) Except as set forth in Schedule 4.20, to the Knowledge of
LSi, neither LSi nor any of the LSi Subsidiaries has interfered with, infringed
upon, misappropriated, or otherwise violated in any material respect any
Intellectual Property rights of third parties, and, there is no pending charge,
complaint, claim, or notice alleging any such material interference,
infringement, misappropriation, or violation. To the Knowledge of LSi, no third
party has interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any of its Intellectual Property rights.
Section 4.21 TANGIBLE PERSONAL PROPERTY
(a) LSi or one of the LSi Subsidiaries owns or leases all
tangible personal property (including, without limitation, furniture, fixtures,
equipment, and supplies) necessary for the conduct in all material respects of
the business of LSi and the LSi Subsidiaries as presently conducted.
(b) Except as set forth in the LSi Financial Statements or in
Schedule 4.21, LSi is the sole lawful and beneficial owner of its tangible
personal property set forth in the LSi Financial Statements as of December 31,
1997 to the date of this Agreement, free and clear of all liens and
encumbrances, except for (i) liens for current Taxes not yet due or payable;
(ii) liens imposed by law and incurred in the Ordinary Course of Business for
obligations not yet due to landlords carriers, warehousemen, laborers and
materialmen; and (iii) hens in respect of pledges or deposits under worker's
compensation laws, and LSi or one of the LSi Subsidiaries has good and
marketable title to all such property subject to such liens and encumbrances.
(c) The tangible personal property of LSi is in serviceable
condition, reasonable wear and tear excepted, and the value attributed to it in
the LSi Financial Statements represents an amount not in excess of the purchase
price, less reasonable depreciation, of such property.
Section 4.22 EMPLOYEES AND INDEPENDENT CONTRACTORS. Except as set
forth in Schedule 4.22, to the Knowledge of LSi, no employee or group of
employees or independent contractors plans to terminate employment with either
entity or the Surviving Corporation, which termination would have a Material
Adverse Effect on LSi.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF TICKETS.COM AND THE COMPANY
Tickets.com and the Company represent and warrant to LSi as follows:
Section 5.1 ORGANIZATION. Each of Tickets.com and the Company is a
corporation duly organized, validly existing, and in good standing under the
laws of its jurisdiction and has all requisite corporate power and authority and
all necessary governmental approvals to own, lease, and operate its properties
and to carry on its business as now being conducted except where the failure to
be so organized, existing, and in good standing or to have such power,
authority, and governmental approvals would not have a Material Adverse Effect
on Tickets.com. Each of Tickets.com and the Company is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the property owned, leased, or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so duly qualified or licensed and be in good standing would
not in the aggregate have a Material Adverse Effect on Tickets.com.
Section 5.2 AUTHORITY. Each of Tickets.com and the Company has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated by this Agreement. In addition,
Tickets.com currently has the financial resources to consummate the Merger. The
execution, delivery, and performance of this Agreement, and the consummation of
the Merger and the other transactions contemplated by this Agreement, have been
duly authorized by all necessary corporate action on the part of Tickets.com and
the Company and no other corporate proceedings on the part of Tickets.com or the
Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly executed and
delivered by Tickets.com and the Company, and, assuming this Agreement
constitutes a valid and binding obligation of LSi, constitutes a valid and
binding obligation of each of Tickets.com and the Company, enforceable against
it in accordance with its terms.
Section 5.3 CONSENTS AND APPROVALS, NO VIOLATIONS. Except for filings,
authorizations, consents, permits, and approvals as may be required under, and
other applicable requirements of the Exchange Act, the Securities Act and the
FBCA, the laws of other states in which Tickets.com or the Company is qualified
to do or is doing business and state takeover laws, neither the execution,
delivery, or performance of this Agreement by Tickets.com or the Company, nor
the consummation by Tickets.com or the Company of the transactions contemplated
by this Agreement, nor compliance by Tickets.com or the Company with any of the
provisions of this Agreement, will (a) conflict with or result in any breach of
any provision of the respective certificates of incorporation, or bylaws of
Tickets.com or the Company; (b) require any filing with, or authorization,
consent, permit, or approval of, any Governmental Entity (except where the
failure to obtain such permits, authorizations, consents, or approvals or to
make such filings would not have a Material Adverse Effect on Tickets.com); (c)
result in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation, or acceleration) under, any of the terms,
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conditions, or provisions of any note, bond, mortgage, indenture, license,
lease, contract, agreement, or other instrument or obligation to which
Tickets.com or the Company is a party or by which any of them or any of their
properties or assets may be bound; or (d) violate any order, writ, injunction,
decree, statute, rule, or regulation applicable to Tickets.com or the Company,
or any of its properties or assets, except as they relate to (c) and (d), for
violations, breaches, or defaults that would not, individually or in the
aggregate, have a Material Adverse Effect on Tickets.com.
Section 5.4 FINANCIAL STATEMENTS. Tickets.com has delivered to LSi its
unaudited balance sheet dated December 31, 1998. This balance sheet complies
with generally accepted accounting principles for the period covered thereby and
(a) presents fairly the financial condition of Tickets.com as of such date, and
(b) is correct and complete, and is consistent with the books and records of
Tickets.com.
ARTICLE VI
COVENANTS
Section 6.1 COVENANTS of LSi. During the period from the date of this
Agreement and continuing until the Effective Time (except as expressly
contemplated or permitted by this Agreement, or to the extent that Tickets.com
shall otherwise consent in writing):
(a) ORDINARY COURSE. Except as set forth in Schedule 6.1(a), each
of LSi and the LSi Subsidiaries shall carry on its business in the usual,
regular, and ordinary course in substantially the same manner as conducted prior
to the date of this Agreement and shall use all commercially reasonable efforts
to preserve intact its present business organizations, keep available the
services of its present officers and employees, and preserve its relationships
with customers and others having business dealings with them to the end that
their goodwill and ongoing business shall not be impaired in any material
respect at the Effective Time. Provided, however, all payments or commitments
requiring future payments in excess of an aggregate of $5,000 in any week shall
be approved in writing by the President of LSi. LSi shall not commence any
proceedings under any federal or state bankruptcy, insolvency, or related law.
(b) DIVIDENDS: CHANGES IN STOCK. LSi shall not, nor shall LSi
propose to, (i) declare or pay any dividends on or make other distributions in
respect of any of its capital stock except for dividends by a wholly-owned
Subsidiary; (ii) split, combine, or reclassify any of its capital stock; or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of, or in substitution for shares of its capital stock; or (iii)
repurchase, redeem, or otherwise acquire any shares of its capital stock.
(c) ISSUANCE OF SECURITIES. LSi shall not, issue, deliver, or
sell, or authorize or propose the issuance, delivery, or sale of, any shares of
its capital stock of any class, any Voting Debt, or any securities convertible
into, or any rights, warrants, calls, subscriptions, or options to
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acquire, any such shares, Voting Debt or convertible securities, other than the
issuance of shares of LSi Common Stock, upon the exercise of Options issued,
awarded, or granted or made prior to the date of this Agreement pursuant to the
LSi Stock Option Plan, except for the conversion of the LSi Preferred Stock.
(d) GOVERNING DOCUMENTS. LSi shall not amend or propose to amend
its articles of incorporation or its bylaws, except as contemplated by this
Agreement. LSi shall deliver to Tickets.com complete and accurate copies of
resolutions of the board of directors of LSi approving the consummation of the
Merger and the transactions contemplated by this Agreement prior to the
execution of this Agreement.
(e) NO SOLICITATION. LSi shall not, nor shall it authorize or
permit any of its officers, directors, or employees or any investment banker,
financial advisor, attorney, accountant, or other representative retained by it
or any of the LSi Subsidiaries to, solicit, initiate, or encourage (including by
way of furnishing information), or take any other action to facilitate, any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Takeover Proposal, or agree to or endorse any Takeover
Proposal. LSi shall immediately advise Tickets.com orally and as soon as
practicable in writing of any such inquiries or proposals, including all
relevant details. Notwithstanding the foregoing, LSi shall not be obligated to
take any of the actions set forth in this Section 6.1(e) or otherwise in this
Agreement (other than as set forth in the immediately preceding sentence or
otherwise in this Agreement), or refrain from taking any of the actions set
forth in this Section 6.1(e) or otherwise in this Agreement, if the board. of
directors of LSi, acting upon advice of counsel determines that such actions or
inactions would be contrary to their legal or fiduciary obligations as directors
of LSi and Tickets.com is notified promptly of such action.
(f) NO ACQUISITIONS. LSi shall not, acquire or agree to acquire
by merging or consolidating with, or by purchasing any equity interest in or
substantial portion of the assets of, or by any manner, any business or any
corporation, partnership, association, or other business organization or
division thereof, or otherwise acquire or agree to acquire any assets not in the
Ordinary Course of Business. Without limiting the generality of the foregoing,
LSi shall not, nor shall it permit any of its Subsidiaries to (i) make any
capital expenditures in excess of $5,000 unless such expenditure shall have been
approved by the President of LSi; (ii) make any venture capital investment; or
(iii) open any additional facilities.
(g) NO DISPOSITIONS. Other than (i) as may be required by law to
consummate the transactions contemplated by this Agreement or (ii) in the
Ordinary Course of Business, neither LSi nor any of the LSi Subsidiaries shall
sell, lease, license, encumber, or otherwise dispose of, or agree to sell,
lease, license, encumber, or otherwise dispose of, any of its material assets.
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(h) INDEBTEDNESS AND LEASES. Except in the Ordinary Course of
Business, neither LSi nor any of the LSi Subsidiaries shall incur any material
indebtedness for borrowed money, guarantee any such indebtedness, issue or sell
any debt securities, warrants, or rights to acquire any debt securities of
itself or any of its Subsidiaries, guarantee any debt securities of others, or
prepay any material indebtedness. LSi shall not, nor shall it permit any of the
LSi Subsidiaries to, enter into any leases other than in the Ordinary Course of
Business.
(i) OTHER ACTIONS. Except in the Ordinary Course of Business,
notwithstanding the fact that such action might otherwise be permitted pursuant
to this Section 6.1, but subject to the last sentence of Section 6.l(e), LSi
shall not, nor shall LSi permit any of the LSi Subsidiaries to, take any action
that would result in any of its representations and warranties set forth in this
Agreement being untrue in any material respect, or in any of the conditions to
the Merger set forth in Article VII not being satisfied.
(j) ADVISE OF CHANGES, FILINGS. Subject to applicable law, LSi
shall confer with reasonable frequency with Tickets.com, report on operational
matters, and promptly advise Tickets.com orally and in writing of any change or
event having, or which, insofar as can reasonably be foreseen, would have, a
Material Adverse Effect on LSi. Each party shall promptly provide the other (or
its counsel) copies of all filings made by such party with any federal, state,
or foreign Governmental Entity in connection with this Agreement and the
transactions contemplated by this Agreement and all SEC and other material
filings made by such party under any federal, state or foreign governmental
entity.
(k) ADDITIONAL MATTERS. The period from the date of this
Agreement and continuing until the Effective Time, LSi agrees that it will not,
without the prior written consent of Tickets.com which will not be unreasonably
withheld or delayed, (i) enter into, adopt, amend (except as may be required by
law), or terminate any LSi Benefit Plan, or any agreement, arrangement, plan, or
policy between LSi and one or more of its directors or officers; (ii) increase
in any manner the compensation or fringe benefits of any director, officer, or
employee; (iii) pay any benefit not required by any plan or arrangement as in
effect as of the date of this Agreement (including, without limitation, the
granting of stock options, stock appreciation rights, restricted stock, or
performance units); or (iv) enter into any contract, agreement, commitment, or
arrangement to do any of the foregoing other than any amendments required to be
made to any LSi Benefit Plan in order to maintain LSi's qualified status under
applicable law.
(l) CERTAIN RESIGNATIONS AND APPOINTMENTS. Immediately after the
execution of this Agreement, (i) individuals designated by RBB shall be
appointed to fill vacancies on the board of directors of LSi, and immediately
thereafter, Jacqueline E. Soechtig, Frank W. Swacker and John J. Chluski shall
resign from the board of directors; (ii) LSi shall accept the election of
Jacqueline E. Soechtig to terminate her employment pursuant to her Employment
Agreement; (iii) LSi shall receive and accept the resignations of Alfred P.
Jones as Secretary of LSi, James H. Moore, Jr. as Assistant Secretary of LSi and
Cliff Soechtig as an employee and officer of LSi;
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and (iv) the LSi board of directors shall appoint David A. Riley as President,
Chief Executive Officer and Secretary of LSi.
(m) REQUIRED FILINGS. LSi shall make all required periodic
filings with the SEC as soon as practicable but no later than the Closing Date,
including without limitation the Form 10-KSB for the period ending December 31,
1998, the Form 10-QSB for the period ending March 31, 1999 and all other
required filings. None of these filings will contain any untrue statement of a
material fact or omit any material fact required to be stated therein or
necessary in order to make the statements in such documents, in light of the
circumstances under which they were made, not misleading and shall comply in all
material respects with the applicable requirements of the Exchange Act and the
Securities Act, as the case may be, and the applicable rules and regulations of
the SEC.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 BOARD APPROVAL, FAIRNESS OPINION, SHAREHOLDER APPROVAL
AND PROXY STATEMENT.
(a) LSi approves of and consents to the Merger and represents
that the board of directors of LSi, at a meeting duly called and held, duly
adopted resolutions approving this Agreement and the Merger, determining that
the terms of the Merger are fair to, and in the best interest of the LSi
Shareholders and recommending that the LSi Shareholders accept the Merger and
approve and adopt this Agreement and the Merger. LSi represents that its board
of directors has received the opinion of Raymond James & Associates, Inc. dated
as of June 21, 1999, that the proposed Cash Consideration to be received by the
LSi Shareholders pursuant to the Merger is fair to such holders from a financial
point of view, and a complete and correct signed copy of such opinion will be
delivered by LSi to Tickets.com within five days of the date of this Agreement.
(b) LSi will, at Tickets.com's request, as soon as practicable
following execution of this Agreement, duly call, give notice of, and convene
and hold a meeting of the LSi Shareholders (the "Shareholders' Meeting") for the
purpose of obtaining the requisite approval of the LSi Shareholders with respect
to the Merger. LSi will, through its board of directors, recommend to the LSi
Shareholders that they vote in favor of, or otherwise consent to, the approval
of this Agreement, the Merger and the transactions contemplated by this
Agreement subject to Section 6.1(e). Without limiting the generality of the
foregoing, LSi agrees that its obligations pursuant to the first sentence of
this Section 7.1(b) shall not be affected by (i) the commencement, pubic
proposal, public disclosure or communication to LSi of any Takeover Proposal or
(11) the withdrawal or modification by the board of directors of LSi of its
approval or recommendation of this Agreement or the Merger.
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(c) LSi will, at Tickets.com's request, as soon as reasonably
practicable following execution of this Agreement prepare and file a preliminary
proxy statement with the SEC and will use its commercially reasonable efforts to
respond to any comments of the SEC or its staff and to cause the proxy statement
to be mailed to the LSi Shareholders as promptly as practicable after responding
to all such comments to the satisfaction of the staff of the SEC. Tickets.com
and its counsel shall be given reasonable opportunity to review and comment upon
the proxy statement prior to its filing with the SEC or dissemination to the LSi
Shareholders. LSi will notice Tickets.com promptly of the receipt of any written
comments from the SEC or its staff and of any requests by the SEC or its staff
for amendments or supplements to the proxy statement or for additional
information and will supply Tickets.com with copies of all correspondence
between LSi or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the proxy statement or the Merger.
Each of LSi and Tickets.com agrees promptly to correct any information provided
by it for use in the proxy statement if and to the extent that such information
shall have become false or misleading in any material respect, and LSi further
agrees to take all steps necessary to amend or supplement the proxy statement
and to cause the proxy statement as so amended or supplemented to be filed with
the SEC and disseminated to the LSi Shareholders, in each case as and to the
extent required by applicable federal securities laws. If at any time prior to
the Shareholders' Meeting there shall occur any event that should be set forth
in an amendment or supplement to the proxy statement, LSi will promptly prepare
and mail to the LSi Shareholders such an amendment or supplement. LSi will not
mail any proxy statement, or any amendment or supplement thereto, to which
Tickets.com reasonably objects.
(d) Tickets.com agrees to cause all shares of LSi Common Stock
owned by Tickets.com or any Subsidiary of Tickets.com to be voted in favor of
the approval of the Merger. Tickets.com has a contract with RBB whereby RBB has
agreed to vote all of its shares of LSi Common Stock in favor of the Merger.
Section 7.2 ACCESS TO INFORMATION. Subject to Section 7.9, upon
reasonable notice and during normal business hours and applicable law, LSi shall
afford to the officers, employees, accountants, counsel, and all other
authorized representatives of Tickets.com, reasonable access during the period
before the Effective Time, to all its properties, books, contracts, commitments,
records, management employees, accountants, and counsel. During the period
before the Effective Time, each of LSi and Tickets.com shall (and shall cause
each of the LSi Subsidiaries to) furnish promptly to Tickets.com a copy of each
report, schedule, registration statement, and other document filed or received
by it during such period pursuant to the requirements of federal securities
laws. LSi shall furnish promptly to Tickets.com all other information concerning
its business, properties, and personnel, and access for discussions with such of
its management and other personnel, as Tickets.com may reasonably request.
Section 7.3 LEGAL CONDITIONS TO MERGER. LSi, Tickets.com and the
Company each will take all reasonable actions necessary to comply promptly with
all legal requirements that may be imposed on itself with respect to the Merger
(which actions shall include furnishing all
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information required in connection with approvals of or filings with any other
Governmental Entity), and will promptly cooperate with and furnish information
to each other in connection with any such requirements imposed upon any of them
or any of their Subsidiaries in connection with the Merger. LSi, Tickets.com and
the Company will each cause their Subsidiaries to, take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, authorization, order, or approval of, or any exemption by, any
Governmental Entity or other public or private third party, required to be
obtained or made by Tickets.com, the Company LSi, or any of their Subsidiaries
in connection with the Merger or the taking of any action contemplated thereby
or by this Agreement.
Section 7.4 EXPENSES. Except as set forth in Section 9.4, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated by this Agreement shall be
paid by the party incurring such expenses, and, in connection therewith, each of
Tickets.com and LSi shall pay, with its own funds and not with funds provided by
the other party, any and all property or transfer taxes imposed on such party.
Section 7.5 BROKERS OR FINDERS. Each of Tickets.com and LSi
represents, as to itself, its Subsidiaries, and its Affiliates, that no agent,
broker, investment bankers, financial advisor, or other firm or Person is or
will be entitled to any brokers' or finder's fee or any other commission or
similar fee ("Finder's Fees") in connection with any of the transactions
contemplated by this Agreement, except Raymond James & Associates, Inc., whose
fees and expenses will be paid by LSi at the Closing in accordance with LSi's
agreement with such firm (copies of which have been delivered by LSi to
Tickets.com prior to the date of this Agreement) subject to the provisions of
Section 9.4 of this Agreement, and each of Tickets.com and LSi agree to
indemnify and hold the other harmless from and against any and all claims,
Liabilities, or obligations with respect to any other Finder's Fees asserted by
any Person on the basis of any act or statement alleged to have been made by
such party or its Affiliate.
Section 7.6 ADDITIONAL AGREEMENTS; REASONABLE BEST EFFORTS.
Subject to the terms and conditions of this Agreement, including, without
limitation, the last sentence of Section 6.1(e) each of the parties agrees to
use its reasonable best efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper, or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, subject to the appropriate vote of
the LSi Shareholders described in Section 7.1(a), including cooperating fully
with the other parties. Without limiting the generality of the foregoing
sentence, the parties shall provide all information and shall use their
reasonable best efforts to obtain regulatory approvals or clearances to
consummate the transactions contemplated by this Agreement. If at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities, and franchises of
either of the
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Constituent Corporations, the proper officers and directors of each party to
this Agreement, in such capacity, shall use reasonable best efforts to take all
such necessary action.
Section 7.7 PUBLIC ANNOUNCEMENTS. Subject to applicable federal and
state law, rules and regulations or on the advice of counsel, each of LSi and
Tickets.com shall use its reasonable best efforts to develop a joint
communications plan and each party shall use its reasonable best efforts to
ensure that all press releases and other public statements with respect to the
transactions contemplated by this Agreement shall be consistent with such joint
communications plan or, to the extent inconsistent therewith, shall have
received the prior written approval of the other.
Section 7.8 INDEMNIFICATION DIRECTORS' AND OFFICERS' LIABILITY
INSURANCE. AB rights to indemnification and/or reimbursement existing in favor
of any present or former director, officer, or employee of LSi (an "Indemnified
Party") as provided in (a) LSi's articles of incorporation or bylaws; (b) the
certificate of incorporation, bylaws, or similar organizational documents of any
of the LSi Subsidiaries; and (c) such related contracts as each is in effect
prior to the date of this Agreement, shall survive the Merger with respect to
matters occurring at or prior to the Effective Time including without
limitation, those with respect to this Agreement. Tickets.com agrees that
pursuant to the terms of the Merger such obligations and Liabilities with
respect to indemnification and reimbursement of the Indemnified Parties shall
become joint and several obligations and Liabilities of the Surviving
Corporation and Tickets.com, and the Surviving Corporation shall as of the
Effective Time assume entirely those obligations and Liabilities. For a period
of six years after the Closing, the Surviving Corporation and Tickets.com shall
cause to be maintained in effect, at no expense to the insured thereunder, the
current policy or policies (hereinafter, the "Current Policy") of directors' and
officers' liability insurance ("D&O Insurance") maintained by LSi for the
benefit of the Indemnified Parties; however, (1) the Surviving Corporation shall
have the right to substitute therefor a policy or policies that provide the same
or greater limits of liability as the Current Policy and that provide, the same
or greater coverage in all material respects (including, without limitation,
extent and scope) as the Current Policy; and (ii) the D&O Insurance to be
maintained during such six-year period shall cover only acts of the insured that
occur on or prior to the Effective Time. In addition, the Surviving Corporation
and Tickets.com specifically agree to indemnify the current directors of LSi
from and against the entirety of any Adverse Consequences that the LSi directors
may suffer that directly relate to claims made by or relating to Jackson
International LLC if this Merger is consummated.
Section 7.9 CONFIDENTIALITY/NON-DISCLOSURE; NON-SOLICITATION. Except
for such disclosure to the parties' professional advisors as may be necessary or
appropriate and such disclosure as may be required by court order or by any law
or regulation to which a party is subject, the parties to this Agreement agree
that they shall maintain in confidence the existence and terms of this Agreement
and any of the terms and conditions of any of the transactions contemplated by
this Agreement and shall refrain from using any Confidential Information, except
in connection with their own (without disclosure to others) evaluation whether
to enter into this Agreement, and no party will issue any press release or
public statement concerning this Agreement or any of
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the transactions contemplated by this Agreement without the prior written
consent of the other parties; provided, however, that LSi may make such
disclosure as is required by law or on the advice of counsel. Upon the
termination of this Agreement, each of the parties shall promptly deliver to
the other parties all tangible embodiments (and all copies) of the Confidential
Information which are in its possession.
Section 7.10 LOAN TO LSI. Promptly after the execution of this
Agreement, LSi will execute and deliver to Tickets.com a secured promissory note
and security agreement in the respective forms attached to this Agreement as
Exhibit 7.10(i) and 7.10(ii), respectively, whereupon Tickets.com will loan
$600,000 to LSi, such funds to be applied by LSi as follows: (a) $325,000 to the
payment of certain outstanding accounts payable which by their terms are due and
payable; (b) up to $100,000 (plus accrued interest) to the repayment of loans
made by RBB during June 1999 to LSi; and (c) the remainder to the immediate
working capital needs of LSi. Thereafter and from time to time until the
Closing, Tickets.com will loan LSi an aggregate of approximately $400,000 in
installments as needed (which may or may not be equal in amount) to be used to
fund the ongoing working capital needs of LSi (consistent with past practices);
provided, however, that if the ongoing capital needs of LSi exceed $400,000
Tickets.com shall consider but shall have no obligation to make any additional
loans to LSi.
ARTICLE VIII
CONDITIONS
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction prior to the Closing of the following conditions:
(a) SHAREHOLDER APPROVAL. This Agreement shall have been approved
and adopted by the affirmative vote of the LSi Shareholders at the Shareholders'
Meeting or by written consent.
(b) OTHER APPROVALS. Other than the filing provided for by
Section 2.1 and any filing pursuant to state takeover laws permitted to be filed
after the Effective Time, all authorizations, consents, orders, or approvals of,
or declarations or filings with, or expirations of waiting periods imposed by,
any Governmental Entity, the failure to obtain of which would have a Material
Adverse Effect on Tickets.com and its Subsidiaries or the Surviving Corporation,
in each case taken as a whole, shall have been filed, occurred, or been
obtained.
(c) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction, or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect.
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Section 8.2 CONDITIONS TO OBLIGATIONS OF TICKETS.COM. The obligations
of Tickets.com to effect the Merger are subject to the satisfaction of the
following conditions, unless waived by Tickets.com:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of LSi set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing as though made on and as of the Closing, except as otherwise
contemplated by this Agreement; provided, however, if any such representation or
warranty is already qualified by materiality, for purposes of determining
whether this condition has been satisfied, such representation or warranty must
be true and correct in all respects without regard to materiality. Tickets.com
shall have received a certificate signed on behalf of LSi by an executive
officer of LSi to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF LSI. LSi shall have performed
in all material respects all obligations, agreements and covenants required to
be performed by it under this Agreement at or prior to the Closing, and
Tickets.com shall have received a certificate signed on behalf of LSi by an
executive officer of LSi to such effect.
(c) NO AMENDMENTS TO RESOLUTIONS. Neither the board of directors
of LSi nor any committee thereof shall have amended, modified, rescinded, or
repealed the resolutions adopted by such board on June 18, 1999 and shall not
have adopted any other resolutions in connection with this Agreement and the
transactions contemplated by this Agreement inconsistent with such resolutions.
(d) CONSENTS UNDER LSI OBLIGATIONS. LSi shall have obtained the
consent or approval of any Person whose consent or approval shall be required
under any agreement or instrument in order to permit the consummation of the
transactions contemplated by this Agreement except those which the failure to
obtain would not, individually or in the aggregate, have a Material Adverse
Effect on Tickets.com and its Subsidiaries taken as a whole, with or without
including its ownership of LSi after the Merger, or LSi.
Section 8.3 CONDITIONS TO OBLIGATIONS OF LSI. The obligation of LSi to
effect the Merger is subject to the satisfaction of the following conditions,
unless waived by LSi:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Tickets.com set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date as of the
Closing as though made on and as of the Closing and except as otherwise
contemplated by this Agreement); provided, however, if any such representation
or warranty is already qualified by materiality, for purposes of determining
whether this condition has been satisfied, such representation or warranty must
be true and correct in all respects without regard to materiality. LSi shall
have received a certificate signed on behalf of Tickets.com by an executive
officer of Tickets.com to such effect.
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(b) PERFORMANCE OF OBLIGATIONS OF TICKETS.COM. Tickets.com shall
have performed in all material respects all obligations, agreements and
covenants required to be performed by them under this Agreement, including its
funding commitments, at or prior to the Closing, and LSi shall have received a
certificate signed on behalf of Tickets.com by an executive officer of
Tickets.com to such effect.
ARTICLE IX
TERMINATION AND AMENDMENT
Section 9.1 TERMINATION. This Agreement may be terminated and the
Merger may be abandoned at any time before the Effective Time, notwithstanding
any requisite approval and adoption of this Agreement and the transactions
contemplated by this Agreement by the LSi Shareholders:
(a) by written consent duly authorized by the boards of directors
of both of Tickets.com and LSi:
(b) by Tickets.com or LSi if either (i) the Effective Time shall
not have occurred on or before October 31, 1999; however, the right to terminate
this Agreement under this Section 9.1(b)(i) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Effective Time to occur on or before such
date unless such failure has been outside the control of such party using its
reasonable efforts; or (ii) there shall be any statute, law, ordinance, rule, or
regulation that makes consummation of the Merger illegal or otherwise prohibited
or if any court of competent jurisdiction or Governmental Entity shall have
issued an order, decree, or ruling or taken any other action restraining,
enjoining, or otherwise prohibiting the Merger and such order, decree, ruling,
or other action shall have become final and nonappealable, except such as have
been sought by or on behalf of Tickets.com;
(c) by Tickets.com, if (i) the board of directors of LSi
withdraws, modifies, or changes its recommendation of this Agreement or the
Merger, or shall have resolved to do any of the foregoing or the board of
directors of LSi shall have recommended to the LSi Shareholders any Takeover
Proposal or resolved to do so; or (ii) a tender offer or exchange offer for 20%
or more of the outstanding shares of capital stock of LSi is commenced, and the
board of directors of LSi, within ten business days after such tender offer or
exchange offer is so commenced, either fails to recommend against acceptance of
such tender offer or exchange offer by the LSi Shareholders or takes no position
with respect to the acceptance of such tender offer or exchange offer by the LSi
Shareholders;
(d) by LSi in order to accept an offer for, or to enter into a
definitive agreement for a Takeover Proposal, upon one business day's prior
written notice to Tickets.com
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setting forth, in reasonable detail, the identity of the Person proposing the
Takeover Proposal and the terms and conditions of such Takeover Proposal, if, as
a result of an unsolicited proposal for such Takeover Proposal, the board of
directors of LSi, after advice of LSi's independent counsel (who may be LSi's
regularly engaged independent legal counsel), determines in good faith that
their legal or fiduciary duties under applicable law require that such Takeover
Proposal be accepted; provided, however, that any termination of this Agreement
by LSi pursuant to this Section 9.1(d) shall not be effective until LSi has made
payment of the full fee required by Section 9.4(a) of this Agreement;
(e) by either Tickets.com or LSi, if the Shareholders' Meeting of
LSi shall have been held and the LSi Shareholders shall have failed to adopt
this Agreement at such meeting (including any adjournment or postponement
thereof); by LSi, upon a breach of any representation, warranty, or agreement
set forth in this Agreement such that the condition set forth in Section 8.3(a)
would not be satisfied (a "Terminating Tickets.com Breach"); however, if such
Terminating Tickets.com Breach is curable by Tickets.com through the exercise of
its commercially reasonable efforts and Tickets.com continues to exercise its
commercially reasonable efforts, LSi may not terminate this Agreement under this
Section 9.1(f) for a period of 30 days after LSi's delivery to Tickets.com of
written notice setting forth in reasonable detail the circumstances giving rise
to such Terminating Tickets.com Breach; or
(g) by Tickets.com, upon a breach of any representation,
warranty, or agreement set forth in this Agreement such that the condition set
forth in Section 8.2(a) would not be satisfied (a "Terminating LSi Breach");
however, if such Terminating LSi Breach is curable by LSi through the exercise
of its commercially reasonable efforts and LSi continues to exercise such
commercially reasonable efforts, Tickets.com may not terminate this Agreement
under this Section 9.1(g) for a period of 30 days from the date on which
Tickets.com delivers to LSi written notice setting forth in reasonable detail
the circumstances giving rise to such Terminating LSi Breach.
Section 9.2 AMENDMENT. This Agreement may be amended by the mutual
agreement of the parties, by action taken or authorized by their respective
boards of directors, at any time before or after approval of the matters
presented in connection with the Merger by the LSi Shareholders, but, after any
such approval, no amendment shall be made that by law requires further approval
by such shareholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties to this Agreement.
Section 9.3 EXTENSION, WAIVER. At any time prior to the Effective
Time, the PARTIES to this Agreement, by action taken or authorized by their
respective boards of directors may, to the extent legally allowed, (a) extend
the time for the performance of any of the obligations or other acts of the
other parties to this Agreement; (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any document
delivered pursuant to this
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<PAGE>
Agreement; and (c) waive compliance with any of the covenants, agreements,
obligations or conditions contained in this Agreement. Any agreement on the part
of a party of this Agreement to any such extension or waiver shall be valid only
if set forth in a written instrument signed on behalf of such party.
Section 9.4 FEES AND EXPENSES UPON TERMINATION.
(a) TERMINATION Fee. LSi shall pay Tickets.com a fee of $250,000,
which amount includes fees and expenses (the "Termination Fee"), if this
Agreement is terminated:
(I) by LSi pursuant to Section 9.1(b)(i) and a Takeover
Proposal, having a value per share of LSi Common Stock exceeding the value per
share of LSi Common Stock as determined based on the Cash Consideration on the
date of termination, shall have been consummated within 12 months of the date of
this Agreement;
(ii) pursuant to Section 9.1(c);
(iii) pursuant to Section 9.1(d);
(iv) pursuant to Section 9.1(g) and a Takeover Proposal
shall have been consummated within 12 months of the date of this Agreement.
(b) Any payment required to be made pursuant to Section 9.4(a)
shall be made as promptly as practicable but in any event not later than five
business days after Tickets.com delivers a written request for such payment and
shall be made by wire transfer of immediately available funds to an account
designated by the recipient of such payment.
(c) If the party obligated to make a payment pursuant to Section
9.4(a) or 9.4(b) fails to pay the entire amount of such payment when due,
interest shall be paid on such unpaid amount, commencing on the date that the
Termination Fee became due, at a daily rate equal to the rate of interest
publicly announced by Citibank, N.A., from time to time, in the City of New
York, as such bank's Base Rate plus 2%, divided by 360.
ARTICLE X
MISCELLANEOUS
Section lO.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES, AND
AGREEMENTS. None of the representations, warranties, and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for the agreements contained in Sections 3.1,
3.2, 3.3, 7.4, 7.8 and 7.9.
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<PAGE>
Section 10.2 NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally or by overnight courier, telecopied (if confirmed), or, three
business days after having mailed, by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) If to Tickets.com or the Company:
Tickets.com, Inc.
4675 MacArthur Court, Suite 1400
Newport Beach, California 92660
Attention: Mr. John M. Markovich, Executive Vice President
Telecopy No.: (949) 862-5410
with a copy to:
Robert J. Grammig, Esquire
Holland & Knight LLP
400 North Ashley Drive, Suite 2300
Tampa, Florida 33602
Telecopy No.: (813) 229-0134
(b) if to LSi:
Lasergate Systems, Inc.
2189 Cleveland Street, Suite 230
Clearwater, Florida 33765
Attention: Chief Executive Officer
Telecopy No.: (727) 803-1590
with a copy to:
Mark S. Hirsch, Esquire
Parker, Chapin, Flattau & Khmpl, LLP
1211 Avenue of the Americas
New York, New York 10036-8735
Telecopy No.: (212) 704-6288
Section 10.3 INTERPRETATION. When a reference is made in this
Agreement to sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation." The phrase "made available" in
this Agreement shall mean that the information referred to has been made
available if requested by the party to whom
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<PAGE>
such information is to be made available. The parties acknowledge that they have
each participated in the negotiation and drafting of this Agreement and this
Agreement shall not be construed against either party as being the drafter of
the Agreement.
Section 10.4 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 10.5 ENTIRE AGREEMENT, NO THIRD PARTY BENEFICIARIES: RIGHTS OF
OWNERSHIP). This Agreement (including the documents and instruments referred to
herein) (a) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement; and (b) except as otherwise contemplated in
the covenants and agreements listed in Articles 6 and 7 (which covenants and
agreements shall be enforceable by the Persons affected thereby following the
Effective Time), are not intended to confer upon any Person other than the
parties hereto any rights or remedies under this Agreement.
Section 10.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of Florida without regard to any
applicable conflicts of law.
Section 10.7 NO REMEDY IN CERTAIN CIRCUMSTANCES. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part of this Agreement to be null, void, or unenforceable, or order
any party to take any action inconsistent with this Agreement or not to take any
action required herein, the other party shall not be entitled to specific
performance of such provision or part of this Agreement or to any other remedy,
including money damages for breach of this Agreement or of any other provision
of this Agreement or part of this Agreement as a result of such holding or
order.
Section 10.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests, or obligations under this Agreement shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties which consent cannot be arbitrarily
withheld, except that the Company may assign, in its sole discretion, any or all
of its rights, interests, and obligations under this Agreement to Tickets.com or
to any direct or indirect wholly-owned Subsidiary of Tickets.com. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by the parties and their respective successors and
permitted assigns.
IN WITNESS WHEREOF, Tickets.com, the Company, and LSi have caused this
Agreement to be executed on the date first written above.
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<PAGE>
LASERGATE SYSTEMS, INC. TICKETS.COM, INC.
By: By:
Jacqueline E. Soechtig, John M. Markovich,
Chairman and Chief Executive Executive Vice President
Officer
ADVANTIX ACQUISITION CORP.
By:
John M. Markovich,
Executive Vice President
IN WITNESS WHEREOF, Tickets.com, the Company, and LSi have caused this
Agreement to be executed on the date first written above.
LASERGATE SYSTEMS, INC. TICKETS.COM, INC
By: By:
Jacqueline E. Soechtig,
Chairman and Chief Executive Executive Vice, President
Officer
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<PAGE>
- -------------------------------------------------------------------------------
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
TICKETS.COM, INC.
AND
LASERGATE SYSTEMS, INC.
DATED OCTOBER 20, 1999
- -------------------------------------------------------------------------------
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<PAGE>
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This First Amendment (this "First Amendment") to Agreement and Plan of
Merger, dated as of October 20, 1999, is by and between Tickets.com, Inc., a
Delaware corporation ("Tickets.com") and Lasergate Systems, Inc., a Florida
corporation ("LSi").
BACKGROUND
Pursuant to an Agreement and Plan of Merger, dated June 21, 1999 (the
"Agreement"), by and among Tickets.com, Advantix Acquisition Corp., a Delaware
corporation (the "Company") and LSi, the Company, upon the affirmative vote of a
majority of the shareholders of LSi, shall be merged with and into LSi and shall
become a wholly-owned subsidiary of Tickets.com. All capitalized terms used and
not otherwise defined in this First Amendment shall have the meanings ascribed
to them in the Agreement. Accordingly, in consideration of the mutual covenants
and agreements set forth below, the parties agree as follows:
TERMS
1. SECTION 9.1 TERMINATION. Section 9.1(b) of the Agreement is hereby
amended in its entirety to read as follows:
(b) by Tickets.com or LSi if either (i) the Effective Time
shall not have occurred on or before January 31, 2000; however, the
right to terminate this Agreement under this Section 9.1(b)(i) shall
not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure
of the Effective Time to occur on or before such date unless such
failure has been outside the control of such party using its reasonable
efforts; or (ii) there shall be any statute, law, ordinance, rule, or
regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any court of competent jurisdiction or Governmental
Entity shall have issued an order, decree, or ruling or taken any other
action restraining, enjoining, or otherwise prohibiting the Merger and
such order, decree, ruling, or other action shall have become final and
nonappealable, except such as have been sought by or on behalf of
Tickets.com.
2. GOVERNING LAW. This First Amendment shall be governed by and construed in
accordance with the laws of Florida, without regard to any applicable conflicts
of law.
3. AGREEMENT REMAINS IN EFFECT. Except as specifically modified by this First
Amendment, the Agreement remains in full force and effect.
4. COUNTERPARTS. This First Amendment may be executed in counterpart originals,
and by facsimile transmission, each of which counterpart original shall be
deemed one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this First Amendment
as of the date first written above.
LASERGATE SYSTEMS, INC.
By: /s/ DAVID A. RILEY
-------------------------------
David A. Riley, Chief Executive
Officer and President
TICKETS.COM, INC.
By: /s/ TIM KELLY
------------------------
Name: Tim Kelly
Title: Executive Vice President
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<PAGE>
ANNEX B
June 21, 1999
Board of Directors
Lasergate Systems, Inc.
2189 Cleveland Street
Suite 230
Clearwater, FL 33765
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, of the consideration to be received by the holders of the outstanding
common stock (the "Common Stock") of Lasergate Systems, Inc. ("Lasergate" or the
"Company") in connection with the proposed merger (the "Merger") of Tickets.com,
Inc. ("Tickets.com", formerly known as ADVANTIX, Inc.) with Lasergate, pursuant
and subject to the Agreement and Plan of merger among Lasergate and Tickets.com
(the "Agreement") dated June 21, 1999. Under the Agreement, Tickets.com will pay
cash at the rate of $0.10 per share in exchange for all of the outstanding
Common Stock of Lasergate.
In connection with our review of the proposed Merger and the preparation of this
opinion, we have examined (i) the financial terms and conditions of the proposed
Merger as contained in the Agreement dated June 21,1999, (ii) the audited
financial statements of the Company for the years ended December 31, 1996 and
1997, (iii) the unaudited interim financial statements of the Company for the
periods ending March 31, June 30, September 30 and December 31, 1998, (iv)
certain internal financial forecasts and projections prepared by the management
of the Company for the Company and (v) certain other publicly available
financial information. Additionally, we held discussions with senior management
of the Company regarding past and current operations and the financial condition
and prospects of the Company, and considered other matters which we deemed
relevant to our inquiry.
We have assumed and relied upon the accuracy and completeness of all such
information provided to us or publicly available and have not independently made
any attempt to verify such information. We have not made any attempt to make or
obtain an independent appraisal of the value of the assets or the liabilities
(contingent or otherwise) of the Company. This opinion is not meant to be an
indication of the price at which Lasergate's common stock will trade at any time
or a recommendation as to any action a Lasergate common shareholder should take.
With respect to all information provided by management of Lasergate, we have
assumed that it represents the best currently available knowledge and judgment
of such management and has
B - 1
<PAGE>
Board of Directors June 21, 1999
Lasergate Systems, Inc. Page 2
been reasonably prepared. We have relied on the management of Lasergate to
advise us promptly if any information previously provided became inaccurate or
was required to be updated during the period of our review.
We express no opinion as to the underlying business decision to effect the
proposed Merger or the structure or tax consequences of the Agreement or the
availability or advisability of any alternatives to the proposed Merger or the
necessity or feasibility of obtaining any required shareholder approvals.
Raymond James did not structure the proposed Merger or negotiate the terms of
the proposed Merger.
We have also been assured by Lasergate's management that the Company is not
party to any pending material transactions including, but not limited to,
external financing, recapitalizations, acquisitions or mergers, other than the
proposed Merger. Our opinions is based on market, financial, economic and other
conditions existing as of the date of this letter and any change in such
conditions would require a reevaluation of this opinion.
In conducting our investigation and analyses and in arriving at our opinion
expressed herein, we have taken into account such accepted financial and
investment banking procedures and considerations as we deemed relevant,
including the review of (i) historical and projected revenues, operating
earnings, net income and capitalization of the Company and certain other
companies we believe to be comparable to the Company, (ii) the current financial
position and operating results of the Company and forecasted results of the
Company, (iii) the historical market prices and trading activities of the
Company's common stock, (iv) reported financial terms of business combinations
we deemed comparable in whole or in part, (v) the consideration to be paid in
the proposed Merger, (vi) the general condition of the securities markets, and
(vii) such other financial criteria as we deemed appropriate.
Raymond James & Associates, Inc. ("Raymond James") is actively involved in
investment banking activities and regularly undertakes the evaluation of
investment securities in connection with public offerings, private placements,
business combinations and similar transactions. Raymond James will be paid a fee
for this opinion. In addition, the Company has agreed to reimburse Raymond James
for its expenses incurred during this engagement and to indemnify Raymond James
against certain liabilities arising out of issuance of this opinion.
In the ordinary course of business, Raymond James may trade in the securities of
Lasergate for Raymond James' own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of Lasergate. This letter does not constitute a recommendation of any
type to any common shareholder as to how
B - 2
<PAGE>
Board of Directors June 21, 1999
Lasergate Systems, Inc. Page 3
such common shareholder should vote his shares in connection with the proposed
Merger, nor should be construed as creating any fiduciary duty on the part of
Raymond James to any such party. Except as provided in our engagement letter
with Lasergate, this opinion is not to be quoted or referred to, in whole or in
part, in any registration statement, prospectus or proxy statement, or in any
other document used in connection with the offering or sale of securities,
without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that as of June 21,
1999, the consideration to be received by Lasergate pursuant to the Agreement is
fair, from a financial point of view, to the holders of Lasergate's outstanding
common stock.
Very truly yours,
/s/ RAYMOND JAMES & ASSOCIATES, INC.
- ------------------------------------
Raymond James & Associates, Inc.
B - 3
<PAGE>
ANNEX C
DISSENTERS' RIGHTS OF APPRAISAL
607.1301 DISSENTERS' RIGHTS; DEFINITIONS.-The following definitions apply to
ss. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value," with respect to a dissenter's shares, means the value of
the shares as of the close of business on the day prior to the shareholders'
authorization date, excluding any appreciation or depreciation in anticipation
of the corporate action unless exclusion would be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date on which
the corporation received written consents without a meeting from the requisite
number of shareholders in order to authorize the action, or, in the case of a
merger pursuant to s. 607.1104, the day prior to the date on which a copy of the
plan of merger was mailed to each shareholder of record of the subsidiary
corporation.
HISTORY.-S. 118, CH. 89-154
607.1302 RIGHT OF SHAREHOLDERS TO DISSENT.-
(1) Any shareholder of a corporation has the right to dissent from, and
obtain payment of the fair value of his or her shares in the event of, any of
the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If the shareholder is entitled to vote on the merger, or
2. If the corporation is a subsidiary that is merged with its parent
under s. 607.1104, and the shareholders would have been entitled to
vote on action taken, except for the applicability of s. 607.1104;
(b) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation, other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale
or exchange pursuant to s. 607.1202, including a sale in dissolution
but not including a sale pursuant to court order or a sale for cash
pursuant to a plan by which all or substantially all of the net
proceeds of the sale will be distributed to the shareholders within 1
year after the date of sale;
<PAGE>
(c) As provided in s. 607.0902(l1), the approval of a control-share
acquisition;
(d) Consummation of a plan of share exchange to which the corporation is
a party as the corporation the shares of which will be acquired, if
the shareholder is entitled to vote on the plan;
(e) Any amendment of the articles of incorporation if the shareholder is
entitled to vote on the amendment and if such amendment would
adversely affect such shareholder by:
1. Altering or abolishing any preemptive rights attached to any of
his or her shares;
2. Altering or abolishing the voting rights pertaining to any of his
or her shares, except as such rights may be affected by the voting
rights of new shares then being authorized of any existing or new
class or series of shares;
3. Effecting an exchange, cancellation, or reclassification of any
of his or her shares, when such exchange, cancellation, or
reclassification would alter or abolish the shareholder's voting
rights or alter his or her percentage of equity in the corporation, or
effecting a reduction or cancellation of accrued dividends or other
arrearages in respect to such shares;
4. Reducing the stated redemption price of any of the shareholder's
redeemable shares, altering or abolishing any provision relating to
any sinking fund for the redemption or purchase of any of his or her
shares, or making any of his or her shares subject to redemption when
they are not otherwise redeemable;
5. Making noncumulative, in whole or in part, dividends of any of
the shareholder's preferred shares which had theretofore been
cumulative;
6. Reducing the stated dividend preference of any of the
shareholder's preferred shares; or
7. Reducing any stated preferential amount payable on any of the
shareholder's preferred shares upon voluntary or involuntary
liquidations; or
(f) Any corporate action taken, to the extent the articles of incorporation
provide that a voting or nonvoting shareholder is entitled to dissent and
obtain payment for his or her shares.
(2) A shareholder dissenting from any amendment specified in paragraph
(1)(e) has the right to dissent only as to those of his or her shares which are
adversely affected by the amendment.
(3) A shareholder may dissent as to less than all the shares registered in
his or her name. In that event, the shareholder's rights shall be determined as
if the shares as to which he or she has dissented and his or her other shares
were registered in the names of different shareholders.
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<PAGE>
(4) Unless the articles of incorporation otherwise provide, this section
does not apply with respect to a plan of merger or share exchange or a proposed
sale or exchange of property, to the holders of shares of any class or series
which, on the record date fixed to determine the shareholders entitled to vote
at the meeting of shareholders at which such action is to be acted upon or to
consent to any such action without a meeting, were either registered on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc., or held of record by not fewer than 2,000 shareholders.
(5) A shareholder entitled to dissent and obtain payment for his or her
shares under this section may not challenge the corporate action creating his
or her entitlement unless the action is unlawful or fraudulent with respect to
the shareholder or the corporation.
HISTORY.- S. 119, CH. 89-154; S 5, CH 94-327; S 31, CH. 97-102.
607.1320 PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS.-
(1)(a) If a proposed corporate action creating dissenters' rights under s.
607.1302 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights and be accompanied by a copy of ss. 607.1301, 607.1302, and 607.1320. A
shareholder who wishes to assert dissenters' rights shall:
1. Deliver to the corporation before the vote is taken written
notice of the shareholder's intent to demand payment for his or her
shares if the proposed action is effectuated, and
2. Not vote his or her shares in favor of the proposed action. A
proxy or vote against the proposed action does not constitute such a
notice of intent to demand payment.
(b) If proposed corporate action creating dissenters' rights under
s. 607.1302 is effectuated by written consent without a meeting, the
corporation shall deliver a copy of ss. 607.1301, 607.1302, and 607.1320 to
each shareholder simultaneously with any request for the shareholder's
written consent or, if such a request is not made, within 10 days after the
date the corporation received written consents without a meeting from the
requisite number of shareholders necessary to authorize the action.
(2) Within 10 days after the shareholders' authorization date, the
corporation shall give written notice of such authorization or consent or
adoption of the plan of merger, as the case may be, to each shareholder who
filed a notice of intent to demand payment for his or her shares pursuant to
paragraph (1)(a) or, in the case of action authorized by written consent, to
each shareholder, excepting any who voted for, or consented in writing to, the
proposed action.
(3) Within 20 days after the giving of notice to him or her, any
shareholder who elects to dissent shall file with the corporation a notice of
such election, stating the shareholder's name and address, the number, classes,
and series of shares as to which he or she dissents, and a
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<PAGE>
demand for payment of the fair value of his or her shares. Any shareholder
failing to file such election to dissent within the period set forth shall be
bound by the terms of the proposed corporate action. Any shareholder filing an
election to dissent shall deposit his or her certificates for certificated
shares with the corporation simultaneously with the filing of the election to
dissent. The corporation may restrict the transfer of uncertificated shares from
the date the shareholder's election to dissent is filed with the corporation.
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and shall not
be entitled to vote or to exercise any other rights of a shareholder. A notice
of election may be withdrawn in writing by the shareholder at any time before an
offer is made by the corporation, as provided in subsection (5), to pay for his
or her shares. After such offer, no such notice of election may be withdrawn
unless the corporation consents thereto. However, the right of such shareholder
to be paid the fair value of his or her shares shall cease, and the shareholder
shall be reinstated to have all his or her rights as a shareholder as of the
filing of his or her notice of election, including any intervening preemptive
rights and the right to payment of any intervening dividend or other
distribution or, if any such rights have expired or any such dividend or
distribution other than in cash has been completed, in lieu thereof, at the
election of the corporation, the fair value thereof in cash as determined by the
board as of the time of such expiration or completion, but without prejudice
otherwise to any corporate proceedings that may have been taken in the interim,
if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the
shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a court
has been made or filed within the time provided in this section; or
(d) A court of competent jurisdiction determines that such shareholder is
not entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which shareholders
may file their notices of election to dissent, or within 10 days after such
corporate action is effected, whichever is later (but in no case later than 90
days from the shareholders' authorization date), the corporation shall make a
written offer to each dissenting shareholder who has made demand as provided in
this section to pay an amount the corporation estimates to be the fair value for
such shares. If the corporate action has not been consummated before the
expiration of the 90-day period after the shareholders' authorization date, the
offer may be made conditional upon the consummation of such action. Such notice
and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which the dissenting
shareholder holds, as of the latest available date and not more than 12
months prior to the making of such offer; and
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<PAGE>
(b) A profit and loss statement of such corporation for the 12-month period
ended on the date of such balance sheet or, if the corporation was not in
existence throughout such 12-month period, for the portion thereof during
which it was in existence.
(6) If within 30 days after the making of such offer any shareholder
accepts the same, payment for his or her shares shall be made within 90 days
after the making of such offer or the consummation of the proposed action,
whichever is later. Upon payment of the agreed value, the dissenting shareholder
shall cease to have any interest in such shares.
(7) If the corporation fails to make such offer within the period specified
therefor in subsection (5) or if it makes the offer and any dissenting
shareholder or shareholders fail to accept the same within the period of 30 days
thereafter, then the corporation, within 30 days after receipt of written demand
from any dissenting shareholder given within 60 days after the date on which
such corporate action was effected, shall, or at its election at any time within
such period of 60 days may, file an action in any court of competent
jurisdiction in the county in this state where the registered office of the
corporation is located requesting that the fair value of such shares be
determined. The court shall also determine whether each dissenting shareholder,
as to whom the corporation requests the court to make such determination, is
entitled to receive payment for his or her shares. If the corporation fails to
institute the proceeding as herein provided, any dissenting shareholder may do
so in the name of the corporation. All dissenting shareholders (whether or not
residents of this state), other than shareholders who have agreed with the
corporation as to the value of their shares, shall be made parties to the
proceeding as an action against their shares. The corporation shall serve a copy
of the initial pleading in such proceeding upon each dissenting shareholder who
is a resident of this state in the manner provided by law for the service of a
summons and complaint and upon each nonresident dissenting shareholder either by
registered or certified mail and publication or in such other manner as is
permitted by law. The jurisdiction of the court is plenary and exclusive. All
shareholders who are proper parties to the proceeding are entitled to judgment
against the corporation for the amount of the fair value of their shares. The
court may, if it so elects. appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value. The appraisers
shall have such power and authority as is specified in the order of their
appointment or an amendment thereof. The corporation shall pay each dissenting
shareholder the amount found to be due him or her within 10 days after final
determination of the proceedings. Upon payment of the judgment, the dissenting
shareholder shall cease to have any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair rate
of interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined by
the court and shall be assessed against the corporation but all or any part of
such costs and expenses may be apportioned and assessed as the court deems
equitable against any or all of the dissenting shareholders who are parties to
the proceeding, to whom the corporation has made an offer to pay for the shares,
if the court finds that the action of such shareholders in failing to accept
such offer was arbitrary, vexatious, or not in good faith. Such expenses shall
include reasonable
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<PAGE>
compensation for, and reasonable expenses of, the appraisers, but shall exclude
the fees and expenses of counsel for, and experts employed by, any party. If the
fair value of the shares, as determined, materially exceeds the amount which the
corporation offered to pay therefor or if no offer was made, the court in its
discretion may award to any shareholder who is a party to the proceeding such
sum as the court determines to be reasonable compensation to any attorney or
expert employed by the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the agreed
value thereof or pursuant to payment of the judgment entered therefor, as
provided in this section, may be held and disposed of by such corporation as
authorized but unissued shares of the corporation, except that, in the case of a
merger. They may be held and disposed of as the plan of merger otherwise
provides. The shares of the surviving corporation into which the shares of such
dissenting shareholders would have been converted had they assented to the
merger shall have the status of authorized but unissued shares of the surviving
corporation.
HISTORY. - S. 120, CH. 89-154; S. 35, CH. 93-281; S. 32, CH 97-102.
C - 6
<PAGE>
PROXY
LASERGATE SYSTEMS, INC.
2189 CLEVELAND STREET, SUITE 230
CLEARWATER, FLORIDA 33765
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF LASERGATE SYSTEMS, INC.
The undersigned shareholder of LASERGATE SYSTEMS, INC., a Florida
corporation ("Lasergate"), hereby appoints David A. Riley and Steven H. Noble,
III, and each of them, as proxies, each with the power to appoint his or her
substitute, and hereby authorizes each of them to represent, and to vote as
designated on the reverse side, all the shares of common stock of Lasergate held
of record by the undersigned on October 25, 1999 at the Special Meeting of
Shareholders of Lasergate, to be held at 2189 Cleveland Street, Clearwater,
Florida, on December 15, 1999 at 10:00 a.m., Daylight Time and at all
adjournments or postponements thereof upon the following matters, as set forth
in the Notice of Special Meeting of Shareholders and Proxy Statement, each dated
November ___, 1999, copies of which have been received by the undersigned,
hereby revoking any proxy heretofore given.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE APPROVAL OF THE AGREEMENT AND PLAN OF MERGER AND THE
TRANSACTIONS CONTEMPLATED THEREBY.
(CONTINUED AND TO BE DATED AND SIGNED ON REVERSE SIDE)
<PAGE>
PLEASE MARK
YOUR VOTES AS
INDICATED /X/
IN THIS EXAMPLE:
The Board of Lasergate recommends a vote for the Agreement and Plan of Merger.
1. Proposal to approve and adopt the Agreement and Plan of Merger, dated
as of June 21, 1999, by and among Tickets.com, Inc., Advantix
Acquisition Corp. and Lasergate Systems, Inc., as heretofore and
hereafter amended, and the transactions contemplated thereby:
/ / FOR / / AGAINST / / ABSTAIN
2. The proxies are hereby authorized to vote in their discretion upon all
other business as may properly come before the Special Meeting.
Please sign exactly as your name appears on this proxy.
If the shares represented by this proxy are held by
joint tenants, both must sign. When signing as
attorney, executor, administrator, trustee or guardian,
please give full title as such. If shareholder is a
corporation, please sign in full corporate name by
President or other authorized officer. If shareholder
is a partnership, please sign in partnership name by
authorized person.
Signature: Date:
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Signature: Date:
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PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED POSTAGE PREPAID ENVELOPE
