ADVANCED MEDICAL PRODUCTS INC.
6 Woodcross Drive
Columbia, SC 29212
INFORMATION STATEMENT
RELATING TO CORPORATE ACTION
TO BE TAKEN BY WRITTEN CONSENT
IN LIEU OF MEETING OF STOCKHOLDERS
ON OR PROMPTLY AFTER DECEMBER 22, 1999
INTRODUCTION
This Information Statement is being furnished in connection
with corporate actions proposed to be authorized by written consent,
without a meeting, on December 22, 1999 or promptly thereafter, by
a majority of the outstanding Common Stock of Advanced Medical
Products Inc. (the "Company") entitled to vote thereon. No meeting
of stockholders will be held, nor is one being called. The matters
to be acted upon by the Consent are set forth as follows:
1. To vote upon a proposal to amend the Company's
Certificate of Incorporation to change the name
of the Company to "ADVA International Inc.";
2. To vote upon a proposal to amend the Company's
Certificate of Incorporation to effectuate a 1-
for-10 reverse stock split (the "Reverse Stock
Split") of all outstanding shares of Common Stock
of the Company;
3. To vote upon a proposal to amend the Company's
Certificate of Incorporation to increase the
amount of authorized Common Stock, following the
effectuation of the Reverse Stock Split; and:
4. To vote upon a proposal to amend the Company's
Certificate of Incorporation to authorize "blank
check" Preferred Stock.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
Record Date and Voting
The Board of Directors has fixed the close of business on December 10,
1999 as the record date for the determination of stockholders entitled to
receive notice of the proposals described above. On that date there were
5,692,495 shares of the Company's Common Stock, par value $.01 per share
("Common Stock"), issued and outstanding. The proposals to be acted upon as
described above each require the affirmative vote of a majority of the out-
standing shares of Common Stock of the Company entitled to vote thereon.
Each share of Common Stock is entitled to one vote on each of the proposals.
The Company has been advised that its officers, directors and certain
major stockholders, who currently exercise voting power over an aggregate of
approximately 3,549,690 shares, or approximately 59.6% of the Company's
outstanding Common Stock, intend to vote in favor of the proposals.
Accordingly, the Company anticipates that each of the proposed amendments to the
Company's Certificate of Incorporation will be authorized by written consent
(the "Consent") without a meeting in accordance with Section 228 of the
Delaware General Corporation Law (see "Voting Securities and Principal Holders
Thereof"). The Company anticipates notifying its stockholders of the Consent
when the proposals become effective approximately January 4, 2000, or as soon
thereafter as practicable.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth, as of December 10, 1999, certain
information concerning beneficial ownership of the Company's Common Stock
by (i) each person known to the Company to own 5% or more of the Company's
Common Stock, (ii) each director of the Company and (iii) all directors and
officers of the Company as a group. Unless otherwise indicated in the footnotes
following the table, the persons as to whom the information is given have sole
voting and investment power over the shares shown as beneficially owned,
subject to community property laws where applicable.
Name and Address Amount and Nature of Percent of
Beneficial Ownership(1) Class(2)
Ronald G. Moyer
6 Woodcross Drive
Columbia, SC 29212 3,300,000(2) 55.3
BIOTEL Inc.
6 Woodcross Drive
Columbia, SC 29212 3,300,000(2) 55.3
George L. Down
6 Woodcross Drive
Columbia, SC 29212 196,766(3) 3.3
Officers and Directors
as a Group (of 4
persons) 3,549,690(1), (2), (3), (4) 59.6
(1) As used herein, the term beneficial ownership with respect to a
security is defined by Rule 13d-3 under the Securities Exchange Act of 1934 as
consisting of sole or shared voting power (including the power to vote or
direct the vote) and/or sole or shared investment power (including the power
to dispose or direct the disposition of) with respect to the security through
any contract, arrangement, understanding, relationship or otherwise, including
a right to acquire such power(s) during the next 60 days.
(2) Ronald G. Moyer as President and Chairman of BIOTEL Inc. ("BIOTEL")
may be deemed to be the beneficial owner of the shares owned by BIOTEL by
virtue of his control over the voting power of those shares.
(3) Includes (i) 14,976 shares owned of record by the Helen L. Down
Trust (Helen Down is the mother of Mr. Down), for which Mr. Down serves as
trustee and (ii) 19,576 shares owned of record by members of Mr. Down's family,
which shares are subject to voting proxies held by Mr. Down
(4) Includes 52,924 shares beneficially owned by the Secretary of the
Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was incorporated in the state of Delaware in September 1986,
and in June 1987 successfully concluded an IPO of its Common Stock, raising
$2,034,000 net proceeds. In 1994 Nishimoto Sangyo Company Ltd., a Japanese
distributor of the Company's products, purchased 2,000 shares of Preferred
Stock in the Company for $2,000,000. Through 1997 Nishimoto accepted
additional shares of Preferred Stock and common stock in satisfaction of
unpaid dividends on the Preferred Stock. 160 Preferred shares were issued to
SCANA in 1996.
On January 12, 1996 Carolina Medical, Inc., a privately held medical
device manufacturing company located in King, North Carolina, purchased 750,000
shares of Advanced Medical Products, Inc.'s authorized but un-issued Common
Stock for $150,000. BioTel International, Inc., a holding company (which was
subsequently acquired by Carolina Medical) purchased an additional 1,400,000
shares of Advanced Medical's Common Stock on March 29, 1996 for $280,000. On
October 20, 1997 the Company entered into a Stock Purchase Agreement with
Carolina Medical, Inc., selling an additional 850,000 shares of Common Stock of
Advanced Medical Products, Inc. to Carolina Medical, Inc. for $263,500. This
stock purchase increased Carolina Medical's ownership in the Company to
3,000,000 shares or 50.3 percent of the 5,962,495 issued and outstanding Common
Stock shares.
In May 1998 Nishimoto Sangyo sold 300,000 common stock shares and 2,217
preferred stock shares in the Company in exchange for shares of Carolina
Medical, Inc. This transaction brought Carolina Medical's ownership in the
Company to 55.3% of the common stock and 93.3% of the preferred stock of the
Company issued and outstanding. In June 1998 Carolina Medical purchased from
SCANA the remaining 160 Preferred shares of the Company. As of June 30, 1998,
dividends on the Preferred Stock of $162,981 were owed to Carolina Medical by
the Company.
On July 23, 1998, Biosensor acquired all of the outstanding shares of
CMI of Minnesota ("CMI"), a Minnesota corporation, pursuant to a Plan of
Reorganization and Agreement by and between CMI and Biosensor. Carolina
Medical Inc., a North Carolina corporation which owned 55.3% of the common
stock and all of the preferred stock of the Company, was merged with and into
CMI, which also owned Braemar, Inc., a North Carolina corporation operating in
Minneapolis, MN. This transaction became effective July 1, 1998 and was
recorded as a "reverse acquisition", whereby CMI was deemed to have acquired
Biosensor. The net assets of Biosensor acquired were recorded at fair market
value. The historical financial statements of Biosensor prior to the
acquisition became those of CMI. Subsequent to July 1, 1998, the financial
statements of Biosensor include the operations of the combined companies,
including Carolina Medical, Braemar, and Advanced Medical Products, Inc.
In July 1998, the Company's board approved a plan to sell the Company's
MICROS QV product line to Carolina Medical in exchange for all of the 2,377
shares of Preferred Stock in the Company (having a face value of $2,377,000),
and the unpaid dividends of $162,981. In October 1998 the Plan that had been
approved by both companies was completed, and all of the shares of the
Company's Preferred Stock issued and outstanding were retired.
On March 23, 1999, after reporting that, for the quarter ended December
31, 1998 the Company had net losses of $373,173 of which $130,000 was as a
result of their distributor in Europe, Kontron Instruments Ltd. filing for
Administrative Receivership, Advanced Medical Products, Inc. filed a motion
with the Federal Bankruptcy Court, District of South Carolina, for an order
authorizing the sale of all assets, including equipment, inventory, and
accounts receivable, outside the ordinary course of business, free and clear
of all liens and encumbrances and other interests, pursuant to 11 U.S.C.
Section 363 of the bankruptcy code. Advanced Medical Products, Inc. continued
to operate as debtor in possession, pending sale of the assets. Emergent Asset
Based Lending, L.L.C., Advanced Medical's principle secured lender whose loan
agreement has been in default since December, agreed to continue to lend
against receivables and inventory based on Biosensor's guarantee of the debt.
As of March 22, 1999, $ 253,446 was borrowed by Advanced Medical under this
agreement.
On May 3, 1999, the United State Bankruptcy Court for the District of
South Carolina entered and order approving the Disclosure Statement filed on
March 23, 1999, fixing June 11, 1999 as the last day for filing ballots
accepting or rejecting the Plan of Reorganization, and setting June 21, 1999
as the date of the hearing on the confirmation of the Plan. On May 11, 1999
Advanced Medical Products, Inc. sold all assets, including equipment,
inventory, and accounts receivable, outside the ordinary course of business,
free and clear of all liens and encumbrances and other interests, pursuant to
11 U.S.C. Section 363 of the bankruptcy code. Biosensor Corporation
purchased the assets and assumed all of the secured debt, employee and
commission liabilities, and all customer warranty and service liabilities of
Advanced Medical Products, Inc. In addition, Biosensor made a payment of
$68,000 for certain priority claims and administrative expenses, and for
distribution to outside unsecured creditors. Biosensor and its subsidiaries
agreed not to participate in distribution of payments toward unsecured claims,
although their claims exceeded unsecured claims by all non-affiliated
creditors combined. The assets and liabilities of Advanced Medical were
consolidated with the operating assets and liabilities of Biosensor, and the
assets and liabilities of Diagnostic Monitoring purchased by Biosensor from
Cardiac Science Inc. on December 31, 1998, into Advanced Biosensor, Inc., a
new wholly owned subsidiary of Biosensor, which also assumed Advanced
Medical's lease obligations and continued to operate the business at the
present Columbia, SC location. On May 23, 1999 stockholders of Biosensor
Corporation voted to change the name of Biosensor Corporation to BIOTEL Inc.
At a hearing held on June 21, 1999 the Plan of Reorganization, as amended,
was confirmed. The Plan had previously been approved by all classes of
creditors. On June 29, 1999 the United State Bankruptcy Court for the District
of South Carolina entered an order confirming the Plan of Reorganization.
The Chapter 11 bankruptcy estate of Advanced Medical Products, Inc. has been
fully administered. The Company filed the Final Report in Chapter 11
Proceeding with the Court on October 5, 1999, and the Final Decree closing the
bankruptcy case was issued by the Court on November 9, 1999.
The Company has been advised that since October 1999, BIOTEL, Inc.
has had discussions with several parties regarding the possibility of
BIOTEL selling its 3,300,000 common stock shares of the Company, or voting
its majority shares in the Company in favor of a reverse merger. No
agreement has been reached with any party at this time, however BIOTEL
intends to continue to pursue the possibility of selling all or part of its
holdings in the Company to a third party, or approving a reverse merger.
Potential buyers of the majority position in the Company's stock have
indicated that their interest is in merging a privately held company into
the Company in a "reverse merger". All of the current Directors of the
Company have agreed to resign if their resignation is requested in order to
facilitate a possible reverse merger that could create value for the
Company's stockholders.
APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
The Board of Directors has unanimously approved and adopted a resolution
amending Article 1 of the Company's Certificate of Incorporation to change the
name of the Company to "ADVA International Inc." (the "Name Change Amendment").
Effect of the Change of Name
The change of the corporate name will not in any way affect the validity
or transferability of stock certificates currently outstanding, the capital
structure of the Company, the rights or obligations of the Company with respect
to its existing contractual obligations, nor will it impact third parties'
obligations with respect to the Company.
Upon adoption of this proposal pursuant to the Consent, the Board of
Directors will authorize the officers of the Company to file such amendment
with the Delaware Secretary of State. In addition, notification of the name
change will be filed with the Securities and Exchange Commission. The Company
anticipates expanded opportunities for a reverse merger outside the medical
field, while being able to retain the use of the trading symbol "ADVA" with
this name change.
Vote Required for Approval
The Board of Directors believes that it is in the best interests of the
Company and its stockholders to amend the Company's Certificate of
Incorporation to change the Company's name to "ADVA International Inc." and has
directed that the Name Change Amendment be submitted for stockholder approval.
The affirmative vote of a majority of the outstanding shares of Common Stock
entitled to vote on this proposal will be required for approval of the proposal
to change the name of the Company. It is expected that this proposal will be
authorized by the Consent.
APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION
TO EFFECT A 1-FOR-10 REVERSE STOCK SPLIT
The Board of Directors has unanimously approved and adopted a resolution
amending Article 4 of the Company's Certificate of Incorporation to effect the
Reverse Stock Split (the "Stock Split Amendment"). The description which
follows is qualified in its entirety by the exact language of the Stock Split
Amendment.
The intent of the Reverse Stock Split is to reduce the number of shares of
Common Stock outstanding and to increase the marketability and liquidity of the
Common Stock. The Reverse Stock Split will be effected unless there is a
subsequent determination by the Board of Directors that the Reverse Stock Split
is not in the best interests of the Company and its stockholders. Although the
Board of Directors believes as of the date of this Information Statement that
the Reverse Stock Split is advisable, the Reverse Stock Split may be
abandoned by the Board of Directors at any time prior to filing the proposed
Stock Split Amendment.
Purposes of the Reverse Stock Split
The principal purpose of the Reverse Stock Split is to reduce the number of
shares of Common Stock outstanding. The Board of Directors believes that the
total number of shares outstanding is disproportionately large relative to the
Company's present market capitalization. The Board of Directors believes that
a decrease in the number of outstanding shares of Common Stock, without any
material alteration of the proportionate economic interest in the Company held
by individual stockholders, may increase the trading price of the outstanding
shares, although no assurance can be given that the market price of the Common
Stock will rise in proportion to the reduction in the number of outstanding
shares resulting from the Reverse Stock Split.
The shares of Common Stock of the Company outstanding have not traded on
any exchange since it was de-listed by NASDAQ in 1995. During the past 12
months, the Company's Common Stock has been listed on the NASDAQ Bulletin Board
at prices ranging from $.01 bid to $.31 asked. There have been no consistently
active market makers and trading volume has been light.
The Board of Directors believes the Name Change, the Reverse Stock Split, and
the Authorization of Additional Common and Preferred Stock are all desirable
changes to position the Company to attempt to do a reverse merger with a
privately held company and recover some value for the stockholders of the
Company. There can be no assurances, however, that the foregoing effects will
occur or that the market price of the Common Stock immediately after
implementation of the proposed Reverse Stock Split will be maintained for any
period of time, or that such market price will approximate ten times the market
price before the proposed Reverse Stock Split, or that a suitable reverse
merger partner can be timely located, or that a suitable transaction can be
successfully negotiated or completed.
Effect of the Reverse Stock Split
Unless there is a subsequent determination by the Board of Directors that
the Reverse Stock Split is not in the best interests of the Company and its
stockholders, the Stock Split Amendment would be filed with the Delaware
Secretary of State on any date (the "Reverse Split Date") selected by the Board
of Directors on or prior to the Company's next annual meeting of stockholders.
The Reverse Stock Split would become effective as of 5:00 p.m. on the date of
such filing (the "Effective Time"). Without any further action on the part of
the Company or the holders of the Common Stock, the shares of Common Stock held
by stockholders of record as of the Reverse Split Date would be converted at
the Effective Time into the right to receive an amount of whole shares of new
Common Stock equal to the number of their shares divided by ten. The number of
authorized shares of Common Stock would be reduced from 7,000,000 to 700,000.
Consummation of the Reverse Stock Split will have no material federal tax
consequences to stockholders.
As of the Effective Time on the Reverse Split Date, each share of the
Common Stock issued and outstanding immediately prior thereto (the "Old Common
Stock") will be reclassified as and changed into the appropriate fraction of a
share of the Company's Common Stock (the "New Common Stock"), subject to the
treatment of fractional share interests described below. Shortly after the
Reverse Split Date, the Company will send transmittal forms to the holders of
the Old Common Stock to be used in forwarding their certificates formerly
representing Old Common Stock for surrender and exchange for (i) certificates
representing shares of New Common Stock, and (ii) scrip in lieu of any fraction
of a share of New Common Stock to which such holders would otherwise be
entitled.
No certificates or cash representing fractional share interests in the New
Common Stock will be issued, and no such fractional share interest will entitle
the holder thereof to vote, or to any rights of a stockholder of the Company.
In lieu of any such fractional share interest, each holder of Old Common Stock
who would otherwise be entitled to receive a fractional share of New Common
Stock will be issued scrip upon surrender of certificates formerly
representing Old Common Stock held by such holder, which scrip shall equal a
credit toward the purchase price of additional shares of the Company's Common
Stock, in an amount equal to the product of such fraction multiplied by the
closing price of the Old Common Stock on the NASDAQ Bulletin Board as of the
Effective Time on the Reverse Split Date (or in the event that the Common
Stock is not so traded at such time, such closing price on the next preceding
day on which such stock was traded on the NASDAQ Bulletin Board). The scrip
shall be freely transferable.
Approval of the Reverse Stock Split would not affect any continuing stock-
holder's percentage ownership interest in the Company or proportional voting
power, except for minor differences resulting from the issuance of scrip for
fractional shares. The shares of Common Stock which would be issued upon
approval of the Reverse Stock Split would be fully paid and non-assessable.
The voting rights and other privileges of the continuing holders of Common
Stock would not be affected substantially by adoption of the Reverse Stock
Split or subsequent implementation thereof.
The Common Stock is listed for trading on the NASDAQ Bulletin Board and on
the Record Date, December 10, 1999, the reported closing price of the Common
Stock was $.125 per share. The number of record holders of the Common Stock on
the Record Date was approximately 1900. The Company does not anticipate that
the Reverse Stock Split would result in a significant reduction in the number of
such holders, and does not currently intend to effect the Reverse Stock Split
if it would result in a reduction in the number of holders large enough to
jeopardize the Company's status as a "public" company. However, the proposed
reverse split will significantly reduce the number of "round lot" (more than
100 shares) holders.
As of the Record Date, the number of issued and outstanding shares of
Common Stock was 5,962,495. Based upon the Company's best estimates, the
aggregate number of shares of Common Stock that would be issued and outstanding
as a result of the Reverse Stock Split would be approximately 595,000 and
105,000 shares would be authorized and unissued, assuming that no additional
shares of Common Stock are issued after the Record Date.
Exchange of Stock Certificates
As soon as practicable after the Reverse Split Date the Company will send
a letter of transmittal to each stockholder of record on the Reverse Split Date
for use in transmitting certificates representing shares of old Common Stock
("Old Certificates") to the Company's transfer agent, Valley Forge Software,
Inc. (the "Exchange Agent"). The letter of transmittal will contain
instructions for the surrender of Old Certificates to the Exchange Agent in
exchange for certificates representing the appropriate number of whole shares of
New Common Stock. No new certificates will be issued to a stockholder until
such stockholder has surrendered all Old Certificates together with a properly
completed and executed letter of transmittal to the Exchange Agent.
Upon proper completion and execution of the letter of transmittal and
return thereof to the Exchange Agent, together with all Old Certificates,
stockholders will receive a new certificate or certificates representing the
number of whole shares of New Common Stock into which their shares of Common
Stock represented by the Old Certificates have been converted as a result of
the Reverse Stock Split. Until surrendered, outstanding Old Certificates
held by stockholders will be deemed for all purposes to represent the number of
whole shares of Common Stock to which such stockholders are entitled as a
result of the Reverse Stock Split. Stockholders should not send their Old
Certificates to the Exchange Agent until they have received the letter of
transmittal. Shares not presented for surrender as soon as practicable after
the letter of transmittal is sent shall be exchanged at the first time they are
presented for transfer.
Stockholders whose shares are held of record by their brokerage firm or
other nominees need not take any action to exchange such shares. The brokerage
firm or other nominee, as the record holder of such shares, will receive the
letter of transmittal and will be required to surrender the Old Certificates
representing such shares, together with the completed and executed letter of
transmittal, in order to receive new certificates.
No service charges will be payable by holders of shares of Common Stock in
connection with the exchange of certificates, all expenses of which will be
borne by the Company.
Federal Income Tax Consequences
The following description of federal income tax consequences is based on
the Internal Revenue Code of 1986, as amended (the "Code"), the applicable
Treasury Regulations promulgated thereunder, judicial authority and current
administrative rulings and practices as in effect on the date of this
Information Statement. The discussion is for general information only and does
not discuss consequences which may apply to special classes of taxpayers (e.g.,
non-resident aliens, broker-dealers or insurance companies). This summary does
not discuss any consequence of the Reverse Stock Split under any state, local
or foreign tax laws. Stockholders are urged to consult their own tax advisors
to determine the particular consequences to them. Neither the exchange of
shares of Old Common Stock for shares of New Common Stock nor the issuance of
scrip will result in recognition of gain or loss. Gain or loss will result
upon the sale or other disposition of scrip (except if such scrip is exchanged
with the Company in return for the issuance of additional shares of Common
Stock). In such event a stockholder would recognize gain or loss, as the case
may be, measured by the difference between the amount of cash or other property
received and the basis of his or her Old Common Stock allocable to the
fractional share represented by the scrip. Such gain or loss will be capital
gain or loss if such stockholder's Old Common Stock was held as a capital
asset, and any such capital gain or loss will generally be long-term capital
gain or loss to the extent such stockholder's holding period for his or her
Old Common Stock exceeds twelve (12) months.
The holding period of the shares of New Common Stock will include the
stockholder's holding period for the shares of Old Common Stock exchanged
therefor, provided that the shares of Old Common Stock were held as a capital
asset. The total basis of the shares of New Common Stock will be the same as
the total basis of the shares of Old Common Stock exchanged therefor, reduced
by the basis allocable to the receipt of scrip in lieu of fractional shares as
described above.
Vote Required for Approval
The Board of Directors believes that it is in the best interests of the
Company and its stockholders to amend the Company's Articles of Incorporation
to effect the Reverse Stock Split and has directed that the Stock Split Amend-
ment be submitted for stockholder approval. The affirmative vote of a
majority of the outstanding shares of Common Stock entitled to vote on this
proposal is required for approval. It is expected that this proposal will be
authorized by the Consent.
Voting Securities and Principal Holders Thereof After Reverse Split
Upon consummation of the reverse stock split, there will be approximately
1,704,165 shares of the Common Stock outstanding, each of which will entitle
the holder thereof to one vote on each matter which may come before a meeting
of the stockholders.
The following table sets forth certain information regarding the
beneficial ownership of the Company's common stock following the Effective Time
of the Reverse Stock Split by (i) each person known to the Company to own 5% or
more of the Company's Common Stock, (ii) each director of the Company and (iii)
all directors and officers of the Company as a group.
Name and Address Amount and Nature of Percent of
Beneficial Ownership(1) Class(2)
Ronald G. Moyer
6 Woodcross Drive
Columbia, SC 29212 330,000(2) 55.3
BIOTEL Inc.
6 Woodcross Drive
Columbia, SC 29212 330,000(2) 55.3
George L. Down
6 Woodcross Drive
Columbia, SC 29212 19,677 (3) 3.3
Officers and Directors
as a Group (of 4
persons) 354,969(1),(2),(3),(4) 59.6
(1) As used herein, the term beneficial ownership with respect to a
security is defined by Rule 13d-3 under the Securities Exchange Act
of 1934 as consisting of sole or shared voting power (including the
power to vote or direct the vote) and/or sole or shared investment
power (including the power to dispose or direct the disposition of)
with respect to the security through any contract, arrangement,
understanding, relationship or otherwise, including a right to
acquire such power(s) during the next 60 days.
(2) Ronald G. Moyer as President and Chairman of BIOTEL Inc. ("BIOTEL")
may be deemed to be the beneficial owner of the shares owned by
BIOTEL by virtue of his control over the voting power of those
shares.
(3) Includes (i) 1,498 shares owned of record by the Helen L. Down Trust
(Helen Down is the mother of Mr. Down), for which Mr. Down serves as
trustee and (ii) 1,957 shares owned of record by members of Mr.
Down's family, which shares are subject to voting proxies held by
Mr. Down
(4) Includes 5,292 shares beneficially owned by the Secretary of the
Company.
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
The Board of Directors has unanimously approved and adopted a resolution
amending Article 4 of the Company's Certificate of Incorporation to increase
the authorized Common Stock of the Company from 700,000 shares following the
Reverse Stock Split to 20,000,000 shares (the "Common Stock Amendment").
Purposes for Increase in Common Stock
The Company's current Certificate of Incorporation provides that the
Company is authorized to issue up to 7,000,000 shares of Common Stock, which
amount will be reduced to 700,000 by the Reverse Stock Split. Approximately
5,962,425 shares of Common Stock are currently issued (596,242 shares following
the Reverse Stock Split). Accordingly, approximately 1,037,575 shares of
authorized but unissued and unreserved Common Stock are currently available for
general use by the Company on an unrestricted basis, and following the Reverse
Stock Split approximately 103,758 shares will be available. The proposed
amendment would increase the authorized Common Stock of the Company from
700,000 shares to 20,000,000 shares following the Reverse Stock Split.
The Board of Directors recommends the increase in authorized Common Stock
to enable the Company to have additional shares available for issuance in
connection with future acquisitions, reverse mergers, conversions of
convertible securities, employee benefit plans, stock splits effected in the
form of stock dividends, and other general corporate purposes. Increasing the
authorized Common Stock will give the Company greater flexibility and will
allow the Company to issue additional Common Stock for the purposes described
above. Except as set forth below, the Company has no current plans, agreements
or arrangements for the issuance of additional Common Stock, other than the
issuance of shares pursuant to its stock option and other employee benefit
plans. The Company is at all times investigating additional sources of
financing and future acquisitions which the Board of Directors believes will
be in the best interests of the Company and its stockholders. The additional
authorized shares of Common Stock would also be available for issuance
(subject to stockholder approval if required by law) at such times and for
such proper corporate purposes as the Board of Directors may approve,
including possible future financing and acquisition transactions. Since
the Company has no cash or other assets following the sale and distribution of
its assets under 11 U.S.C. Section 363 of the Federal Bankruptcy Code, the
Board may find it advisable from time to time to utilize common or preferred
stock in lieu of cash to compensate employees, directors, advisors or
consultants for services provided to the Company.
Vote Required for Approval
The Board of Directors believes that it is in the best interests of the
Company and its stockholders to amend the Company's Certificate of
Incorporation to increase its authorized Common Stock, on a post-Reverse
Stock Split basis, to 20,000,000 shares, and has directed that the Common
Stock Amendment be submitted for stockholder approval. The affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
entitled to vote will be required to approve this proposal. It is expected
that this proposal will be authorized by the Consent.
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
TO AUTHORIZE "BLANK CHECK" PREFERRED STOCK
The Board of Directors has unanimously approved and adopted a resolution
amending Article 4 of the Company's Certificate of Incorporation to authorize
6,000 shares of "blank check" preferred stock (the "Preferred Stock"), issuable
in one or more series (the "Preferred Stock Amendment"). The term "blank
check" preferred stock refers to stock for which the designations, preferences,
conversion rights, cumulative, relative, participating, optional or other
rights, including voting rights (subject to the limitations described below),
qualifications, limitations or restrictions thereof (collectively, the
"Designations") are determined by the board of directors of a company
Purposes for Authorization of "Blank Check" Preferred Stock
The Certificate of Incorporation of the Company currently authorizes 4,000
shares of Class A Preferred Stock without par value. The current Certificate of
Incorporation provides that the maximum capital stock of the Company shall be
7,000,000 shares of Common Stock and 4,000 shares of Class A Preferred Stock.
Following the Reverse Stock Split, the Company's Certificate of Incorporation
will provide for 700,000 shares of Common Stock. The Reverse Stock Split will
not affect the currently authorized shares of Class A Preferred Stock, none of
which are issued or outstanding .
The preferences, rights and terms of the Class A Preferred Stock are
expressly set forth in Article 4 of the Company's Certificate of Incorporation,
which does not provide any flexibility to modify the terms and conditions of
the Class A Preferred Stock. As of the Record Date no Class A Preferred
Stock is outstanding. The Board of Directors has recommended the authorization
of new modern "blank check" preferred stock because it is highly unlikely
that the Company would use the existing Class A Preferred Stock for corporate
financing or other purposes in view of the fixed terms of the Class A
Preferred Stock. Management believes that the lack of flexible modern "blank
check" Preferred Stock greatly reduces the ability of the Company to utilize
preferred stock in response to rapidly developing acquisition and corporate
financing opportunities. Upon adoption of modern "blank check" preferred stock
by the Consent, the Class A Preferred Stock would remain authorized.
Under the proposed amendment, the Board of Directors could authorize the
issuance, at any time or from time to time, of one or more series of Preferred
Stock (subject to approval of the holders of a majority of the issued and out-
standing Class A Preferred stock, and further stockholder approval if required
by law). In addition, the Board of Directors would determine all designations,
relative rights, preferences and limitations of such stock, including but not
limited to the following: designation of series and numbers of shares; dividend
rights; rights upon liquidation or distribution of assets of the Company;
conversion or exchange rights; redemption provisions; sinking fund provisions
and voting rights; provided that the holders of shares of Preferred Stock
will not be entitled to more than the greater of (i) one vote per $100 of
liquidation value or (ii) one vote per share, when voting as a class with
holders of shares of capital stock generally, and will not be entitled to vote
separately as a class except where such class or series of Preferred Stock is
adversely affected. No holder of shares of the Company will have any preemptive
rights to acquire any securities of the Company.
The Board of Directors is required to make any determination to issue
shares of Common Stock or Preferred Stock based on its judgment as to the best
interests of the stockholders and the Company.
While the Company may issue such stock in the future for purposes of
raising additional capital or acquisitions, the Company, except as described
above (see "Approval of Amendment to Certificate of Incorporation to Increase
Authorized Common Stock") the Company has no agreements or understandings with
any third party to effect any such issuance of Preferred Stock, and no
assurances are given that any transaction will in fact be effected or that an
acquisition pursuant to which such shares may be issued will be proposed and
consummated. Therefore, the terms of any Preferred Stock subject to this
proposal cannot be stated or estimated with respect to any or all of the
securities authorized.
Vote Required for Approval
The Board of Directors believes that it is in the best interests of the Company
and its stockholders to amend the Company's Certificate of Incorporation
to authorize a class of "blank check" Preferred Stock as described above, and
has directed that the Preferred Stock Amendment be submitted for Stockholder
approval. The affirmative vote of a majority of the outstanding shares of
Common Stock entitled to vote on this proposal will be required for approval.
It is expected that this proposal will be authorized by the Consent.
RIGHTS OF DISSENTING STOCKHOLDERS
There are no rights of appraisal or similar rights of dissenters with
respect to any matter proposed to be acted upon by the Consent.
OTHER PROPOSED ACTION
The Company is not aware of any other matter(s) to be acted upon by the
Consent.
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C:\MY DOCUMENTS\AMP-INF.DOC/sfc December 24, 1999
