<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ x ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FIBERCHEM, INC.
(Name of Registrant as Specified In Its Charter)
None
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ x ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- ---------
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE>
FCI FiberChem, Inc. A Delaware Corporation
1181 Grier Drive, Suite B, Las Vegas, NV 89119
(702) 361-9873
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
AUGUST 31, 1998
To the Stockholders of FiberChem, Inc.:
You are cordially invited to attend the Annual Meeting of the
Stockholders (the "Annual Meeting") of FiberChem, Inc., which will be held
at the Company's offices, 1181 Grier Drive, Suite B, Las Vegas, Nevada at
10:00 a.m., Pacific time, on August 31, 1998, to consider and act upon the
following matters:
(1) To elect two Class C members to the Board of Directors to hold
office for a three-year term and until their successors are duly
elected and qualified. The persons nominated by the Board of
Directors (Messrs. Gerald T. Owens and Byron A. Denenberg) are
described in the accompanying Proxy Statement.
(2) To renew authorization to effect a reverse stock split of the
Company's Common Stock.
(3) To consider and act upon a proposal to amend the Company's
Certificate of Incorporation to increase the number of authorized
shares of Common Stock of the Company, $.0001 par value ("Common
Stock"), by one hundred (100) million shares of common stock.
(4) To ratify the appointment of Goldstein Golub Kessler LLP
P.C. as the Company's auditors for the fiscal year ending
September 30, 1998.
(5) To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Only stockholders of record at the close of business on July 15, 1998,
will be entitled to notice of, and to vote at, the Annual Meeting or any
adjournments thereof.
Stockholders are cordially invited to attend the Annual Meeting. Whether
or not you expect to attend the Annual Meeting in person, please complete,
date and sign the accompanying proxy card and return it without delay in the
enclosed postage prepaid envelope. Your proxy will not be used if you are
present and prefer to vote in person or if you revoke the proxy.
Dated: August 3, 1998
BY ORDER OF THE BOARD OF DIRECTORS,
MELVIN W. PELLEY, SECRETARY
i
<PAGE>
FIBERCHEM, INC.
1181 GRIER DRIVE, SUITE B
LAS VEGAS, NEVADA 89119
(702) 361-9873
-------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 31, 1998
These proxy materials are furnished in connection with the solicitation
of proxies by the Board of Directors of FiberChem, Inc., a Delaware
corporation (the "Company"), for use at the Fiscal 1997 Annual Meeting of
Stockholders of the Company and for any adjournment or adjournments thereof
(the "Annual Meeting"), to be held at the Company's offices, 1181 Grier
Drive, Suite B, Las Vegas, Nevada at 10:00 a.m., Pacific time, on August 31,
1998, for the purposes set forth in the accompanying Notice of Annual Meeting
of Stockholders. A Board of Directors' proxy (the "Proxy") for the Annual
Meeting is enclosed, by means of which you may indicate your votes as to each
of the proposals described in this Proxy Statement.
All Proxies which are properly completed, signed and returned to the
Company prior to the Annual Meeting, and which have not been revoked, will be
voted in accordance with the stockholder's instructions contained in such
Proxy. The affirmative vote by holders of a majority of the Common Stock and
Preferred Stock voting together represented at the Annual Meeting is required
for the election of Directors, for the approval of the proposal to authorize
a reverse stock split of the Company's Common Stock, for amending the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock of the Company, $.0001 par value ("Common Stock"), by
one hundred (100) million shares of common stock and for ratifying the
appointment of Goldstein Golub Kessler LLP as the Company's auditors.
Directors and Officers of the Company beneficially own approximately 17.6% of
the outstanding Voting Securities. In the absence of contrary instructions,
shares represented by such Proxy will be voted FOR the election of the
nominees for Directors as set forth herein, FOR the ratification of the
authorization of the reverse stock split, FOR the amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock of the Company, and FOR the ratification of the appointment of
the Company's auditors for the fiscal year ending September 30, 1998. Shares
represented by proxies which are marked "abstain" for Proposals 2, 3, and 4
on the proxy card and proxies which are marked to deny discretionary
authority on all other matters will not be included in the vote totals, and
therefore will have no effect on the vote. In addition, where brokers are
prohibited from exercising discretionary authority for beneficial owners who
have not provided voting instructions (commonly referred to as "broker
non-votes"), those shares will not be included in the vote totals.
The Board of Directors does not anticipate that any of its nominees
will be unavailable for election and does not know of any other matters that
may be brought before the Annual Meeting. In the event that any other matter
shall come before the Annual Meeting or any nominee is not available for
election, the persons named in the enclosed Proxy will have discretionary
authority to vote all Proxies not marked to the contrary with respect to such
matter in accordance with their best judgment.
A stockholder may revoke his Proxy at any time before it is exercised by
filing with the Secretary of the Company at its executive offices in Las
Vegas, Nevada, either a written notice of revocation or a duly executed Proxy
bearing a later date, or by appearing in person at the Annual Meeting and
expressing a desire to vote his or her shares in person. All costs of this
solicitation are to be borne by the Company.
A list of stockholders entitled to vote at the Annual Meeting will be
open to examination by any stockholder, for any purpose genuine to the
meeting, at the executive offices of the Company, 1181 Grier Drive, Suite B,
Las
-1-
<PAGE>
Vegas, Nevada 89119, during ordinary business hours for ten days prior to the
Annual Meeting. Such list shall also be available during the Annual Meeting.
This Proxy Statement and the accompanying Notice of Annual Meeting of
Stockholders, the Proxy, the 1997 Annual Report to Stockholders, and the
Quarterly Report on Form 10-QSB for March 31, 1998 are expected to be mailed
commencing on or about August 3, 1998 to stockholders of record on July 15,
1998.
VOTING SECURITIES
July 15, 1998, has been fixed as the record date for the determination
of stockholders entitled to notice of and to vote at the Annual Meeting or
any adjournment or adjournments thereof. As of that date, the Company had
outstanding 26,441,207 shares of Common Stock, $.0001 par value, and
218,998 shares of Preferred Stock, or an aggregate of 28,631,187 voting
securities (the "Voting Securities") outstanding. Holders of Preferred Stock
have ten votes per share of Preferred Stock held and Common Stockholders have
one vote per share of Common Stock held, upon all matters to be considered at
the Annual Meeting. Holders of Preferred Stock vote together with the holders
of Common Stock as one class on all matters submitted to a vote of
stockholders, except where a class vote of Preferred Stockholders may be
required by law.
The following table sets forth certain information concerning those
persons known to the Company, based on information obtained from such
persons, with respect to the beneficial ownership (as such term is defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of shares of Common
Stock, $.0001 par value, of the Company by (i) each person known by the
Company to be the owner of more than 5% of the outstanding shares of Common
Stock, (ii) each nominee and Director of the Company, (iii) each executive
officer named in the Summary Compensation Table and (iv) all Officers and
Directors as a group:
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percentage
of Beneficial Owner Beneficial Ownership (1) of Class (2)
- -------------------- ------------------------ ------------
<S> <C> <C>
Walter Haemmerli 3,749,844(5) 12.4%
Manport AG
Basteiplatz 3, CH 8001
Zurich, Switzerland
Gerald T. Owens 226,823(6) (4)
147 Paddington Way
San Antonio, TX 78209
Irwin J. Gruverman 300,470(7) 1.1%
30 Ossipee Road
Newton, MA 02164
Byron A. Denenberg 190,000(8) (4)
RCT Systems, Inc.
327 Messner Drive
Wheeling, IL 60090
Geoffrey F. Hewitt (3) 576,429(9) 2.1%
-2-
<PAGE>
Name and Address Amount and Nature of Percentage
of Beneficial Owner Beneficial Ownership (1) of Class (2)
- -------------------- ------------------------ ------------
Melvin W. Pelley (3) 293,863(10) 1.1%
Thomas A. Collins (3) 175,000(11) (4)
All Directors and Officers as 5,512,429 17.6%
a Group (7 persons)
</TABLE>
- -------------------
(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole investment power with respect to all shares of Common Stock
beneficially owned by them. 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 upon the conversion
of convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that options or warrants or shares of Convertible
Preferred Stock 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.
(2) Based on 26,441,207 shares issued and outstanding as of July 15, 1998.
(3) The address of this person is c/o FCI Environmental, Inc., 1181 Grier
Drive, Suite B, Las Vegas, Nevada 89119.
(4) Represents less than one percent ownership.
(5) Includes 32,000 Class D Common Stock Purchase Warrants, 3,586 shares of
Convertible Preferred Stock convertible into 35,860 shares of Common Stock,
and an aggregate of 29,000 shares of Common Stock issuable upon exercise of
a like number of options. Also includes 704,000 shares of Common Stock,
863,800 Class D Common Stock Purchase Warrants, and 165,286 shares of
Convertible Preferred Stock convertible into 1,652,860 shares of Common
Stock, all held by Privatbank Vermag A.G., Chur, Switzerland, as custodian
for certain customers, of which company Mr. Haemmerli is Vice-Chairman.
Also includes $150,000 of Senior Convertible 8% notes convertible into
367,824 shares of Common Stock held by Manport AG, of which company Mr.
Haemmerli is Chief Executive Officer.
(6) Includes 39,965 Class D Common Stock Purchase Warrants and an aggregate of
82,000 shares of Common Stock issuable upon exercise of a like number of
options.
(7) Includes 66,880 shares of Common Stock issuable upon exercise of a like
number of options. Also includes 67,500 shares of Common Stock held by G&G
Diagnostics, L.P. I, 48,200 shares of Common Stock held by G&G Diagnostics,
L.P. II, and 8,161 shares of Convertible Preferred Stock convertible into
81,610 shares of Common Stock held by G&G Diagnostics, L.P. III, all of
which Mr. Gruverman is a principal.
(8) Includes an aggregate of 58,142 shares of Common Stock issuable upon
exercise of a like member of options.
(9) Includes an aggregate of 486,247 shares of Common Stock issuable upon
exercise of a like number of options.
(10) Includes an aggregate of 75,000 shares of Common Stock issuable upon
exercise of a like number of options.
(11) Includes an aggregate of 175,000 shares of Common Stock issuable upon
exercise of a like number of options.
PROPOSAL 1
ELECTION OF DIRECTORS
Pursuant to Section 2 of Article III of the Company's By-Laws, as
amended, the Board of Directors is divided into three classes, each of which
is to be elected for three-year terms. The Company's Board of Directors
currently
-3-
<PAGE>
has five (5) Directors, two (2) of which are to be elected as Class C
Directors at the Annual Meeting to hold office, subject to the provisions of
the Company's By-Laws, for a three-year term and until their successors are
duly elected and qualified. The two Class C nominees (the "Nominees") are
Gerald T. Owens and Byron A. Denenberg, who have served as Directors since
1987 and 1995, respectively. Of the remaining three (3) members of the Board
of Directors, one (1) was elected in May 1996 and two (2) were elected in June
of 1997 for their respective staggered terms with the ending date of their
terms of office set forth below.
It is intended that the accompanying form of Proxy will be voted FOR the
election as Directors of the two (2) Nominees named below, unless the Proxy
contains contrary instructions. Proxies which direct the Proxy holders to
abstain and do not direct the Proxy holders to vote for or withhold authority
in the matter of electing Directors will be voted for the election of the two
(2) Nominees named below. Proxies cannot be voted for a greater number of
persons than the number of nominees named in the Proxy Statement.
Management has no reason to believe that any of the Nominees will not be
a candidate or will be unable to serve. However, in the event that any of the
Nominees should become unable or unwilling to serve as a Director, the Proxy
will be voted for the election of such person or persons as shall be
designated by the Directors.
The following persons are currently serving as Directors of the Company
for their respective staggered terms, with the ending date of their terms of
directorship set forth below, including Messrs. Owens and Denenberg who are
nominees for re-election for a new three-year term.
<TABLE>
<CAPTION>
Name Age Position Term
- ------------------- --- ---------------------------- ----------
<S> <C> <C> <C>
Geoffrey F. Hewitt 55 President, Chief Executive May 2000
Officer and Class A Director
Walter Haemmerli 68 Class B Director May 1999
Gerald T. Owens 71 Class C Director July 1998
Irwin J. Gruverman 64 Class A Director May 2000
Byron A. Denenberg 63 Class C Director July 1998
</TABLE>
The names, ages and respective positions of the Executive Officers and
Directors of FCI Environmental, Inc. ("Environmental"), a wholly-owned
subsidiary of the Company, are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ------------------- --- ----------------------------
<S> <C> <C>
Geoffrey F. Hewitt 55 Chairman of the Board of Directors, Chief
Executive Officer and Director
Thomas A. Collins 51 President and Director
-4-
<PAGE>
Melvin W. Pelley 53 Chief Financial Officer and Secretary of
the Company and Chief Financial Officer,
Secretary and Director
</TABLE>
GEOFFREY F. HEWITT has served as Chairman of the Board of Directors
since November 14, 1997 and as President and Chief Executive Officer of the
Company, as well as Chief Executive Officer of FCI Environmental since August
1995. Mr. Hewitt was appointed as a Director of the Company on September 11,
1996. He has also served as a Director of FCI Environmental since April 1994
and as its President from April 1994 to November 1996. He served as Chief
Operating Officer of FCI Environmental from April 1994 to August 1995. Prior
thereto, from 1977 until March 1994, Mr. Hewitt served as Vice President of
worldwide sales and marketing for H.N.U. Systems, Inc., a manufacturer of
environmental and material analysis instrumentation.
WALTER HAEMMERLI has served as a Director of the Company since February
1990. Mr. Haemmerli has been the Chief Executive Officer since 1978 of
Manport AG, Zurich, Switzerland, an investment management company owned by
him. Mr. Haemmerli was employed by Union Bank of Switzerland, Geneva, Basel
and Zurich from 1960 to 1978, holding the position of Vice President from
1970. Mr. Haemmerli serves on the Board of Directors and is Vice-Chairman of
Privatbank Vermag AG, Chur, Switzerland, and is a Member of the Board of
Directors for American Cold Storage, Inc., Louisville, Kentucky.
GERALD T. OWENS has served as a Director of the Company since December
1987. Mr. Owens served with Mobil Oil from 1962 to 1983 when he retired. At
retirement, he was President of Mobil Sales and Supply Corporation, a
wholly-owned subsidiary of Mobil Oil, and he was a Vice President of Mobil
Oil. From 1951 to 1961, Mr. Owens practiced law with the law firm of Andrews
and Kurth in Houston, Texas. Mr. Owens received an L.L.B. degree from the
University of Texas in 1950 and a B.A. degree in history in 1948 from the
University of Texas. He serves as Chairman of the Board of Trustees for the
Kenny Stout Memorial Golf Foundation, and as a member of the Board of
Trustees for the Monterey Institute of International Studies.
IRWIN J. GRUVERMAN has served as a Director of the Company since May
1994. Since 1990, Mr. Gruverman has served as the General Partner for G&G
Diagnostics Funds, a venture capital business, and in 1982 founded and
currently serves as Chairman of the Board of Directors and Chief Executive
Officer of Microfluidics Corporation, an equipment manufacturer and process
research and development company.
BYRON A. DENENBERG has served as a Director of the Company since August
1995. Mr. Denenberg has been a private investor since 1991. Mr. Denenberg was
co-founder in 1969 of MDA Scientific, Inc. ("MDA"), a manufacturer and
marketer of toxic gas monitoring systems, where he was CEO from inception
until 1991. MDA was purchased by Zwellweger Uster AG in 1988. Mr. Denenberg
received a B.S. degree in Mechanical Engineering from Bucknell University,
Lewisburg, Pennsylvania. He currently serves as a Director of RCT Systems,
Inc., MST Measurement Systems, Inc., FPM Analytics, Inc., and Microsensor
Technologies, GmbH.
MELVIN W. PELLEY has been the Chief Financial Officer and Secretary of
the Company since April 1994 and has been Chief Financial Officer and
Secretary of FCI Environmental since June 1993. Prior thereto, from 1988 he
was Vice President of Finance and Administration of Acoustic Imaging
Technologies Corporation, Phoenix, Arizona, a manufacturer of diagnostic
ultrasound medical equipment. From 1983 to 1988 he was Director of Costs,
Financial Planning and Analysis of Advanced Technology Laboratories, Inc.,
Bothell, Washington, which manufactures and markets real-time ultrasound
medical equipment. From 1977 to 1983, Mr. Pelley was Chief Financial and
Administrative Officer for Advanced Diagnostic Research Corporation, Tempe,
Arizona, a designer, manufacturer and marketer of diagnostic ultrasound
medical equipment.
THOMAS A. COLLINS has served as President of FCI Environmental since
November 1996 and as Vice President of International Marketing and Product
Development from March 1996 to November 1996. Prior thereto, from 1992 he was
Director of International Sales and Product Marketing of Arizona Instrument
Corporation, a
-5-
<PAGE>
manufacturer of environmental and control instrumentation; from 1990 to 1992
he was Director of Marketing of Wayne Division, Dresser Industries, Inc., a
manufacturer of dispensing equipment for the gasoline industry; from 1986 to
1989 he was Manager of Domestic Retail Marketing for Diebold, Inc., a
manufacturer of transaction terminals in the petroleum retailing market; and
from 1968 to 1986 he held marketing and engineering positions at ARCO
Petroleum Products Co.
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS
Officers serve at the discretion of the Board of Directors. All
Directors hold office until the expiration of their terms and the election
and qualification of their successors. The Company's Board of Directors is
divided into three classes of approximately equal size with the members of
each class elected, after an initial phase-in-period, to three-year terms
expiring in consecutive years. Mr. Haemmerli was elected to a three-year term
as Director at the Company's May 1996 Annual Meeting of Stockholders, and Mr.
Owens was elected to a three-year term as Director at the Company's May 1995
Annual Meeting of Stockholders. Mr. Gruverman was appointed to the Board of
Directors in May 1994; Mr. Denenberg was appointed to the Board of Directors
in August 1995; and Mr. Hewitt was appointed to the Board of Directors in
September 1996.
In January 1993, the Company established a Stock Option Committee. The
Stock Option Committee is responsible for the granting of stock options under
the Company's Stock Option Plans and during the fiscal year ended September
30, 1997 (the "Fiscal 1997") the Stock Option Committee met two times. The
Company also established a Compensation Review Committee, which is
responsible for reviewing the compensation of the Company's executives and
employees. The Compensation Review Committee met two times during Fiscal
1997. In August 1995, Mr. Owens and Mr. Haemmerli were appointed to a single
Compensation Review and Stock Option Committee. Also, in August 1995, Mr.
Owens was appointed to a newly established Audit Committee and Mr. Gruverman
was appointed to the Audit Committee in November 1997. The Audit Committee is
responsible for recommending the independent public accountants to serve as
the Company's auditors, reviewing and considering the actions of management
in matters relating to audit functions, reviewing with such accountants the
scope and results of their audit engagement, reviewing the financial
statements and information included in the Company's filings with the
Securities and Exchange Commission, reviewing the Company's system of
internal controls and procedures and reviewing the effectiveness of
procedures intended to prevent violations of laws and regulations. The Audit
Committee met six times in Fiscal 1997. The Board of Directors did not have a
standing nomination committee or committee performing similar functions
during Fiscal 1997.
The Company held three meetings of the Board of Directors during Fiscal
1997 and conducted other business by unanimous written consent. Each member
of the Board of Directors (at the time of such meeting) attended all of the
meetings either in person or telephonically.
EXECUTIVE COMPENSATION
The compensation paid and/or accrued to each of the Executive Officers
of the Company and its subsidiaries and of all executive officers as a group,
whose annual compensation exceeds $100,000, for services rendered to the
Company during the three fiscal years ended September 30, 1997, was as
follows:
-6-
<PAGE>
(a) SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------------------------
Annual Compensation Awards Payouts
------------------------------------- --------------------------- --------------
Other Restricted Securities Long-Term All
Name of Individual Fiscal Annual Stock Underlying Incentive Plan Other
and Principal Position Year Salary($) Bonus($) Compensation($) Awards($) Options/SARs(#) Payouts($) Compensation($)
- ---------------------- ------ ----------- -------- --------------- ---------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Geoffrey F. Hewitt 1997 $205,000(1) $ - $ - - 125,000 $ - $ -
President and CEO of 1996 $195,768 $ - $ - - 100,000 $ - $ -
FiberChem, Inc. and 1995 $177,596 $ - $ - - 75,000 $ - $ -
CEO of FCI
Environmental, Inc.
Dale W. Conrad 1997 $ - $ - $ 2,709(2) 25,000 $ - $ -
Chairman of the Board 1996 $ 18,730 $ - $13,594(2) - 35,000 $ - $ -
of FCI Environmental, 1995 $112,535 $ - $ - - 60,000 $ - $ -
Inc.(3)
Melvin W. Pelley 1997 $136,708(4) $ - $ - - 75,000 $ - $ -
Chief Financial Officer 1996 $126,461 $ - $ - - 50,000 $ - $ -
of FiberChem, Inc. and 1995 $113,346 $ - $ - - 25,000 $ - $ -
of FCI Environmental,
Inc.
Thomas A. Collins 1997 $129,708(5) $ - $ - - 75,000 $ - $ -
President of 1996 $ 70,192 $ - $ - - 100,000 $ - $ -
FCI Environmental, Inc. 1995 $ - $ - - $ - $ -
</TABLE>
- ---------------
(1) Includes $14,808 in accrued but unpaid salary, earned during the period
from June 15 through September 30, 1997. Payment has been deferred until
after January 1, 1998 at the Company's discretion. From June 15, 1997
through June 19, 1998, a total of $55,000 has been deferred.
(2) Consulting fees of $2,709 paid during Fiscal 1997; Directors' compensation
of $11,194 and consulting fees of $2,400 paid during Fiscal 1996. Amounts
earned are net of applicable taxes, and reduced the Promissory notes issued
by Mr. Conrad to the Company for the exercise of options.
(3) Mr. Conrad resigned from all positions with the Company on April 8, 1998.
(4) Includes $8,615 in accrued but unpaid salary, earned during the period from
June 15 through September 30, 1997. Payment has been deferred until after
January 1, 1998 at the Company's discretion. From June 15, 1997 through
June 19, 1998, a total of $32,000 has been deferred.
(5) Hired March 1, 1996 as Vice President of International Marketing and
Product Development; President of FCI Environmental since November 1996.
Includes $6,730 in accrued but unpaid salary, earned during the period from
June 15 through September 30, 1997. Payment has been deferred until after
January 1, 1998 at the Company's discretion. From June 15, 1997 through
June 19, 1998, a total of $25,000 has been deferred.
-7-
<PAGE>
(b) OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of
Securities Percent of Total
Underlying Options/SARs Granted Exercise
Options/SARs to Employees or Base Expiration
Name of Individual Granted In Fiscal Year Price($/Share) Date
- ------------------ ------------ -------------------- -------------- ------------------
<S> <C> <C> <C> <C>
Geoffrey F. Hewitt 125,000(3) 27.8% $1.00 September 12, 2007
Dale W. Conrad 25,000(4) 5.6% $0.22 May, 29, 2007
Melvin W. Pelley 75,000(3) 16.7% $0.25 September 12, 2007
David R. LeBlanc -- -- $ --
Thomas A. Collins 75,000(3) 16.7% $0.25 September 12, 2007
</TABLE>
(c) AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR
END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Shares Options/SARs Options/SARs
Acquired on Value at Fiscal Year End (#) at Fiscal Year End ($)
Name of Individual Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------ ------------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Geoffrey F. Hewitt 18,961 $(3,262)(1) 486,247 / 0 $(255,740) (2) / $0
Dale W. Conrad -- $ - 120,000 / 0 $ (20,781) (2) / $0
Melvin W. Pelley 74,712 $(9,068)(1) 75,000 / 0 $ (2,344) (2) / $0
David R. LeBlanc 0 $ 0 98,350 / 0 $ (21,514) (2) / $0
Thomas A. Collins 0 $ 0 175,000 / 0 $ (69,531) (2) / $0
</TABLE>
(1) Certain options were exercised at exercise prices which exceeded fair
market value at the time of exercise, resulting in negative "Value
Realized."
(2) The options' exercise price exceeded their fair market value as of
September 30, 1997, resulting in negative "Value of Unexercised
In-The-Money Options."
(3) Exercisable from the date of grant on September 12, 1997 until
September 12, 2007 at $0.25 per share.
(4) Exercisable from the date of grant on May 29, 1997 until May 29,
2007 at $0.22 per share.
(d) LONG-TERM INCENTIVE PLANS
Effective January 1, 1994, the Company implemented an Internal Revenue
Code Section 401(k) Profit Sharing Plan (the "Plan"). The Plan provides for
voluntary contributions by employees into the Plan subject to the limitations
imposed by Internal Revenue Code Section 401(k). The Company will match
employee contributions at a rate of 50% of the employee's contribution up to
a maximum of 2% of the employee's compensation. The Company matching funds
are determined at the discretion of management and are subject to a five-year
vesting schedule from the date of original employment.
(e) DIRECTORS COMPENSATION
In September 1996, the existing base compensation fee of $10,000 per
year for non-management directors was eliminated, replaced by the granting of
options to purchase 25,000 shares of Common Stock of the Company. Fees for
attendance at Board meetings, was suspended. Fees for service as Chairman and
fees for committee service were also eliminated and replaced by the granting
of options to purchase from 4,000 to 12,500 shares of Common Stock of the
Company.
-8-
<PAGE>
On May 29, 1997, the Company granted to each of its six non-management
Directors options to purchase 25,000 shares of Common Stock at $0.22 per
share, which was the market value of the Common Stock on that date. In
addition, the Company granted options to purchase an aggregate of 36,500
shares of the Common Stock to three of its non-management directors for
service as Chairman (12,500 shares) and members of its Audit Committee (8,000
shares to each of its two members) and Compensation and Stock Options
Committee (4,000 shares to each of its two members).
(f) EMPLOYMENT CONTRACTS
Geoffrey F. Hewitt serves under an employment agreement with the
Company, effective October 1, 1997. Mr. Hewitt is currently compensated at a
rate of $205,000 per annum and is entitled to receive bonuses, if any, at the
discretion of the Board of Directors. The employment contract is terminable
for cause. Since June 15, 1997, payment of approximately 27% (or $55,000) of
Mr. Hewitt's salary has been deferred. Payment of the earned but unpaid
amount is at the discretion of the Company and is expected to be paid when
the Company's financial position allows.
Melvin W. Pelley serves under an employment agreement with the Company,
effective October 1, 1997. Mr. Pelley is currently compensated at a rate of
$132,000 per annum, and is entitled to receive bonuses, if any, at the
discretion of the Board of Directors. The employment contract is terminable
for cause. Since June 15, 1997, payment of approximately 24% (or $32,000) of
Mr. Pelley's salary has been deferred. Payment of the earned but unpaid
amount is at the discretion of the Company and is expected to be paid when
the Company's financial position allows.
Thomas A. Collins serves under an employment agreement with the Company,
effective October 1, 1997. Mr. Collins is currently compensated at a rate of
$125,000 per annum, and is entitled to receive bonuses, if any, at the
discretion of the Board of Directors. The employment contract is terminable
for cause. Since June 15, 1997, payment of approximately 20% (or $25,000) of
Mr. Collins' salary has been deferred. Payment of the earned but unpaid
amount is at the discretion of the Company and is expected to be paid when
the Company's financial position allows.
David R. LeBlanc served until October 5, 1996 under an employment
agreement with FCI Environmental, effective July 18, 1994. Mr. LeBlanc was
compensated at a rate of $125,000 per annum and was entitled to receive
bonuses, if any, at the discretion of the Board of Directors. The employment
contract was terminable without cause with 90 days notice.
(g) CONSULTING AGREEMENTS
In August 1995, the Company entered into an agreement with Dale W.
Conrad to provide consulting services to the Company on an as requested basis
at an hourly rate. The services include advice and assistance in technical,
operational, and administrative matters. During Fiscal 1997, the Company paid
Mr. Conrad $2,709 under this agreement, all of which was applied to
promissory notes, the exercise of stock options and payment for group
insurance benefits paid by the Company. The agreement is terminable by either
party upon written notice. On April 8, 1998, Mr. Conrad resigned as a
director of the Company and this Agreement was terminated.
On February 14, 1996, the Company entered into an agreement, superseding
earlier verbal and letter agreements, with European Capital Advisors, Ltd.
("ECA") pursuant to which ECA would be compensated for marketing strategy and
business and financial planning services for the Company. In consideration
for these services, ECA was paid $30,000 in cash and was granted warrants to
purchase 75,000 shares of Common Stock of the Company at $0.90 per share,
exercisable until February 13, 2001.
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(h) STOCK OPTIONS
Primarily in order to provide a means to raise additional cash through
existing outstanding options, warrants and promissory notes receivable, on
April 4, 1997, the per share exercise price of all employee stock options,
all Unit and other Warrants (except Class D Warrants) were decreased as
follows: to $0.32 from April 4 through April 11, 1997, and thereafter
adjusted weekly to the average closing bid price for the five prior trading
days less a discount of 10% (but never to a price less than $0.30) through
May 16, 1997, when the prices reverted to the original prices. As a result,
the Company received $39,943 from the exercise of 131,453 options at prices
ranging from $0.30 to $0.32 per share. Effective April 17, 1997 the per share
exercise price of Class D Warrants was decreased to $0.30 through May 16,
1997 when the exercise price reverted to its prior $1.10 per share. As a
result, the Company received approximately $30,954 from the exercise of
103,179 Class D Warrants at $0.30 per share.
As of April 4, 1997 an aggregate of $277,916 had been paid on the
promissory notes receivable (issued in 1994 for the early exercise of stock
options), an aggregate of $47,999 of interest had been paid, and an
additional $248,212 of interest had been accrued (through December 31, 1996)
but remained unpaid.
In conjunction with the temporary reduction of the exercise prices of
the options and warrants effective April 4, 1997 and Class D Warrants
effective April 17, 1997, as described above, the remaining unpaid principal
on the promissory notes could be fully paid in an amount determined by
multiplying the unpaid balance by a fraction, the numerator of which was the
revised exercise price, and the denominator of which was $1.50 (the original
exercise price). If the unpaid principal was not so paid by May 16, 1997 the
underlying collateral shares would be forfeited and all unpaid principal and
accrued interest would be extinguished.
As a result, the Company received $160,875 in payment for 520,252
escrowed shares at prices ranging from $0.30 to $0.32 per share, which amount
liquidated $780,379 of original note principal. The remaining $756,804 of
unpaid note principal was extinguished and the underlying collateral of
504,535 shares were forfeited to the Company and immediately canceled,
thereby reducing the total number of shares outstanding. Unpaid accrued
interest receivable aggregating $248,212 was expensed.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Executive Compensation - Stock Options; Employment Agreements; and
Consulting Agreements" for information concerning stock options granted and
employment and consulting agreements entered into during Fiscal 1996 and
Fiscal 1997 with officers and Directors of the Company.
The Company entered into an agreement effective June 30, 1992, to sell
its wholly-owned subsidiary, AgriBioTech, Inc. ("ABT"), to the Company's
former President, its former Vice-President, its former Chairman of the Board
and a fourth individual (collectively, the "Purchaser"). The Purchaser agreed
to purchase all of the issued and outstanding shares of common stock of ABT,
which were all owned by the Company, for the approximate book value of ABT.
The net sales price of $425,559 was payable in four equal installments of
principal plus interest at a rate of 8% per annum, commencing on July 1, 1993
and annually thereafter until paid in full. As of September 30, 1996, the
entire principal and accrued interest had been paid in full.
In March 1994, the Company's Board of Directors approved a plan by which
employees and directors of the Company and its subsidiaries would be given an
opportunity to exercise stock options eligible under the Company's early
incentive plan through the execution of promissory notes. As of March 15,
1994, the Company received promissory notes aggregating $1,815,099 for the
exercise of 1,210,066 stock options. The promissory notes bear interest at 5%
per annum until September 15, 1994, and at 7% per annum thereafter, and were
initially due on September 15, 1995. On April 7, 1995, the Board of Directors
extended the due date of the notes to March 15, 1998. As of April 4, 1997 an
aggregate of $277,916 of principal had been paid on these notes, an aggregate
of $47,999 of interest had been paid, and an additional $248,212 of interest
had been accrued (through December 31, 1996) but remained unpaid.
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In conjunction with the temporary reduction of the exercise prices of
the options and warrants effective April 4, 1997 and Class D Warrants
effective April 17, 1997, as described above, the remaining unpaid principal
on the promissory notes could be fully paid in an amount determined by
multiplying the unpaid balance by a fraction, the numerator of which was the
revised exercise price, and the denominator of which was $1.50 (the original
exercise price). If the unpaid principal was not so paid by May 16, 1997 the
underlying collateral shares would be forfeited and all unpaid principal and
accrued interest would be extinguished. The Company did not want to penalize
its employees and directors by requiring payment of the promissory notes. The
Company believes that it must provide an incentive when it is compensating
employees and directors for services rendered to the Company in the form of
non-cash compensation.
As a result, the Company received $160,875 in payment for 520,252
escrowed shares at prices ranging from $0.30 to $0.32 per share, which amount
liquidated $780,379 of original note principal. The remaining $756,804 of
unpaid note principal was extinguished and the underlying collateral of
504,535 shares were forfeited to the Company and immediately canceled,
thereby reducing the total number of shares outstanding. Unpaid accrued
interest receivable aggregating $248,212 was expensed.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, Directors and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission. Officers, Directors and ten percent shareholders are required by
regulation to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on the Company's copies of such forms received or written
representations from certain reporting persons that no forms were required
for those persons, the Company believes that, during the time period from
October 1, 1996 to September 30, 1997, all filing requirements applicable to
its officers, Directors and greater than ten percent beneficial owners were
complied with.
PROPOSAL 2
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO AUTHORIZE, IF
NECESSARY, A REVERSE STOCK SPLIT OF NOT MORE THAN ONE-FOR-FIFTY.
GENERAL
The Board of Directors has approved a proposal to amend the Company's
Certificate of Incorporation to authorize, if necessary, a reverse stock
split of not more than one-for-fifty of the presently issued and outstanding
shares of the Company's Common Stock (the "Reverse Split"), by changing each
of up to fifty issued and outstanding shares of Common Stock into one issued
and outstanding share of Common Stock, (i) to increase the marketability and
liquidity of the Company's Common Stock by attracting an increased number of
market makers and a wider following (Many investment banking firms are
prohibited from trading securities of issuers that trade below $3.00 per
share although they are traded on Nasdaq.), and (ii) to reduce the Company's
stated capital $.0001 for each share of Common Stock changed into up to
one-fiftieth share of Common Stock as a result of the Reverse Split.
REASONS FOR THE REVERSE SPLIT
The Company's shares of Common Stock are quoted on the OTC Bulletin
Board or in the "pink sheets" maintained by the National Quotation Bureau,
Inc. Until February 25, 1998, the Common Stock was listed on the NASDAQ Small
Cap Market. The Company believes that it may be advantageous to apply for a
new listing on the NASDAQ Small Cap Market. Requirements for a new listing on
the NASDAQ SmallCap Market include a minimum bid price of $4.00 per share. In
order to increase the marketability and liquidity of the Company's Common
Stock by attracting an increased number of market members and a wider
following the Company has authorized the Reverse
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Stock Split. Many investment banking firms are prohibited from trading
securities of issuers that trade on the OTC Bulletin Board and many are also
prohibited from trading securities below $3.00 per share. In connection with
any determination by the Board of Directors to such effect, the Board will
also in its discretion, determine the ratio of the Reverse Split based on
prevailing market conditions, the likely effect on the market price of the
Common Stock, and other relevant factors.
EXCHANGE OF SHARES
If the Shareholders approve the Reverse Split and it is determined by
the Board of Directors that the Reverse Split is necessary, upon the filing
of the following amendment to the Company's Certificate of Incorporation with
the Secretary of State of Delaware, the Reverse Split will be deemed
effective. The Reverse Split will be formally implemented by amending the
present Article Fourth of the Company's Certificate of Incorporation as
amended, to add the following Section C:
Fourth: (c) Effective as of 5:00 p.m., Pacific time, on
__________ __, 1998, all outstanding shares of Common Stock
held by each holder of record on such date shall be automatically
combined at the rate of one-for-fifty without any further action on
the part of the holders thereof or this Corporation. No fractional
shares shall be issued. All fractional shares shall be increased to
the next higher whole number of share.
Following the effectiveness of the amendment, each certificate
representing shares of Common Stock outstanding immediately prior to the
Reverse Split (the "Old Shares") will be deemed automatically, without any
action on the part of the Shareholders, to represent 1/50 of the number of
shares of Common Stock after the Reverse Split (the "New Shares"). After the
Reverse Split becomes effective, Shareholders will be asked to surrender
certificates representing Old Shares in accordance with the procedures set
forth in a letter of transmittal to be sent by the Corporation. SHAREHOLDERS
SHOULD NOT SUBMIT ANY CERTIFICATES UNTIL REQUESTED TO DO SO. Upon such
surrender, a certificate representing the New Shares will be issued and
forwarded to the shareholders. However, each certificate representing Old
Shares will continue to be valid and represent New Shares equal to 1/50 of
the number of Old Shares (plus one additional New Share where such Old Shares
are not evenly divisible by 50).
If Proposal 2 is approved by the shareholders and determined by the
Board of Directors that the Reverse Split is necessary, the Reverse Split
will become effective upon filing a Certificate of Amendment of the
Certificate of Incorporation with the Secretary of State of Delaware. If the
Reverse Split is not deemed necessary by the Board of Directors on or prior
to the next Annual Meeting of Shareholders, the Board shall have no further
right to effect the Reverse Split.
PRINCIPAL EFFECTS OF THE REVERSE SPLIT AND THE ADDITIONAL REVERSE SPLIT
Shareholders have no right under the Delaware General Corporation Law
(the "DGCL") or under the Company's Certificate of Incorporation or Bylaws to
dissent from the Reverse Split or to dissent from the rounding to the nearest
whole share of any fractional share resulting from the Reverse Split in lieu
of issuing fractional shares.
The authorized capital stock of the Company will not be reduced or
otherwise affected by the Reverse Split. The number of issued and outstanding
shares of Common Stock of the Company on June 18, 1998, was 26,014,707 and
the number of issued and outstanding shares of Preferred Stock was 218,998.
The Company's stated capital was approximately $2,821. Based upon these
figures, the aggregate number of shares of Common Stock and Preferred Stock
that will be issued and outstanding if the Reverse Split is effected on a
one-for-fifty basis will be approximately 520,294 and 218,998, respectively,
and the stated capital will be approximately $2,821. Although the authorized
shares of Preferred Stock will not be affected by the Reverse Split, the
number of shares of Common Stock issuable upon conversion of the Preferred
Stock will be adjusted in the same proportion.
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The Reverse Split may result in some shareholders owning "odd-lots" of
less than 100 shares of Common Stock. Brokerage commissions and other costs
of transactions in odd-lots are generally somewhat higher than the costs of
transactions in "round-lots" of even multiples of 100 shares.
There can be no assurance that any or all of the foregoing effects will
occur. In particular, there can be no guarantee that the market price for
each New Share after the Reverse Split will be its sum multiple of the market
price (per Old Share) before the Reverse Split and the number of shares of
Common Stock charged for one share of Common Stock, or that such price will
either exceed or remain in excess of the current market price. Furthermore,
there can be no assurance that the market for shares of Common Stock will be
improved or that the Common Stock will be listed on the NASDAQ/SmallCap or
any other market. The Board of Directors cannot predict what effect the
Reverse Split will have on the market for or the market price of the Common
Stock.
DILUTION
The Company has suffered recurring losses from operations. The Company
may issue additional shares of its Common Stock on an ongoing basis in order
to satisfy all or a portion of its need for cash. If and to the extent that
the Company issues additional shares of Common Stock, either prior or
subsequent to the implementation of the Reverse Split, each Shareholder's
percentage ownership interest in the Company and proportional voting power
will be proportionately reduced.
The Company has previously issued, and has outstanding, various options,
warrants, and rights to purchase an aggregate of approximately 20,917,217
shares of Common Stock as of July 15, 1998. In addition, the Company has
filed for the registration of 8,960,337 units (each unit consisting of one
share of Common Stock and one Class E Common Stock Purchase Warrant and the
Common Stock underlying the Class E Warrant) for a total of 17,920,674 shares
of Common Stock to be registered in a rights offering (the "Rights
Offering"). Each existing Common Stockholder will receive one right to
purchase one Unit for every four Shares of Common Stock owned by them on the
record date. Each Unit is purchasable for $.22 and each underlying Warrant is
exercisable at $.22 per warrant for one additional share. Each holder of
outstanding Preferred Stock or Warrants will receive one right to purchase
one Unit for every four Shares of Common Stock issuable upon conversion of
the Preferred Stock or exercise of Warrants. If Proposal 2 is approved, in
general, both the exercise price and the number of shares subject to each
such option, warrant and right will be affected by the Reverse Split.
The Company has previously issued and has outstanding Convertible
Preferred Stock and Convertible Notes currently convertible into
approximately 6,113,436 shares of Common Stock. If Proposal 2 is approved, in
general, both the conversion price and the number of shares subject to such
Preferred Stock and Convertible Notes will be affected by the Reverse Split.
As a result, if the Reverse Split is implemented, it is possible that
the holders of all or a substantial number of the outstanding options,
warrants, rights, Preferred Stock and Convertible Notes to purchase or
convert to shares of the Company's Common Stock will determine that it is not
in their best interests to exercise or convert such options, warrants,
rights, stock or notes. If and to the extent that such is the case, each
Shareholder's percentage ownership interest in the Company and proportional
voting power will not be proportionately maintained as the result of the
exercise of such outstanding options, warrants, and rights.
FEDERAL INCOME TAX CONSEQUENCES
The following description of federal income tax consequences is based
upon the Internal Revenue Code of 1986, as amended, the applicable Treasury
Regulations promulgated thereunder, judicial authority, and current
administrative rulings and practices as in effect on the date of this Proxy
Statement. This discussion is for general information only and does not
discuss consequences that may apply to special classes of taxpayers (e.g.,
non-resident aliens, broker-dealers or insurance companies). Shareholders are
urged to consult their own tax advisors to determine the particular
consequences to them.
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The exchange of Old Shares of Common Stock for New Shares of Common
Stock will not result in recognition of gain or loss. The holding period for
the New Shares will include the Shareholder's holding period for the Old
Shares exchanged therefor, provided that the Old Shares were held as a
capital asset. The adjusted basis of the New Shares will be the same as the
adjusted basis of the Old Shares exchanged therefor.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF AND URGES YOU TO VOTE "FOR"
THE PROPOSED AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION IN
THE FOREGOING PROPOSAL 2.
PROPOSAL 3
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE
AMOUNT OF AUTHORIZED COMMON STOCK.
At the Annual Meeting, Stockholders will be asked to ratify an amendment
to the Company's Certificate of Incorporation (the "Certificate") proposed by
resolution of the Board of Directors which would increase the number of
authorized shares of Common Stock by one hundred (100) million shares of
common stock.
The Company's authorized capital stock currently consists of 50,000,000
shares of Common Stock and 10,000,000 shares of Preferred Stock. As of the
Record Date, 26,441,207 shares of Common Stock were outstanding, 2,116,556
shares were issuable under the 1994 and 1995 Employee Option Plans, 1,895,175
shares were issuable upon exercise of Class D Warrants, 3,333,333 shares were
issuable upon exercise of the May 1996 Unit Warrants; 3,923,456 shares were
issuable upon the conversion of 8% Senior Convertible Notes and 2,048,153
shares were issuable upon the exercise of certain Placement Agent and other
warrants. Also, as of the Record Date, 218,998 shares of Preferred Stock were
issued and outstanding, convertible into 2,189,980 shares of Common Stock and
the Registration Statement for the Rights Offering has been filed with the
Securities and Exchange Commission concerning an aggregate of 17,920,674
shares of Common Stock issuable upon full exercise of the Rights to be
offered by the Company. If all options and warrants currently outstanding
were exercised, and if all Preferred Stock and Senior Convertible Notes were
converted to Common Stock, and if all Rights are exercised and all Warrants
are exercised, the Company would exceed its authorized common shares of
50,000,000 by 9,868,534 shares; and if additional options already authorized
were granted and exercised, would exceed its authorized common shares by an
additional 1,125,000 shares. The Common Stock has no preemptive or other
subscription rights.
The additional shares of Common Stock proposed to be authorized would be
available and provide to the Board of Directors flexibility to meet future
business developments and capital requirements, including, but not limited
to, providing for issuance in connection with the pending Rights Offering,
other financings and acquisition opportunities and for stock dividends or
splits should the Board decide that it would be desirable, in light of market
conditions then prevailing, taking advantage or propitious market conditions,
to broaden the public ownership of, and to enhance the market for, the Common
Stock. From its inception the Company has focused on regulated markets
primarily under the jurisdiction of various national, state and local
environmental agencies. The political climate has since changed, and certain
federally driven programs have been delayed or de-emphasized.
The Board of Directors has charged the Company's Management with
reducing the Company's dependence on regulated markets by identifying and
pursuing opportunities in non-regulated, economically driven marketplaces.
This can be achieved either by internal development and growth, or by
acquisition or merger. The Company believes that its technology, and
especially its Sensor-on-a-Chip technology, has potential applications in a
number of such areas including for example the health and safety marketplace.
A lack of resources currently limits the Company to its existing markets. The
Company's goal is to expand such commercial opportunities as rapidly as
possible until it is no longer dependent on regulated markets for the
majority of its business. The Company believes that opportunities may arise
for a synergistic merger or acquisition, or mergers and acquisitions, which
would be enhanced by the fact that additional shares had been authorized for
such purposes by the stockholders. If approved by the stockholders, the
Company intends to undertake an aggressive review of opportunities that may
exist to enhance both the technical
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as well as commercial potentials of the technology, in areas that have
already been commercialized, as well as in areas for future potential
commercialization.
To the extent required by Delaware law, stockholder approval will be
solicited in the event shares of stock are to be issued in connection with a
merger or acquisition. Additional shares would also be available for issuance
for these and other purposes, which include employee benefit programs, at the
discretion of the Board of Directors of the Company, without the delays and
expenses ordinarily attendant upon obtaining further stockholder approval. In
general, the additional authorized shares may be issued by the Board of
Directors for such purposes without stockholder approval. The issuance of
such shares would dilute the voting power and, in many cases, the liquidation
value of the outstanding shares.
The affirmative vote of the majority of shares represented and entitled
to vote at the Annual Meeting is required to ratify the amendment to the
Certificate.
The proposed Amendment to the Certificate is as follows:
"FOURTH: (a) The Corporation is authorized to issue 160,000,000 shares,
consisting of 150,000,000 shares of common stock, $.0001 par value ("Common
Stock"), and 10,000,000 shares of preferred stock, $.001 par value
("Preferred Stock")..."
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF AND URGES YOU TO VOTE "FOR"
THE PROPOSED AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION IN
THE FOREGOING PROPOSAL 3.
PROPOSAL 4
RATIFICATION OF THE APPOINTMENT OF AUDITORS
On January 24, 1997, KPMG Peat Marwick LLP (the "Former Accountant")
resigned as the Company's principal accountants.
The Former Accountant did not state any reason for resigning in its
resignation letter to the Company. However, in its letter to the Audit
Committee and its Material Weakness letter both dated January 10, 1997 and
delivered January 23, 1997, the Former Accountant reported "Disagreements
with Management" on financial accounting and reporting matters and auditing
scope concerning revenue recognition that, if not satisfactorily resolved
(which all were) would have caused a modification of their report on the
fiscal 1996 consolidated financial statements. The disagreements, aggregating
approximately $1,800,000, concerned certain transactions termed
"consignments" by the Former Accountant, products warehoused for customers,
and a research and development effort, none of which met the requirements for
revenue recognition under generally accepted accounting principles.
The Audit Committee of the Board of Directors met with and discussed the
subject matter of the disagreements with the Former Accountant.
The Former Accountant's report on the consolidated financial statements
for the fiscal years ended September 30, 1995 and 1996 contained an
explanatory paragraph concerning the Company's ability to continue as a going
concern. Management plans in regard to these matters are described in Note 1
to the Consolidated Financial Statements for September 30, 1996. The
consolidated financial statements do not include any adjustment that might
result from the ultimate outcome of these uncertainties.
The Company has authorized the Former Accountant to respond fully to
inquiries of the successor accountant concerning the subject matter of such
disagreements.
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On April 9, 1997, the Board of Directors appointed Goldstein Golub
Kessler & Company, P.C., certified public accountants, as the Company's
successor accountant and to audit the books of account and other records of
the Company for the fiscal year ended September 30, 1997. The Company
subsequently retained Goldstein Golub Kessler LLP to re-audit the Company's
financial statements for the year ended September 30, 1996.
Representatives of Goldstein Golub Kessler LLP are expected to be
present at the Annual Meeting to respond to appropriate questions from
stockholders and to make a statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF THE COMPANY'S AUDITORS.
OTHER MATTERS
The Board of Directors is not aware of any business to be presented at
the Annual Meeting except the matters set forth in the Notice and described
in this Proxy Statement. Unless otherwise directed, all shares represented by
Board of Directors' Proxies will be voted in favor of the proposal of the
Board of Directors described in this Proxy Statement. If any other matters
come before the Annual Meeting, the persons named in the accompanying Proxy
will vote on those matters according to their best judgment.
EXPENSES
The entire cost of preparing, assembling, printing and mailing this
Proxy Statement, the enclosed Proxy and other materials, and the cost of
soliciting Proxies with respect to the Annual Meeting, will be borne by the
Company. The Company will request banks and brokers to solicit their
customers who beneficially own shares listed of record in names of nominees,
and will reimburse those banks and brokers for the reasonable out-of-pocket
expenses of such solicitations. The original solicitation of Proxies by mail
may be supplemented by telephone and telegram by officers and other regular
employees of the Company, but no additional compensation will be paid to such
individuals.
STOCKHOLDER PROPOSALS
No person who intends to present a proposal for action at a forthcoming
stockholders' meeting of the Company may seek to have the proposal included
in the proxy statement or form of proxy for such meeting unless that person
(a) is a record beneficial owner of at least 1% or $2,000 in market value of
shares of Common Stock, has held such shares for at least one year at the
time the proposal is submitted, and such person shall continue to own such
shares through the date on which the meeting is held, (b) provides the
Company in writing with his name, address, the number of shares held by him
and the dates upon which he acquired such shares with documentary support for
a claim of beneficial ownership, (c) notifies the Company of his intention to
appear personally at the meeting or by a qualified representative under
Delaware law to present his proposal for action, and (d) submits his proposal
timely. A proposal to be included in the proxy statement or proxy for the
Company's next annual meeting of stockholders, will be submitted timely only
if the proposal has been received at the Company's executive offices no later
than April 5, 1999. If the date of such meeting is changed by more than
30 calendar days from the date such meeting is scheduled to be held under the
Company's By-Laws, or if the proposal is to be presented at any meeting other
than the next annual meeting of stockholders, the proposal must be received
at the Company's principal executive office at a reasonable time before the
solicitation of proxies for such meeting is made.
Even if the foregoing requirements are satisfied, a person may submit
only one proposal of not more than 500 words with a supporting statement if
the latter is requested by the proponent for inclusion in the proxy
materials, and under certain circumstances enumerated in the Securities and
Exchange Commission's rules relating to the solicitation of proxies, the
Company may be entitled to omit the proposal and any statement in support
thereof from its proxy statement and form of proxy.
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BY ORDER OF THE BOARD OF DIRECTORS
LAS VEGAS, NEVADA MELVIN W. PELLEY
AUGUST 3, 1998 SECRETARY
Copies of the Company's Annual Report on Form 10-KSB for the year ended
September 30, 1997, as amended, as filed with the Securities and Exchange
Commission, including the financial statements (but without exhibits), can be
obtained without charge by stockholders (including beneficial owners of the
Company's Common Stock) upon written request to Melvin W. Pelley, the
Company's Secretary, FiberChem, Inc., 1181 Grier Drive, Suite B, Las Vegas,
Nevada 89119.
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FIBERCHEM, INC.
1181 Grier Drive, Suite B
Las Vegas, Nevada 89119
PROXY
The undersigned, a holder of Common Stock of FiberChem, Inc. a Delaware
corporation (the "Company"), hereby appoints GEOFFREY F. HEWITT and MELVIN W.
PELLEY, and each of them, the proxies of the undersigned, each with full
power of substitution, to attend, represent and vote for the undersigned, all
of the shares of the Company which the undersigned would be entitled to vote,
at the Annual Meeting of Stockholders of the Company to be held on August 31,
1998 and any adjournments thereof, as follows:
1. The election of two Class C members to the Board of Directors to hold
office for a three year term and until their successors are duly
elected and qualified, as provided in the Company's Proxy Statement:
[ ] FOR all nominees listed below
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
(Instructions: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH OR OTHERWISE STRIKE OUT HIS OR HER
NAME BELOW)
Gerald T. Owens and Byron A. Denenberg
2. The renewal of the proposal to amend the Certificate of Incorporation
to authorize, if necessary, a reverse stock split of the Company's
Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. The adoption of the proposal to amend the Certificate of
Incorporation to increase the authorized shares of the Company's
Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. The ratification of the appointment of Goldstein Golub Kessler LLP
as the Company's auditors for the fiscal year ending September 30,
1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Upon such other matters as may properly come before the meeting or any
adjournments thereof.
The undersigned hereby revokes any other proxy to vote at such Annual
Meeting, and hereby ratifies and confirms all that said attorneys and
proxies, and each of them, may lawfully do by virtue hereof. With respect to
matters not known at the time of the solicitations hereof, said proxies are
authorized to vote in accordance with their best judgment.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS ON THE OTHER SIDE HEREOF. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE TWO DIRECTORS NAMED IN PROPOSAL 1, FOR
THE ADOPTION OF PROPOSALS 2, 3, AND 4; AND AS SAID PROXIES SHALL DEEM
ADVISABLE ON SUCH OTHER BUSINESS AS MAY COME BEFORE THE MEETING.
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<PAGE>
The undersigned acknowledges receipt of a copy of the Notice of Annual
Meeting and accompanying Proxy Statement dated August 3, 1998 relating to the
Annual Meeting, the 1997 Annual Report to Stockholders, and the Quarterly
Report on Form 10-QSB for March 31, 1998.
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Signature(s) of Stockholder(s)
The signature(s) hereon should correspond exactly with the name(s) of
the Stockholder(s) appearing on the Stock Certificate. If stock is jointly
held, all joint owners should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If signer
is a corporation, please sign the full corporate name, and give title of
signing officer.
Date: , 1998
-----------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
FIBERCHEM, INC.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
-19-
