<PAGE>
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)
File by the Registrant [XX]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for use of Commission
[ ] Definitive Proxy Statement Only (as Permitted by Rule 14a-6(e)(2)
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
OZO DIVERSIFIED AUTOMATION, INC.
---------------------------------------------------
(Name of Registrant as Specified In Its Charter)
David J. Wolenski, President
----------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate Box:)
[ ] No fee required
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: NOT
APPLICABLE
(2) Aggregate number of securities to which transaction applies: NOT
APPLICABLE
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1 NOT APPLICABLE
(4) Proposed maximum aggregate value of transaction: $920,000
(5) Total fee paid: $184
[XX] Fee paid previously with preliminary materials.
__________
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
OZO DIVERSIFIED AUTOMATION, INC.
7450 EAST JEWELL AVENUE, SUITE A
DENVER, CO 80231
-------------------------------------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on February 15, 1999
-------------------------------------------------------------------------
January 6, 1999
TO THE SHAREHOLDERS OF OZO DIVERSIFIED AUTOMATION, INC.:
OZO Diversified Automation, Inc., a Colorado corporation, (the
"Company") has entered into an agreement to sell substantially all of its
assets to JOT Automation, Inc. as described in the proxy statement
accompanying this notice. The Company entered into this agreement because it
had been suffering cash flow difficulties on the relatively low-margin
products it had been manufacturing, which has been exacerbated during 1998 by
the Asian economic crisis. Although the Company's sales have improved during
the last quarter of 1998, there can be no assurance that such improvement
will continue. In addition, the Company has developed a prototype
micro-robotic device to manipulate tissues on an extremely small scale which
the Company has not been able to complete because of the need for its
resources in its core business. The sale of that core business to the
purchaser, if approved by the shareholders, will allow the Company to focus
its efforts on the completion of the development of this prototype and, if
completed (of which there can be no assurance), to offer the technology and
equipment to bio-medical and bio-technical research organizations. If
approved by the shareholders, the sale will take place on the third business
day after the Special Meeting.
The Company expects to use all of the proceeds of the transaction to
repay existing indebtedness (including indebtedness owed to affiliates) and
to complete the research and development necessary to complete the prototype
micro-robotic device. Consequently shareholders will not receive any
dividend from the Company as a result of this transaction. The ownership of
the Company's common stock by shareholders will not be affected by the
proposed transaction, the Company will continue to be subject to the
reporting requirements of the Securities Exchange Act of 1934 following
completion of the transaction, and the Company's common stock may continue to
trade on the OTC Bulletin Board to the extent a market continues to exist.
The Company has no control whether a market will continue to exist.
If the transaction is not approved by the shareholders, the Company
anticipates that its cash flow difficulties will continue in the near term,
but believes that the Company will continue to survive as a going concern
over the long term. Because the Company will be required to devote its
resources to its core de-paneling and routing business if the shareholders do
not approve the sale of the assets to the purchaser as described in the proxy
statement, the Company will likely not be able to devote the time and
resources necessary to complete the development of its prototype
micro-robotic device.
<PAGE>
The Special Meeting of the Shareholders of the Company will be held on
Monday, February 15, 1999, at 10:30 a.m., at the Denver Hilton South, 7801
East Orchard Road, Englewood, Colorado 80111, to consider and take action on:
1. A proposal to approve the sale of substantially all of the assets of the
Company and change the name of the Company to RMMR, Inc. to become
effective at the time of the completion of the sale of assets.
2. A proposal to amend Article VI of the Company's Restated Articles of
Incorporation, as amended, to reduce the vote required by shareholders
to approve asset dispositions, mergers, consolidations or exchanges, and
any other matter which would require an amendment to the Company's Restated
Articles of Incorporation, as amended, from two-thirds to a majority.
3. A proposal to adopt a new Article IX to the Company's Restated Articles
of Incorporation, as amended, to provide for the limitation of certain
liabilities of the Company's directors to the Company and its shareholders
as permitted under Section 7-108-402(1) of the Colorado Business
Corporation Act.
4. Such other business as may properly come before the meeting, or any
adjournments or postponements thereof.
The discussion of the proposals set forth above is intended only as a
summary, and is qualified in its entirety by the information contained in the
accompanying Proxy Statement.
Only holders of record of common stock at the close of business on
December 31, 1998, will be entitled to notice of and to vote at this Special
Meeting, and any postponements or adjournments thereof.
SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON AND
THE MANAGEMENT OF THE COMPANY HOPES THAT YOU WILL FIND IT CONVENIENT TO
ATTEND.
Shareholders, whether or not they expect to be present at the meeting, are
requested to sign and date the enclosed proxy and return it promptly in the
envelope enclosed for that purpose. Any person giving a proxy has the power to
revoke it at any time by following the instructions provided in the Proxy
Statement. Each proxy will be voted as directed by the shareholder granting the
proxy; an indication to abstain from voting on any particular proposal will be
treated as an abstention.
By Order of the Board of Directors:
David J. Wolenski, President
PLEASE DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR SHARES MAY
BE VOTED IN ACCORDANCE WITH YOUR WISHES. THE GIVING OF SUCH PROXY DOES NOT
AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
YOUR VOTE IS IMPORTANT
<PAGE>
OZO DIVERSIFIED AUTOMATION, INC.
7450 EAST JEWELL AVENUE, SUITE A
DENVER, CO 80231
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 15, 1999
December 31, 1998
This Proxy Statement is being furnished to shareholders of OZO
Diversified Automation, Inc. ("OZO" or the "Company") in connection with the
solicitation of proxies by and on behalf of the Company's Board of Directors
for use at the Special Meeting of shareholders of the Company (the "Special
Meeting") and at any adjournments or postponements thereof. The Special
Meeting will be held on Monday, February 15, 1999, at 10:30 a.m. local time,
at the Denver Hilton South, 7801 East Orchard Road, Englewood, Colorado
80111. This Proxy Statement will be first mailed to the shareholders on or
about January 16, 1999.
This Proxy Statement relates to the approval of a number of matters as
summarized in the notice which is attached to this Proxy Statement and
described in more detail herein. The Company is also delivering with this
proxy statement the following documents which are hereby incorporated herein:
the Company's annual report on Form 10-KSB for the year ended December 31,
1997, and the Company's quarterly report on Form 10-QSB for the quarter ended
September 30, 1998. The Company further incorporates by reference into this
Proxy Statement its current reports on Form 8-K reporting events of November
4, 1998 and December 15, 1998, and all other reports filed since December 31,
1997, in accordance with Sections 13(a) or 15(d) of the Securities and
Exchange Act of 1934, as amended.
VOTING SECURITIES
Holders of record of the Company's common stock, par value $0.10 per
share (the "Common Stock") at the close of business on December 31, 1998 (the
"Record Date") will be entitled to vote on all matters. On the Record Date,
the Company had 570,660 shares of Common Stock outstanding. The holders of
shares of Common Stock are entitled to one vote per share. The Company's
only class of voting securities is the Common Stock.
One-third of the issued and outstanding shares of the Common Stock
entitled to vote, represented in person or by proxy, constitutes a quorum for
the transaction of business at the Special Meeting. As described in more
detail below, if there is a quorum present two-thirds of the outstanding
shares must vote in favor of proposals 1 through 3 for their approval.
Management may, in its discretion, seek an adjournment of the Special
Meeting to a specific time and place if sufficient votes are not cast for the
approval of proposals 1, 2, and 3, or any of them. Management may also
recommend that the meeting be adjourned if a quorum is not present, although
Management has not determined whether to do so. If Management moves for an
adjournment to solicit additional votes, the proxy holder will vote all
proxies it receives which
1
<PAGE>
have directed a vote FOR proposal 1 in favor of the adjournment for the
purpose of soliciting additional votes; the proxy holder will vote all
proxies received which voted against proposal 1 against any such adjournment;
all proxies which direct an abstention with respect to the vote on proposal 1
will abstain from voting on any adjournment proposed for the purpose of
soliciting additional votes.
Abstentions will be treated as shares present or represented and
entitled to vote for purposes of determining the presence of a quorum, but
will not be considered as votes cast in determining whether a matter has been
approved by the shareholders. Any shares a broker indicates on its proxy
that it does not have the authority to vote on any particular matter because
it has not received direction from the beneficial owner thereof will not be
counted as voting on a particular matter. The officers and directors of the
Company (holders of approximately 166,066 shares, 29% of the outstanding
shares) have indicated their intention to vote FOR each of the three
proposals. No other shareholder has indicated his or her intentions with
respect to voting on any of the proposals.
A shareholder who gives his proxy pursuant to this solicitation may
revoke it at any time before it is voted either by giving notice of the
revocation thereof to the Secretary of the Company, by filing another proxy
with the Secretary or by attending the Special Meeting and voting in person.
All properly executed and unrevoked proxies, if received in time, will be
voted in accordance with the instructions of the beneficial owners contained
thereon.
The Company will bear the cost of the solicitation. In addition to
solicitation by mail, the Company will request banks, brokers and other
custodian nominees and fiduciaries to supply proxy materials to the
beneficial owners of the Company's Common Stock for whom they hold shares and
will reimburse them for their reasonable expenses in so doing.
DISSENTERS' RIGHTS
The Colorado Business Corporation Act provides shareholders a right to
dissent and obtain payment of the fair value of their shares from the Company
under certain circumstances; provided, that, if the shareholder has a right
to dissent, the shareholder strictly follows the statutory procedures for
doing so to perfect his or her dissenters' rights. In connection with
Proposal 1 contained in this Proxy Statement shareholders will have the right
to dissent if the Company completes the proposed sale of assets. For a
detailed description of these dissenters' rights and the statutory provisions
governing them, see the section entitled "DISSENTERS' RIGHTS" appearing
immediately after the description of Proposal 3.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
OZO has only one class of outstanding voting securities, its Common
Stock. The following table sets forth information as of December 31, 1998
with respect to the ownership of the Common Stock for all directors,
individually, all executive officers named in the
2
<PAGE>
compensation table, individually, all executive officers and directors as a
group, and all beneficial owners of more than five percent of the Common
Stock.
<TABLE>
<CAPTION>
Shares owned Percent
Name of beneficial owner beneficially (1) of class
- ------------------------ ---------------- --------
<S> <C> <C>
David W. Orthman 129,710 (2) 21%
7450 E. Jewell Ave., Suite A
Denver, CO 80231
David J. Wolenski 66,000 (3) 11%
7450 E. Jewell Ave., Suite A
Denver, CO 80231
Scott E. Salpeter 25,000 (4) 4%
201 S. Biscayne Blvd., # 2950
Miami, FL 33131
Alvin L. Katz 86,606 (5) 14%
201 S. Biscayne Blvd., # 2950
Miami, FL 33131
Brantley J. Halstead 20,000(6) 3%
7450 E. Jewell Ave., Suite A
Denver, CO 80231
All officers and 327,316 45%
directors as a (2)(3)(4)(5)(6)
group (5 persons)
Steven N. Bronson 111,650 (7) 19%
201 S. Biscayne Blvd., #2950
Miami, FL 33131
James S. Cassel 28,750 (8) 5%
201 S. Biscayne Blvd., #2950
Miami, FL 33131
</TABLE>
___________
(1) As used in this section, 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) with respect to the security
through any contract, arrangement, understanding, relationship or
otherwise. Unless otherwise indicated, beneficial ownership is of record
and consists of sole voting and investment power.
3
<PAGE>
(2) Includes 79,090 shares held jointly with Mr. Orthman's spouse, 10,000
shares owned by Mr. Orthman's spouse, and 35,000 shares underlying stock
options held by Mr. Orthman all of which all are exercisable at $1.125 per
share through June 24, 2002.
(3) Includes 35,000 shares underlying stock options exercisable at $1.125 per
share through June 24, 2002.
(4) Includes 25,000 shares underlying stock options exercisable at $1.125 per
share through June 24, 2002.
(5) Includes the following securities owned by Mr. Katz's spouse: 16,428
shares; 25,000 shares underlying warrants exercisable at $1.00 per share
through April 1, 2001; and 3,750 shares underlying warrants exercisable at
$0.75 per share through October 10, 2001. Also includes the following
securities attributable to the 50% interest of Mr. and Mrs. Katz in a
general partnership: 16,482 shares. Finally, this also includes 25,000
shares underlying stock options held by Mr. Katz exercisable at $1.125 per
share through June 24, 2002.
(6) Includes 7,500 shares and options to acquire 25,000 shares exercisable at
$1.25 per share through February 16, 2003. This does not include options
to acquire 12,500 shares do not vest and are not exercisable until
September 30, 1999.
(7) Includes 82,900 shares as well as: 25,000 shares underlying warrants
exercisable at $1.00 per share through April 1, 2001; 3,750 shares
underlying warrants exercisable at $0.75 per share through October 10,
2001; and 11,482 shares issued upon conversion of promissory notes.
(8) Includes 25,000 shares underlying warrants exercisable at $1.00 per share
through April 1, 2001; and 3,750 shares underlying warrants exercisable at
$0.75 per share through October 10, 2001.
The Company knows of no arrangement, the operation of which may, at a
subsequent date, result in change in control of the Company.
PROPOSAL 1
SALE OF SUBSTANTIALLY ALL OF THE COMPANY'S ASSETS
The Company has entered into an Asset Purchase Agreement (the
"Agreement"), dated November 4, 1998 (and amended December 15, 1998), with
JOT Automation, Inc. ("JOT Sub"), a wholly-owned Texas subsidiary of JOT
Automation Group Oyj ("JOT Parent"), a Finnish corporation which has its
common stock registered on the Helsinki Stock Exchange. JOT Sub is engaged
in the business of production automation and robotics for use within the
electronics industry. The Company proposes to sell to JOT Sub all of its
assets relating to its routing and depaneling business in exchange for
$920,000 and the assumption of the operating liabilities related to the
Company's business assets (the "Transaction"). JOT Sub will acquire
approximately 99% of the Company's total assets, which had generated 100% of
the Company's
4
<PAGE>
revenues and was responsible for approximately 99% of its expenses. As the
Company currently has a net loss through the first nine months of 1998, the
net loss acquired by JOT Sub will be slightly less than reported as certain
expenses will remain with the Company after the Transaction. Please refer to
the pro forma financial statements which are attached hereto as Exhibit "C."
JOT Sub will acquire all of the current assets of the company, current
operating liabilities, and the fixed assets used in the production of
depaneling equipment. As of September 30, 1998, current assets totaled
$509,984, current operating liabilities totaled $219,152, and fixed assets
(net of accumulated depreciation) totaled $145,314. JOT Sub is also
acquiring the rights to the OZO name and trademark, copyrighted software, and
the Company's customer lists. Virtually all of the Company's employees will
become JOT Sub employees, and the current production facility in Denver will
continue to operate in much the same manner as it has before the Transaction.
OZO (which will operate under a new name after the Transaction) will
retain certain assets which include the net cash proceeds of the Transaction
(see the pro forma schedule attached as Exhibit C) and a new technology
currently under development. None of the Company's current products will be
retained. Because the new technology represents a significant departure from
the current product line, it is unlikely any of the Company's current
customers would continue as customers after the new technology is
commercially available.
In addition, JOT Sub has agreed to license certain technologies back to
the Company after the Transaction has been completed. This will allow the
Company to continue to use copyrighted motion control and automation software
in certain fields of use. These fields of use include, among other things,
the manipulation of biological systems in order to accomplish a wide range of
research, medical and commercial objectives. This is a fully paid,
non-revocable, transferable, royalty-free license in perpetuity offered by
JOT Sub to the Company.
If the shareholders approve the Transaction and the Company completes
the Transaction, shareholders will be entitled to dissenters' rights under
Colorado law. See "Dissenters' Rights" below and the separate section
entitled "DISSENTERS' RIGHTS" which appears immediately following the
discussion of Proposal 3.
INFORMATION ABOUT THE TRANSACTION
MATERIAL TERMS OF THE AGREEMENT
The Agreement provides for the Company to sell and JOT Sub to purchase
substantially all of the Company's assets, including its routing and
depaneling business in exchange for $920,000, assumption by JOT Sub of the
operating liabilities of the business and JOT Sub's grant of a license to the
Company for use of the technology being conveyed for certain specified
purposes. The assets being sold by the Company include, without limitation,
substantially all of the Company's intellectual property, the rights to the
name "OZO Diversified Automation," machinery and equipment, inventory,
accounts receivable, the office lease and all of its furniture and fixtures.
The liabilities being assumed by JOT Sub include (i) all of the Company's
accounts payable generated in the ordinary course of business that have been
incurred prior to the closing of
5
<PAGE>
the Transaction and that will become due after the closing; (ii) obligations
of the Company under the contracts being assigned and/or assumed by JOT Sub;
(iii) specified payroll obligations and employee vacation and sick leave pay;
(iv) specified domestic and international product warranties. JOT Sub is not
assuming any other liabilities, whether accrued, absolute or contingent,
including liabilities based on or arising out of or in connection with (a)
any defects in products manufactured or sold by the Company, (b) any implied
or express warranties relating to products manufactured or sold by the
Company in excess of the accruals identified in clause (iv), above, or (c)
any pension or other benefit liability relating to the Company's employees
who may be hired by JOT Sub.
If the Transaction is completed, the Company will be required to change
its corporate name so as not to include the words "OZO Diversified
Automation." A change in the Company's corporate name requires shareholder
approval and, because the name is one of the assets being sold under the
Agreement, if shareholders approve the Transaction, they also will be
approving a change of the Company's name from "OZO Diversified Automation,
Inc." to "RMMR, Inc."
If the Transaction is completed, fourteen of the Company's fifteen
full-time employees (as of December 21, 1998) including all but one of the
Company's executive officers, will become employees of JOT Sub. Brantley
Halstead, currently the Company's chief financial officer and a director,
will be the only employee of the Company who will remain an employee of the
Company following the completion of the Transaction. David Orthman (a
director of the Company) and David Wolenski (president and a director of the
Company) will provide services to the Company on a part-time basis during the
Transition Period described below) and thereafter. Effective upon the
closing of the Transaction, the Company will be required to release each of
the employees hired by JOT Sub from all employment, non-compete and
non-disclosure agreements related to their employment with the Company.
The Agreement provides for a 90-day transition period (the "Transition
Period") during which the Company's former employees hired by JOT Sub may
provide certain transitional services to the Company for a specified hourly
rate. During the transitional period, the Company will sublease office space
from JOT Sub for $200 per month. After the Transitional Period, the Company
will be required to relocate its offices.
The Agreement contains representations and warranties and
indemnification provisions by the parties which Management believes are
standard in transactions of a similar nature. Completion of the Transaction
is conditioned on, among other things, receipt of approval of the Company's
shareholders, accuracy of the representations and warranties at the time of
closing, performance and compliance with all covenants and conditions
contained in the Agreement, receipt of opinions of legal counsel,
satisfactory completion of due diligence by JOT Sub, and no material change
in the Company's business occurring between the date of the Agreement and the
date of closing.
FINDER'S FEE
6
<PAGE>
OZO entered into an investment banking agreement in June 1998 with
Catalyst Financial Corp. of Miami, Florida ("Catalyst"). The primary goal of
this investment banking relationship was to obtain financial consulting
services related to merger and acquisition activities and to assist the
Company in its efforts to restructure and survive the economic downturn and
anticipated losses identified by the Board in June 1998. Catalyst was
specifically charged with, among other things, the responsibilities of"
developing a financial summary of the company and its business; identifying,
developing, and providing introductions to suitable acquisition candidates;
assisting in the negotiations of terms and the structure of any transactions
that came under review; and working closely with the Company nad its other
advisors to orchestrate a closing. It was the Company's intention to use
Catalyst as its primary advisor in its efforts to facilitate its
restructuring. The contract did not require that any monthly fee be paid to
Catalyst or CapitaLink, but it does require that a fee be paid in connection
with the completion of the Transaction with JOT Sub.
As stated in the contract, the amount of the fee was based on 5% of the
total transaction consideration. For the purposes of calculating the fee,
the transaction consideration equaled not only the cash to be paid by JOT
Sub, but also the liabilities assumed. In December 1998, the parties
mutually agreed to reduce the fee from 5% to 3.75%, which will result in a
fee of approximately $40,000 (plus expenses incurred, on an accountable
basis) to be paid to CapitaLink if the Transaction is completed. Following
the completion or abandonment of the Transaction, the agreement will expire.
At the time the Company entered into the agreement with Catalyst, Scott
Salpeter, a director of the Company, was an employee and officer of Catalyst.
Steve Bronson and James Cassel, two persons identified in the shareholder
table above, were also affiliated with Catalyst. Subsequently Mr. Cassel and
Mr. Bronson separated, and Mr. Cassel, with Mr. Salpeter, formed a new
corporation known as CapitaLink. CapitaLink assumed the contract effective
October 1, 1998. Mr. Salpeter abstained from the Board's vote with respect to
the CapitaLink agreement and the fee.
EMPLOYMENT AGREEMENTS
In connection with the closing of the Transaction, David J. Wolenski,
President, Chief Executive Officer and a director of the Company, and David
W. Orthman, Director of Research and Development, Secretary-Treasurer and a
director of the Company will enter into three-year employment agreements with
JOT Sub. Upon entering into these agreements, they will resign their
positions as executive officers and employees of the Company. Mr. Wolenski
will serve as President of a designated subsidiary of JOT Sub and Mr. Orthman
will serve as Director of Research and Development of a designated subsidiary
of JOT Sub. For his services as President of the designated subsidiary of
JOT Sub, Mr. Wolenski will be paid a base salary of $75,000 per year, an
annual bonus of up to $10,000 based on performance criteria, stock options
and other standard employee benefits. Mr. Wolenski will be allowed to work
for the Company on a part-time basis during the Transition Period and for up
to eight hours per month thereafter. The Company will be obligated to
reimburse JOT Sub $40 per hour for Mr. Wolenski's services while he is an
employee of JOT Sub.
7
<PAGE>
For his services as Director of Research and Development of the
designated subsidiary of JOT Sub, Mr. Orthman will be paid a base salary of
$62,000 per year for services of four days per week to JOT Sub, bonuses as
may be determined and granted by JOT Sub from time to time and other standard
employee benefits. Mr. Orthman will continue to provide services to OZO for
one day per week for approximately $1,000 per month compensation at $35.00
per hour. Except for their titles, duties and compensation, the employment
contracts for Mr. Wolenski and Mr. Orthman will be substantially the same.
The Company has entered into an employment agreement with Mr. Halstead
for his services following the completion of the Transaction. The agreement
provides that the Company will retain Mr. Halstead at a salary equal to
$72,000 per year commencing on the completion of the Transaction, together
with standard provision for vacation, continuing professional education, and
appropriate insurance coverage and, in the discretion of the Board of
Directors, bonuses. The employment agreement (for a term of three years)
provides that Mr. Halstead will be president of the Company during that term.
The Company has entered into no other employment agreement with any
other person for periods up to or following the completion of the proposed
Transaction. After the completion of the Transaction (of which there can be
no assurance), Mr. Halstead will be the only full-time employee of the
Company. During the Transition Period, Mr. Halstead will be considering
hiring persons to complete the research and development of the prototype
micro-robotic device, but no persons have been identified to date, and no
offers have been made.
CONSULTING AGREEMENT
In connection with the closing of the Transaction, the Company and
Brantley J. Halstead, Chief Financial Officer and a director of the Company,
will enter into a consulting agreement with JOT Sub to provide certain
transition consulting services to JOT Sub during the Transition Period for an
established rate of $35 per hour to be paid to the Company.
REASONS FOR THE PROPOSED SALE OF ASSETS AND CHANGES IN BUSINESS AFTER THE
TRANSACTION
The Company's Board of Directors has carefully reviewed and considered
the Transaction and has unanimously determined that completion of the
Transaction is in the best interests of the Company and its shareholders,
based on a number of factors discussed in more detail below, including the
book value of the Company's stock, the existing working capital deficit,
earnings prospects of the Company in light of the Asian economic crisis, and
changing conditions in the industry. The Board did not, however, seek or
obtain a fairness opinion from any investment banker or other person with
respect to the Transaction or any aspect of the Transaction.
The Board of Directors based its unanimous decision on three principal
factors: a significant amount of debt existing in the Company which was
initially repayable on December 30, 1998, the profitability of the Company's
core business of depaneling and routing having been materially affected by
the Asian economic crisis coupled with significant changes in the industry,
and the desire of the Company to enter into the related field of developing
its prototype device for
8
<PAGE>
micro-manipulation in the bio-medical and bio-technical fields which is
expected to work in conjunction with extremely powerful microscopes at
extremely small tolerances.
OUTSTANDING INDEBTEDNESS. The Company has a significant amount of
indebtedness which was originally due in full on December 30, 1998, although
approximately $130,000 has been extended until January 31, 1999 and an
additional $75,000 has been extended until February 28, 1999. In part, the
holders of the indebtedness agreed to extend the debt in reliance on the
announcement made of the proposed Transaction. The debt (which will be
repaid from the proceeds of the Transaction) can be described in detail as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
nature of indebtedness amount due original due due date as
date extended
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Convertible Promissory Note* $30,000 12/30/98 1/31/99
- --------------------------------------------------------------------------------
Convertible Promissory Note* $20,000 12/30/98 not extended
- --------------------------------------------------------------------------------
Promissory Note* $100,000 12/30/98 1/31/99
- --------------------------------------------------------------------------------
Promissory Note* $20,000 12/30/98 not extended
- --------------------------------------------------------------------------------
Secured Promissory Note+ $75,000 12/30/98 2/28/99
- --------------------------------------------------------------------------------
Secured Promissory Note^ $11,715 on demand on demand
- --------------------------------------------------------------------------------
Reimbursement Amount# $18,147 on demand on demand
- --------------------------------------------------------------------------------
</TABLE>
* Issued to investors on December 30, 1993. Holders of convertible
promissory notes aggregating $70,000 converted their notes into common
stock during November and December 1998. These amounts do not include
interest through December 30, 1998, of approximately $5,400 which is
payable on that date. On November 13, 1998, in an effort to reduce the
Company's total indebtedness the Board of Directors authorized a reduction
in the conversion price of outstanding convertible promissory noes from
$1.14 per share to $.875, a price which was still in excess of the market
price on November 13, 1998 as quoted by the OTC Bulletin Board. As a
result each of the twelve $10,000 promissory notes became convertible into
11,428 shares as compared to 8,772 shares at the higher conversion price.
One of the Company's directors, Alvin Katz, owns one convertible promissory
note through his wife and two additional convertible promissory notes
through a partnership in which Mr. Katz and his wife have a 50% interest.
Subsequently both Mrs. Katz and the partnership converted their promissory
notes to acquire shares of common stock at the lower price. Mr. Katz
abstained on the vote in favor of reducing the conversion price, but
benefitted by that decision.
9
<PAGE>
+ This represents funds advanced by Alvin Katz, a director of the Company,
after December 31, 1997 for working capital purposes, and does not include
accrued interest of approximately $4,000 through December 30, 1998. Mr.
Katz' loan to the Company was originally repayable on December 30, 1998,
but was extended by Mr. Katz for no additional consideration until February
28, 1999. The loan is collateralized by a substantial portion of the
Company's assets and bears interest at 10% per annum.
^ Throughout the course of 1997, David Wolenski loaned the Company a total of
$304,000, for working capital purposes. This amount bore interest at 2%
over prime, including approximately $300 due through December 31, 1998. As
of December 31, 1997, the outstanding loan balance had been repaid in full.
Subsequent to December 31, 1997, Mr. Wolenski loaned the Company an
additional $213,200, for working capital purposes. This amount is
repayable on demand, is collateralized by a substantial portion of the
Company's assets, and bears interest at 2% over prime. As of the date of
this proxy statement, $11,715 remains unpaid.
# This amount is intended to reimburse, on an accountable basis and without
interest, David Orthman for expenses he has incurred on behalf of the
Company.
Mr. Wolenski and Mr. Katz, directors of the Company, have agreed to
advance additional amounts to the Company solely for the purpose of repaying
the principal of and interest on convertible promissory notes and the
promissory notes when due if the Company does not have sufficient capital at
the time the notes are payable. If these persons advance additional funds to
the Company, they will be substituted for those creditors, although they have
agreed to accept repayment of the amounts advanced after the Transaction is
completed, but not later than February 28, 1999.
ADVERSE IMPACTS TO COMPANY PROFITABILITY. Although the Company achieved
profitable for six of the eight quarters in 1997 and 1998, its operations and
profitability have been materially adversely affected by two significant
factors which are beyond the Company's control: the Asian economic crisis
which has significantly reduced orders for the Company's products from that
region, and the industry moving away from single product purchases and toward
the purchase of a total solution for their manufacturing needs. The
Company's profitability achieved during 1997 could not be sustained due in
large part to the significant economic downturn in Asia during the latter
part of 1997 and substantially all of 1998. Management believes that had
Asian orders for the Company's products not been adversely affected by the
Asian regional economy (and in part by an adverse trend in economic
conditions throughout the world), the Company may have been able to sustain
the limited profitability achieved in 1997. Economic factors beyond the
Company's control, however, placed the Company in a position where it was
required to borrow working capital from certain of its directors (as
described above), and it had to renegotiate the terms of outstanding
indebtedness or generate cash through a sale of its depaneling and routing
business.
During 1998, Asian markets have weakened significantly, resulting in a
substantial decrease in the Company's sales and revenues. During 1996,
approximately 31% of the
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<PAGE>
Company's total sales ($675,000) derived from sales to customers in Asia and
the Pacific Rim; this reduced to approximately 14% of the Company's total
sales during 1997 ($402,000) and only 4% ($50,000) during the first three
quarters of 1998. The Company's routing and depaneling business yields low
gross margins. Management cannot predict a timetable for a recovery of the
Asian markets and believes that weak economic conditions have persisted in
Asian markets for the remainder of 1998 and are likely to continue well into
1999.
Asia had been the Company's principal market for the routing and
depaneling machines it manufactured. As a result of the Asian crisis and as
a further result of the maturing electronics assembly industry, buyers of
circuit board assembly equipment are now demanding their equipment vendors
provide a complete solution, not just a single machine which has been OZO's
market niche. OZO does not have the resources to be able to provide a
complete solution.
JOT Sub, on the other hand, makes a full line of circuit board assembly
equipment including a basic depaneling cell that is sold in Europe. OZO
fills a niche for JOT Sub by providing JOT Sub with a better depaneling and
routing machine for its circuit board assembly process. To date, JOT has not
developed a bench-top or a stand-alone depaneling machine.
ENTRY INTO NEW LINE OF BUSINESS WITH RELATED TECHNOLOGY. Finally, the
Company believes that it has an opportunity to complete the research and
development necessary for the creation of a prototype device for
micro-manipulation in the bio-medical and bio-technical fields which is
expected to work in conjunction with extremely powerful microscopes at
extremely small tolerances. This is a new line of business for the Company,
but the Company will be using its existing technology (which it is selling to
JOT Sub as a part of the Transaction and is subject to the license back from
JOT Sub as described herein). That technology provides for the manipulation
of cutting devices within extremely small tolerances for the purpose of
depaneling circuit boards. The existing technology is capable of repeating
these cuts an unlimited number of times through robotics, simply by
programming the Company's cutting devices properly with its motion control
software.
The Company has developed a prototype device that works in conjunction
with an extremely powerful vision system (that could include a microscope or
monitor) with the ability to manipulate a micro-tool at tolerances which are
substantially less (by a factor of ten) than the Company's current equipment.
The existing prototype device is developed only on a single axis - by which
the tool can touch the tissue being examined in a single spot, retract, and
then return to the same spot, demonstrating the repeatability and accuracy of
motions at extremely small tolerance levels. Following the Transaction, with
the funds made available thereby, the Company will hire employees to continue
the research and development to add the additional axes and to reduce
tolerances.
The Company expects to use the licensed technology and the technology
included in the patent application the Company is retaining to develop this
prototype over the six to nine months following the Transition Period. The
Company is unable to develop this device in its current financial situation,
but the completion of the Transaction will provide the Company with
sufficient funds to continue this work for a period of at least twelve
months. (See "Use of Estimated Net Proceeds," below.)
11
<PAGE>
At this time the Company is not aware of any competitors with similar
technology. A patent application has been filed for the purpose of
protecting certain aspects of the Company's technology. The License Agreement
with JOT Sub also gives the Company certain exclusive rights with respect to
the technology in this field.
Because of limited resources available to the Company has not been able
to complete a more detailed analysis of the market and potential competition
and competitors. Based on industry literature and other information widely
available, however, management believes that the potential market for the
prototype device, when and if completed, is quite large if the prototype
device performs in the manner expected (of which there can be no assurance).
Even if the Company is successful in completing the prototype device, the
Company will not have the capital necessary to commence production of the
device in any significant quantities. The Company had not made any
arrangements for additional capital if the prototype device is successful,
and there can be no assurance that additional capital will be available when
needed.
Furthermore, there can be no assurance that the Company will succeed in
developing a micro-manipulation device with the necessary degree of accuracy
within the budget provided by the completion of the Transaction. If the
Company is not able to do so, then it probably will not have sufficient
capital available to complete the prototype device or to pursue any other
line of business, and there can be no assurance that the Company would be
able to obtain any additional funding. In such a case, it is likely that the
Company would have to cease business operations, and shareholders may not
receive any return on their investment.
CHANGES IN MANAGEMENT AFTER THE TRANSACTION CLOSING
Following the closing of the Transaction, Mr. Wolenski and Mr. Orthman
will resign as executive officers to become employees and executive officers
of JOT Sub. They will continue to serve on the board of directors of the
Company. During and after the Transition Period (and as described in more
detail above), Mr. Wolenski will provide the Company transitional management
services at a specified hourly rate to the Company. The Company will pay
this consulting fee to JOT Sub to reimburse it for employment expenses it
incurs in providing the services of Mr. Wolenski to the Company. Also as
described above, Mr. Orthman will continue to provide services to the
Company in addition to his duties to JOT Sub as permitted in his employment
agreement with JOT Sub.
The Board of Directors has elected Brantley J. Halstead as President,
Chief Executive Officer, Treasurer and Chief Financial Officer of the Company
effective upon the completion of the Transaction. Mr. Halstead has served as
the Company's Chief Financial Officer since February 1998. From September
1997 until February 1998, he served as the Company's Controller. Mr.
Halstead has extensive experience in management consulting, focusing
primarily on the application of information technology to facilitate business
process re-engineering.
USE OF ESTIMATED NET PROCEEDS
The purchase price to be received from JOT Sub as a result of the
Transaction will be $920,000. Pursuant to an amendment to the Asset Purchase
Agreement, the Company has agreed
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<PAGE>
to reimburse JOT Sub for expenses paid by the Company which are related to
the assets being retained by the Company after the Transaction or which are
related to the indebtedness described above. The following table sets forth
the anticipated use of the full $920,000 to be received by the Company:
<TABLE>
<S> <C>
------------------------------------
Purchase Price $920,000
------------------------------------
Indebtedness payable $274,862
(see table, above)
------------------------------------
Sales and use taxes $20,000
(estimate)
------------------------------------
Finder's fee $40,000
(Catalyst)
------------------------------------
Net proceeds remaining $585,138
(estimated)
------------------------------------
</TABLE>
As a result of the foregoing, the remaining net proceeds of the
Transaction will be approximately $585,000 (the "post-Transaction net
proceeds"). (See the "Pro Forma Financial Statements" included as Exhibit
"C" to this proxy statement.) The Company expects to pay the costs of the
Transaction out of their corporate funds in the ordinary course of business
and, therefore, these expenditures will not reduce the post-Transaction net
proceeds.
The Company believes that the post-Transaction net proceeds will enable
the Company to continue its research and development activities in developing
the prototype device, and in pursuing the patent application for the proposed
device. Generally the Company anticipates that the net proceeds expected to
be made available by the completion of the Transaction will be expended over
the following twelve to fifteen months as follows. In all cases, the amounts
are estimated and are subject to change based on the needs of the Company, as
they develop over time during and after the Transition Period.
<TABLE>
<S> <C>
-----------------------------------
Salaries (1) $300,000
-----------------------------------
Rent and Leasehold $90,000
-----------------------------------
Improvements (2)
-----------------------------------
Consulting fees (3) $40,000
-----------------------------------
Materials and Supplies $100,000
-----------------------------------
Miscellaneous (4) $55,000
-----------------------------------
</TABLE>
- - Including officers' salaries and fringe benefits. This also includes
salaries for software, mechanical and electrical engineers necessary to
complete the development, design, and construction, and testing of the
Company's prototype device.
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<PAGE>
- - After the completion of the Transaction, the Company will move to new
facilities in the Denver, Colorado area.
- - Including consulting fee of $12,000 to be payable to David Orthman.
- - Including legal, accounting and working capital.
The net proceeds to be made available by the completion of the
Transaction are expected to be sufficient to allow the Company to complete
the development of a functional prototype (although there can be no assurance
that these efforts will be successful). If successful, the Company will also
identify estimated manufacturing and production costs for the prototype
device. At that time, the Company will not have sufficient capital to
produce or market the prototype device, and will either begin an effort to
raise additional capital and build and distribute the technology internally,
or seek out a business partner with that expertise. There can be no
assurance, however, that the Company will be able to achieve any of these
goals.
AS NOTED, THE FUTURE CONDUCT OF THE BUSINESS OF THE COMPANY AND ITS
RESPONSE TO ISSUES RAISED BY THIRD PARTIES ARE DEPENDENT UPON A NUMBER OF
FACTORS, AND THERE CAN BE NO ASSURANCE THAT THE COMPANY WILL BE ABLE TO
CONDUCT ITS OPERATIONS OR COMPLETE THE PROTOTYPE MICRO-DISSECTION DEVICE AS
CONTEMPLATED. CERTAIN STATEMENTS CONTAINED IN THIS REPORT USING THE TERMS
"MAY," "EXPECTS TO," AND OTHER TERMS DENOTING FUTURE POSSIBILITIES, ARE
FORWARD-LOOKING STATEMENTS. THE ACCURACY OF THESE STATEMENTS CANNOT BE
GUARANTEED AS THEY ARE SUBJECT TO A VARIETY OF RISKS WHICH ARE BEYOND THE
COMPANY'S ABILITY TO PREDICT OR CONTROL AND WHICH MAY CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THE PROJECTIONS OR ESTIMATES CONTAINED HEREIN. THESE
RISKS INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS DESCRIBED ABOVE, AND THE
OTHER RISKS ASSOCIATED WITH START-UP OPERATIONS IN COMPANIES DEPENDENT ON THE
DEVELOPMENT OF NEW TECHNOLOGY, AND THE OPERATIONS OF A COMPANY WITH NO
HISTORICAL PROFITABILITY AND LITTLE PROBABILITY OF OBTAINING ADDITIONAL
FINANCING BEYOND THE CAPITAL AVAILABLE. IT IS IMPORTANT THAT EACH PERSON
REVIEWING THIS PROXY STATEMENT UNDERSTANDS THE SIGNIFICANT RISKS ATTENDANT TO
THE OPERATIONS OF THE COMPANY. THE COMPANY DISCLAIMS ANY OBLIGATION TO
UPDATE ANY FORWARD-LOOKING STATEMENT MADE HEREIN EXCEPT TO THE EXTENT
REQUIRED TO DO SO IN FURTHER REPORTS TO BE FILED PURSUANT TO THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
MATERIAL CHANGES IN SHAREHOLDER RIGHTS AFTER THE TRANSACTION
The Company plans to continue operations but change the nature of its
business after the Transaction as described in the foregoing section entitled
"Changes in the Business of the Company after the Transaction."
Consequently, the rights of the Company's shareholders after the Transaction
will not differ materially from their rights before the sale of assets.
The shareholders will have an investment in a company with no historical
earnings, however. As described herein, the assets which have generated the
revenues which have been reflected on the Company's financial statements will
be considered to be "discontinued operations." Furthermore, it is not likely
that the Company will be able to generate any revenues or earnings until
after the prototype device discussed above has been completed and accepted by
14
<PAGE>
the market and, therefore, sales have commenced. Although the Company
believes that it will be able to complete the development of the prototype
device by using the post-Transaction net proceeds to be received from JOT
Sub, there can be no assurance that it will be able to do so.
ACCOUNTING TREATMENT AND FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION
The Transaction will be accounted for as a sale and the Company will
recognize gain on the sale of its assets to the extent the portion of the
purchase price allocated to such assets exceeds the Company's basis in the
assets. Any gain will be offset by the Company's operating loss
carry-forwards. Management does not expect that the Company will be liable
for any state or federal income taxes.
PRO FORMA FINANCIAL INFORMATION
Pro forma financial statements, including balance sheets at December 31,
1997 and September 30, 1998 and statements of operations for the year ended
December 31, 1997 and the nine months ended September 30, 1998 have been
prepared to reflect the Transaction as if it occurred on January 1, 1998.
These pro forma financial statements are included as Exhibit C to this Proxy
Statement.
REGULATORY REQUIREMENTS
No federal or state regulatory requirements must be met or approval
obtained in connection with the Company's proposed sale of assets.
NO PREVIOUS RELATIONSHIP WITH JOT SUB OR JOT PARENT
Prior to this proposed transaction, none of the Company, its directors,
officers or affiliates has had any material contracts, arrangements,
understandings, relationships, negotiations or transactions with JOT Sub or
JOT Parent.
MARKET INFORMATION
On October 5, 1998, the day immediately preceding the Company's public
announcement of the proposed sale of assets, the range of the bid and asked
prices of the Company's common stock as quoted on the OTC Bulletin Board was
$1.125 (high) to $0.5625 (low). On that date, the Company's common stock
closed at $0.844.
DISSENTERS' RIGHTS
Article 113 of the Colorado Business Corporation Act provides a
procedure by which shareholders who were record holders of Common Stock
immediately prior to the effectiveness of the sale of assets may be entitled
to an appraisal of the fair value of their shares, exclusive of any element
of value arising from the expectation or accomplishment of the sale of
assets, together with a fair rate of interest, if any, to be paid thereon.
Any shareholder who wishes to exercise
15
<PAGE>
this right to an appraisal must do so by making written demand to the
Company. The written demand must be received by the Company before voting on
the proposal for the sale of assets. Shareholders desiring to exercise their
dissenters' rights must strictly follow the procedures set forth in Article
113 of the Colorado Business Corporation Act.
For more detailed information about dissenters' rights which will be
available to shareholders in connection with the proposed sale of assets if
the sale is approved and completed, see the section entitled "DISSENTERS'
RIGHTS" which appears immediately following the discussion of Proposal 3.
PROPOSAL 2
TO REDUCE THE SHAREHOLDER VOTING REQUIREMENTS
The Board of Directors has approved and recommends that the shareholders
approve the following amendment to the Company's Restated Articles of
Incorporation, as amended. The amendment proposed would reduce the voting
requirement for shareholder approval of asset dispositions, mergers,
consolidations or exchanges, or any other matter which would require an
amendment to the Company's Restated Articles of Incorporation, as amended,
from two-thirds to a majority. The following discussion is qualified in its
entirety by the text of the Article VI as it is proposed to be amended is
included as Exhibit A to this Proxy Statement. If approved, the amendment
would become effective upon the filing of an Amendment to the Company's
Restated Articles of Incorporation, as amended, with the Secretary of State
of Colorado.
The proposed amendment to Article IV of the Company's Restated Articles
of Incorporation, as amended, will reduce the affirmative shareholder vote
necessary to approve certain transactions, such as mergers, major
acquisitions or sales of all or substantially all the Company's assets, or
any other matter which would require an amendment to the Company's Restated
Articles of Incorporation. Under the Company's Restated Articles of
Incorporation, as amended to date, the affirmative vote of two-thirds of the
issued and outstanding Common Stock is required to approve such transactions,
either as expressly provided by the language contained therein or the lack of
a provision contained therein. The Colorado Business Corporation Act was
amended effective July 1, 1994, to provide that no action taken by a
corporation requires more than a majority vote of the shares entitled to vote
unless otherwise provided in the corporation's articles of incorporation, or
unless the corporation was formed before July 1, 1994 and its articles of
incorporation do not contain a provision reducing the voting requirement from
two-thirds to not less than a majority.
Due to the dispersion of the Company's shareholders, it may be difficult
for the Company to locate and obtain the vote of two-thirds of the outstanding
shares. As noted in this proxy statement, the Company requires the vote of
two-thirds of the outstanding shares for the approval of each of the
proposals to be presented to the shareholders; management and the board of
directors who have indicated their intention to vote for each of the
proposals constitute only approximately 29% of the outstanding shares.
Because the Company believes that the approval of the proposals is so
important to the Company, officers of the Company will contact other
16
<PAGE>
significant shareholders after the proxy statement is made to assist them in
making their voting decision. This assistance will be limited in accordance
with the requirements of the Securities and Exchange Commission's proxy
rules. Because of the two-thirds voting requirement, however, there can be
no assurance that the Company, even with the assistance to be provided by its
officers, will be able to generate sufficient vote to approve any of the
proposals.
The Board of Directors believes that it is in the best interests of the
Company to reduce the voting requirement from two-thirds to a majority of the
shares entitled to vote in order to conform with the recent amendments to the
Colorado Business Corporation Act, so that a minority of the Company's
shareholders will not be able to thwart the will of the majority.
Other than as described elsewhere in this Proxy Statement, the Board of
Directors has no present or contemplated plans to enter into any transactions
that would require approval of the Company's shareholders.
VOTE REQUIRED AND RECOMMENDATION
Approval of this Proposal 2 for the Company to amend its Restated
Articles of Incorporation to reduce the shareholder voting requirements
requires the affirmative vote of two-thirds of the outstanding shares of the
Company's Common Stock. THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS
THAT SHAREHOLDERS VOTE FOR THIS PROPOSAL TO AMEND THE COMPANY'S RESTATED
ARTICLES OF INCORPORATION, AS AMENDED, TO REDUCE THE SHAREHOLDER VOTING
REQUIREMENTS. Unless otherwise specified, the enclosed proxy will be voted
"FOR" the approval of this Proposal 2.
PROPOSAL 3
TO PROVIDE FOR THE LIMITATION OF CERTAIN LIABILITIES OF THE
COMPANY'S DIRECTORS TO THE COMPANY AND ITS SHAREHOLDERS
The Board of Directors has approved an amendment to the Company's
Restated Articles of Incorporation, as amended, to add a new Article IX which
would limit certain liabilities of the Company's directors to the Company and
its shareholders as permitted under Section 7-108-402(1) of the Colorado
Business Corporation Act. The following discussion is qualified in its
entirety by the text of the proposed Article IX attached hereto as Exhibit B.
If approved, the amendment would become effective upon the filing of an
Amendment to the Company's Restated Articles of Incorporation, as amended,
with the Secretary of State of Colorado. The amendment, if approved, will
incorporate any future changes in Colorado law further limiting or
eliminating personal liability of directors.
Proposed Article IX of the Restated Articles will limit the personal
liability of the Company's directors for monetary damages for certain
breaches of the fiduciary duty of care as permitted under Section
7-108-402(1) of the Colorado Business Corporation Act. The Colorado Business
Corporation Act permits a Colorado corporation to limit or eliminate the
personal monetary liability of its directors to the corporation or its
shareholders by reason of their breach of
17
<PAGE>
the fiduciary duty of care as directors, including liability for negligence,
and gross negligence, by including a provision to this effect in its Articles
of Incorporation. This provision of the Colorado Business Corporation Act
was enacted after the Company's inception.
Proposed Article IX of the Restated Articles would NOT permit any
limitation upon the liability of a director for: (i) any breach of his or her
duty of loyalty to the Company and its shareholders, (ii) acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) assenting to an unlawful distribution made in
violation of section 7-106-401 of the Colorado Business Corporation Act or
the Articles of Incorporation, or (iv) any transaction from which he or she
directly or indirectly derived an improper personal benefit. Accordingly,
the provisions limiting or eliminating the potential monetary liability of
directors permitted by the Colorado Business Corporation Act apply only to
the "duty of care" of directors. The provision is not retroactive to limit
liability for acts or omissions which occurred prior to the date of its
adoption by Company's shareholders.
In performing their duties, the Company's directors are scrutinized
under the "business judgment rule" which stipulates the fiduciary duties of
care and loyalty imposed upon directors. Under the business judgment rule, a
director is required to perform his or her duties as a director in good
faith, in a manner he or she reasonably believes to be in the best interests
of the corporation, and with such care as an ordinarily prudent person in a
like position would use under similar circumstances.
The "duty of care" requires that each director act in a manner which,
after a reasonable investigation, he or she believes in good faith to be in
the best interests of the Company and all of its shareholders and requires
that each director, in the performance of his or her corporate
responsibilities, exercise the care that an ordinary prudent person would
exercise under similar circumstances. The "duty of loyalty" prohibits
faithlessness and self-dealing by directors and prohibits directors from
using their corporate position to make a personal profit or gain other
personal advantage.
In recent years, litigation seeking to impose liability on directors and
officers of publicly-held corporations for violations of the duty of care has
become commonplace. To avoid liability, the director is required to show
that he conducted himself in strict compliance with the duty of care as set
forth in the business judgment rule. In practice, the application of this
duty varies widely among the courts, leaving directors with little guidance
and certainty as to what constitutes adequate care under a given set of
circumstances. Compounding this uncertainty, in several decisions, courts
imposed a clairvoyant duty upon directors, despite the fact that the actions
of the directors in exercising reasonable care are supposed to be judged as
of the time and under the circumstances existing at the time the decision was
made.
This type of litigation is expensive to defend, with costs frequently
amounting to hundreds of thousands, and sometimes millions of dollars. In
many cases, costs of defense exceed the means of individual defendants, even
if ultimately they are vindicated on the issue of individual liability or
wrongdoing. In addition, in view of the costs and uncertainties of
litigation, it is often prudent to settle such claims. While settlements
frequently are for only a fraction of the amount
18
<PAGE>
claimed, the settlement amount may well exceed the financial resources of
individual defendants. In summary, without the benefit of protective
measures such as indemnification and limitation of liability as permitted
under the Colorado Business Corporation Act, exposure to the costs and risks
of claims of personal liability for corporate directors may exceed any
benefit to them of serving as a director of a public corporation.
The risks of personal liability for directors has traditionally been
mitigated through directors' and officers' liability insurance ("D&O
Insurance"). Changes in the market for D&O Insurance over time has resulted
in meaningful coverage becoming unavailable for directors and officers of
many corporations. Insurance carriers have in certain cases declined to
renew existing directors' and officers' liability policies, or have increased
premiums, thereby making the cost of obtaining such insurance prohibitive.
Moreover, policies often exclude coverage for areas where the service of
qualified independent directors is most needed and beneficial to the Company.
For example, many policies do not cover liabilities or expenses arising from
directors' and officers' activities in response to attempted takeovers of a
corporation.
In response to the above developments regarding litigation against
directors and the general unavailability of meaningful D&O Insurance, in 1987
the Colorado legislature adopted Section 7-108-402 of the Colorado Business
Corporation Act which permits a corporation to limit or eliminate the
personal monetary liability of a director for certain breaches of the duty of
care. Effectively, the limitation acts as a substitute for, or a supplement
to, D&O Insurance coverage.
In the opinion of the Board of Directors, inclusion of a provision for
limitation of liability will best position the Company to attract and retain
qualified candidates to serve as its directors. Although the Company has not
experienced difficulty finding qualified candidates to serve on its Board of
Directors to date, it believes that it may experience difficulty in the
future if protective measures are not taken.
This provision would prevent the Company and its shareholders, but not
third parties, from bringing actions for monetary damages based upon a
director's negligent or grossly negligent business decisions, including those
related to attempts to change control of the Company, to the benefit of the
Board and at the expense of the shareholders. Thus, if the proposal to add a
provision to limit the monetary liability of directors is approved, the
Company or a shareholder will be able to prosecute an action against a
director for monetary damages for breach of fiduciary duty only if it can be
shown that such damages have been caused by a breach of the duty of loyalty,
a failure to act in good faith, intentional misconduct, a knowing violation
of law, a direct or indirect improper personal benefit, or an illegal
distribution. It would not limit or eliminate the right of the Company or
any shareholder to seek an injunction or any other non-monetary relief if a
director breaches his or her duty of care. Although equitable remedies
remain available, they may be inadequate as a practical matter.
The provision for the limitation of liability proposed to be included in
the Restated Articles is intended to be effective only against actions by the
Company and its shareholders. Third party plaintiffs, such as creditors,
will not be prevented from recovering damages on the basis of the provision.
In addition, the provision would apply only to claims against a director
arising out of
19
<PAGE>
his or her status as a director and would not apply to claims arising from
his status as an officer or his or her status in any other capacity; nor
would it apply to a director's responsibilities under any other law, such as
the federal securities laws. If this proposed provision is approved, changes
in Colorado law further limiting or eliminating personal liability of
directors automatically will be applicable without further shareholder
approval.
Neither the Board of Directors nor any of its members have experienced
any recent litigation which would have been affected by the above provision
had it been in effect previously. The proposal to include this provision in
the Restated Articles is not the result of any pending or threatened
litigation against any member of the Company's Board of Directors.
VOTE REQUIRED AND RECOMMENDATION
Approval of this Proposal 3 for the Company to amend its Restated
Articles of Incorporation to provide for the limitation of certain
liabilities of the Company's directors to the Company and its shareholders as
permitted under Section 7-108-402(1) requires the affirmative vote of
two-thirds of the outstanding shares of the Company's Common Stock.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THIS PROPOSAL TO AMEND THE COMPANY'S RESTATED ARTICLES OF INCORPORATION,
AS AMENDED. It should be noted that the directors of the Company face a
potential conflict of interest in recommending to the shareholders an
amendment which would relieve them of future liability to the shareholders or
to the Company. However, the Board of Directors recommends approval of this
amendment because it believes the provision for limitation of monetary
liability of directors for certain acts, as permitted under the Colorado
Business Corporation Act, will encourage capable individuals to continue to
serve as, and become directors of, the Company and that adoption of the
amendment is in the best interests of the Company. Unless otherwise
specified, the enclosed proxy will be voted "FOR" the approval of this
Proposal 3.
DISSENTERS' RIGHTS
To the extent shareholders may be entitled under Colorado law to dissent
from the Transaction described in Proposal 1 and obtain payment of the fair
value of their shares from the Company, they must strictly comply with the
provisions of Article 113 of the Colorado Business Corporation Act (the
"Dissenters' Rights Statute"). A copy of the Dissenters' Rights Statute is
included in this Proxy Statement as Exhibit D. The following summary of the
procedures for complying with the Dissenters' Rights Statute is qualified in
its entirety by the actual provisions of the Dissenters' Rights Statute.
- - Any shareholder of record on December 31, 1998, wishing to dissent from the
Transaction must give the Company written notice of his intention to
dissent from the Transaction. Person holding shares of common stock in
street name (through a broker, dealer, or other intermediary) must exercise
their right to dissent through that intermediary.
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<PAGE>
- - The Company must receive the shareholder's notice before the vote is taken
on Proposal no. 1 at the Special Meeting.
- - The shareholder must not vote for proposal no. 1 either by proxy or in
person at the meeting.
- - If proposal no. 1 is approved, the Company will send an additional notice
to the shareholders to provided notice of their intention to dissent and
who did not vote for proposal no. 1. This additional notice will supply a
form for each shareholder to demand payment for his or her shares and will
include additional information. The additional notice will also establish
a time limit for the shareholder response. Shareholders holding stock
certificates representing their shares of the Company's common stock will
have to deposit their certificates with the Company.
- - Following the timely receipt of the demands for payment from all
shareholders entitled to dissent the Company will pay each dissenting
shareholder the "fair value" of his or her shares of the Company's common
stock. The Board of Directors has not yet determined 'fair value,' but
will determine fair value based on a number of objective and subjective
factors including (without limitation):
- - The Company's negative net worth and working capital deficit at the time of
the announcement of the Transaction;
- Market value of the Company's common stock at the time of the
announcement of the transaction;
- The Company's historical operating losses and the prospects for
profitability without being able to complete the transaction; and
- Other factors the Board deems relevant to the determination of "fair
value."
- - If the Company fails to make payment to the dissenting shareholder within
60 days after the completion of the Transaction, or if the dissenting
shareholder is dissatisfied with the Company's payment, the dissenting
shareholder may make demand on the Company for additional payment and file
litigation in the District Court in and for the City and County of Denver,
Colorado.
- - The court proceeding will be conducted as described in the statute. Among
other things, the court may assess costs against either the Company or the
dissenting shareholder as the court may determine to be equitable.
INDEPENDENT AUDITORS
The independent accounting firm of Wheeler Wasoff, P.C. audited the
Company's financial statements for the years ended December 31, 1997 and
1996. This firm has been selected by the Board of Directors to audit of the
financial statements of the Company for the
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year ending December 31, 1998. A representative of Wheeler Wasoff, P.C. is
not expected to be present at the Special Meeting.
PROPOSALS FROM SHAREHOLDERS
The Special Meeting is not an annual meeting of shareholders of the
Company inasmuch as directors will not be elected at the Special Meeting.
The Company has not held an annual meeting of its shareholders for a
significant period of time. The Company does expect to hold an annual
meeting of its shareholders in December 1999. Proposals from shareholders
intended to be present at the next annual meeting of shareholders should be
addressed to the Company, Attention: Corporate Secretary, 7450 East Jewell
Avenue, Suite A, Denver, Colorado 80231, and must be received by the Company
by July 26, 1999. If they are not received by that date, they will be
considered to be untimely. Upon receipt of any such proposal, the Company
shall determine whether or not to include any such proposal in the Proxy
Statement and proxy in accordance with applicable law. It is suggested that
such proposals be forwarded by Certified Mail-Return Receipt Requested.
ANNUAL REPORT TO SHAREHOLDERS
This proxy statement is being accompanied by the Company's Annual Report
on Form 10KSB for the year ended December 31, 1997 and its Quarterly Report
on Form 10-QSB for the period ended September 30, 1998. The 1997 Annual
Report includes the audited financial statements for the Company.
OTHER MATTERS
Management does not know of any other matters to be brought before the
meeting. Should any other matter requiring a vote of shareholders arise at
the meeting, the persons named in the proxy will vote the proxies in
accordance with their best judgment.
By Order of the Board of Directors:
OZO DIVERSIFIED AUTOMATION, INC.
David J. Wolenski, President
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<PAGE>
EXHIBIT A
TEXT OF ARTICLE VI AS PROPOSED TO BE AMENDED
ARTICLE VI
SHAREHOLDER VOTING
Section 1. QUORUM. A quorum for the transaction of business at a duly
called meeting of shareholders shall consist of not less than one-third of
the shares entitled to vote at the meeting.
Section 2. NO CUMULATIVE VOTING. Cumulative voting shall not be
permitted in the election of directors.
Section 3. GENERAL. Elections of directors shall be conducted by a
plurality vote at a duly held meeting at which a quorum is present. Whenever
the shareholders must approve any matter, the affirmative vote of a majority
of the shares entitled to vote, represented in person or by proxy, and voting
at a duly held meeting at which a quorum is present shall be necessary to
constitute such approval or authorization; PROVIDED, THAT, for any matter
requiring shareholder approval for which the Company's articles of
incorporation would require approval of two-thirds of the shares entitled to
vote on the matter as a result of the adoption of such articles under the
now-repealed Colorado Corporation Code, the vote required shall be a majority
of the shares entitled to vote on the matter.
23
<PAGE>
EXHIBIT B
TEXT OF PROPOSED NEW ARTICLE IX
ARTICLE IX
LIMITATION ON DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or to its shareholders for monetary damages for breach of
fiduciary duty as a director; except that this provision shall not eliminate
or limit the liability of a director to the Corporation or to its
shareholders for monetary damages otherwise existing for (i) any breach of
the director's duty of loyalty to the Corporation or to its shareholders;
(ii) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) acts specified in Section
7-108-403 of the Colorado Business Corporation Act; or (iv) any transaction
from which the director directly or indirectly derived any improper personal
benefit. If the Colorado Business Corporation Act is hereafter amended to
eliminate or limit further the liability of a director, then, in addition to
the elimination and limitation of liability provided by the preceding
sentence, the liability of each director shall be eliminated or limited to
the fullest extent permitted by the Colorado Business Corporation Act as so
amended. Any repeal or modification of this Article IX shall not adversely
affect any right or protection of a director of the corporation under this
Article IX as in effect immediately prior to such repeal or modification with
respect to any liability that, but for this Article IX, would have accrued
prior to such repeal or modification.
24
<PAGE>
EXHIBIT C
PRO FORMA FINANCIAL STATEMENTS
PRO FORMA FINANCIALS
OZO Diversified Automation, Inc.
Notes to Pro Forma Financial Statements
(Unaudited)
Note 1 - Summary of Transaction and Basis of Presentation
The accompanying unaudited pro forma financial statements are presented to
reflect the contemplated transaction between the Company and JOT Automation,
Inc.
The accompanying pro forma balance sheet dated September 30, 1998, has been
prepared to give effect to the transaction as if it had occurred on September
30, 1998. The accompanying unaudited pro forma statements of operation are
presented as if the transaction had occurred at the beginning of each of the
periods presented.
Note 2 - Pro Forma Adjustments
(a) assets and liabilities acquired by JOT Automation per the Asset Purchase
Agreement
(b) gross cash proceeds from the asset sale to JOT Automation per the Asset
Purchase Agreement
(c) repayment of liabilities not acquired by JOT Automation per the Asset
Purchase Agreement
(d) payment of transaction expenses and sales taxes incurred executing the
Asset Purchase Agreement
(e) reclassification of operating revenues and expenses to discontinued
operations pursuant to Asset Purchase Agreement with JOT Automation, Inc.
(f) gain recognized on transaction with JOT Automation, Inc.
Note: no income tax expenses are anticipated, as the estimated gain from the
sale is less than the current balance of the net tax loss carryforwards.
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<PAGE>
OZO DIVERSIFIED AUTOMATION, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical Adjustments Adjusted
---------- ----------- ---------
<S> <C> <C> <C>
Net Sales 1,352,919 (1,352,919)(e) --
Cost of Sales 802,615 (802,615)(e) --
--------- --------- -------
Gross Profit 550,304 (550,304) --
Operating Expenses:
Marketing & Sales 119,660 (119,660)(e) --
Research & Development 105,421 (105,421)(e) --
General & Administrative 341,168 341,168
--------- --------- -------
566,249 (225,081) 341,168
--------- --------- -------
(15,945) (325,223) (341,168)
Other (Expense) Items:
Interest expense (24,340) 1,747 (e) (22,593)
--
--
--------- --------- -------
(24,340) 1,747 (22,593)
--------- --------- -------
Income (loss) before Income Tax (40,285) (323,476) (363,761)
--
--
--------- --------- -------
Net Income (Loss) from Continuing Operations (40,285) (323,476) (363,761)
Discontinued Operations:
Income (loss) from discontinued operations
(net of taxes) (323,476)(e) (323,476)
Gain (loss) from disposal of discontinued
operations (net of taxes) 496,283 (f) 496,283
--------- --------- -------
Net Income (Loss) (40,285) 496,283 455,998
--------- --------- -------
--------- --------- -------
Net Income (Loss) per Common Share (0.08) 0.95
Net Income (Loss) per Common Share
Assuming Dilution (0.08) 0.95
Weighted Average Common Shares Outstanding 480,942 480,942
Weighted Average Common Shares Outstanding
Assuming Dilution 480,942 480,942
</TABLE>
Please see the accompanying notes to the pro forma financial statements.
26
<PAGE>
OZO DIVERSIFIED AUTOMATION, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical Adjustments Adjusted
---------- ----------- ---------
<S> <C> <C> <C>
Net Sales 2,715,991 (2,715,991)(e) --
Cost of Sales 1,490,352 (1,490,352)(e) --
--------- --------- -------
Gross Profit 1,225,639 (1,225,639) --
Operating Expenses:
Marketing & Sales 255,964 (255,964)(e) --
Research & Development 562,020 (562,020)(e) --
General & Administrative 154,414 154,414
--------- --------- -------
972,398 (817,984) 154,414
--------- --------- -------
253,241 (407,655) (154,414)
Other (Expense) Items:
Interest expense (44,942) 14,915 (e) (30,027)
Provision for bad debts (79,109) 79,109 (e) --
Loss on disposition of assets (6,336) 6,336 (e) --
--------- --------- -------
(130,387) 100,360 (30,027)
--------- --------- -------
Income (loss) before Income Tax 122,854 (307,295) (184,441)
Provision for Income Taxes 15,689 (15,689)(e)
Tax Benefit of Operating Loss Carryforwards (15,689) 15,689 (e)
--------- --------- -------
Net Income (Loss) from Continuing Operations 122,854 (307,295) (184,441)
Discontinued Operations:
Income (loss) from discontinued operations
(net of taxes) (307,295)(e) (307,295)
Gain (loss) from disposal of discontinued
operations (net of taxes) --
--------- --------- -------
-- (307,295) (307,295)
--------- --------- -------
Net Income (Loss) 122,854 -- 122,854
--------- --------- -------
--------- --------- -------
Net Income (Loss) per Common Share 0.27 0.27
Net Income (Loss) per Common Share
Assuming Dilution 0.18 0.18
Weighted Average Common Shares Outstanding 458,218 458,218
Weighted Average Common Shares Outstanding
Assuming Dilution 693,218 693,218
</TABLE>
Please see the accompanying notes to the pro forma financial statements.
27
<PAGE>
OZO DIVERSIFIED AUTOMATION, INC.
PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1998
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical Adjustments Adjusted
<S> <C> <C> <C>
CURRENT ASSETS
Cash 607 (607)(a) 456,391
920,000 (b)
(393,609)(c)
(70,000)(d)
Accounts and notes receivable, net 131,296 (131,296)(a) --
Inventories 366,866 (366,866)(a) --
Prepaid expenses 11,215 (11,215)(a) --
------- --------- -------
Total Current Assets 509,984 (53,593) 456,391
PROPERTY AND EQUIPMENT
Manufacturing 40,391 (40,391)(a) --
Furniture & Fixtures 83,581 (83,581)(a) --
Capitalized Leases 204,814 (204,814)(a) --
Leasehold Improvements 5,010 (5,010)(a) --
Vehicle 10,820 (10,820)(a) --
------- --------- -------
344,616 (344,616) --
Less accumulated depreciation 199,302 (199,302)(a) --
------- --------- -------
Total Property and Equipment 145,314 (145,314) --
OTHER ASSETS
Deferred Financing Costs 2,255 2,255
Other 2,859 2,859
------- --------- -------
5,114 -- 5,114
------- --------- -------
TOTAL ASSETS 660,412 (198,907) 461,505
------- --------- -------
------- --------- -------
</TABLE>
28
<PAGE>
OZO DIVERSIFIED AUTOMATION, INC.
PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1998
(UNAUDITED)
LIABILITIES AND SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical Adjustments Adjusted
<S> <C> <C> <C>
CURRENT LIABILITIES
Current portion of notes payable and
Capitalized lease obligation $281,835 (41,835)(a) 240,000
(240,000)(c) (240,000)
Accounts payable and accrued expenses 149,902 (149,902)(a) --
Note payable - Bank 27,415 (27,415)(a) --
Note payable - Officer 78,609 (78,609)(c) --
Note payable - Director 75,000 (75,000)(c) --
------- --------- -------
Total Current Liabilities 612,761 (612,761) --
LONG-TERM DEBT AND CAPITALIZED LEASE 82,429 (82,429)(a) --
------- --------- -------
Total Liabilities 695,190 (695,190) --
------- --------- -------
------- --------- -------
SHAREHOLDERS' EQUITY
Preferred stock $0.10 par value, Authorized
1,000,000 shares, Issued - none
Common stock, $0.10 par value, Authorized 48,316 48,316
5,000,000 shares, Issued and
outstanding - 483,164 (1998)
Capital in excess of par value 1,198,004 1,198,004
Accumulated deficit (1,281,098) 496,283 (784,815)
--
--
---------- --------- ---------
Total Shareholders' (Deficiency) Equity (34,778) 496,283 461,505
---------- --------- ---------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 660,412 (198,907) 461,505
---------- --------- ---------
---------- --------- ---------
</TABLE>
Please see the accompanying notes to the pro forma financial statements.
29
<PAGE>
EXHIBIT D
DISSENTERS' RIGHTS STATUTE
ARTICLE 113, C.R.S. TITLE 7
7-113-101. DEFINITIONS. For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares held in a
voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter before the
corporate action, or the surviving or acquiring domestic or foreign
corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from corporate
action under section 7-113-102 and who exercises that right at the
time and in the manner required by part 2 of this article.
(4) "Fair value", with respect to a dissenter's shares, means the value of the
shares immediately before the effective date of the corporate action
to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action except
to the extent that exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the corporate action
until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at the legal
rate as specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are registered
in the records of a corporation or the beneficial owner of shares that
are registered in the name of a nominee to the extent such owner is
recognized by the corporation as the shareholder as provided in
section 7-107-204.
(7) "Shareholder" means either a record shareholder or a beneficial
shareholder.
7-113-102. RIGHT TO DISSENT. (1) A shareholder, whether or not entitled to
vote, is entitled to dissent and obtain payment of the fair value of the
shareholder's shares in the event of any of the following corporate
actions:
(a) Consummation of a plan of merger to which the corporation is a party if:
(I) Approval by the shareholders of that corporation is required for
the merger by section 7-111-103 or 7-111-104 or by the articles of
incorporation; or (II) The corporation is a subsidiary that is
merged with its parent corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired;
(c) Consummation of a sale, lease, exchange, or other disposition of all, or
substantially all, of the property of the corporation for which a
shareholder vote is required under section 7-112-102 (1); and
(d) Consummation of a sale, lease, exchange, or other disposition of all, or
substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled
to vote upon the consent of the corporation to the disposition
pursuant to section 7-112-102 (2).
(1.3) A shareholder is not entitled to dissent and obtain payment, under
subsection (1) of this section, of the fair value of the shares of any
class or series of shares which either were listed on a national securities
exchange registered under the federal "Securities Exchange Act of 1934", as
amended, or on the national market system of the national association of
securities dealers automated quotation system, or were held of record by more
han two thousand shareholders, at the time of:
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<PAGE>
(a) The record date fixed under section 7-107-107 to determine the shareholders
entitled to receive notice of the shareholders' meeting at which the corporate
action is submitted to a vote;
(b) The record date fixed under section 7-107-104 to determine shareholders
entitled to sign writings consenting to the corporate action; or
(c) The effective date of the corporate action if the corporate action is
authorized other than by a vote of shareholders.
(1.8) The limitation set forth in subsection (1.3) of this section shall not
apply if the shareholder will receive for the shareholder's shares, pursuant to
the corporate action, anything except:
(a) Shares of the corporation surviving the consummation of the plan of merger
or share exchange;
(b) Shares of any other corporation which at the effective date of the plan of
merger or share exchange either will be listed on a national securities exchange
registered under the federal "Securities Exchange Act of 1934", as amended, or
on the national market system of the national association of securities dealers
automated quotation system, or will be held of record by more than two thousand
shareholders;
(c) Cash in lieu of fractional shares; or
(d) Any combination of the foregoing described shares or cash in lieu of
fractional shares.
(2) (Deleted by amendment effective June 1, 1996.)
(2.5) A shareholder, whether or not entitled to vote, is entitled to dissent
and obtain payment of the fair value of the shareholder's shares in the event of
a reverse split that reduces the number of shares owned by the shareholder to a
fraction of a share or to scrip if the fractional share or scrip so created is
to be acquired for cash or the scrip is to be voided under section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the fair value
of the shareholder's shares in the event of any corporate action to the extent
provided by the bylaws or a resolution of the board of directors.
(4) A shareholder entitled to dissent and obtain payment for the shareholder's
shares under this article may not challenge the corporate action creating such
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
7-113-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS. (1) A record shareholder
may assert dissenters' rights as to fewer than all the shares registered in the
record shareholder's name only if the record shareholder dissents with respect
to all shares beneficially owned by any one person and causes the corporation to
receive written notice which states such dissent and the name, address, and
federal taxpayer identification number, if any, of each person on whose behalf
the record shareholder asserts dissenters' rights. The rights of a record
shareholder under this subsection (1) are determined as if the shares as to
which the record shareholder dissents and the other shares of the record
shareholder were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to the shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the corporation to receive the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all shares beneficially
owned by the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents with
respect to the shares held by any one or more beneficial shareholders, each such
beneficial shareholder must certify to the corporation that the beneficial
31
<PAGE>
shareholder and the record shareholder or record shareholders of all shares
owned beneficially by the beneficial shareholder have asserted, or will timely
assert, dissenters' rights as to all such shares as to which there is no
limitation on the ability to exercise dissenters' rights. Any such requirement
shall be stated in the dissenters' notice given pursuant to section 7-113-203.
7-113-201. NOTICE OF DISSENTERS' RIGHTS. (1) If a proposed corporate action
creating dissenters' rights under section 7-113-102 is submitted to a vote at a
shareholders' meeting, the notice of the meeting shall be given to all
shareholders, whether or not entitled to vote. The notice shall state that
shareholders are or may be entitled to assert dissenters' rights under this
article and shall be accompanied by a copy of this article and the materials, if
any, that, under articles 101 to 117 of this title, are required to be given to
shareholders entitled to vote on the proposed action at the meeting. Failure to
give notice as provided by this subsection (1) shall not affect any action taken
at the shareholders' meeting for which the notice was to have been given, but
any shareholder who was entitled to dissent but who was not given such notice
shall not be precluded from demanding payment for the shareholder's shares under
this article by reason of the shareholder's failure to comply with the
provisions of section 7-113-202 (1).
(2) If a proposed corporate action creating dissenters' rights under section
7-113-102 is authorized without a meeting of shareholders pursuant to section
7-107-104, any written or oral solicitation of a shareholder to execute a
writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117 of this
title, would have been required to be given to shareholders entitled to vote on
the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to give notice as provided by this subsection
(2) shall not affect any action taken pursuant to section 7-107-104 for which
the notice was to have been given, but any shareholder who was entitled to
dissent but who was not given such notice shall not be precluded from demanding
payment for the shareholder's shares under this article by reason of the
shareholder's failure to comply with the provisions of section 7-113-202 (2).
7-113-202. NOTICE OF INTENT TO DEMAND PAYMENT. (1) If a proposed corporate
action creating dissenters' rights under section 7-113-102 is submitted to a
vote at a shareholders' meeting and if notice of dissenters' rights has been
given to such shareholder in connection with the action pursuant to section
7-113-201 (1), a shareholder who wishes to assert dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is taken, written notice
of the shareholder's intention to demand payment for the shareholder's shares if
the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
(2) If a proposed corporate action creating dissenters' rights under section
7-113-102 is authorized without a meeting of shareholders pursuant to section
7-107-104 and if notice of dissenters' rights has been given to such shareholder
in connection with the action pursuant to section 7-113-201 (2), a shareholder
who wishes to assert dissenters' rights shall not execute a writing consenting
to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of subsection (1) or
(2) of this section is not entitled to demand payment for the shareholder's
shares under this article.
7-113-203. DISSENTERS' NOTICE. (1) If a proposed corporate action creating
dissenters' rights under section 7-113-102 is authorized, the corporation shall
give a written dissenters' notice to all shareholders who are entitled to demand
payment for their shares under this article.
(2) The dissenters' notice required by subsection (1) of this section shall be
given no later than ten days after the effective date of the corporate action
creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state the effective date
or proposed effective date of the corporate action;
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<PAGE>
(b) State an address at which the corporation will receive payment demands and
the address of a place where certificates for certificated shares must be
deposited;
(c) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request a dissenter
to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment demand and
certificates for certificated shares, which date shall not be less than thirty
days after the date the notice required by subsection (1) of this section is
given;
(f) State the requirement contemplated in section 7-113-103 (3), if such
requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204. PROCEDURE TO DEMAND PAYMENT. (1) A shareholder who is given a
dissenters' notice pursuant to section 7-113-203 and who wishes to assert
dissenters' rights shall, in accordance with the terms of the dissenters'
notice:
(a) Cause the corporation to receive a payment demand, which may be the payment
demand form contemplated in section 7-113-203 (2) (d), duly completed, or may be
stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with subsection (1) of this
section retains all rights of a shareholder, except the right to transfer the
shares, until the effective date of the proposed corporate action giving rise to
the shareholder's exercise of dissenters' rights and has only the right to
receive payment for the shares after the effective date of such corporate
action.
(3) Except as provided in section 7-113-207 or 7-113-209 (1) (b), the demand
for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the shareholder's
share certificates as required by the date or dates set in the dissenters'
notice is not entitled to payment for the shares under this article.
7-113-205. UNCERTIFICATED SHARES. (1) Upon receipt of a demand for payment
under section 7-113-204 from a shareholder holding uncertificated shares, and in
lieu of the deposit of certificates representing the shares, the corporation may
restrict the transfer thereof.
(2) In all other respects, the provisions of section 7-113-204 shall be
applicable to shareholders who own uncertificated shares.
7-113-206. PAYMENT. (1) Except as provided in section 7-113-208, upon the
effective date of the corporate action creating dissenters' rights under section
7-113-102 or upon receipt of a payment demand pursuant to section 7-113-204,
whichever is later, the corporation shall pay each dissenter who complied with
section 7-113-204, at the address stated in the payment demand, or if no such
address is stated in the payment demand, at the address shown on the
corporation's current record of shareholders for the record shareholder holding
the dissenter's shares, the amount the corporation estimates to be the fair
value of the dissenter's shares, plus accrued interest.
(2) The payment made pursuant to subsection (1) of this section shall be
accompanied by:
(a) The corporation's balance sheet as of the end of its most recent fiscal
year or, if that is not available, the corporation's balance sheet as of the end
of a fiscal year ending not more than sixteen months before the date of payment,
an income statement for that year, and, if the corporation customarily provides
such statements to
33
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shareholders, a statement of changes in shareholders' equity for that year and
a statement of cash flow for that year, which balance sheet and statements
shall have been audited if the corporation customarily provides audited
financial statements to shareholders, as well as the latest available
financial statements, if any, for the interim or full-year period,
which financial statements need not be audited;
(b) A statement of the corporation's estimate of the fair value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under section
7-113-209; and
(e) A copy of this article.
7-113-207. FAILURE TO TAKE ACTION. (1) If the effective date of the corporate
action creating dissenters' rights under section 7-113-102 does not occur within
sixty days after the date set by the corporation by which the corporation must
receive the payment demand as provided in section 7-113-203, the corporation
shall return the deposited certificates and release the transfer restrictions
imposed on uncertificated shares.
(2) If the effective date of the corporate action creating dissenters' rights
under section 7-113-102 occurs more than sixty days after the date set by the
corporation by which the corporation must receive the payment demand as provided
in section 7-113-203, then the corporation shall send a new dissenters' notice,
as provided in section 7-113-203, and the provisions of sections 7-113-204 to
7-113-209 shall again be applicable.
7-113-208. SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER ANNOUNCEMENT OF
PROPOSED CORPORATE ACTION. (1) The corporation may, in or with the dissenters'
notice given pursuant to section 7-113-203, state the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action creating dissenters' rights under section 7-113-102 and state
that the dissenter shall certify in writing, in or with the dissenter's payment
demand under section 7-113-204, whether or not the dissenter (or the person on
whose behalf dissenters' rights are asserted) acquired beneficial ownership of
the shares before that date. With respect to any dissenter who does not so
certify in writing, in or with the payment demand, that the dissenter or the
person on whose behalf the dissenter asserts dissenters' rights acquired
beneficial ownership of the shares before such date, the corporation may, in
lieu of making the payment provided in section 7-113-206, offer to make such
payment if the dissenter agrees to accept it in full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this section shall include
or be accompanied by the information required by section 7-113-206 (2).
7-113-209. PROCEDURE IF DISSENTER IS DISSATISFIED WITH PAYMENT OR OFFER. (1) A
dissenter may give notice to the corporation in writing of the dissenter's
estimate of the fair value of the dissenter's shares and of the amount of
interest due and may demand payment of such estimate, less any payment made
under section 7-113-206, or reject the corporation's offer under section
7-113-208 and demand payment of the fair value of the shares and interest due,
if:
(a) The dissenter believes that the amount paid under section 7-113-206 or
offered under section 7-113-208 is less than the fair value of the shares or
that the interest due was incorrectly calculated;
(b) The corporation fails to make payment under section 7-113-206 within sixty
days after the date set by the corporation by which the corporation must receive
the payment demand; or
(c) The corporation does not return the deposited certificates or release the
transfer restrictions imposed on uncertificated shares as required by section
7-113-207 (1).
(2) A dissenter waives the right to demand payment under this section unless
the dissenter causes the corporation to receive the notice required by
subsection (1) of this section within thirty days after the corporation made or
offered payment for the dissenter's shares.
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7-113-301. COURT ACTION. (1) If a demand for payment under section 7-113-209
remains unresolved, the corporation may, within sixty days after receiving the
payment demand, commence a proceeding and petition the court to determine the
fair value of the shares and accrued interest. If the corporation does not
commence the proceeding within the sixty-day period, it shall pay to each
dissenter whose demand remains unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in subsection (1)
of this section in the district court of the county in this state where the
corporation's principal office is located or, if the corporation has no
principal office in this state, in the district court of the county in which its
registered office is located. If the corporation is a foreign corporation
without a registered office, it shall commence the proceeding in the county
where the registered office of the domestic corporation merged into, or whose
shares were acquired by, the foreign corporation was located.
(3) The corporation shall make all dissenters, whether or not residents of this
state, whose demands remain unresolved parties to the proceeding commenced under
subsection (2) of this section as in an action against their shares, and all
parties shall be served with a copy of the petition. Service on each dissenter
shall be by registered or certified mail, to the address stated in such
dissenter's payment demand, or if no such address is stated in the payment
demand, at the address shown on the corporation's current record of shareholders
for the record shareholder holding the dissenter's shares, or as provided by
law.
(4) The jurisdiction of the court in which the proceeding is commenced under
subsection (2) of this section is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend a decision
on the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to such order. The parties to the
proceeding are entitled to the same discovery rights as parties in other civil
proceedings.
(5) Each dissenter made a party to the proceeding commenced under subsection
(2) of this section is entitled to judgment for the amount, if any, by which the
court finds the fair value of the dissenter's shares, plus interest, exceeds the
amount paid by the corporation, or for the fair value, plus interest, of the
dissenter's shares for which the corporation elected to withhold payment under
section 7-113-208.
7-113-302. COURT COSTS AND COUNSEL FEES. (1) The court in an appraisal
proceeding commenced under section 7-113-301 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation; except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and experts for
the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any dissenters if the court finds
the corporation did not substantially comply with the requirements of part 2 of
this article; or
(b) Against either the corporation or one or more dissenters, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this article.
(3) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to said counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who were benefitted.
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OZO DIVERSIFIED AUTOMATION, INC.
7450 EAST JEWELL AVENUE, SUITE A
DENVER, CO 80231
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints DAVID J. WOLENSKI and BRANTLEY J.
HALSTEAD, or either one of them, as Proxy, each with the power to appoint his
substitute, and hereby authorizes them to vote, as designated below, all of
the shares of Common Stock of OZO Diversified Automation, Inc. held of record
by the undersigned on November 25, 1998, at the Annual Meeting of
Shareholders to be held on December 30, 1998 and at any adjournments or
postponements thereof.
1. On approval of the proposed sale of assets of the Company and change of the
Company's name to RMMR, Inc. at the time the sale of assets becomes
effective.
/ / FOR / / AGAINST / / ABSTAIN
2. On approval of the reduction of the vote required by shareholders to
approve asset dispositions, mergers, consolidations or exchanges, and any
other matter which would require an amendment to the Company's Restated
Articles of Incorporation, as amended, from two-thirds to a majority of the
outstanding Common Stock
/ / FOR / / AGAINST / / ABSTAIN
3. On adoption of a new Article IX to the Company's Restated Articles of
Incorporation, as amended, to provide for the limitation of certain
liabilities of the Company's directors to the Company and its shareholders
as permitted under Section 7-108-402(1) of the Colorado Business
Corporation Act.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, the above-named Proxies are authorized to vote upon
such other business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF ALL NOMINEES AND FOR THE
APPROVAL OF ALL OTHER MATTERS.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. WHEN SHARES ARE HELD BY
JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, AS EXECUTOR,
ADMINISTRATOR, TRUSTEE, OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
/s/
- -------------------------------
Signature
Date: ,1998
-----------------
/s/
- -------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE
