<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
American Film Technologies, Inc.
- - -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
John Karl
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
AMERICAN FILM TECHNOLOGIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
On February 10, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
American Film Technologies, Inc. (the "Company") will be held at the offices of
Jeffer, Mangels, Butler & Marmaro LLP, 2121 Avenue of the Stars, Tenth Floor,
Los Angeles, California, on February 10, 1997 at 10:00 A.M. (Pacific Time) for
the following purposes:
1. To elect seven directors to the Board of Directors who will serve
until the Company's 1997 Annual Meeting of Stockholders and until their
successors have been duly elected and qualified.
2. The amendment of the Company's Certificate of Incorporation to
increase the capital stock of the Company to 250,000,000 shares, consisting of
225,000,000 million shares of common stock and 25,000,000 shares of preferred
stock.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on December 31, 1996
will be entitled to notice of and to vote at said meeting or any adjournments
thereof. A list of such stockholders shall be open to the examination of any
stockholder at the meeting and for a period of ten days prior to the date of the
meeting at the offices of the Company, located at 4105 Sorrento Valley Blvd.,
San Diego, CA 92121.
The Board of Directors urges each stockholder to read carefully the
enclosed proxy statement which is incorporated herein by reference.
By Order of the Board of Directors,
/s/ John Karl
---------------------------------------
John Karl
Secretary
4105 Sorrento Valley Blvd.
San Diego, CA 92121
Dated: January ___, 1997
IMPORTANT
Whether or not you expect to attend the 1996 Annual Meeting in person, please
complete, date, sign and return the enclosed proxy in the enclosed envelope
which requires no postage if mailed in the United States. Your proxy will be
revocable any time prior to its exercise either in writing or by voting your
shares personally at the 1996 Annual Meeting.
<PAGE>
AMERICAN FILM TECHNOLOGIES, INC.
4105 Sorrento Valley Blvd.
San Diego, CA 92121
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
February 10, 1997
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors (the "Board") and management of American Film
Technologies, Inc., a Delaware corporation (the "Company"), of proxies to be
used at the Company's 1996 Annual Meeting of Stockholders (the "Annual Meeting")
to be held at the offices of Jeffer, Mangels, Butler & Marmaro LLP, 2121 Avenue
of the Stars, Tenth Floor, Los Angeles, California, on February 10, 1997 at
10:00 A.M. (Pacific Time) and at any adjournments thereof. A form of the proxy
is enclosed for use at the meeting. Stockholders are being asked to vote upon
the election of seven directors to the Board, the amendment of the Certificate
of Incorporation and to transact such other business as may properly come before
the meeting.
If no instructions are given on the proxy, all shares represented by
valid proxies received pursuant to this solicitation (and not revoked before
they are voted) will be voted FOR the directors nominated by the Board, and FOR
the amendment to the Certificate of Incorporation, and as recommended by the
Board with regard to all other matters or if no such recommendation is given, in
the discretion of the proxy holder. Proxies marked "withhold" and/or "abstain"
will be counted towards the quorum requirement but will not be voted for the
election of the Board's director nominees or amendment to the Certificate of
Incorporation, as the case may be.
A proxy may be revoked at any time before it is exercised by giving
written notice of revocation to the Secretary of the Company or by submitting,
prior to the time of the meeting, a properly executed proxy bearing a later
date. Stockholders having executed and returned a proxy, who attend the meeting
and desire to vote in person, are requested to so notify the Secretary of the
Company prior to the time of the meeting.
The mailing address of the Company is 4105 Sorrento Valley Blvd., San
Diego, CA 92121. The approximate date on which this Proxy Statement and form of
proxy are being mailed to the stockholders is January __, 1997.
GENERAL INFORMATION
Outstanding Shares and Voting Rights
There were 73,400,644 shares of common stock of the Company ("Common
Stock") outstanding as of December 31, 1996, the Record Date for the
stockholders entitled to vote at the Annual Meeting. Each stockholder of record
at the close of business on December 31, 1996 is entitled to one vote for each
share of Common Stock then held on each matter to come before the meeting, or
any adjournments thereof.
<PAGE>
A majority of the votes eligible to be cast at the Annual Meeting by
holders of Common Stock, or 36,700,323 votes, represented in person or by proxy
at the Annual Meeting is required for a quorum. A plurality of the votes cast at
the Annual Meeting by holders of shares of Common Stock entitled to vote, and
present, in person or by proxy at the Annual Meeting voting for the election of
directors is required for the election of each nominee as a director. Votes that
are withheld from any nominee will be excluded from the vote and will have no
effect. Brokers who hold shares in street name have the authority to vote on
certain "routine" matters when they have not received instructions from
beneficial owners. Brokers that do not receive instructions are entitled to vote
on the election of directors. The Company's Certificate of Incorporation does
not provide for cumulative voting. Approval of the amendment to the Company's
Certificate of Incorporation (item 2 on the Notice) will require the affirmative
vote of a majority of the outstanding shares. Accordingly, "abstentions" will
have the same effect as a "no" vote on the proposal to amend the Company's
Certificate of Incorporation. Brokers do not have discretionary authority to
vote on this matter.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of December 31, 1996 (the
Record Date) by each person believed by the Company to own beneficially more
than 5% of the outstanding shares of any class of the Company's voting
securities. Unless noted otherwise, the holders listed below have sole voting
power and dispositive power over the shares beneficially held by them. The table
below includes options which are exercisable within 60 days of December 31,
1996. As of December 31, 1996, 73,400,644 shares of Common Stock were
outstanding.
<TABLE>
<CAPTION>
% of % of
Name and Address of Amount and Nature of Common Total
Beneficial Owner Beneficial Ownership Stock Votes
- - -------------------- --------------------- ------- ------
<S> <C> <C> <C>
Gerald Wetzler 33,156,333 (1) (2) (3) 34.63% (3) 45.93% (3)
(Chairman of the Board and
Chief Executive Officer)
L&R Holdings, Inc. 12,145,854 16.55% 16.55%
130 Shore Road
Port Washington, NY 11050
JCV Capital Corp. 10,545,854 14.37% 14.37%
P.O. Box 22719
Rochester, NY 14692
</TABLE>
(1) Includes 2,333,333 shares issuable upon the exercise of outstanding options.
(2) Includes 178,644 shares issuable upon the exercise of outstanding options
which Mr. Wetzler has agreed not to exercise until such time as such exercise
along with the exercise of all other outstanding options and the shares of
common stock actually outstanding would no longer exceed the total number of
authorized shares of the Company's Common Stock. In the event the stockholders
approve the proposed Amendment to the Certificate of Incorporation at the Annual
Meeting, Mr. Wetzler would be free to exercise these shares (see "Stock
Options").
2
<PAGE>
(3) Also includes shares issuable upon the exercise of outstanding options to
acquire an additional 20,000,000 shares of common stock. As of December 31,
1996, the Company had insufficient authorized shares of common stock to effect
the conversion of such option. If the Company does not, at the time of exercise,
have sufficient shares of common stock authorized to exercise the option, Mr.
Wetzler shall have the right to purchase 10,000,000 shares of the Company's
authorized but unissued convertible preferred stock. These preferred shares
represent 100% of such class and in addition the right along with the common
stock to vote on all matters at a rate of four votes per share of preferred
stock (see "Stock Options").
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock of the Company as of December 31, 1996,
owned by all directors and officers as a group. Unless noted otherwise, the
holders listed below have sole voting and dispositive power over the shares
beneficially held by them. The table below includes options which are
exercisable within 60 days of December 31, 1996.
<TABLE>
<CAPTION>
% of % of
Amount and Nature of Common Total
Name of Beneficial Owner Beneficial Ownership Stock Votes
- - -------------------------- ---------------------- ---------- ----------
<S> <C> <C> <C>
Gerald Wetzler 33,156,333 (1) (2) (3) 34.63%(3) 45.93%(3)
(Chairman and Chief Executive Officer)
Larry King (Director) 1,000,000 (4) 1.34% 1.34%
Harvey Finkel (Director) 50,000 (4) * *
Edward Payne (Director) 650,000 (5) * *
Porter Bibb (Director) 600,000 (5) * *
Steven Lefkowitz (Director) 300,000 (6) * *
Kay Salomon (Director) 2,000,000 2.72% 2.72%
John Karl 282,000 (6) * *
(Vice President - Finance)
Directors and Officers as a group 38,038,333 39.06% 49.44%
</TABLE>
- - ---------------------------
* Less than one percent
(1) Includes 2,333,333 shares issuable upon the exercise of outstanding options.
(2) Includes 178,644 shares issuable upon the exercise of outstanding options
which Mr. Wetzler has agreed not to exercise until such time as such exercise
along with the exercise of all other outstanding options and the shares of
common stock actually outstanding would no longer exceed the total number of
authorized shares of the Company's Common Stock. In the event the stockholders
approve the proposed Amendment to the Certificate of Incorporation at the Annual
Meeting, Mr. Wetzler would be free to exercise these shares (see "Stock
Options").
(3) Also includes shares issuable upon the exercise of outstanding options to
acquire an additional 20,000,000 shares of common stock. As of December 31,
1996, the Company had insufficient authorized shares of common stock to effect
the conversion of such option. If the Company does not, at the time of exercise,
have sufficient shares of common stock authorized to exercise the option, Mr.
Wetzler shall have the right to purchase 10,000,000 shares of the Company's
authorized but unissued convertible preferred stock. These preferred shares
represent 100% of such class and in addition the right along with the common
stock to vote on all matters at a rate of four votes per share of preferred
stock (see "Stock Options").
3
<PAGE>
(4) All shares issuable upon exercise of outstanding options.
(5) Includes 100,000 shares issuable upon exercise of outstanding options.
(6) Includes 200,000 shares issuable upon exercise of outstanding options.
ITEM 1. ELECTION OF DIRECTORS
All seven current members have been nominated for reelection at the
meeting, each to hold office until the next Annual Meeting and until their
successors have been duly elected and qualified.
In the event that any nominee for director should become unavailable,
it is intended that votes will be cast, pursuant to the enclosed proxy, for such
substitute nominee as may be nominated by the Board. The Board has no present
knowledge that any of the persons named will be unavailable to serve.
Information Concerning Directors and Nominees for Board of Directors
Set forth below is certain information concerning the nominees for
election as directors:
Position With
Name Age the Company
- - ---- --- --------------
Gerald Wetzler 58 Chairman, Director, Chief
Executive Officer
Porter Bibb 59 Director
Harvey Finkel 50 Director
Larry King 63 Director
Steven Lefkowitz (1) 40 Director
Edward Payne (1) 51 Director
Kay Salomon 42 Director
- - ---------------------
(1) Member of Audit Committee
Gerald Wetzler
Mr. Wetzler was elected Chairman of the Board of Directors of the
Company on October 26, 1993, following his purchase of the controlling interest
in the Company. Mr. Wetzler received a Juris Doctor degree from Columbia Law
School and a Master of Laws degree from Harvard Law School. He practiced law
with Cahill, Gordon & Reindel from 1962 to 1966. He worked in the corporate
finance department of Lehman Brothers for five years and served as General
Counsel for Beker Industries Corp., a New York Stock Exchange company. He has
been a private investor since 1975.
4
<PAGE>
Porter Bibb
Mr. Bibb was elected to the Company's Board of Directors in October
1996. Mr. Bibb is a Managing Director at Ladenburg, Thalman & Co., Inc., a New
York based investment banking concern since 1984. A senior investment banker
specializing in media, entertainment and technology, Mr. Bibb is also the author
of It Ain't As Easy As It Looks, a best selling biography of Ted Turner. He is
currently writing a history of the Bronfman family dynasty for William Morrow &
Co. Mr. Bibb is currently a Director of East Wind Group, Inc. located in
Conshohocken, Pennsylvania and is also a Director of PMC International, Inc.
located in Denver, Colorado.
Harvey Finkel
Mr. Finkel is a Certified Public Accountant who was elected to the
Company's Board of Directors in November 1996. Mr. Finkel has served as Senior
Vice President and Chief Financial Officer of New World Entertainment, Ltd.
since 1994. Previously, Mr. Finkel worked for Twentieth Century Fox from 1983 to
1994 in various executive capacities, most recently as Senior Vice President,
Finance and Administration from 1988 to 1994.
Larry King
Mr. King was elected to the Company's Board of Directors in February
1996. For more than five years, Mr. King has been a nationally recognized
columnist, news commentator and talk show host. He is currently the host of
CNN's "Larry King Live" and Mutual Radio's "Larry King Show" and is a columnist
for USA Today. Among his many honors are Ace Awards, a Peabody Award and the
Broadcaster of the Year from the International Radio and Television Society.
Steven Lefkowitz
Mr. Lefkowitz was elected to the Company's Board of Directors in
February 1996. He had previously served on the Board from 1994 to 1995. Mr.
Lefkowitz is the founder and, for more than five years, has been President of
Wade Capital Corporation, a privately held investment firm organized in 1990.
Between 1985 and 1990, Mr. Lefkowitz was a member of the Corporate Finance
Department of Drexel, Burnham, Lambert Incorporated. Mr. Lefkowitz is
currently on the Board of Directors of Franklin Credit Management Corporation,
a specialized finance company located in New York, New York.
Edward Payne
Mr. Payne was elected to the Company's Board of Directors in June 1995.
He is President of C. Melchers Consulting, Inc., a management consulting firm
serving an international clientele in the areas of business strategy development
and mergers and acquisitions. Previously, he was a Principal in Edward A. Payne
& Associates, a business strategy firm, which he founded in 1987. Prior to
forming Edward A. Payne & Associates, Mr. Payne had been a Senior Partner with
Management Practice, Inc., a management consulting firm and was a Senior
Associate in Booz, Allen & Hamilton, an international consulting firm.
5
<PAGE>
Kay Salomon
Ms. Salomon was elected to the Company's Board of Directors in December
1996. Since July 1995, she has been an Investment Banker with Levesque Beaubien
Geoffrion, an investment firm specializing in film and entertainment financing,
located in Montreal, Canada. Ms. Salomon also produces feature motion pictures.
In December 1996, she finished production of Hysterie, starring Patrick
MacGoohan and Amanda Plummer. From 1990 to July 1995, Ms. Salomon was an
Executive Vice President managing domestic and international bond portfolios and
served on the Board of Directors of Marleau Lemire Securities, Inc., a publicly
traded, full service investment dealer, located in Montreal, Canada. She is
currently on the Board of Directors of Keystone Entertainment, Inc., a publicly
traded company located in Los Angeles, California.
The Board recommends voting FOR the election of all seven nominees for
directors. All the nominees currently serve as directors of the Company. Proxies
given without instructions will be voted for all seven nominees.
Meetings and Committees of the Board of Directors
The business affairs of the Company are managed under the direction of
the Board of Directors, although the Board is not involved in day-to-day
operations. During the fiscal year ended June 30, 1996, the Board met eight
times. With the exception of Larry King, each director attended at least 75% of
all Board and applicable committee meetings during the fiscal year ended June
30, 1996. Mr. King did not attend any of the Board meetings during the 1996
fiscal year. All outside directors have received options to purchase varying
amounts of Common Stock at exercise prices which were less than the market price
at the time of the grant.
Audit Committee
The Audit Committee reviews with a firm of independent public
accountants the scope and results of the annual audit and consults with the
independent public accountants with regard to the adequacy of the Company's
system of internal accounting controls.
The Company's independent public accountants are invited to attend
meetings of the Audit Committee and certain members of management may also be
invited to attend. In fiscal 1996, the Audit Committee consisted of two
non-employee directors, Steven Lefkowitz and Edward Payne. The audit committee
met once during this period.
Compensation Committee Interlocks and Insider Participation
As a result of severe cash shortages which precipitated the Company's
filing for bankruptcy protection in 1993, and its subsequent cessation of
operations, the Company has had limited ability to pay its executive officers
and, therefore, has not elected compensation committees of the Board. Currently,
the Company still operates with limited cash availability. Mr. Karl is the only
salaried executive at this time. During this period, the entire Board has
determined the executive compensation, including Mr. Wetzler's (the Chief
Executive Officer). At such time as the Company receives sufficient additional
funding to restart its operations and rehire additional employees and
executives, the Board intends to elect a new Compensation Committee who will be
responsible for establishing a comprehensive program for the Company's
executives' compensation.
6
<PAGE>
Directors' Option Grants
For their services on the Board during fiscal 1996, non-officer or
non-employee directors were granted options to purchase varying amounts of the
Company's common stock. Shown below is information concerning the amount of
options granted to each non-officer or non employee director during fiscal 1996:
<TABLE>
<CAPTION>
# of Date of Exercise Date
Director options Grant Price Exercised
- - -------- ------- ------- ------------- ---------
<S> <C> <C> <C> <C>
Larry King 1,000,000 Feb. 23, 1996 $0.176 unexercised
Steven Lefkowitz 50,000 Feb. 23, 1996 $0.176 unexercised
</TABLE>
Executive Compensation Table
The following table sets forth the compensation of the officers of the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-term Compensation
- - --------------------------------------------------------------- -------------------------------------------------------------
Other Restricted Securities Payouts All
Name and Annual Stock Underlying LTIP Other
Position Year Salary ($) Bonus ($) Compensation Awards Options/SARs Payouts Compensation
- - -------- ---- ---------- --------- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gerald 1996 0 $125,000* 0 0 10,000,000 (1) 0 0
Wetzler
Chairman,
Director,
Chief
Executive
Officer
1995 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0
John Karl 1996 $113,500 0 0 $20,500 0 0 0
Senior Vice
President,
Finance,
Treasurer
1995 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0
</TABLE>
- - -------------------
* Upon confirmation of the Company's Plan of Reorganization (the "Plan") in
October 1995, Mr. Wetzler received a bonus of $125,000, in accordance with
the terms of the Plan
(1) In January 1996, pursuant to the terms of an Employment Agreement between
the Company and Mr. Wetzler, Mr. Wetzler received options to purchase 10 million
shares of the Company's Common Stock at $0.0628 per share. These options vest on
a cumulative basis each month at a rate of 1 2/3% per month. The options were
granted in lieu of cash compensation (see "Stock Options")
7
<PAGE>
Stock Options
In accordance with the terms of the Plan, all prepetition stock options
were canceled. Subsequent to filing Chapter 11, the Board of Directors granted
options to purchase common stock totaling 15,700,000 shares as of June 30, 1996
and 2,450,000 shares as of June 30, 1995. The options contain an exercise price
per share in the range of $0.01 to $0.176. As of June 30, 1996 and 1995, vested
options totaled 5,200,000 and 2,450,000 shares respectively.
Included in the stock options at June 30, 1996 mentioned above, are
options granted pursuant to the employment agreement of Gerald Wetzler, the
Company's Chairman and CEO, which was entered into in January 1996. Under terms
of the employment agreement, in lieu of cash compensation, the Company granted
an option to purchase 10,000,000 shares of the Company's common stock at an
exercise price of $0.0628. The options become exercisable on a cumulative basis
each month at the rate of 1 2/3%. At June 30, 1996, 1,000,000 options were
vested and exercisable. The options terminate on January 1, 2006. Compensation
expense of $120,000 was recognized in fiscal 1996 related to these options.
On June 17, 1996, the Company also entered into an agreement with
Gerald Wetzler whereby Mr. Wetzler purchased, for a fee of $200,000 (which was
deemed by the Board to be fair value), an option to acquire the Company's common
stock, or if insufficient authorized shares of common stock are then available
(as is currently the case), preferred stock convertible into common stock. The
option gives the right to purchase up to 20,000,000 shares of the Company's
common stock at an exercise price of $0.12 per share. As discussed above, Mr.
Wetzler currently has pursuant to this option, the right to purchase 10,000,000
shares of the Company's authorized but unissued convertible preferred stock,
carrying four (4) votes per share, at an exercise price of $0.24 per share. Any
preferred stock issued pursuant to this option automatically converts to common
stock when a sufficient number of additional shares of common stock are
authorized. The option expires on June 17, 1998.
Also included in the stock options at June 30, 1996 mentioned above are
options granted to Larry King, a member of the Board of Directors, pursuant to
an agreement dated February 9, 1996. Under the terms of the agreement, the
Company granted an option to purchase 2,000,000 shares of the Company's common
stock at an exercise price of $0.01. The options vest and become exercisable
upon consummation of a financing arrangement within a two year period from the
date of grant. At June 30, 1996, none of these were vested or exercisable. The
options terminate on February 9, 1998. Upon consummation of a financing
arrangement in accordance with the terms of the agreement, the fair value of the
option at the grant date ($220,000) will be treated as a financing cost.
The Company entered into agreements which became effective with the
approval of the Plan with two former employees whereby they will be issued
100,000 shares of common stock of the reorganized Company upon their return to
the Company, which had not occurred through June 30, 1996. If these employees do
not return to the Company, these options will lapse. These shares will vest in
25,000 share increments every six months commencing on the effective date. These
shares are not reflected as being issued in the consolidated balance sheet at
June 30, 1996.
The following table sets forth information with respect to stock
options granted to each of the executives named in the Summary Compensation
Table. The potential value of options granted depends entirely upon a long-term
increase in the market.
8
<PAGE>
OPTION/SAR GRANTS IN
FISCAL YEAR
JULY 1, 1995 THROUGH JUNE 30, 1996
<TABLE>
<CAPTION>
Number of Percent of total
Securities options/SARs
Underlying granted to Exercise
Options/SARs employees in or base Expiration
Name Granted (#) fiscal year price Date
- - ---- ------------ ---------------- -------- -----------
<S> <C> <C> <C> <C> <C>
Gerald Wetzler 10,000,000 100% $0.0628 1/1/2006
</TABLE>
Stock Grants
As an inducement and compensation to certain key employees who were
first put on reduced work and compensation schedules and later put on
administrative leave, the Company agreed to issue common stock in order to
initially incentivize these employees from not seeking other employment and
subsequently to induce them to return to the Company if they are asked to do so.
The agreement, which became effective with the approval of the Plan, called for
an initial grant of 10,000 shares per employee, plus an additional 2,000 shares
per employee per week up to a maximum of 36 weeks. These shares will be issued
only if the employee is asked to return to the Company and does so, or if the
employee is not asked to return to the Company, when and as if the Company
recommences its operations. As of June 30, 1996, 742,000 shares have been set
aside, of which 164,000 shares were issued on the Effective Date of the Plan. At
this time, the Company does not know when, if ever, any of these employees will
be asked to return to work.
Employment Contracts
Wetzler Employment Agreement. Effective January 1, 1996 the Company
entered into an employment agreement with Mr. Wetzler (the "Employment
Agreement") to serve as the Chief Executive Officer of the Company. The
agreement provides for a term of five years, subject to termination as provided
in the Agreement, and provides that, as sole compensation under the Agreement,
Mr. Wetzler will receive an option to purchase 10,000,000 shares of the
Company's common stock at an exercise price of twelve cents less than the
average trading price in the Company's common stock for the twenty trading days
prior to and including January 18, 1996, which has been calculated as $0.628 per
share, pursuant to the terms of a Stock Option Agreement (described below). The
Employment Agreement provides for no cash compensation, but does entitle Mr.
Wetzler to fringe benefits, including health insurance, on terms which may be
agreed to from time to time by the Company and Mr. Wetzler.
The Employment Agreement obligates the Company to indemnify Mr. Wetzler
from and against third party claims in accordance with the Company's Certificate
of Incorporation and By-Laws.
Mr. Wetzler is entitled to terminate the Employment Agreement on the
occurrence of certain events, including a breach by the Company or a change in
control of the Company, as defined in the Employment Agreement. If the
Employment Agreement is terminated because of a breach of the Employment
Agreement by the Company, Mr. Wetzler is entitled to receive, as liquidated
damages, a termination payment equal to $250,000, multiplied by the number of
years, including partial years, remaining on the original term of the Employment
Agreement. If the Employment Agreement is terminated in connection with a change
in control of the Company, Mr. Wetzler is entitled to receive and amount equal
to 2.99 multiplied by the greater of (a) the average annual gross compensation
received by Mr. Wetzler from the Company from all sources during the five years
prior to and including the year in which the event giving rise to termination
occurs or (b) $250,000.
9
<PAGE>
Wetzler Stock Option Agreement. Pursuant to Mr. Wetzler's Employment
Agreement, in lieu of cash compensation, the Company agreed to issue to Mr.
Wetzler options to purchase 10,000,000 shares of common stock. The Stock Option
Agreement between Mr. Wetzler and the Company, dated as of January 1, 1996 (the
"Stock Option Agreement"), provides for the grant of the 10,000,000 shares at an
exercise price of $.0628 per share, subject to adjustment in accordance with the
terms of the Stock Option Agreement. The options granted pursuant to the Stock
Option Agreement have a term ending on January 1, 2006. One and two-thirds
percent (1 2/3%) of the options granted vest on January 31, 1996, with an
additional one and two-thirds percent (1 2/3%) vesting at the end of each
calendar month during Mr. Wetzler's employment, throughout the fifth anniversary
of the grant at which time the options will be 100% vested.
The exercise price of the options and the number of options are to be
adjusted for corporate events having an effect of the capitalization of the
Company. In addition, Mr. Wetzler may require the Company to redeem the options
on the occurrence of certain material events, including a reorganization,
reclassification or other similar capital transaction. The redemption price of
the options, in such an event, would be equal to the average of the daily
closing prices per share of common stock for the five consecutive business days
immediately preceding the event, multiplied by the number of shares of common
stock into which the option is exercisable at the time of redemption.
The Company has no other outstanding employment contracts with any of
the other executive officers named in the Summary Compensation table above.
Certain Relationships and Related Party Transactions
Mr. King entered into a letter agreement and Transactional Stock Option
Agreement with the Company, each dated February 23, 1996 pursuant to which Mr.
King agreed to assist the Company in connection with the Company's efforts to
find a suitable strategic alliance or financing partner. As consideration for
locating such an investor or partner, Mr. King was granted options to acquire
2,000,000 shares of the Company's common stock at an exercise price of $0.01 per
share. The options terminate on February 19, 1999, unless the options have
vested prior to that date, in which case the options will terminate on February
23, 2001. The options shall vest solely upon the consummation of a transaction
involving a financing or strategic alliance meeting certain parameters. The
number of options granted and the exercise price of the options shall be
adjusted to take into account stock dividends, stock splits and other similar
events.
Concurrently with the granting of the options described above, Mr. King
and the Company entered into a Registration Undertaking dated February 23, 1996,
under which the Company granted to Mr. King the demand and "piggyback"
registration rights. Under the Registration Undertaking, Mr. King may make a
single written request to the Company to effect a registration or qualification
to permit the public transfer of the shares obtained by Mr. King through
exercise of the above described options. Mr. King may not request a registration
of fewer than 500,000 shares, and subject to certain conditions contained in the
Agreement, the right to request registration will be effective commencing August
9, 1997 and ending on the earlier to occur of (i) August 9, 2002, (ii) the date
when Mr. King may not longer acquire at least 500,000 shares of common stock
through the exercise of options, (iii) the registrable securities can be sold
without registration under Rule 144 (k) promulgated under the Securities Act of
1933, or (iv) the options are otherwise registered as part of a separate
registration of options, which registration meeting specified qualifications.
Mr. King also has "piggyback" registration rights, entitling him to require
that, subject to certain limitations, the option shares be included in a
registration of securities by the Company.
10
<PAGE>
On June 17, 1996, the Company also entered into an agreement with
Gerald Wetzler whereby Mr. Wetzler purchased, for a fee of $200,000 (which was
deemed by the Board to be fair value), an option to acquire up to 20,000,000
shares of the Company's common stock at an exercise price of $0.12 per share If
the Company does not, at the time of exercise, have sufficient shares of common
stock authorized to exercise the option, Mr. Wetzler shall have the right to
purchase 10,000,000 shares of the Company's authorized but unissued convertible
preferred stock at an exercise price of $0.24 per share. The option expires on
June 17, 1998.
ITEM 2. AMENDMENT OF THE COMPANY'S CERTIFICATE
OF INCORPORATION
The Board of Directors, by unanimous vote of those present, has
declared advisable and directed that there be submitted to the stockholders of
the Company at the Meeting a proposed amendment to Article Four of the Company's
Certificate of Incorporation, which would effect an increase in the number of
authorized shares of the Company's capital stock from 100,000,000 shares to
250,000,000 shares, consisting of an increase in the number of authorized shares
of common stock from 90,000,000 shares to 225,000,000 shares and an increase the
number of authorized shares of preferred stock from 10,000,000 shares to
25,000,000 shares.
On the record date, the Company had 73,400,644 shares of common stock
outstanding and had reserved for issuance an additional 16,778,000 shares
(exclusive of Gerald Wetzler's 20,000,000 options - see Stock Options) pursuant
to the exercise of outstanding options and stock grants, for a total of
90,178,644 shares authorized. Accordingly, the total of common shares
outstanding and reserved for stock options and stock grants is in excess of the
number of authorized shares of common stock of 90,000,000. In connection with
the foregoing, Gerald Wetzler has agreed to refrain from exercising currently
vested options to purchase 178,644 shares of common stock until such time as
there is a sufficient number of authorized shares of common stock available for
such exercise. In addition until such time as the number of shares of common
stock is increased, Mr. Wetzler's options provide that such options be
exercisable into 10 million shares of preferred stock, thereby utilizing all of
the currently authorized preferred shares.
The Company has been required to issue or authorize additional shares
of common stock as a result of its financing activities to fund its continued
activities and to attract and keep qualified consultants, executives and
directors in lieu of cash payments. The Company anticipates being required to
issue a significant number of additional shares in the financing of its
continued activities as well as in an attempt to obtain financing for the
recommencement of its business operations. The Company cannot state at this time
the amount, if any, of financing which may become available to it or, if
available, whether such financing will be on terms and conditions acceptable to
it.
11
<PAGE>
If approved, the increased number of authorized shares of common stock
and preferred stock will be available for issue from time to time for such
purposes and consideration as the Board of Directors may approve and no further
vote of stockholders of the Company will be required, except as provided under
Delaware law. The availability of additional shares for issue will afford the
Company vital flexibility in acting upon potential financing. As discussed
above, the Company is seeking additional equity capital and will issue
additional shares of common stock, preferred stock or securities convertible
into shares of common stock, if it has the opportunity to do so on terms which
the Board of Directors deems to be in the best interests of the Company and its
stockholders. Without the authorization of such additional shares, the Company's
ability to raise additional capital would be severely limited.
The proposed amendment would enable the Board of Directors to authorize
the issuance, without further stockholder action (unless required in a specific
case by applicable laws, regulations or stock exchange rules), of up to
25,000,000 shares of Preferred Stock, in one or more series, with such terms and
at such times and for such consideration as the Board of Directors may
determine. With respect to any such series of Preferred Stock, the Board will be
authorized to determine, among other things: (i) the dividend rate, which may be
fixed or variable, the conditions and times at which the dividend is payable,
its preference as to any other class or series of capital stock, and whether
dividends will be cumulative or non-cumulative; (ii) whether the shares are to
be redeemable and, if so, at which times and prices and on what other terms and
conditions; (iii) the terms and amount of any sinking fund provided for the
purchase or redemption of the shares; (iv) whether the shares shall be
convertible or exchangeable and, if so, the times, prices, rates, adjustments
and other terms of such conversion or exchange; (v) the voting rights, if any,
applicable to the shares in addition to those prescribed by law; (vi) the
restrictions and conditions, if any, on the issue or reissue of any additional
shares of such series or of any other series of Preferred Stock ranking on a
parity with, or prior to, the shares of such series; and (vii) the rights of the
holders of such shares upon voluntary or involuntary liquidation, dissolution or
winding up of the Company.
If the amendment is adopted, the result will be to increase the
flexibility of the terms of the Preferred Stock to give the Board greater
latitude in determining the rights, powers, preferences and terms with respect
to any series and to simplify and modernize the language.
The Board believes that the proposed amendment is in the best interests
of the Company and its stockholders. The authorization of additional shares of
Preferred Stock will give the Company greater flexibility in equity financing by
permitting the Board to issue shares of Preferred Stock without the delay and
expense of a special meeting of stockholders. For example, the Board may deem it
appropriate to make a private or public offering of the Company's Preferred
Stock in order to raise funds for working capital or other purposes or the
Preferred Stock could be issued to finance possible future acquisitions.
The flexibility to issue the "blank check" Preferred Stock could also
enhance the Board's bargaining capability in a takeover situation. For example,
the Board could issue a series of Preferred Stock with the right as a separate
class to approve any merger or sale of the Company. This could have the effect
of delaying, deferring or preventing a change in control of the Company. In
addition, the Board could forestall or prevent a change in control by means of a
private placement of the Preferred Stock with a person or entity friendly to
management, whose vote would be required to approve the proposed takeover.
Preferred Stock could also be issued in conjunction with the adoption of a
stockholder purchase rights plan.
12
<PAGE>
The additional shares of common stock and preferred stock for which
authorization is sought would be identical to the shares of common stock and
preferred stock of the Company now authorized. Holders of common stock do not
have preemptive rights to subscribe for additional securities which may be
issued by the Company.
The affirmative vote of the holders of a majority of the outstanding
shares of common stock entitled to vote at the Meeting is required to authorize
the proposed increase in the authorized number of shares of common stock and
preferred stock. If the amendment is approved, the text of Article Four of the
Company's Certificate of Incorporation will be amended to read as follows:
"4. The total number of shares of stock which the corporation shall
have authority to issue is Two Hundred and Fifty Million (250,000,000)
of which stock Two Hundred and Twenty-Five Million (225,000,000) shares
of the par value Two Mills ($.002) each shall be common stock and of
which Twenty-Five Million (25,000,000) shares of the par value of One
Mill ($.001) shall be preferred stock.
The Board recommends voting FOR the proposal to amend the Company's
Certificate of Incorporation to increase the Company's authorized capital stock.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Act of 1934 (the "Exchange Act")
requires the Company's officers and directors and the holders of more than ten
percent of the Company's outstanding common stock to file reports of ownership
with the Securities and Exchange Commission and to furnish the Company with
copies of these reports. The Company believes that all such reports required to
be filed during or with respect to the fiscal year ended June 30, 1996 were made
on a timely basis.
Common Stock Performance
The Company filed for Chapter 11 bankruptcy in October 1993.
Accordingly, the stock performance for the period July 1, 1991 through the
period ended June 30, 1993 has been omitted since the dramatic decrease in the
Company's stock trading price in the period prior to its bankruptcy filing would
unduly distort the actual stock performance of the reorganized Company. As of
June 30, 1991, the stock closed at $5.50 per share as opposed to a closing price
of $1.375 per share on June 30, 1993. On December 3, 1996, the Company's stock
closed at $0.89. In October 1995, the Company's Plan of Reorganization (the
"Plan") was approved by the Bankruptcy Court. In accordance with the terms of
the Plan, upon the effective date, the Company issued approximately 56% of its
common stock upon receipt of $3,460,200 in connection with the H. J. Meyers
Private Placement.
The graph below compares the cumulative total shareholder return on the
Company's common stock with the cumulative total return on the NASDAQ Composite
Index and Color Systems, Inc. for the period beginning June 30, 1993 and ending
June 30, 1996. The data set forth below assumes the value of an investment in
the Company's Common Stock, the NASDAQ Composite Index and Color Systems, Inc.
was $100.00 on June 30, 1993.
13
<PAGE>
Comparison of Total Return
Since June 30, 1993
Among American Film Technologies, Inc.,
The NASDAQ Composite Index and Color Systems, Inc.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
200|----------------------------------------------------------------------------------------------------------------------|
| |
| |
| |
175|----------------------------------------------------------------------------------------------------------------------|
| & |
| |
| & |
150|----------------------------------------------------------------------------------------------------------------------|
| & & |
| & |
| |
125|----------------------------------------------------------------------------------------------------------------------|
D | & |
O | |
L | & & & & & |
A 100|*&#----------------------------------&--------------------------------------------------------------------------------|
R | |
S | # # |
| |
75|----------*-----------------------------------------------------------------------------------------------------------|
| # |
| |
| # |
50|----------------------------------------------------------------------------------------------------------------------|
| # # # |
| * # |
| #* |
25|----------------------------------------------------------------------------------------------------------------------|
| # |
| # # |
| * * * * * * |
0| * * * |
----------|--------|--------|--------|----------|---------|--------|--------|---------|---------|--------|---------|--|
June 30, Sept 30, Dec 31, Mar 31, June 30, Sept 30, Dec 31, Mar 31, June 30, Sept 30, Dec 31, Mar 31, June 30,
1993 1993 1993 1994 1994 1994 1994 1995 1995 995 1995 1996 1996
</TABLE>
* American Film Technologies, Inc. & NASDAQ Composite Index
# Color Systems, Inc.
14
<PAGE>
Independent Auditors
The firm of Ernst & Young LLP, Independent Auditors, has audited the
books and records of the Company for the past eleven fiscal years, and the Board
of Directors desires to continue the services of this firm for the current
fiscal year.
A representative of Ernst & Young is expected to be available at the
Meeting to respond to appropriate questions and to make a statement if so
desired.
Stockholder Proposals
The Company currently contemplates holding its 1997 Annual Meeting
during the fall of 1997. Proposals of stockholders intended to be presented at
the Annual Meeting of Stockholders in 1997 must be sent to the Company at 4105
Sorrento Valley Blvd., San Diego, CA 92121 and received not later than June 30,
1997 in order to be considered for inclusion in the proxy material relating to
that meeting.
Other Matters
The Board of Directors does not know of any other matters to be
presented at the Meeting but, if other matters do properly come before the
Meeting, it is intended that the persons named in the proxy will vote on them in
accordance with their best judgment.
Annual Report
A copy of the Annual Report to stockholders is being enclosed with this
Proxy Statement. This Annual Report includes the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1996, as filed with the Securities and
Exchange Commission containing detailed information concerning the Company and
its operations.
15
<PAGE>
PROXY AMERICAN FILM TECHNOLOGIES, INC.
4105 Sorrento Valley Boulevard
San Diego, California 92121
The undersigned hereby appoints Gerald M. Wetzler and Steven Lefkowitz,
and each of them, with power of substitution, to represent and vote on behalf of
the undersigned all of the shares of American Film Technologies, Inc., which the
undersigned is entitled to vote at the Annual Meeting of Stockholders (the
"Meeting") to be held at the offices of Jeffer, Mangels, Butler & Marmaro, LLP,
2121 Avenue of the Stars, Tenth Floor, Los Angeles, California on February 10,
1997 at 10:00 a.m. (Pacific Time), and at any adjournment or postponement
thereof, hereby revoking all proxies heretofore given with respect to such
stock, upon the following proposals more fully described in the Notice of and
Proxy Statement for the Meeting (receipt of which is hereby acknowledged).
1. ELECTION OF DIRECTORS
FOR all nominees listed WITHHOLD AUTHORITY
below (except as marked to vote for all nominees listed
to the contrary below) / / below / /
Gerald Wetzler, Steve Lefkowitz, Edward Payne, Larry King, Porter Bibb,
Harvey Finkel and Kay Salomon
TO WITHHOLD AUTHORITY to vote for any individual nominee, write that
nominee's name in the space provided below:
---------------------------------------------------------------------------
2. Amendment of Certificate of Incorporation to Increase Authorized Amount of
Capital Stock of the Company to 250,000,000 shares, consisting of 225,000,000
shares of common stock and 25,000,000 shares of preferred stock.
For / / Against / / Abstain / /
3. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the Meeting.
The Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this Proxy will
be voted "FOR" the election of all seven nominees for director and "FOR"
Proposal 2. This Proxy also delegates discretionary authority to vote with
respect to any other matters which may properly come before the Meeting or any
adjournment or postponement thereof.
Please sign exactly as your name appears
on this proxy. When shares are held by
joint tenants, both should sign. When
signing as attorney, 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. Please return
this proxy in the enclosed envelope. No
postage is required if mailed within the
United States.
Dated:
----------------------------------
----------------------------------------
(Signature)
----------------------------------------
(Signature if held jointly)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
