SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant |X|
Filed by a party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to |_| ss.240.14a-11(c)
or |_| ss.240.14a-12
TOTALAXCESS.COM, INC.
-------------------------------------------
(Name of Registrant as Specified In Its Charter)
----------------------------------------------------------------------
(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>ii
TOTALAXCESS.COM, INC.
201 Clay Street, 2nd Floor
Oakland, California 94607
(510) 286-8700
To the Stockholders of TotalAxcess.com, Inc.:
You are invited to attend the Annual Meeting of the Stockholders of
TotalAxcess.com, Inc., a Delaware corporation ("Company") which will be held on
Friday, January 28, 2000, at 10:00 a.m. (local time) at the South San Francisco
Conference Center, Baden Room A, 255 S. Airport Boulevard, South San Francisco,
California 94080.
The accompanying Notice of the Annual Meeting of the Stockholders and Proxy
Statement contain the matters to be considered and acted upon, and you should
read such material carefully.
The Proxy Statement contains information concerning:
(1) the election of the Board of Directors of the Company;
(2) the approval of an amendment to the Company's Certificate of
Incorporation to amend the voting rights granted to the Stockholders
of Series B Convertible Preferred Stock to be consistent with the
proposed share consolidation;
(3) the approval of an amendment to the Company's Certificate of
Incorporation to adopt a one-for-fifteen share consolidation of the
outstanding shares of the Company's Common Stock and decrease the
authorized number of shares of Common Stock from 333,000,000 to
22,200,000; and
(4) the approval of the Company's 2000 Stock Option Plan.
The Board of Directors strongly recommends your approval of these
proposals.
It is important that your shares be represented. Accordingly, we urge you
to mark, sign, date and return the enclosed proxy promptly. You may, of course,
withdraw your proxy if you attend the meeting and choose to vote in person.
Sincerely,
/s/ JOSEPH J. MONTEROSSO
-------------------------------------
Joseph J. Monterosso
President and Chief Executive Officer
January 12, 2000
<PAGE>iii
TOTALAXCESS.COM, INC.
201 Clay Street, 2nd Floor
Oakland, California 94607
(510) 286-8700
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held On January 28, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
TotalAxcess.com, Inc., a Delaware corporation (the "Company"), will be held on
Friday, January 28, 2000 at 10:00 a.m. (local time), at the South San Francisco
Conference Center, Baden Room A, 255 S. Airport Boulevard, South San Francisco,
California 94080, for the following purposes, which are more completely
discussed in the accompanying Proxy Statement:
1. To elect two directors, each to hold office until the next Annual
Meeting of Shareholders and until their successors are elected and
qualified;
2. To approve an amendment to the Company's Certificate of Incorporation
to amend the voting rights granted to the Stockholders of Series B
Convertible Preferred Stock to be consistent with the proposed share
consolidation;
3. To approve an amendment to the Company's Certificate of Incorporation
to adopt a one-for-fifteen share consolidation of the outstanding
Common Stock and to decrease the authorized number of shares of Common
Stock from 333,000,000 to 22,200,000;
4. To adopt the TotalAxcess.com, Inc. 2000 Stock Option Plan; and
5. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on December 23, 1999,
are entitled to notice of and to vote at the Annual Meeting of the Stockholders.
By Order of the Board of Directors
/s/ JOSEPH J. MONTEROSSO
-------------------------------------
Joseph J. Monterosso
President and Chief Executive Officer
January 12, 2000
YOU ARE CORDIALLY INVITED TO ATTEND THE COMPANY'S ANNUAL MEETING OF
STOCKHOLDERS. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE
NUMBER YOU OWN. EVEN IF YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING, YOU ARE
URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE
ENVELOPE PROVIDED. IF YOU ATTEND THIS MEETING, YOU MAY VOTE EITHER IN PERSON OR
BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY
TIME PRIOR TO THE EXERCISE THEREOF.
<PAGE>1
PROXY STATEMENT
of
TOTALAXCESS.COM, INC.
201 Clay Street, 2nd Floor
Oakland, California 94607
(510) 286-8700
Information Concerning the Solicitation
This Proxy Statement is furnished to the stockholders of TotalAxcess.com,
Inc., a Delaware corporation ("Company") in connection with the solicitation of
proxies on behalf of the Company's Board of Directors for use at the Company's
Annual Meeting of the stockholders (the "Meeting") to be held on Friday, January
28, 2000, at 10:00 a.m. (local time), at the South San Francisco Conference
Center, Baden Room A, 255 S. Airport Boulevard, South San Francisco, California
94080, and at any and all adjournments. Only stockholders of record on December
23, 1999 ("Record Date"), will be entitled to notice of and to vote at the
Meeting.
The proxy solicited, if properly signed and returned to the Company and not
revoked prior to its use, will be voted at the Meeting in accordance with the
instructions contained in the proxy. If no contrary instructions are given, each
proxy received will be voted "FOR" the nominees for the Board of Directors,
AFOR@ the approval of Proposals Two, Three, and Four, and, at the proxy holders'
discretion, on such other matters, if any, which may come before the Meeting
(including any proposal to continue or adjourn the Meeting). Any stockholder
giving a proxy has the power to revoke it at any time before it is exercised by
(i) filing with the Company written notice of its revocation addressed to
Secretary, TotalAxcess.com, Inc., 201 Clay Street, 2nd Floor, Oakland,
California 94607, (ii) submitting a duly executed proxy bearing a later date, or
(iii) appearing in person at the Meeting and giving the Secretary notice of his
or her intention to vote in person.
The Company will bear the entire cost of preparing, assembling, printing
and mailing proxy materials furnished by the Board of Directors to stockholders.
Copies of proxy materials will be furnished to brokerage houses, fiduciaries and
custodians to be forwarded to beneficial owners of the Common Stock. In addition
to the solicitation of proxies by use of the mail, some of the officers,
directors, employees and agents of the Company may, without additional
compensation, solicit proxies by telephone or personal interview, the cost of
which the Company will also bear.
This Proxy Statement and form of proxy were first mailed to stockholders on
or about January 12, 2000.
Record Date and Voting Rights
The Company is currently authorized to issue up to 333,000,000 shares
of Common Stock, par value $0.01, and 1,000,000 shares of Preferred Stock, par
value $0.01, of which 250,000 shares have been designated as Series B
Convertible Preferred Stock, par value $2.00, and 170,000 shares have been
designated as 14% Cumulative Convertible Preferred Stock, par value $0.01 ("14%
Preferred Stock"). As of December 23, 1999, 159,161,506 shares of Common Stock
were issued and outstanding, 23,589 shares of Series B Convertible Preferred
Stock were issued and outstanding, and 170,000 shares of 14% Preferred Stock
were issued and outstanding. The shares of Common Stock, Series B Convertible
Preferred Stock, and 14% Preferred Stock shall vote together as a class and be
<PAGE>2
entitled to vote on all matters submitted for stockholder approval, including
the election of directors. With regards to Proposal Two, the holders of Series B
Convertible Preferred Stock will also be entitled to vote as a separate class.
Each share of Common Stock and 14% Preferred Stock shall be entitled to one vote
and each share of Series B Convertible Preferred Stock shall be entitled to
seventy-eight (78) votes. As of the Record Date, 23,589 shares of Series B
Convertible Preferred Stock were outstanding and hold 1,839,942 votes.
A majority of the shares entitled to vote of the Common Stock, Series B
Convertible Preferred Stock, and 14% Preferred Stock, together as a class, as
determined on the Record Date, represented in person or by proxy constitute a
quorum for the Meeting. Directors shall be elected by a plurality of the votes
cast by holders of Common Stock, Series B Preferred Stock, and 14% Preferred
Stock, voting together as a class, present in person or represented by proxy at
the Annual Meeting and entitled to vote on the election of directors. The
affirmative vote of a majority of the votes outstanding held by the holders of
the Common Stock, Series B Convertible Preferred Stock, and 14% Preferred Stock,
entitled to vote on the Record Date and voting together as a class, and the
affirmative vote of a majority of shares of outstanding Series B Convertible
Stock, entitled to vote on the Record Date and voting separately as a class, is
necessary to approve Proposal Two. The affirmative vote of a majority of the
votes outstanding held by the holders of the Common Stock, Series B Convertible
Preferred Stock, and 14% Preferred Stock, entitled to vote on the Record Date
and voting together as a class is necessary to approve Proposal Three. The
affirmative vote of a majority of the votes cast by the holders of the Common
Stock, Series B Convertible Preferred Stock, and 14% Preferred Stock, voting
together as a class, represented and voting at the Annual Meeting is necessary
to approve Proposal Four. Under Delaware law, abstentions and broker non-votes
shall be counted for purposes of determining quorum but will not be counted
either for or against any proposal.
PROPOSAL ONE
ELECTION OF DIRECTORS
General Information
At the Annual Meeting, two directors are to be elected to hold office until
the next annual meeting or until their respective successors have been duly
elected and qualified. The Company currently has three directors, Messrs. Joseph
J. Monterosso, Russell F. McCann, Jr., and Dennis Houston. The Company's Bylaws
provide that the authorized number of directors of the Company shall be a
minimum of one and a maximum of twenty-five (25). The Board of Directors has
fixed the number of directors at two, effective at the election. Messrs. Joseph
J. Monterosso and Russell F. McCann, Jr. have been nominated for re-election.
Nominees for Directors
The nominees for directors have consented to being named nominees in
this Proxy Statement and have agreed to serve as directors if elected at the
Annual Meeting. In the event that the nominees are unable to serve, the persons
named in the proxy have discretion to vote for other persons if such other
persons are designated by the Board of Directors. The Board of Directors has no
reason to believe that the nominees will be unavailable for election.
The following sets forth the persons nominated by the Board of
Directors for election as directors and certain information with respect to
those persons.
<PAGE>3
Background of Nominees
Joseph J. Monterosso, age 53, serves as Chairman of the Board of Directors
of the Company, and has been a Director since 1996. Mr. Monterosso has also been
the President, Chief Executive Officer, and Chief Financial Officer of the
Company since 1997. From 1970 to 1979, Mr. Monterosso founded three successful
firms including a company that manufactured custom wheels and imported
accessories for off-road sport vehicles which was subsequently sold to Ford
Motor Corporation. In 1979, he was appointed as the Sales and Operating Vice
President of Tony Ward, Inc., an importer of forklifts from Japan, and served
until 1980 when he left and founded North American Forklift, Inc. Mr. Monterosso
also co-founded National Pool Corporation (ANPC@) in 1992 where he served as
President, Chief Executive Officer, Secretary and Chairman of the Board until it
was acquired by the Company in 1996.
Russell F. McCann, Jr., age 44, has served as a Director since 1998. Mr.
McCann, Jr. also serves as President and CEO of Actio Software Corporation and
on the Board of Trustees for the Bigelow Laboratory for the Ocean Sciences in
Boothbay, Maine. Previous to Actio Software Corporation, he co-founded and
served as the President and Chief Executive Officer of Ares Software
Corporation. From 1989 to 1990, Mr. McCann, Jr. served as Vice President of
Marketing and Sales for Emerald City Software prior to being acquired by Adobe
Systems. He also previously worked for Letraset Graphics Design Software, a
subsidiary of Esselte Business Systems, and Boston Software Publishers. Mr.
McCann, Jr. received his BS degree with high honors in political science and
economics and an MBA in finance and marketing from Northeastern University and
specialized marketing studies from the Sloan School of Management at MIT.
Committees of the Board of Directors and Attendance
The Company does not have any committees. During the fiscal year ended June
30, 1999, the Board of Directors met six times. Except for Mr. Dennis Houston,
all directors attended at least 75% of the meetings.
Directors Compensation and Grant of Stock Options
The directors of the Company are not compensated. However,
Director-employees receive compensation for their services as officers of the
Company.
Vote Required
The plurality of votes of the votes cast by the holders of Common Stock,
Series B Preferred Stock, and 14% Preferred Stock, voting together as a class,
present in person or represented by proxy and entitled to vote on the election
of directors, is required to elect the nominees.
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE NOMINEES FOR THE ELECTION OF
DIRECTORS
<PAGE>4
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the persons currently serving as directors
of the Company, whose terms do not expire until the next Annual Meeting of
Stockholders in 2000, and certain information with respect to those persons.
HELD OFFICE
Director AGE SINCE
- ------------------------- ----- ------------
Joseph J. Monterosso 53 1996
Dennis Houston 54 1997
Russell F. McCann, Jr. 44 1998
Background of Current Directors
For the business backgrounds of Messrs. Joseph J. Monterosso and Russell F.
McCann, Jr., see "Background of Nominees."
Dennis Houston: Mr. Houston served as Chief Operating Officer from July 1,
1997 through June 29, 1998, and as a Director since August 8, 1997. In 1996, Mr.
Houston joined the Chesapeake and Potomac Telephone Co. (a former Bell Operating
Company) as a telecommunications consultant. He progressed through various
executive management positions in several of the former Bell Operating Companies
before moving to AT&T headquarters in New York City. His tenure with the Bell
System provided him with responsibilities and experience in commercial
operations, business office operations, network design, pricing, profitability,
public relations, personnel, Capitol Hill liaison, finance, and sales and
marketing. With the advent of divestiture, Mr. Houston formed his own company
initially specializing in acquisitions and importing and exporting of
telecommunication equipment. Subsequently, he formed several companies,
including an organization to franchise long distance companies, as well as the
acquisition of financially distressed telecommunications companies. In 1989, he
led a group to acquire the controlling interests in Uni-Net, Inc., a
telecommunications holding company, and subsequently merged its long distance
telephone interests with Discount Communications Services to help form the
Universal Network Services Organization. On June 8, 1998, Universal Network
Services filed for protection under Chapter 11 of the U.S. Bankruptcy Code and
has subsequently been liquidated.
Executive Officers
The following table sets forth certain information with respect to the
current executive officer of the Company.
<TABLE>
<S> <C> <C> <C>
Name Positions with the Company Age Office Held Since
- -------------------- ------------------------------------------- ----- -----------------
Joseph J. Monterosso Chairman of the Board, President, Chief 53 1997
Executive Officer, and Chief Financial
Officer
</TABLE>
<PAGE>5
Executive officers are elected periodically by the Board of Directors and
serve at the pleasure of the Board. No family relationship exists between any of
the officers or directors.
Background of Executive Officer
For the business backgrounds of Mr. Joseph J. Monterosso, President, Chief
Executive Officer, and Chief Financial Officer, see "Background of Nominees"
above.
Family Relationships
There are no family relationships between any director, executive officer
or key employee.
Executive Compensation
The following table sets forth the aggregate cash compensation paid for the
past three fiscal years by the Company and its predecessors for services of Mr.
Monterosso, the Company's President. No other executive officers earned in
excess of $100,000.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long Term
Compensation
---------------
Annual Compensation Awards Payouts
---------------------- ------- --------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Fiscal Salary Bonus Compensation Award(s) Options Payouts Compensation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
- ---------------------------- -------- ------------- ------- ------------- ----------- ------------ ---------- ------------
Joseph J. Monterosso 1999 $250,000 - - - - - -
President, Chief Executive 1998 $175,000 - - - - - -
Officer, Chief Financial 1997 $ 77,083 (1) - - - - - -
Officer & Chairman
</TABLE>
(1) Amounts incurred for fiscal year 1997 represent salary from December
23, 1996, through June 30, 1997; NPC was acquired on December 24,
1996. Mr. Monterosso has deferred all payments of his salary for
fiscal year ended 1997.
No options/SARs were granted or exercised in fiscal year ended June 30,
1999 by the officer named in the Summary Compensation Table.
Employment Agreements with Executive Officers
On April 1, 1994, NPC entered into an employment agreement with Joseph J.
Monterosso to serve as the Company's Chief Executive Officer. In conjunction
with the acquisition of NPC, Mr. Monterosso became the Company's President and
Director on November 25, 1996, and Chairman on August 8, 1997. Subsequent to
June 30, 1997, the Board of Directors ratified the agreement with Mr.
Monterosso. The agreement initially compensates Mr. Monterosso $125,000 per
annum and increases to $250,000 per annum upon the first sale of the Company's
HitLoTTo(R) Club Card, payable in cash or in common stock of the Company. The
first sale of the Company's HitLoTTo(R) Club Card occurred in February 1998.
<PAGE>6
PROPOSAL TWO
APPROVAL OF AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO AMEND THE VOTING RIGHTS GRANTED TO THE
STOCKHOLDERS OF SERIES B CONVERTIBLE PREFERRED STOCK
Reason For the Proposal
Although the Certificate of Determination for Series B Convertible
Preferred Stock provides for the adjustment of the conversion ratio to Common
Stock in the event of a stock split or reverse stock split, it inadvertently did
not provide for the adjustment of the voting rights. The Company currently has
23,589 shares of Series B Convertible Preferred Stock issued and outstanding.
Under the terms of the Series B Convertible Preferred Stock, the holders of
Series B Convertible Preferred stock shall have 78 votes per share. Therefore,
in the event a one-for-fifteen share consolidation, as proposed in Proposal
Three, is implemented, the holders of Series B Convertible Preferred Stock will
still be entitled to 78 votes per share after the effective date of a
one-for-fifteen share consolidation. That was not the intent of the Company or
the holders of Series B Preferred Stock.
The Company believes that adoption of Proposal Two, which will amend the
voting rights of the Series B Convertible Preferred Stock will maintain the
rights, preferences, privileges, and rights as originally intended by the
Company and the holders of Series B Convertible Preferred Stock. If Proposal Two
is approved and implemented, upon a one-for-fifteen share consolidation, each
share of Series B Convertible Preferred Stock shall be entitled to five votes on
an as converted basis. After discussions, the holders of the majority of the
outstanding shares of Series B Convertible Preferred Stock intend to vote to
approve the amendment to the Company's Certificate of Incorporation to amend the
voting rights granted to the Series B Convertible Preferred Stock.
If Proposal Two is approved and implemented, the voting rights of Series B
Convertible Stock as set forth in Paragraph (f) of the Certificate of
Designations, Preferences and Rights of Series B Convertible Preferred Stock
will be amended to read as follows:
"(f) Voting Rights.
(i) General. Except as otherwise required by law or expressly
provided in this Paragraph (f), the holders of Series B
Preferred Stock shall be entitled to notice of any
shareholders' meeting and to vote upon any matter submitted
to shareholders for a vote, at any time on the following
basis:
(1) Each holder of Series B Preferred Stock shall be
entitled to each share of Series B Preferred Stock held
by such holder to the number of votes equal to the
highest number of full shares of Common Stock to which
each share of Series B Preferred Stock is convertible
pursuant to Paragraph (d) hereof at the record date for
the determination of stockholders entitled to vote on
such matters; and
(2) Except as otherwise required by law or expressly
provided herein, the holders of Series B Preferred
Stock and Common Stock shall vote together and not as
separate classes."
<PAGE>7
For all of the above reasons, the Company believes that amending the voting
rights granted to the holders of the Series B Convertible Preferred Stock is in
the best interest of the Company and its stockholders.
Vote Required
The affirmative vote of a majority of the votes outstanding held by the
holders of the Common Stock, Series B Convertible Preferred Stock, and 14%
Preferred Stock, entitled to vote on the Record Date and voting together as a
class, and the affirmative vote of a majority of shares of outstanding Series B
Convertible Stock entitled to vote on the Record Date and voting separately as a
class, is necessary to approve Proposal Two.
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE ADOPTION OF THE AMENDMENT TO
THE COMPANY'S CERTIFICATE OF INCORPORATION TO AMEND THE VOTING RIGHTS GRANTED TO
THE STOCKHOLDERS OF SERIES B CONVERTIBLE PREFERRED STOCK.
PROPOSAL THREE
APPROVAL OF AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO IMPLEMENT A ONE-FOR-FIFTEEN SHARE
CONSOLIDATION AND DECREASE AUTHORIZED NUMBER OF SHARES
OF COMMON STOCK
General
The Board of the Company has approved a resolution approving this Proposal
Three and recommends to the stockholders that they approve this proposal to
amend the Company's Certificate of Incorporation to implement a one-for-fifteen
share consolidation of outstanding Common Stock and to decrease the authorized
number of shares of Common Stock from 333,000,000 to 22,200,000, all of which
shall be considered as one proposal to be submitted to a vote of holders of
Common Stock, Series B Convertible Preferred Stock, and 14% Preferred Stock. If
Proposal Three is approved, Article Fourth will read as follows:
"FOURTH: The Corporation shall be authorized to issue 22,200,000
shares of common stock at the par value of $.15 and
1,000,000 shares of preferred stock at the par value of
$.01. Further, the Board of Directors of this Corporation,
by resolution only and without further action or approval,
may cause the Corporation to issue one or more classes of
stock or one or more series of stock within any class
thereof (including the $.15 par value common stock described
in this Article Fourth), any or all of which classes may be
of stock with par value or stock without par value and which
classes or series may have such voting powers, full or
limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other
special rights, and qualifications, limitations or
restrictions thereof, as shall be stated and expressed in
the resolution or resolutions adopted by the Board of
Directors; and to fix the number of shares constituting any
classes or series and to increase or decrease the number of
shares of any such class or series subsequent to the issue
of shares of that class or series.
<PAGE>8
Effective at the close of business on the effective date of
this amendment (the "Effective Time"), each fifteen (15)
issued and outstanding shares of common stock of this
Corporation shall hereby be combined into one (1) share of
validly issued, fully paid and non-assessable share of
common stock par value $.15 per share ("Share
Consolidation"). Each person as of the Effective Time
holding of record any issued and outstanding shares of
common stock shall receive upon surrender to the
Corporation's transfer agent a stock certificate or
certificates to evidence and represent the number of shares
of post-consolidation common stock to which such stockholder
is entitled after given effect to the consolidation. No
fractional shares or scrip for fractional shares shall be
issued by reason of this reverse stock split. In cases in
which the Share Consolidation would otherwise result in any
stockholder holding a fractional share, the Corporation
shall issue one whole share Common Stock for each fractional
share of Common Stock."
If approved by the stockholders and implemented by the Board of Directors,
other than (i) decreasing the authorized number of shares of Common Stock from
333,000,000 to 22,200,000, (ii) adjusting the par value of the Common Stock from
$.01 to $.15, and (iii) adjusting the total number of shares of Common Stock
issued prior to the adoption of the one-for-fifteen share consolidation,
Proposal Three will result in no other material changes to ownership of the
stock. Each stockholder will hold the same percentage of Common Stock, Series B
Convertible Preferred Stock, and 14% Preferred Stock outstanding immediately
following the one-for-fifteen share consolidation as each stockholder did
immediately prior to the one-for-fifteen share consolidation, except that the
consolidation may result in an immaterial adjustment due to the rounding up of
any fractional shares of Common Stock that result from the consolidation. See
"Exchange of Stock Certificate; No Fractional Shares." Further, the voting
rights and other privileges that each share of Common Stock, Series B Preferred
Stock, and 14% Preferred Stock enjoyed before the proposed one-for-fifteen share
consolidation will be the same following the one-for-fifteen share
consolidation, except that if Proposal Two is approved and implemented, the
voting rights of Series B Convertible Preferred Stock shall be adjusted to
reflect the number of votes which the holder of Series B Convertible Preferred
Stock is entitled to on an as converted basis.
Proposal Three will be implemented by an amendment to the Company's
Certificate of Incorporation and will become effective at the close of business
upon the filing of such amendment with the Secretary of State of Delaware (the
"Effective Time"). If Proposal Three is adopted, at the Effective Time, each
fifteen (15) shares of Common Stock issued and outstanding will automatically be
consolidated and converted into one (1) share of Common Stock. In cases in which
the one-for-fifteen share consolidation would otherwise result in any
stockholder holding a fractional share, the Company shall issue one whole share
of Common Stock for each fractional share of Common Stock. The conversion rate
for shares of Series B Convertible Preferred Stock and 14% Preferred Stock will
automatically be adjusted to reflect the one-for-fifteen share consolidation of
the outstanding Common Stock if the amendment is adopted.
If Proposal Three is approved by the stockholders of the Company, the
amendment will be filed unless the Board of Directors of the Company determines
that filing such amendment would not be in the best interest of the Company and
its stockholders. If the Board of Directors makes such determination, it may
elect not to file or elect to delay the filing of the amendment to implement
Proposal Three. The actual timing of such filing (and whether such filing is
made) will be determined by the Board of Directors based upon their evaluation
as to when such action will be most advantageous to the Company and its
stockholders. In addition, the Board of Directors may make any and all changes
<PAGE>9
to the one-for-fifteen share consolidation amendment that it deems necessary to
give effect to the intent and purpose of the one-for-fifteen share
consolidation.
Reasons For The One-For-Fifteen Share Consolidation
The Board of Directors believes that the current per share price of the
Common Stock and the large number of shares of Common Stock outstanding may have
had a negative effect on the marketability of the existing Common Stock, the
amount and percentage of transaction costs paid by individual shareholders, and
the potential ability of the Company to raise capital by issuing additional
shares of Common Stock. The Board of Directors is hopeful that after the
consolidation the market will react positively and in such a fashion that the
price of the Company's Common Stock will rise and will no longer be considered
low-priced by the investment community. The Board of Directors recognizes that
the proposed consolidation will not, in itself, result in the Company's Common
Stock being categorized other than as a low-priced stock, and that the only path
to being categorized as other than a low-priced stock is sustained growth and
profitability, neither of which can be assured.
The Company believes there are several reasons why the proposed
consolidation may enhance the value of and marketability of the Common Stock.
These reasons are summarized as follows:
1. Institutional investors often have internal policies that prevent the
purchase of low-priced stocks and many brokerage houses do not permit
low-priced stocks to be used as collateral for margin accounts.
Similarly, many banks do not permit collateralization of loans through
the pledge of low-priced stocks. If the one-for-fifteen share
consolidation, coupled with Company potential growth and
profitability, results in an increase in the per share price for the
Company's Common Stock, the Company may be able to attract additional
institutional investors as well as provide an avenue for its
stockholders to collateralize loans using their Common Stock instead
of selling that stock for needed money.
2. Further, some brokerage firm's implement internal policies and
practices that tend to discourage dealing with low-priced stock (stock
priced under $5 per share). These practices result in time-consuming
procedures and internal controls that must be complied with for
payment of brokerage commissions (and additional procedures, including
branch manager approval), which function to make handling low-priced
stock unattractive to brokers and registered representatives of a
brokerage firm. Some brokerage firms also require a non-solicitation
letter from the client when the client desires to purchase a
low-priced stock. These policies and procedures add delay and burden
to the process, based on separate business criteria of the brokerage
firm, and are designed to balance the commission to be paid with the
cost of handling the stock transaction, rather than considering and
evaluating such factors as the underlying nature of the transaction
and quality of the issuer. The Company believes that such policies do
not foster evaluation of its reported results and prospects for future
growth and stockholder return, factors which should be considered in
evaluating stock prices. Although the Company is hopeful that the
market price of its Common Stock will increase as a result of the
share consolidation to be no longer deemed a low-price stock, no
assurance can be given that this will occur.
3. Since the broker's commissions and transaction costs on low-priced
stock generally represent a higher percentage of the stock sale price
than commissions and costs on higher-priced stocks, the current share
price of the Company's Common Stock can result in individual
<PAGE>10
stockholders paying transaction costs (commissions, mark-ups,
mark-downs, etc.) which are a higher percentage of the total share
value than would be the case if the Company's share price were higher.
Although the Board of Directors is hopeful that the decrease in the number
of shares of Common Stock that would be outstanding after the proposed
one-for-fifteen share consolidation will result in an increased price level per
share of Common Stock which will encourage interest in the market for that
Common Stock and promote greater marketability for the Common Stock, no
assurances can be given that the market will respond to the one-for-fifteen
share consolidation with an increase in the per share price or with any increase
in average daily trading volume.
Finally, the effect of the proposed one-for-fifteen share consolidation, if
adopted and implemented, and resulting decrease in the number of shares of
Common Stock on the market, could adversely affect the trading value of such
Common Stock if there is not a corresponding increase in the per share price
level for such stock following the one-for-fifteen share consolidation. Many
factors beyond the Company's control will affect the ultimate trading market and
there can be no assurance that the per-share price for the Company's Common
Stock immediately after the one-for-fifteen share consolidation will reflect the
corresponding math material value based on the one-for-fifteen share
consolidation alone, or that any such value will be sustained for any period of
time.
The Company's Common Stock is traded on the OTC-Bulletin Board under the
symbol "TXCI." On December 20, 1999, the average high and low prices for the
Company's Common Stock was $.20. There is no public market for Company's Series
B Convertible Preferred Stock and the 14% Preferred Stock.
Set forth below are the high ask and low bids for the Common Stock of the
Company for fiscal years ended June 30, 1998 and 1999, and for the first two
quarters of fiscal 2000. The quotations are derived either from the IDD
Information Services, Tradeline Database or the National Association of
Securities Dealers, Inc. and reflect inter-dealer prices, without retail
mark-up, mark-down or commissions and may not necessarily represent actual
transactions in the Common Stock.
<TABLE>
<S> <C> <C>
Fiscal 1999 High Low
---------------------- ---- -----
Quarter ended 12/31/99 $.45 $.16
Quarter ended 09/30/99 $.89 $.40
Fiscal 1999 High Low
---------------------- ---- -----
Quarter ended 06/30/99 $.98 $.09
Quarter ended 03/31/99 $.23 $.02
Quarter ended 12/31/98 $.05 $.02
Quarter ended 09/30/98 $.09 $.03
Fiscal 1998 High Low
---------------------- ---- -----
Quarter ended 06/30/98 $.14 $.03
Quarter ended 03/31/98 $.17 $.09
Quarter ended 12/31/97 $.23 $.12
Quarter ended 09/30/97 $.27 $.13
</TABLE>
<PAGE>11
Effect Of The One-For-Fifteen Share Consolidation Proposal
Assuming approval of and adoption of the one-for-fifteen share
consolidation, each stockholder will own one-fifteenth (1/15) as many shares
(but the same percentage of the outstanding shares) as such stockholder owned
before the one-for-fifteen share consolidation. The one-for-fifteen share
consolidation may, however, result in an immaterial adjustment due to the
purchase of any fractional shares of Common Stock that result from the
consolidation. Each stockholder of the Company immediately before the
one-for-fifteen share consolidation will continue to be a stockholder
immediately after the one-for-fifteen share consolidation. The number of shares
of Common Stock that may be purchased upon the exercise of outstanding options,
warrants, and other securities convertible into Common Stock, such as the Series
B Convertible Preferred Stock and 14% Preferred Stock, or exercisable or
exchangeable for shares of Common Stock (collectively, "Convertible Securities")
and the per share exercise or conversion prices thereof will be adjusted
appropriately as of the Effective Time so that the aggregate number of shares of
Common Stock issuable in respect of Convertible Securities immediately following
the Effective Time will be one-fifteenth (1/15) (without taking into account the
effect of rounding up) of the number issuable in respect thereof immediately
prior to the Effective Time and the total exercise or conversion prices for all
of such shares issuable in respect of Convertible Securities will remain
unchanged. For example, a holder of a stock option to purchase 30,000 shares of
Common Stock at an exercise price of $1.00 per share prior to the Effective Time
will be the holder of a stock option to purchase 2,000 shares of Common Stock at
an exercise price of $15.00 per share at the Effective Time. The number of
shares of Common Stock reserved for issuance under an option plan would also be
reduced after the Effective Time to one-fifteenth of the number reserved for
issuance under an option plan prior to the Effective Time.
The one-for-fifteen share consolidation will also result in some
stockholders owning "odd lots" of less than 100 shares of Common Stock received
as a result of the one-for-fifteen share consolidation. Brokerage commissions
and other costs of transactions in odd lots may be higher, particularly on a
per-share basis, than the cost of transactions in even multiples of 100 shares.
The par value of the Common Stock will increase to $0.15 per share following the
one-for-fifteen share consolidation, and the number of shares of the Common
Stock outstanding will be reduced. As a consequence, the aggregate par value of
the outstanding Common Stock and the aggregate capital in excess of par value
attributable to the outstanding Common Stock for statutory and accounting
purposes will remain the same. The one-for-fifteen share consolidation will not
affect the Company's total stockholders' equity. If the one-for-fifteen share
consolidation is implemented, all share and per share information would be
retroactively adjusted following the Effective Time to reflect the
one-for-fifteen share consolidation for all periods presented in future filings
by the Company with the Securities and Exchange Commission.
If Proposal Three is adopted and implemented, the authorized number of
shares will decrease from 333,000,000 to 22,200,000. There would be no effect
(i) on the authorized number of shares of Preferred Stock, and (ii) the Series B
Convertible Preferred Stock and 14% Preferred Stock outstanding, except for the
adjustment to the conversion ratio to reflect the proposed share consolidation.
<PAGE>12
The following table illustrates the principal effects of the proposed
one-for-fifteen share consolidation on the authorized number of shares:
<TABLE>
<S> <C> <C>
Number of Shares of
Common Stock Prior to Proposal Three After Proposal Three
- ---------------------------------- ------------------------ --------------------
Authorized: 333,000,000 22,200,000
Outstanding: 159,161,506 10,610,767(1)
Available for Future Issuance: 173,838,494 11,589,233(1)
Number of Shares of
Common Stock Prior to Proposal Three After Proposal Three
- ---------------------------------- ------------------------ --------------------
Authorized: 1,000,000 1,000,000
Outstanding Series B 23,589 23,589
Outstanding 14% Preferred 170,000 170,000
</TABLE>
(1) Subject to minor adjustment due to rounding of fractional shares.
Exchange Of Stock Certificates; No Fractional Shares
If the one-for-fifteen share consolidation is adopted and implemented,
the combination and reclassification of shares of Common Stock pursuant to
the one-for-fifteen share consolidation will occur automatically on the
Effective Time without any action on the part of stockholders of the Company and
each holder of fifteen (15) shares of Common Stock will automatically become the
holder of one (1) share of post-one-for-fifteen share consolidation Common
Stock. No fractional shares will be deemed issued in connection with the
one-for-fifteen share consolidation, and any fractional shares that may result
will be rounded up to the nearest whole share of post-one-for-fifteen share
consolidation Common Stock. The following table gives an example of the effect
of the one-for-fifteen consolidation:
Common Stock Owned Before Common Stock Owned
Stockholder Effective Time After Effective Time
-------------- -------------------------- ---------------------
Stockholder A 3,000 200
Stockholder B 3,001 201
If Proposal Three is adopted and implemented, the stock certificates
representing the outstanding shares of pre-one-for-fifteen share consolidation
Common Stock will not be required to be exchanged for new stock certificates
representing the shares of post-one-for-fifteen share consolidation Common
Stock. Rather, the existing stock certificates shall be deemed to automatically
constitute and represent the correct number of shares of post-one-for-fifteen
share consolidation Common Stock without further action by the stockholders, and
new stock certificates will only be issued as old certificates are delivered to
the Company's transfer agent upon transfers of shares or at the election of
<PAGE>13
Stockholders after the Effective Time. Stockholders will be required to pay any
transfer fee or other fee in connection with any transfer of shares or upon
request for a new stock certificate.
Federal Income Tax Consequences
The following discussion of material federal income tax consequences of the
one-for-fifteen share consolidation is based upon the Internal Revenue Code of
1986, as amended (the "Code"), Treasury Regulations thereunder, judicial
decisions, and current administrative rulings and practices, all as in effect on
the date hereof and all of which could be repealed, overruled, or modified at
any time, possibly with retroactive effect. No ruling from the Internal Revenue
Service (the AIRS@) with respect to the matters discussed herein has been
requested, and there is no assurance that the IRS would agree with the
conclusions set forth in this discussion.
This discussion is for general information only and does not address
certain federal income tax consequences that may be relevant to particular
stockholders in light of their personal circumstances or to certain types of
stockholders (such as dealers in securities, insurance companies, foreign
individuals and entities, financial institutions, and tax-exempt entities) who
may be subject to special treatment under the federal income tax laws. This
discussion also does not address any tax consequences under state, local, or
foreign laws. IF PROPOSAL THREE IS APPROVED AND IMPLEMENTED, STOCKHOLDERS SHOULD
CONSULT THEIR TAX ADVISERS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE
ONE-FOR-FIFTEEN SHARE CONSOLIDATION.
Except as discussed below, no gain or loss should be recognized by a
stockholder who receives only Common Stock upon the one-for-fifteen share
consolidation. The aggregate tax basis of the shares of Common Stock held by a
stockholder following the one-for-fifteen share consolidation will equal the
stockholder's aggregate basis in the Common Stock held immediately prior to the
one-for-fifteen share consolidation and generally will be allocated among the
shares of Common Stock held following the one-for-fifteen share consolidation on
a pro-rata basis. Stockholders who have used the specific identification method
to identify their basis in shares of Common Stock combined in the
one-for-fifteen share consolidation should consult their own tax advisors to
determine their basis in the post-one-for-fifteen share consolidation shares of
Common Stock received in exchange therefor. Shares of Common Stock received
should have the same holding period as the Common Stock surrendered.
Registration and Trading
Assuming the one-for-fifteen share consolidation is approved and
implemented, the post one-for-fifteen share consolidation shares of Common Stock
will continue to be registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the Company will continue to file periodic and
current reports with the Securities and Exchange Commission (the "Commission")
pursuant to the Exchange Act. In addition, the Company's post-one-for-fifteen
share consolidation shares of Common Stock will continue to be traded on the
OTC-Bulletin Board. The Company intends to file all required notifications with
the OTC-Bulletin Board to provide for continued trading (on a post-consolidated
basis) in coordination with the Effective Time. Certificates representing the
post-one-for-fifteen share consolidation shares of Common Stock will, however,
contain a new CUSIP number. Further, the Company intends to file all reports
with regulatory authorities and issue a press release in the event it decides to
implement the one-for-fifteen share consolidation.
<PAGE>14
The Company has no intention of entering into any future transaction or
business combination which would result in deregistration of the
post-one-for-fifteen share consolidation shares of Common Stock under the
Exchange Act, or which might result in loss of eligibility for the
post-one-for-fifteen share consolidation shares of Common Stock to be listed and
traded on the OTC-Bulletin Board.
No Dissenter's Rights
Under Delaware Law, stockholders are not entitled to dissenter's rights of
appraisal with respect to the Company's share consolidation or any other element
of Proposal Three.
Vote Required
Proposal Three must be approved by the affirmative vote of a majority of
the votes outstanding held by the holders of the Common Stock, Series B
Convertible Preferred Stock, 14% Preferred Stock, entitled to vote on the Record
Date and voting together as a class.
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THIS PROPOSAL THREE.
PROPOSAL FOUR
ADOPTION OF THE COMPANY'S 2000 STOCK OPTION PLAN
Effective January 31, 2000, and subject to stockholder approval, the Board
of Directors approved adoption of the Company's 2000 Stock Option Plan (the
"2000 Plan") to serve as a vehicle to attract and retain the services of
employees, officers, directors, and consultants. As discussed below, the 2000
Plan is a "dual plan" which provides for the grant of both Incentive Stock
Options and Non-qualified Stock Options.
Description of the 2000 Plan
The 2000 Plan covers 30,000,000 (pre-one-for-fifteen share consolidation as
discussed in Proposal Three) shares of the Company's Common Stock, which shares
will be reserved upon confirmation of the 2000 Plan. If Proposals Three and Four
are approved, the 30,000,000 shares of Common Stock reserved for the 2000 Plan
shall be adjusted to 2,000,000 shares of Common Stock following the proposed
one-for-fifteen share consolidation. The following is a summary of the
provisions of the 2000 Plan.
Eligibility. The 2000 Plan provides for the grant of options to employees,
officers, directors, and consultants of the Company or its subsidiaries, if any.
Administration. The 2000 Plan will be administered ("Administrator") by (i)
the Board of Directors or (ii) a Compensation Committee consisting of two or
more disinterested non-employee board members. The Administrator is responsible
for the operation of the 2000 Plan and, subject to the terms thereof, makes all
determinations regarding (i) which eligible persons shall be granted options
("participants"), and (ii) the nature and extent of participation. The
interpretation and construction of any provisions of the 2000 Plan by the
Administrator shall be final.
Terms of Options. Each option will be evidenced by a stock option agreement
between the Company and a participant. The Administrator shall determine the
term of an option, provided that an option may not have a term longer than 10
<PAGE>15
years, and in the case of an Incentive Stock Option, an optionee who holds more
than 10% voting control of all shares of the Company shall not have more than a
five-year term.
Limitation on Incentive Stock Options. The Administrator shall determine
the number of shares subject to an option grant. However, the aggregate fair
market value of the Common Stock for which any Incentive Stock Option may first
become exercisable by any optionee during any calendar year under the Plan,
together with that of stock subject to Incentive Stock Options first exercisable
by such optionee under any other plan of the Company, shall not exceed $100,000.
Exercise of the Option. Options shall become exercisable during a period or
during such periods as the Administrator shall determine.
Option Price. The option price will be determined by the Administrator and
shall be the fair market value of the Company's Common Stock on the date of
grant, based upon the closing price of the common stock on that date. In the
case of an Incentive Stock Option granted to an employee who owns more than 10%
voting control of all shares of the Company, or its parent or subsidiary, the
exercise price will be 110% of the fair market value.
Employment Agreement. The Administrator may include in an option agreement
a condition that the participant shall agree to remain in the employ of the
Company for a specified period of time following the date of grant.
Termination of Status as an Employee, Officer, Director or Consultant. If
for any reason other than permanent and total disability or death, an optionee
ceases to be employed by the Company, Incentive Stock Options held at the date
of such termination (to the extent then exercisable) may be exercised at any
time within three months after the date of termination or such lesser period
specified in the option agreement. Non-qualified Stock Options are not limited
to such three-month exercise period. If an optionee granted an Incentive Stock
Option continues as a consultant, advisor or in a similar capacity to the
Company, the optionee need not exercise the option within three months of
termination of employment but shall be entitled to exercise the option within
three months of termination of services to the Company (or one year in the event
of permanent disability or death); however, the option will not qualify as an
Incentive Stock Option if not exercised within three months of termination of
employment.
Death or Permanent Disability. If a holder of an Incentive Stock Option
should die or become permanently disabled (or if the optionee dies within the
period that the option remains exercisable after termination of employment), the
Incentive Stock Option may be exercised by the participant's estate, or the
participant or his representative, at any time within one year after the death
or permanent disability or any lesser period specified in the option agreement,
but in no event after the earlier of (i) the expiration date of the option as
set forth in the option agreement, and (ii) ten years from the date of grant
(five years in the event of a more than 10% stockholder). Non-qualified Stock
Options shall not be limited to such one-year exercise period upon permanent
disability or death and such options may be exercised within the time specified
in the option agreement.
Suspension or Termination of Options. No option shall be exercisable by any
person after its expiration date. If the Board or Administrator reasonably
believes that a participant has committed an act of misconduct, the
Administrator may suspend the participant's right to exercise any option pending
a final determination by the Administrator. If the Board or Administrator
determines a participant has committed an act of embezzlement, fraud,
dishonesty, breach of fiduciary duty, or deliberate disregard of the Company's
<PAGE>16
rules, or if a participant makes an unauthorized disclosure of any Company trade
secret or confidential information, engages in any conduct constituting unfair
competition, induces any Company customers or contracting parties to breach a
contract with the Company, or induces any principal for whom the Company acts as
an agent to terminate such agency relationship, neither the participant nor his
or her estate shall be entitled to exercise any option thereunder. In making
such determination, the Board or Administrator shall give the participant an
opportunity to appear and present evidence on the participant's behalf. The
determination of the Board or Administrator shall be final and conclusive.
Non-transferability of Options. An option is nontransferable, other than by
will or the laws of descent and distribution, and is exercisable only by the
participant during his or her lifetime or, in the event of death, by the
executors, administrators, legatees, or heirs of his or her estate during the
time period described above.
Adjustment upon Changes in Capitalization. In the event of a
recapitalization, reclassification, stock split, combination of shares, stock
dividend, or other event, an appropriate adjustment shall be made in the option
price and in the number of shares subject to the option.
Dissolution, Liquidation, Merger. In the event of a dissolution or
liquidation of the Company, a merger, consolidation, combination, or
reorganization in which the Company is not the surviving corporation, or a sale
of substantially all of the assets of the Company, the Administrator, in its
absolute discretion, may (i) cancel each outstanding option upon payment in cash
to the optionee of the amount by which any cash and the fair market value of any
other property which the optionee would have received as consideration for the
shares of Common Stock covered by the option if the option had been exercised
immediately prior to such liquidation, dissolution, merger, consolidation,
combination, reorganization, or sale exceeds the exercise price of the option,
or (ii) negotiate to have such option assumed by the surviving corporation. In
addition, the Administrator in its absolute discretion may accelerate the time
within which each outstanding option may be exercised. If the Company is the
survivor, the Board of Directors shall determine the appropriate adjustment of
the number and kind of securities and the exercise price with respect to which
outstanding options may be exercised.
Amendment and Termination. The Board of Directors may amend the 2000 Plan
at any time or from time to time or may terminate it without approval of the
stockholders; provided, however, that stockholder approval is required for any
amendment which increases the number of shares for which options may be granted,
changes the designation of the class of persons eligible to be granted options,
or materially increases the benefits which may accrue to participants under the
1999 Plan. Notwithstanding the foregoing, no action by the Board of Directors or
stockholders may impair any option previously granted under the 2000 Plan
without the consent of the participant.
Other Provisions. The option agreement may contain such other terms,
provisions, and conditions not inconsistent with the 2000 Plan as may be
determined by the Administrator.
Federal Tax Aspects
The 2000 Plan is a "dual plan" in that it provides for the grant of both
Non-qualified Stock Options and Incentive Stock Options.
Non-qualified Stock Options. In general, the grant of an option under the
2000 Plan that is designated as a Non-qualified Stock Option will not result in
taxable income to the recipient at the time of grant.
<PAGE>17
In general, a participant who exercises the option will recognize ordinary
income in an amount equal to the excess of the fair market value of the shares
at the time of exercise over the option price. The Company will be entitled to
tax deductions in the same amounts and at the same times as the participant
takes amounts into income. The participant's cost basis in the acquired shares
will be the same as the fair market value of the shares on the
date they are valued to determine taxable income.
Incentive Stock Options. The grant of an option under the 2000 Plan that is
designated as an Incentive Stock Option under Section 422 of the Internal
Revenue Code will not result in taxable income to the recipient at the time of
the grant. The participant will, however, recognize taxable income in the year
in which the shares purchased under the Incentive Stock Option are sold or
otherwise made the subject of disposition.
For federal income tax purposes, dispositions are divided into two
categories: qualifying and disqualifying. The participant will make a qualifying
disposition of a purchased share if no disposition of such share is made by
participant within two years from the date of the granting of the option nor
within one year after the transfer of such share to the participant. If the
participant fails to satisfy either of these two holding periods prior to the
sale or other disposition of the purchased shares, then a disqualifying
disposition will result.
Upon a qualifying disposition, the participant will recognize capital gain
in an amount equal to the excess of (i) the amount realized upon the sale or
other disposition of the purchased shares over (ii) the option price paid for
the shares. If there is a disqualifying disposition of the shares, then the fair
market value of the shares on the date of exercise less the option price paid
for such shares will be taxable as ordinary income. Any additional gain
recognized upon the disposition will be capital gain.
If the participant makes a disqualifying disposition of the purchased
shares, then the Company will be entitled to an income tax deduction for the
taxable year in which such disposition occurs, equal to the amount by which the
fair market value of such shares on the date the option was exercised exceeded
the option price. In no other instance will the Company be allowed a deduction
with respect to the optionee's disposition of the purchased shares.
Withholding Taxes. The Company is entitled to take appropriate measures to
withhold from the shares of common stock, or to otherwise obtain from the
recipients, sufficient sums the Company deems necessary to satisfy any
applicable federal, state and local withholding taxes, including FICA taxes,
before the delivery of the common stock to the recipient.
Vote Required
The affirmative vote of a majority of votes cast by the holders of the
Common Stock, Series B Convertible Preferred Stock, 14% Preferred Stock, voting
together as a single class, represented in person or by proxy at the Annual
Meeting and entitled to vote is required to approve the Proposal Four.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE COMPANY'S 2000
STOCK OPTION PLAN.
<PAGE>18
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS THEREOF
The following table sets forth certain information about the ownership
of the Company's Common Stock, Series B Convertible Preferred Stock, and 14%
Preferred Stock as of December 23, 1999, by (i) those persons known by the
Company to be the beneficial owners of more than five percent (5%) of the total
number of outstanding shares of any class entitled to vote; (ii) each director,
director nominee, and highly compensated officer; and (iii) all directors,
director nominee, and officers of the Company as a group. The table includes
Common Stock issuable upon the exercise of Options or Warrants that are
exercisable within sixty (60) days. Except as indicated in the footnotes to the
table, the named persons have sole voting and investment power with respect to
all shares of the Company's Common Stock, Series B Convertible Preferred Stock,
14% Preferred Stock shown as beneficially owned by them, subject to community
property laws where applicable. The ownership figures in the table are based on
the books and records of the Company.
<TABLE>
<S> <C> <C> <C> <C>
Preferred Stock Common Stock
------------------ ----------------
Name and Address Number of Number of
of Beneficial Owner Shares Percentage Shares Percentage
- --------------------------- ------------- ----------- ----------- -------------
Joseph J. Monterosso 32,246,625 20%
201 Clay Street
Oakland, CA 94607
- --------------------------- ------------- ----------- ----------- -------------
Russell F. McCann, Jr. 16,708,497 10%
201 Clay Street
Oakland, CA 94607
- --------------------------- ------------- ----------- ----------- -------------
Dano Construction, Inc. 9,607,580 6%
420 Montrose Ct.
Modesto, CA 95350
- --------------------------- ------------- ----------- ----------- -------------
Brad Hunt 9,481,585 6%
5050 Dunville
Las Vegas, NV 89118
- --------------------------- ------------- ----------- ----------- -------------
Dennis Houston -0- *
- --------------------------- ------------- ----------- ----------- -------------
Luis Vargas -0- *
- --------------------------- ------------- ----------- ----------- -------------
Series B Convertible
Preferred Stock
- --------------------------- ------------- ----------- ----------- -------------
Pat Kuleto 1,630 7%
900 North Point, Suite A201
San Francisco, CA 94109
- --------------------------- ------------- ----------- ----------- -------------
MCI/WorldCom 21,959 93%
Mail Drop 5.2-510
6929 North Lakewood
Tulsa, Oklahoma 74117
- --------------------------- ------------- ----------- ----------- -------------
<PAGE>19
14% Preferred Stock
- --------------------------- ------------- ----------- ----------- -------------
Raymond C. Kitely 30,000 18%
20079 Glen Arbor Court
Saratoga, CA 95070
- --------------------------- ------------- ----------- ----------- -------------
Eli Moshe 10,000 6%
110 S. Sweetzer, No. 301
Los Angeles, CA 90048
- --------------------------- ------------- ----------- ----------- -------------
Walter K. Theis, M.D. 20,000 12%
1200 Corsica Drive
Pacific Palisades, CA 90272
- --------------------------- ------------- ----------- ----------- -------------
David Seror 77,500 46%
Ch. 7 Trustee for the
Estate of David A Paletz
221 N. Figueroa St., Rm. 800
Los Angeles, CA 90012
- --------------------------- ------------- ----------- ----------- -------------
Neil Miller 15,000 9%
2790 Forrester Drive
Los Angeles, CA 90064
- --------------------------- ------------- ----------- ----------- -------------
David Sheetrit 10,000 6%
c/o Moshe Shram
929 East Fourteenth Street
Los Angeles, CA 90021
- --------------------------- ------------- ----------- ----------- -------------
All Executive Officers, 48,955,122 30%
Directors and
Director Nominees As A Group
- --------------------------------------------------
</TABLE>
* Less than 1%
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company directors, executive officers and persons who own more than ten
percent (10%) of the Company's Common Stock to file reports of ownership and
changes in ownership with the Commission. Directors, officers and stockholders
of more than ten percent (10%) of the Company's Common Stock are required by the
Commission regulations to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely on review of the copies of such forms furnished to the
Company, or written representations that such filings were not required, the
Company believes that during its most recent fiscal year, all Section 16(a)
filing requirements applicable to its directors, officers and stockholders of
more than ten percent (10%) of the Company's Common Stock were timely filed.
<PAGE>20
OTHER MATTERS
Other Matters
The Board of Directors of the Company knows of no other matters that may be
or are likely to be presented at the Meeting. However, if additional matters are
presented at the Meeting, the persons named in the enclosed proxy will vote such
proxy in accordance with their best judgment on such matters pursuant to the
discretionary authority granted to them by the terms and conditions of the
proxy.
Stockholder Proposals
Stockholder proposals to be included in the Company's Proxy Statement and
proxy for the Company's next annual meeting must meet the requirements of Rule
14a-8 promulgated by the Commission, and must be received by the Company no
later than June 30, 2000.
Additional Information
A copy of the Company's Form 10-KSB for fiscal year ended June 30, 1999,
containing the Company's 1999 audited financial statements, including the report
of its independent public accountants, accompanies this Proxy Statement.
Additional copies may be obtained by written request addressed to the Company's
Secretary, Luis Vargas.
TotalAxcess.com, Inc.
By Order of the Board of Directors
/s/ JOSEPH J. MONTEROSSO
-------------------------------------
Joseph J. Monterosso
President and Chief Executive Officer
Oakland, California
January 12, 2000
<PAGE>
COMMON STOCK PROXY
TOTALAXCESS.COM, INC.
201 Clay Street, 2nd Floor
Oakland, California 94607
(510) 286-8700
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joseph J. Monterosso and Russell F. McCann, Jr.,
and each of them, as proxies with the power to appoint his or their successor,
and hereby authorizes them to represent and to vote, as designated below, all
the shares of Common Stock of TOTALAXCESS.COM, INC. ("Company") that the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders to be held on January 28, 2000, at 10:00 a.m. (local),
at the South San Francisco Conference Center, Baden Room A, 255 S. Airport
Boulevard, South San Francisco, California 94080, and at any and all
adjournments thereof.
This 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" for the two nominees and "FOR" Proposal Two, Three, and Four, and at
the proxy holder's discretion, any such other business as may properly come
before the Meeting.
1. Election of Directors.
|_| FOR all nominees listed below |_| WITHOUT AUTHORITY
(except as marked to the contrary below) (to vote for all nominees below)
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
Joseph J. Monterosso Russell F. McCann, Jr.
2. Approval of the Amendment to the Company's Certificate of Incorporation
to amend the voting rights granted to the Stockholders of Series B
Preferred Stock.
|_| FOR |_| AGAINST |_| ABSTAIN
3. Approval of the Amendment to the Company's Certificate of Incorporation
to implement a one-for-fifteen share consolidation of outstanding
Common Stock and decrease the authorized number of shares of Common
Stock from 333,000,000 to 22,200,000.
|_| FOR |_| AGAINST |_| ABSTAIN
4. Approval of the Company's 2000 Stock Option Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
5. In their discretion, the proxies are authorized to vote upon such other
business (including any extension or adjournment thereof) as may
properly come before the Meeting.
|_| I will attend the meeting. |_| I will not attend the meeting.
Number of persons to attend ____.
<PAGE>
Please sign exactly as your name appears on your share certificates. When shares
are held by joint tenants, all joint tenants should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If the signatory is a corporation, please sign the full corporate name
by the president or another authorized officer. If the signatory is a
partnership, please sign in the partnership's name by an authorized person.
<TABLE>
<S> <C> <C> <C>
Signature ______________________ Date ________ Signature(if held jointly) ______________________ Date ________
</TABLE>
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
