CONSYGEN, INC.
125 SOUTH 52ND STREET
TEMPE, AZ 85281
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
DECEMBER 11, 2000
To the Stockholders:
Notice is hereby given that the 2000 Annual Meeting of the Stockholders of
CONSYGEN, INC. will be held on Monday, December 11, 2000 at 4:30 P.M. at Fiesta
Inn, 2100 South Priest Drive, Tempe, AZ 85282, for the following purposes:
1. To elect a Board of seven Directors, to serve until the next annual
meeting of stockholders and until their successors shall be elected and
qualified, as more fully described in the accompanying Proxy Statement;
2. To ratify the Board of Directors' selection of King, Weber & Associates,
P.C. as independent public accountants for the fiscal year ended May 31, 2001;
3. To consider an amendment to the Corporation's Articles of Incorporation
to increase the number of authorized shares from 40,000,000 to 69,000,000
shares;
4. To approve the Company's 2000 Combination Stock Option Plan; and
5. To consider and act upon any other business which may properly come
before the meeting.
The Board of Directors has fixed the close of business on October 12, 2000
as the record date for the determination of stockholders having the right to
notice of, and to vote at the meeting. Only stockholders of record on the record
date are entitled to notice of and to vote at the meeting.
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED WHETHER
OR NOT YOU INTEND TO BE PRESENT AT THE MEETING IN PERSON.
By Order of the Board of Directors
Amelia C. Ulep, Secretary
Tempe, Arizona
November 13, 2000
<PAGE>
CONSYGEN, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of ConSyGen, Inc. (the "Company") for use at
2000 Annual Meeting of Stockholders to be held on Monday, December 11, 2000, at
the time and place set forth in the attached notice of the meeting, and at any
adjournments thereof. The approximate date on which this Proxy Statement and the
enclosed Proxy are first being sent to stockholders is November 13, 2000.
If the enclosed Proxy is properly executed and returned, it will be voted
in the manner directed by the stockholder. If no instructions are specified with
respect to any particular matter to be acted upon, proxies will be voted in
favor thereof. Any person giving a proxy has the power to revoke it by voting in
person at the meeting, or by giving written notice of revocation to the
Secretary of the Company at any time before the proxy is exercised.
The holders of a majority in interest of all common stock, par value $.003
per share ("Common Stock") issued, outstanding and entitled to vote are required
to be present in person or to be represented by proxy at the meeting in order to
constitute a quorum for transaction of business. The election of nominees for
Director will be decided by a majority vote of the Common Stock entitled to vote
at the meeting. Abstentions and "non-votes" are counted as present in
determining whether the quorum requirement is satisfied. Abstentions and
"non-votes" have the same effect as votes against proposals presented to
stockholders, other than election of directors. Abstentions and "non-votes" will
have no effect on the election of directors. A "non-vote" occurs when a nominee
holding shares for a beneficial owner votes on one proposal, but does not vote
on another proposal because the nominee does not have discretionary voting power
and has not received instructions from the beneficial owner.
The Company will bear the cost of the solicitation. It is expected that the
solicitation will be made primarily by mail, but regular employees or
representatives of the Company (none of whom will receive any extra compensation
for their activities) may also solicit proxies by telephone, telegraph,
telecopy, electronic mail and in person and arrange for brokerage houses and
other custodians, nominees and fiduciaries to send proxies and proxy materials
to their principals at the expense of the Company.
The Company's principal executive offices are located at 125 South 52nd
Street, Tempe, Arizona 85281, and its telephone number is (480) 394-9100.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on October 12, 2000
are entitled to notice of and to vote at the meeting. On October 31, 2000, the
Company had outstanding and entitled to vote 34,735,248 shares of Common Stock.
Each outstanding share of the Company's Common Stock entitles the record holder
to one vote.
2
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Seven Directors of the Company are to be elected to hold office until the
next annual meeting and until their successors shall be duly elected and
qualified. The persons named in the accompanying proxy will vote, unless
authority is withheld, for the election of the seven nominees named below. If
any of such nominees should become unavailable for election, which is not
anticipated, the persons named in the enclosed proxy will vote for such
substitutes as management may recommend. No nominee is related to any other
nominee or to any executive officer of the Company or its subsidiaries.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED A POSITION WITH THE COMPANY OR PRINCIPAL
NAME OF NOMINEE AGE DIRECTOR OCCUPATION DURING THE PAST FIVE YEARS
--------------- --- -------- -------------------------------------
<S> <C> <C> <C>
A. Lewis Burridge 80 1998 Mr. Burridge is President and Chief Executive Officer
of the Company since March 1999, elected as Chairman
on April 2000 and has been a Member of the Board of
Directors since June 1998. Mr. Burridge has had a
long and distinguished career spanning 30 years with
Sterling Drug Inc. as Corporate Vice President and
President of Sterling Asia. Mr. Burridge focused
developing Sterling manufacturing and marketing
companies throughout Asia for its medical and
consumer products in the Asia-Pacific area. Mr.
Burridge was President of the American Chamber of
Commerce both of Japan and the Philippines and was
Chairman of the Asia-Pacific Counsel of the American
Chamber of Commerce. Since 1992, Mr. Burridge was
Chief Operating Officer of Digitel Inc., a
telecommunications and Internet Company and Director
of Environment 1. He is currently a Director of
Integrated Transportation Network Group (ITNG),
Director of Massa, Inc., Trustee/Director of the
Trinity College of Vermont and Director of the United
States-Philippines Tourism Advisory Council.
John L. Caldwell 60 1999 Mr. Caldwell was elected to the Board on June 24,
1999. He is President of U.S. Trading & Investment
Company (USTIC), international business firm that
develops foreign markets for American products,
services and technologies and structures business
transactions worldwide. Mr. Caldwell has had
extensive experience in successfully developing and
concluding projects and contracts and establishing
joint ventures, strategic alliances, licensees,
distribution networks and sales representatives in
the Asia Pacific region, European Union, Eastern
Europe, Russia, Latin America, Africa and the Middle
East.
Mr. Caldwell was Managing Director, United States
Trading Company (1982), Senior Vice President and
General Manager, Carl Byoir and Associates
(1981-1982) and Vice President, International, for
the U.S. Chamber of Commerce (1966-1980). He is
currently a member of the International Policy
Committee of the U.S. Chamber of Commerce and a
lecturer at the Elliot School of International
Affairs, The George Washington University.
Luther H. Hodges, Jr. 63 2000 Mr. Hodges was appointed as a Director on June 6,
2000. Since 1990, he has been Chairman/Publisher of
The Santa Fean Magazine, and is an owner/manager of
Santa Fe Hospitality and the Hotel Santa Fe. He has
recently served on a range of government advisory
committees in New Mexico, and is a member of the
Arizona Business Leadership Association. In 1979, he
served as Undersecretary of the U.S. Department of
Commerce and in 1980 as the First Deputy Secretary of
Commerce. Mr. Hodges has also served on the boards of
numerous community, educational, and corporate
organizations, and he has been a member of the
faculty of the University of North Carolina (Chapel
Hill) and Duke University.
Donald P. Knode 77 1999 Mr. Knode was appointed to the Board of Directors on
December 28, 1999. Mr. Knode headed Merrill Lynch
Tokyo from 1961 to 1967 and was appointed to Vice
President of Merrill Lynch, Inc. due to his
accomplishments in Asia. In the 1990's, Mr. Knode
consulted with the bull market technology companies
such as IBM, Microsoft, Honeywell, Nasdaq, and United
Technologies. Mr. Knode also represented Blue Chip
Companies like Proctol & Gamble. Mr. Knode brings
vast national experience to ConSyGen's Board.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED A POSITION WITH THE COMPANY OR PRINCIPAL
NAME OF NOMINEE AGE DIRECTOR OCCUPATION DURING THE PAST FIVE YEARS
--------------- --- -------- -------------------------------------
<S> <C> <C> <C>
Andrew Lee 51 1998 Mr. Lee was appointed to the Board of Directors on
February 24, 1998 to fill an existing vacancy. Mr.
Lee is President and a Director of Integrated
Transportation Network Group Inc. Since 1997, Mr. Lee
has been the Co-Chairman of the Board and Co-Chief
Executive Officer of Greater Alliance Corporation, a
financial service corporation. Since 1992, Mr. Lee
has been the President and Chief Executive Officer of
First Shanghai Corporation, a merchant bank, BOXX
International Corporation, a computer and electronics
company, and TowerCom Inc., a software company. Mr.
Lee also is Chairman of the Board of Valentine USA
Inc., a company that manufactures ladies' apparel.
Russell B. Stevenson, Jr. 59 2000 Mr. Stevenson was appointed as a Director on July 6,
2000. Since 2000, he has been Executive Vice
President and General Counsel of ARBROS
Communications, Inc., a provider of integrated
communications services. From 1996 to 2000, he served
as Senior Vice President and General Counsel of
CyberCash, Inc., a provider of software and services
for electronic commerce. Prior to that, he practiced
law at Ballard Spahr Andrews & Ingersoll. His law
practice has concentrated on securities and corporate
law, with an emphasis on technology-based companies
and venture capital. He has served on the faculty of
George Washington University, and is a member of the
bars of the District of Columbia and the United
States Supreme Court.
Robert L. Stewart 81 1996 Mr. Stewart was appointed as a Director on March 24,
1999 and as Chairman of the Board from August 2, 1999
until April 19,2000. Prior to this, he had been the
Chairman of the Board from 1980 until January 1999
and had served as President and Chief Executive
Officer of ConSyGen-Arizona from 1980 until January
15, 1997. He was also President and Chief Executive
Officer of ConSyGen-Texas from September 5, 1996 to
January 15, 1997. Mr. Stewart is currently a Director
of Integrated Transportation Network Group.
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended May 31, 2000, the Board of Directors held a
total of 4 meetings; all meetings were in person at the Company's office in
Arizona. Meetings were held on June 24, 1999, December 13, 1999, January 31,
2000 and April 19, 2000. All in person meetings were attended by all incumbent
directors except for Mr. Lee who missed the last two meetings. All actions as a
result thereof were taken by unanimous written consent.
COMMITTEES OF THE BOARD OF DIRECTORS
Pursuant to action taken by unanimous written consent dated June 29, 1998,
the Board of Directors established an Audit Committee and a Compensation &
Benefits Committee. The Board of Directors does not have a nominating committee
or any committee performing similar functions.
At May 31, 2000, the Audit Committee members were Messrs. John L. Caldwell
and Donald P. Knode. The Audit Committee had no meeting during the fiscal year
ended May 31, 2000. On September 25, 2000, Mr. Russell B. Stevenson, Jr. was
added as a third member of the Audit Committee. The Audit Committee has not
adopted a written charter. Based on the definition of "independent director" in
Rule 4200(a)(14) of the Rules of the National Association of Securities Dealers,
Inc., in the opinion of the Board of Directors of the Company, all current
members of the Company's Audit Committee are independent directors.
The Compensation and Benefits Committee consists of Messrs. Donald Knode
and John Caldwell. The Compensation Committee held one meeting during the fiscal
year ended May 31, 1999. Meeting was held on April 19, 2000. All actions as a
result thereof were taken by unanimous written consent during the Board of
Directors Meeting that was held the same day.
4
<PAGE>
On June 24, 1999, an Executive Committee was formed to address various
Board level matters and development solutions only when the Board of Directors
is not in session but all major issues will be referred to the Board for
approval. Current members are Messrs. A. Lewis Burridge and Luther H. Hodges,
Jr. The Executive Committee had five Executive Memo sent out for the fiscal year
ended May 31, 2000, all actions as a result thereof were taken by unanimous
written consent.
AUDIT COMMITTEE REPORT
To the Board of Directors of ConSyGen, Inc.
We have reviewed and discussed with management the Company's audited
financial statements as of and for the year ended May 31, 2000.
We have discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, Communications with Audit
Committees, as amended, by the Auditing Standards Board of the American
Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter from
the independent auditors required by Independence Standard No. 1, Independence
Discussions with Audit Committees, as amended, by the Independence Standards
Board, and have discussed with the auditors the auditors' independence.
Based on the reviews and discussions referred to above, we recommend to the
Board of Directors that the financial statements referred to above be included
in the Company's Annual Report on Form 10-KSB for the year ended May 31, 2000.
Members of Audit Committee:
John L. Caldwell
Donald P. Knode
Russell B. Stevenson, Jr.
DIRECTOR COMPENSATION
The Compensation Committee recommended in their April 19, 2000 meeting to
change the Company's standard compensation arrangement whereby Directors who are
not also executive officers or employees of the Company will now receive
compensation in the amount of $1,500 for each meeting of the Board of Directors
or of a committee of the Board of Directors of which any such Director is a
member which is physically attended by such Directors and $500 for each
telephone meeting. In addition, the Company has increased the stock option grant
to such Directors to 25,000 shares of the Company's common stock under the
Company's 1997 Amended and Restated Non-Qualified Stock Option Plan. The
following table shows information concerning options granted to Directors during
the Company's fiscal year ended May 31, 2000.
NUMBER OF
SECURITIES
UNDERLYING EXERCISE
OPTIONS PRICE EXPIRATION
NAME DATE GRANTED $/SHARE DATE
---- ---- ------- ------- ----
Andrew Lee 02/24/98 10,000 $0.50 (1) 02/24/08
04/19/00 15,000 $1.1875 (2) 04/19/10
5
<PAGE>
John Caldwell 06/24/99 10,000 $0.50 (1) 06/24/09
04/19/00 15,000 $1.1875 (2) 04/19/10
Donald Knode 12/28/99 10,000 $0.50 (1) 12/28/09
04/19/00 15,000 $1.1875 (2) 04/19/10
Luther Hodges 06/06/00 25,000 $0.9062 (3) 06/06/10
Russell Stevenson 07/06/00 25,000 $1.00 (3) 07/06/10
----------
(1) Options are exercisable 50% at date of grant and 50% 1 year from such date.
(2) Options will vest over the next 12 months through 04/19/01 at 1/12 per
month.
(3) 5,000 shares are immediately exercisable and the remaining 20,000 Option
Shares shall be exercisable in twelve equal monthly installments.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by, or
paid to the Company's Chief Executive Officer and each of the Company's
Executive Officers (other than the Chief Executive Officer) whose total annual
salary and bonus exceeded $100,000 (collectively the "Named Executive Officers")
for all services rendered in all capacities to the Company and its subsidiaries
for each of the Company's last three completed fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPEN-
ANNUAL COMPENSATION SATION AWARDS
------------------------------- --------------
OTHER SECURITIES
NAME AND YEAR ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION (1)(2) ENDED SALARY BONUS COMPENSATION OPTIONS (#)(4) COMPENSATION (5)
------------------------- ----- ------ ----- ------------ -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
A. Lewis Burridge 05/31/00 $116,250 -- -- -- --
President & CEO 05/31/99 $ 22,769 -- -- 1,010,000 --
Jason M. Genet 05/31/00 $ 84,303 -- -- 495,000 --
Executive Vice President 05/31/99 $ 6,225 -- -- 5,000 --
Chief Operating Officer (3)
Thomas S. Dreaper 05/31/99 $ 83,231 -- -- -- --
Former President
& CEO
Ronald I. Bishop 05/31/99 $ 87,500 -- -- 669,095 --
Former President 05/31/98 $107,708 $1,083 900,000
& CEO 05/31/97 $ 26,250 -- -- 400,000 --
J. Stephen Kelly 05/31/99 $ 46,269 -- -- 64,685 --
Former EVP
& Chief Admin Officer
Robert L. Stewart 05/31/99 $119,750 -- -- -- --
Former President 05/31/98 $ 94,333 $1,429
& CEO 05/31/97 $ 65,250 -- -- -- --
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Carl H. Canter
Former President 05/31/97 -- -- -- -- --
& CEO 05/31/96 -- -- -- -- $36,000
</TABLE>
----------
(1) Mr. Lewis Burridge joined the Company as President and Chief Executive
Officer effective March 24, 1999.
(2) Mr. Thomas S. Dreaper served as President and Chief Executive Officer from
July 17, 1998 to March 23, 1999. For information regarding Mr. Dreaper's
compensation arrangements, see "Certain Relationships and Related
Transactions." Mr. Bishop served as President and CEO of the Company from
January 15, 1997 to June 30, 1998. Mr. Stewart served as President and CEO
of the Company from September 5, 1996, the date the Company acquired
ConSyGen-Arizona, through January 15, 1997. Mr. Canter served as President
and CEO of the Company until September 4, 1996. For information regarding
compensation arrangements and changes in terms of options in connection
with Mr. Bishop's termination of employment, see "Certain Relationships and
Related Transactions."
(3) Mr. Genet joined the Company on April 5, 1999.
(4) 1,000,000 options were granted to Mr. A. Lewis Burridge at $1.50 on March
30, 1999 which was repriced to $0.50 on October 1, 1999. Options were
granted to Ronald I. Bishop under the 1997 Amended and Restated
Non-Qualified Stock Option Plan. In November 1997, options to purchase
400,000 shares granted at an option price of $8.875 per share in March 1997
and options to purchase 500,000 shares granted at an option price of $5.50
per share in September 1997 were canceled and replaced by options to
purchase 900,000 shares at an option price of $4.00 per share. See "Stock
Option Plans - Option Grants in Fiscal Year Ended May 31, 1998" and "Report
of Ronald I. Bishop and the Board of Directors on Executive Compensation
and Repricing of Options."
(5) Represents amounts accrued by the Company and payable to The Canter
Corporation, a consulting firm controlled by Mr. Canter, for consulting
services provided by The Canter Corporation to the Company. In connection
with the acquisition, The Canter Corporation forgave this indebtedness.
EMPLOYMENT AGREEMENTS
The Company has prepared Employment Agreements, containing a range of
standard provisions as set out below, with the executive officers listed below.
Standard agreement provisions include:
* initial employment term of five years, automatically extended for
successive five-year periods if neither the Company nor the officer
provides the other party with notice of termination;
* officer eligibility to receive an annual bonus of up to 100% of base
salary;
* officer eligibility to receive fringe benefits, including monthly
lease payments for an automobile, as may be accorded other executives
under the Company's established plans and programs;
* officer eligibility to receive a non-qualified stock option to
purchase shares of the Company's stock (as listed below);
* in the event the Company terminates the officer without cause or if
the officer terminates employment for good reason, the Company must
pay to the officer an amount equal to five times base salary at the
time of termination, plus any bonus awarded but not yet paid and any
deferred bonus. Officer will be entitled to immediate vesting of all
restricted stock and unvested stock options, and the Company must
continue to pay the cost of health and welfare benefits for a period
of five years;
7
<PAGE>
* in the event of the officer's death or termination for cause, the
Company must pay an amount equal to base salary earned and unpaid as
of the date of termination; and
* in the event of a change in control, the officer shall be entitled to,
among other benefits, a cash payment equal to three times base salary.
Specific terms for each officer's employment agreement are:
<TABLE>
<CAPTION>
AGREEMENT INITIAL TERM BASE SALARY AS OF STOCK
NAME DATE DATE JUNE 30, 2000 OPTIONS
---- ---- ---- ------------- -------
<S> <C> <C> <C> <C>
A. Lewis Burridge June 6, 2000 June 6, 2005 $175,000 1,000,000
Jason M. Genet June 6, 2000 June 6, 2005 $150,000 500,000
John D. Roskelley June 6, 2000 June 6, 2005 $90,000 300,000
Eric J. Strasser June 6, 2000 June 6, 2005 $100,000 300,000
Amelia C. Ulep June 6, 2000 June 6, 2005 $42,000 115,000
</TABLE>
STOCK OPTIONS
In April 2000, the Company adopted the ConSyGen 2000 Combination Stock
Option Plan. This Plan was designed to supplement earlier stock option plans,
and to increase the total number of shares available for issuance within the
Company's stock option plans by 5,000,000 to a total of 10,500,000, either as
incentive stock options or non-qualified stock options. As of October 31, 2000,
options to purchase 4,020,200 shares of common stock were outstanding under the
Plan. Specific terms for grants under the Plan are in the discretion of the
Board or the Committee. The standard terms provide that employees' options
become exercisable in 48 equal monthly installments. The standard maximum term
for exercising options is ten years.
The following tables set forth with respect to each Named Executive Officer
certain information concerning (a) stock options granted during the Company's
fiscal year ended May 31, 2000 and (b) stock options exercised during the fiscal
year ended May 31, 2000 and unexercised at the end of such fiscal year.
OPTION GRANTS IN FISCAL YEAR ENDED MAY 31, 2000
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED
-------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR $/SHARE DATE 5% ($) 10% ($)
---- ------- ----------- ------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Jason M. Genet 45,000 1.69% $0.50 07/16/09 52,999 97,720
250,000 9.36% $0.50 01/25/10 1,007,082 1,677,651
200,000 7.49% $0.50 02/01/10 531,034 904,816
John D. Roskelley 50,000 1.87% $0.50 07/21/09 81,693 144,890
50,000 1.87% $0.50 01/25/10 201,416 335,530
200,000 7.49% $0.50 02/01/10 531,034 904,816
Eric J. Strasser 300,000 11.23% $0.50 01/28/10 766,253 1,308,980
</TABLE>
8
<PAGE>
----------
(1) The 5% and 10% assumed rates of annual compounded stock price appreciation
are mandated by the rules of the Securities and Exchange Commission and do
not represent the Company's estimate or projection of future prices of the
Company's common stock or of the potential realizable value of the options
granted.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NUMBER OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT 5/31/00 IN-THE-MONEY OPTIONS AT 5/31/00
ACQUIRED ON VALUE ------------------------- -------------------------------
NAME EXERCISE REALIZED (1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (2)
---- -------- ------------ ------------------------- -----------------------------
<S> <C> <C> <C> <C>
A. Lewis Burridge -- -- 743,333 / 266,667 673,460 / 241,600
Jason M. Genet 162,000 89,210 215,930 / 166,667 273,612 / 151,000
John D. Roskelley 30,000 24,124 170,000 / 100,000 154,020 / 90,600
Eric J. Strasser 35,000 43,750 165,000 / 100,000 149,490 / 90,600
</TABLE>
----------
(1) Represents the excess of the fair market value of the shares on the date of
exercise over the exercise price and does not necessarily reflect cash
realized upon the sale of such shares.
(2) Value based on the last quoted price of our common stock at $0.906 on May
31, 2000, as quoted on the National Association of Securities Dealers,
Inc.'s OTC Bulletin Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On June 26, 1998, Andrew Lee and Robert L. Stewart were elected to serve as
Members of the Compensation and Benefits Committee, which persons served as such
members for the duration of the fiscal year ended May 31, 1999. On December 13,
1999, John L. Caldwell was elected to replace Mr. Lee and on April 19, 2000,
Donald P. Knode was elected to replace Mr. Stewart. The Compensation Committee
had one meeting during the fiscal year ended May 31, 2000. Except for Mr.
Stewart, no member of the Compensation Committee was, during or prior to the
close of such fiscal year, an officer or employee of the Company or any of its
subsidiaries. However, during the fiscal year ended May 31, 2000, all
deliberations and determinations concerning (i) executive officer salary and
bonus compensation were first made by Mr. Lewis Burridge, the Company's
President and Chief Executive Officer, with the approval of the Board of
Directors, until the Compensation and Benefits Committee met on April 19, 2000,
and (ii) grants of options were also made by the Compensation Committee on that
same meeting. During the fiscal year ended May 31, 2000, the Company's Board of
Directors consisted of Mr. Stewart, Lewis Burridge (from June 29, 1998), Andrew
Lee (from February 24, 1998), John Caldwell (from June 24, 1999), Donald Knode
(from December 28, 1999), Luther Hodges (from June 6, 2000), Russell Stevenson
(from July 6, 2000) Harvey Dietrich (from February 11, 1999 to December 8,
1999), and Jeffrey Weiss (from October 6, 1998 to June 24, 1999).
REPORT OF A. LEWIS BURRIDGE AND THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION AND REPRICING OF OPTIONS
For the fiscal year ended May 31, 2000, the compensation of the Company's
executive officers was first determined by A. Lewis Burridge, the President and
Chief Executive Officer, with the approval of the Board of Directors as
indicated below and described under the caption "Compensation Committee
Interlocks and Insider Participation" up to the time that the Compensation and
Benefits Committee met on April 19, 2000.
9
<PAGE>
The Company's objective with respect to executive compensation is to
provide a level of total compensation that allows the Company to attract and
retain superior talent, to achieve its business objectives, and to align the
financial interests of the executive officers with the stockholders of the
Company. To that end, the Company has implemented and will continue to implement
a compensation strategy that includes a competitive salary and substantial
equity-based incentive compensation. On April 19, 2000, the Compensation and
Benefits Committee met for the purpose of considering and making recommendations
to the Board for such purposes.
In their consideration of the compensation for the Company's executive
officers, the Compensation Committee considered the past performance of the
officers, their level of responsibilities, overall performance with the Company,
and their view of the level of compensation necessary to attract and retain
talented individuals. No particular weight was assigned to any one factor, or to
corporate performance, and the deliberations are viewed an exercise of
subjective judgment, subject to the above-mentioned criteria.
The executive officers of the Company are eligible to receive options under
the Company's 1996 Non-Qualified Stock Option Plan and the Company's 1997
Amended and Restated Non-Qualified Stock Option Plan. The purpose of these plans
is to provide equity-based incentive compensation based on the long-term
appreciation in value of the Company's Common Stock and to promote the interests
of the Company and its stockholders by encouraging greater management ownership
of the Company's Common Stock. Most of the options granted to executive officers
under these stock option plans vest over a period of approximately two years,
thereby providing a continuing incentive and encouraging a long-term
relationship between such persons and the Company. For the fiscal year ended May
31, 2000, options to purchase 1,025,000 shares were granted by the Board of
Directors to executive officers of the Company. The following Table sets forth
certain information concerning all repricings of options held by any executive
officer of the Company since the adoption of the Company's 1996 and 1997
Non-Qualified Stock Option Plan.
On October 1, 1999, the Board of Directors determined that certain stock
options issued to the employees had an exercise price significantly higher than
the market value of the Company's common stock. The Board further noted that
employees had suffered materially through the Company's financial difficulties,
including failure to meet payrolls and remuneration commitments. To redress this
situation and to reward the dedication of the employees, the Board approved a
re-pricing of all options granted to that date, including the named executive
officers, to an exercise price of $0.50, the then fair market value of the
common stock. Subsequent option grants to new employees have been at the current
market price at the date of each grant.
<TABLE>
<CAPTION>
ORIGINAL LENGTH OF
NUMBER OF MARKET EXERCISE ORIGINAL
SECURITIES PRICE OF PRICE OF OPTION TERM
UNDERLYING STOCK AT CANCELLED NEW REMAINING AT
OPTIONS TIME OF OR AMENDED EXERCISE DATE OF
NAME DATE REPRICED REPRICING OPTION PRICE (1) REPRICING
---- ---- -------- --------- ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
A. Lewis Burridge 03/30/99 1,000,000 $0.4688 $1.50 $0.50 exp. 3/30/09
06/29/98 10,000 $0.4688 $2.875 $0.50 exp. 6/29/08
Jason M. Genet 04/04/99 5,000 $0.4688 $1.38 $0.50 exp. 4/04/09
07/16/99 45,000 $0.4688 $1.03 $0.50 exp. 7/16/09
John Roskelley 06/21/99 25,000 $0.4688 $1.31 $0.50 exp. 6/21/09
Ronald I. Bishop (2) 11/21/97 400,000 $6.125 $8.875 $4.00 exp. 3/18/07
11/21/97 500,000 $6.125 $5.50 $4.00 exp. 9/10/07
</TABLE>
----------
(1) Fair market value on date of grant as determined by the Board of Directors.
(2) See also the Summary Compensation Table, Table of Option Grants in Fiscal
Year Ended May 31, 1999, and related Notes.
10
<PAGE>
COMPENSATION OF A. LEWIS BURRIDGE, PRESIDENT AND CHIEF EXECUTIVE OFFICER
The compensation of A. Lewis Burridge, President and Chief Executive
Officer of the Company for the fiscal year ended May 31, 2000, was evaluated and
determined by the Board of Directors, using the same criteria that were used to
determine the compensation of other executive officers, as described above,
without assigning any weight to the relationship of such compensation to the
performance of the Company. During the fiscal year ended May 31, 2000, Mr.
Burridge received a salary of $116,250. Mr. Burridge's salary was set at the
minimum level of income appropriate for his position, and stock options were
granted to him such that his total compensation would be comparable to others in
similar industries.
The foregoing report has been approved by all members of the Board of
Directors.
BOARD OF DIRECTORS
Robert L. Stewart
A. Lewis Burridge
Andrew Lee
John L. Caldwell (1)
Donald P. Knode (2)
Luther H. Hodges, Jr. (3)
Russell B. Stevenson, Jr. (4)
(1) From June 24, 1999
(2) From December 28, 1999
(3) From June 6, 2000
(4) From July 6, 2000
11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of October 31, 2000 certain information
with respect to beneficial ownership of the Company's Common Stock by: (i) each
person known by the Company to own beneficially more than 5% of the Company's
Common Stock; (ii) each of the Company's directors, (iii) each of the executive
officers of the Company; and (iv) all directors and executive officers as a
group. This information is based upon information received from or on behalf of
the named individual. Unless otherwise noted, each person identified possesses
sole voting and investment power over the shares listed.
AMOUNT AND
NATURE OF
NAME OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER (12) OWNERSHIP** CLASS
--------------------- ----------- -----
A. Lewis Burridge 1,010,000 (1) 2.90%
President & Chief Executive Officer
John L. Caldwell 25,000 (2) *
Director
Jason M. Genet 338,000 (3) *
Chief Operating Officer
Luther H. Hodges, Jr. 25,000 (4) *
Director
Donald P. Knode 25,000 (5) *
Director
Andrew Lee 25,000 (6) *
Director
John D. Roskelley 270,000 (7) *
Vice President, Business Development
Russell B. Stevenson, Jr. 25,000 (8) *
Director
Robert L. Stewart 3,314,500 (9) 9.54%
Director
Eric J. Strasser 265,000 (10) *
Chief Financial Officer
Rodney R. Shoemann, Sr. 2,336,242 (11) 6.73%
3904 Wheat Drive
Metarie, LA 70002
All executive officers and Directors
as a Group (10 persons) 5,322,500 15.32%
----------
* Less than one percent
12
<PAGE>
** Unless otherwise noted, each person identified possesses sole voting and
investment power with respect to the shares listed, except to the extent
shared by spouses under applicable law.
(1) Includes 883,772 shares issuable pursuant to immediately-exercisable stock
options.
(2) Includes 16,003 shares issuable pursuant to immediately-exercisable stock
options.
(3) Includes 277,967 shares issuable pursuant to immediately-exercisable stock
options.
(4) Includes 13,114 shares issuable pursuant to immediately-exercisable stock
options.
(5) Includes 16,003 shares issuable pursuant to immediately-exercisable stock
options.
(6) Includes 16,003 shares issuable pursuant to immediately-exercisable stock
options.
(7) Includes 203,213 shares issuable pursuant to immediately-exercisable stock
options.
(8) Includes 11,469 shares issuable pursuant to immediately-exercisable stock
options.
(9) Includes 1,000,000 shares held by a Hong Kong corporation controlled by Mr.
Stewart.
(10) Includes 228,898 shares issuable pursuant to immediately-exercisable stock
options.
(11) Includes 700,000 shares issuable pursuant to immediately-exercisable stock
options.
(12) Unless otherwise noted, the address of each person in the table is c/o
ConSyGen, Inc. 125 South 52nd Street, Tempe, Arizona 85281.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 24, 1999, A. Lewis Burridge was elected President and Chief
Executive Officer of the Company. The terms of Mr. Burridge's employment provide
for an annual salary of $120,000 which was increased to $135,000 in October 1999
and options to purchase 1,000,000 shares of the common stock of the Company. The
options were granted to Mr. Burridge at an exercise price of $1.50 per share,
re-priced to $0.50 in October 1999, and as of January 25, 2000, 50% of the
1,000,000 shares were immediately exercisable while the remaining 50% is vested
equally over the next 12 months (through January 25, 2001) at 1/12 per month.
ConSyGen, Inc. has contracted with Boxx International for the manufacturer
and assembly of Counterfeit Cop. Boxx corporate headquarters and product design
center are maintained in Westchester, New York; research and development (R&D)
center in Taiwan; and cost effective manufacturing facilities in Asian countries
such as China and Malaysia. Boxx International's management, engineering, design
and marketing teams are drawn from highly experienced, international
professionals led by CEO, Mr. Andrew Lee, a leading executive with extensive
expertise in technology, marketing, and finance particularly related to the US
and the Far East. Mr. Andrew Lee became a member of ConSyGen's Board of
Directors in February 1998.
In June 2000, the Stewart Family Trust, Robert L. Stewart and various third
parties entered into a stock purchase agreement pursuant to which the Stewart
Family Trust, an affiliate of ours, and Robert L. Stewart, an affiliate of ours,
agreed to sell 1,300,000 shares of our common stock that they held to these
various third parties. In connection with the stock purchase agreement, the
Stewart Family Trust, of which Robert L. Stewart is the trustee, agreed to cause
us to register the 1,300,000 shares. Accordingly, in June 2000, we entered into
a registration rights agreement with the third parties and agreed to register
the 1,300,000 shares of common stock they purchased from the Stewart Family
Trust and Robert L. Stewart. The 1,300,000 shares of common stock are being
registered for these various third parties on the Company's Registration
Statement on Form SB-2 which was filed on September 19, 2000 ("The SB-2 Capital
13
<PAGE>
Registration Statement"). We were otherwise contractually obligated (unrelated
to the foregoing transaction) to file the SB-2 Registration Statement.
In August 2000, Robert L. Stewart, an affiliate of ours, sold privately
150,000 shares of our common stock to a private investor. Mr. Stewart agreed to
cause us to register such shares for sale by such investor under the Securities
Act of 1933, as amended. Such shares are included in the SB-2 Registration
Statement. We were otherwise contractually obligated (unrelated to the foregoing
transaction) to file the SB-2 Registration Statement.
Between August 31 and October 7, 1999, we received an aggregate of
approximately $199,000 in non-interest-bearing, unsecured loans from Robert L.
Stewart, a Director and affiliate.
On October 1, 1999, we received $150,000 in loan proceeds from a third
party. This loan is secured by a mortgage on property owned by Robert L.
Stewart, an affiliate of ours. This loan bears interest at 2% per month.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that the Company's directors and executive officers and persons owning more than
10% of the outstanding Common Stock, file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). Executive
officers, directors and beneficial owners of more than 10% of the Company's
Common Stock are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on copies of such forms furnished as provided above, or
written representations that no Forms 5 were required, the Company believes that
during the fiscal year ended May 31, 1998, all Section 16(a) filing requirements
applicable to its executive officers, directors and beneficial owners of more
than 10% of its Common Stock were complied with, except as follows: Messrs.
Strasser, Stevenson and Hodges each failed to file a Form 3, Initial Statement
of Beneficial Ownership; Messrs. Caldwell, Knode and Lee each failed to file one
Form 4, Statement of Changes in Beneficial Ownership of Securities, relating in
each case to one transaction; Mr. Roskelley failed to file a Form 3 and failed
to file one Form 4 relating to 15 transactions; Mr. Genet failed to file a Form
3 and failed to file two Forms 4 relating to a total of 41 transactions; Mr.
Stewart and the Stewart Family Trust each failed to file five Forms 4 to a total
of 10 transactions by each such reporting person. All of the foregoing reporting
persons filed the Form 5, Annual Statement of Changes in Beneficial Ownership,
for the fiscal year ended May 31, 2000, after the due date for such form. In
addition, during the fiscal year ended May 31, 1999, Mr. Stewart failed to file
two Forms 4 relating to a total of 10 transactions and failed to file a Form 5,
and the Stewart Family Trust failed to file a Form 5.
PROPOSAL NO. 2
RATIFICATION OF THE BOARD OF DIRECTORS'
SELECTION OF KING, WEBER & ASSOCIATES, P.C. AS
INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDED MAY 31, 2001
The Board of Directors has appointed King, Weber & Associates, P.C. as
independent public accountants to audit the consolidated financial statements of
the Company and its subsidiaries for the fiscal year ended May 31, 1999 to
replace Wolinetz, Gottlieb & Lafazan, P.C., who performed such functions for the
fiscal year ended May 31, 1998, the 5 months ended May 31, 1997 and the fiscal
year ended December 31, 1996. The reason for the change in independent
accountants is the convenience of the proximity of the offices of King, Weber &
Associates, which is located in Tempe, Arizona, to the location of the Company's
principal offices. Wolinetz, Gottlieb & Lafazan, P.C. is located in Rockville
Centre, New York.
The reports of King, Weber & Associates P. C. for the fiscal year ended May
31, 2000 contained no adverse opinion or disclaimer of opinion, and was not
qualified or modified as to uncertainty, audit, scope, or accounting principles,
except that such reports were qualified as to the uncertainty relating to the
Company's ability to continue as a going concern. The Company had no
disagreements with Wolinetz, Gottlieb & Lafazan, P.C. during any of the
above-mentioned fiscal period or for the subsequent interim period preceding the
engagement of King, Weber &
14
<PAGE>
Associates, P.C. on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure.
The reports of Wolinetz, Gottlieb & Lafazan P. C. for the fiscal year ended
May 31, 1998, the 5 months ended May 31, 1997, and the fiscal year ended
December 31, 1996 contained no adverse opinion or disclaimer of opinion, and was
not qualified or modified as to uncertainty, audit, scope, or accounting
principles, except that such reports were qualified as to the uncertainty
relating to the Company's ability to continue as a going concern. The Company
had no disagreements with Wolinetz, Gottlieb & Lafazan, P.C. during any of the
above-mentioned fiscal periods on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.
A representative of King, Weber & Associates, P.C. is expected to be
present at the meeting and will have the opportunity to respond to appropriate
questions.
At the Annual Meeting, the stockholders will be asked to ratify the Board
of Directors' selection of King, Weber & Associates, P.C. as the Company's
independent accountant for the Company's fiscal year ended May 31, 2001 and
recommends that the stockholders approve such selection.
PROPOSAL NO. 3
CONSIDER AN AMENDMENT TO THE CORPORATION'S
ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES FROM 40,000,000 TO 69,000,000 SHARES
Your Board of Directors has approved, subject to stockholder approval, an
amendment of the Company's Articles of Incorporation, as amended (the "Articles
of Incorporation"), to increase the number of authorized shares of Common Stock
from 40,000,000 to 69,000,000. This will provide the Company with sufficient
shares to meet its existing contractual obligations to issue shares pursuant to
outstanding options, warrants and convertible debentures, and will provide the
Board of Directors with the flexibility to conduct the Company's future
operations. The Board of Directors recommends that the Company's stockholders
approve this amendment.
The Company is currently authorized to issue 40,000,000 shares of Common
Stock, par value $.003 per share (the "Common Stock"). At October 31, 2000, the
status of the Company's Common Stock was as follows:
<TABLE>
<CAPTION>
<S> <C>
Shares authorized: ....................................................................... 40,000,000
Less: Shares issued and outstanding 34,735,248
Estimated shares issuable upon conversion of outstanding debenture (Note 1) 4,625,003
Shares issuable upon exercise of outstanding common stock warrants 4,613,000
Shares issuable upon exercise of existing stock options:
Options currently exercisable at October 31, 2000 (Note 2) 3,801,460
Additional options to vest by December 11, 2000 (Note 3) 199,352
Additional options not exercisable by December 11, 2000 1,938,647
-----------
Total shares issuable upon exercise of existing stock options 5,939,459
-----------
Total shares outstanding and subject to existing commitments ............................. 49,912,710
------------
Total additional shares required to fulfill all existing commitments to issue stock: .... 9,912,710
Additional shares reserved for future issuance under employee stock option plans: ........ 979,800
</TABLE>
----------
(1) Based on hypothetical conversion on October 31, 2000 of all principal,
interest and other charges in the amount of $817,430 at a price of $0.21
per share (which is based on 80% of the average closing bid price for the
five
15
<PAGE>
trading days preceding October 31, 2000). Also includes an additional
756,706 shares issuable under a pending conversion effected on October 24,
2000. See discussion, below.
(2) At October 31, 2000, no stock options were exercisable at an exercise price
of less than $0.50 per share and options to purchase 2,669,758 shares were
exercisable at $0.50 per share. The last quoted price of our common stock
on October 31, 2000, was $0.26, as quoted on the National Association of
Securities Dealers, Inc.'s OTC Bulletin Board.
(3) Represents options that will become exercisable between October 31, 2000
and December 11, 2000 under the terms of existing option agreements and the
Company's stock option plans.
As indicated in the table above, we have commitments to issue shares of our
Common Stock in excess of the number of shares we are authorized to issue. We
will not issue in excess of 40,000,000 shares unless and until the proposal to
increase the authorized Common Stock is approved. If the proposal to increase
the number of authorized shares of Common Stock to 69,000,000 shares is not
approved by the stockholders, the Company may be forced to default on certain
existing commitments to issue Common Stock. If we are unable to fulfill our
obligations to issue shares of Common Stock in a timely fashion, we could be
subject to substantial liability, which could have a material, adverse effect on
our liquidity and our ability to continue as a going concern.
SHARES ISSUABLE UPON EXERCISE OF STOCK OPTIONS
On October 10, 2000, pending the outcome of the vote of the stockholders on
this proposal at the annual meeting, the Company suspended the granting of
additional employee stock options and the exercise of outstanding stock options
held by current employees and current officers and directors of the Company. The
total number of existing stock options affected by this suspension is 4,807,757
and the number of options held by directors and officers that are affected by
this suspension is 2,235,000. If the proposal to increase the number of
authorized shares of Common Stock to 69,000,000 shares is not approved by the
stockholders, such suspension of options exercises will be continued until such
time as such increase in the authorized Common Stock is approved by the
stockholders. The holders of options affected by the suspension of exercise
rights will benefit from approval by the stockholders of the proposal to
increase the number of authorized shares of Common Stock since future
exercisability of their option will depend upon stockholder approval of the
proposal. See "PROPOSAL NO. 4, APPROVAL OF THE 2000 COMBINATION STOCK OPTION
PLAN," "DIRECTOR COMPENSATION," "EXECUTIVE COMPENSATION" and "STOCK OPTIONS" for
additional information regarding the officers and directors who will benefit
from the proposed increase in the number of authorized shares of Common Stock.
SHARES ISSUABLE UPON EXERCISE OF COMMON STOCK PURCHASE WARRANTS
Of the 4,613,000 shares issuable upon exercise of outstanding common stock
purchase warrants, 4,498,000 are issuable upon exercise of immediately
exercisable warrants issued by the Company to 52 investors that purchased
securities directly from the Company in a private placement. All such warrants
are exercisable until November 5, 2002 at a price of $1.50 per share, and the
shares of common stock issuable upon exercise of such warrants have been
included in the Company's Registration Statement on Form SB-2 which was filed on
September 19, 2000. The Company does not expect that its Registration Statement
will be declared effective by the Securities and Exchange Commission until after
the 2000 Annual Meeting of Stockholders. The holders of such warrants will
benefit from approval by the stockholders of the proposal to increase the number
of authorized shares of Common Stock since future exercisability of their
warrants may depend upon stockholder approval of the proposal.
SHARES ISSUABLE UPON CONVERSION OF DEBENTURE
At October 31, 2000, the Company had outstanding $656,751 in principal
amount of its 6% Convertible Debenture due May 29, 2003 ("Debenture"), accrued
interest in the amount of $95,004 (through October 31, 2000) and other amounts
payable under the Debenture in the amount of $65,675, for a total outstanding
obligation in the amount of $817,430 at October 31, 2000. The total amount is
convertible, under the terms of the Debenture, from time-to-time by the holder
of the Debenture at a price per share equal to 80% of the average closing bid
price for the five trading
16
<PAGE>
days preceding the effective date of the conversion. Consequently, the number of
shares issuable upon full conversion of the Debenture floats with the average
trading price of the Company's Common Stock. If the entire outstanding
obligation under the Debenture were converted on October 31, 2000, the
conversion price, based upon 80% of the average closing bid price for the five
trading days preceding October 31, 2000, would be $0.212 and the estimated
number of shares issuable upon such full conversion would be 3,859,297. In
addition, at October 31, 2000 the Company had the obligation to issue, and was
in the process of issuing, an additional 765,706 shares of Common Stock in
fulfillment of a pending conversion of Debentures effected on October 24, 2000.
Since the number of shares that are issuable upon conversion of the
Debenture is based upon a floating conversion rate that is tied to the average
closing price of our Common Stock, it is not possible to predict how many shares
will be required to meet the Company's obligation to issue Common Stock upon
conversion of the Debenture. Issuance of Common Stock upon conversion of the
Debenture could result in significant dilution of the per share value of our
Common Stock held by current investors. The lower the average trading price of
our Common Stock at the time of conversion of the Debenture, the greater the
number of shares required to be issued and the greater the risk of dilution
caused by these conversion shares. The perceived risk of dilution may cause the
Debenture holder, as well as other ConSyGen stockholders, to sell their shares,
which would contribute to the downward movement in the stock price of our Common
Stock. The significant downward pressure on the trading price of our Common
Stock could encourage the Debenture holder, and other ConSyGen stockholders, to
engage in short sales, which would further contribute to the stock price decline
of our Common Stock.
There is no minimum conversion price for conversion of the Debenture that
would establish a maximum number of shares of Common Stock that we could be
required to issue upon conversion of the Debenture. The table below sets forth
the number of shares of Common Stock that would be issued upon an assumed
conversion at October 31, 2000, of the entire outstanding unconverted Debenture
obligation in the amount of $817,430, if the average closing bid price for the
five trading days preceding October 31, 2000 had been discounted at 0%, 25%, 50%
and 75% from the levels actually reported on such trading days.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Assumed average closing bid price for five
trading days before conversion.......... $ 0.26476 $ 0.19857 $ 0.13238 $ 0.06619
Applicable conversion price............. 0.211808 0.158856 0.105904 0.052952
Number of shares that would be issued upon
conversion (Note 1)..................... 3,859,297 5,145,730 7,718,594 15,437,188
Percentage of total outstanding shares
after conversion represented by the
shares issuable to Debenture holder upon
conversion (Note 2)..................... 9.8% 12.7% 17.9% 30.3%
</TABLE>
----------
(1) Does not include 765,706 shares issuable to the Debenture holder at October
31, 2000 under a pending conversion effected on October 24, 2000. For
purposes of this table, such 765,706 shares have been treated as issued and
outstanding at October 31, 2000.
(2) Based upon pro forma issued and outstanding shares at October 31, 2000 in
the amount of 35,500,954 shares, which includes 765,706 shares issuable
under a pending conversion effected on October 24, 2000. See Note 1.
Except for shares currently reserved as listed above, we do not have any
present plan, understanding or agreement to issue additional shares of Common
Stock. However, we consider it desirable to have the flexibility, without
further stockholder action, to reserve and issue additional amounts of Common
Stock for proper corporate purposes that may be identified by the Board of
Directors from time to time. This will enable us to act quickly if we have the
opportunity to make an acquisition or raise capital on terms that we deem to be
in the best interests of the Company and its stockholders. The Company does not
currently have any agreements with respect to future acquisitions, but the
Company may consider acquisition opportunities in the future. Further, we
believe the availability of additional shares of Common Stock will enable the
Company to attract and retain talented employees through the
17
<PAGE>
grant of stock options and other stock-based incentives. We do not presently
intend to seek further stockholder approval of any particular issuance of shares
unless such approval is required by law or the rules of The Nasdaq Stock Market.
Stockholders do not have any preemptive or similar rights to subscribe for
any additional securities that may be issued in the future, which means that the
current stockholders do not have a prior right to purchase any new issue of
Common Stock of the Company in order to maintain their proportionate ownership.
Consequently, future issuances of Common Stock may, depending on the
circumstances, have a dilutive effect on the earnings per share, voting power
and other interests of the existing stockholders.
The proposal could have an anti-takeover effect, although that is not its
intention. If the Company was the subject of a hostile takeover attempt, it
could issue additional shares of Common Stock to create voting impediments to
the potential takeover, dilute the voting power of the person seeking to acquire
control or increase the potential cost of the takeover. The Company's ability to
issue the shares could discourage a third party from attempting to acquire
control of the Company. We are not aware of any attempt, or contemplated
attempt, to acquire control of the Company, and this proposal is not being
presented with the intent that it be utilized as a type of anti-takeover device.
The proposed amendment is not part of a plan by the Company to adopt other
measures intended to have or having potential anti-takeover effects.
If the stockholders approve the amendment, Article IV of the Articles of
Incorporation will be replaced in its entirety by the following:
The total number of shares of all classes of stock which the corporation
shall have authority to issue is sixty-nine million (69,000,000) shares of
common stock, par value $0.003 per share.
Other than increasing the authorized shares of common stock from 40,000,000
to 69,000,000, the proposed amendment in no way changes the Articles of
Incorporation.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock entitled to vote at the Meeting is necessary for approval of
Proposal No. 3. Therefore, abstentions and broker non-votes effectively count as
votes against the proposal. If approved by the stockholders, the proposed
amendment to the Company's Articles of Incorporation will become effective upon
the filing of Articles of Amendment with the Secretary of State of Texas, which
will occur shortly after the stockholders approve the amendment.
Your Board of Directors recommends that stockholders vote FOR the proposal
to amend the Articles of Incorporation to increase the authorized Common Stock.
Proxies solicited by management will be voted FOR Proposal No. 3 unless a vote
against the proposal or abstention is specifically indicated.
PROPOSAL NO. 4
APPROVAL OF THE 2000 COMBINATION STOCK OPTION PLAN
The purposes of the Company's 2000 Combination Stock Option Plan (the "2000
Plan") are to provide long-term incentives and rewards to those key employees of
the Company and its subsidiaries and any other persons who are in a position to
contribute to the long-term success and growth of the Company and its
subsidiaries, to assist the Company in retaining and attracting executives and
key employees with requisite experience and ability and to associate more
closely the interests of such executives and key employees with those of the
Company's stockholders.
The number of shares of Common Stock that may be the subject of awards under
this 2000 Plan is 5,000,000 shares. The Board of Directors has approved the 2000
Plan, subject to stockholder approval.
Under the 2000 Plan, the Company may grant both incentive stock options
intended to qualify under Section 422 of the Internal Revenue Code of 1986, as
it may be amended from time to time ("incentive stock options"), and other
options which are not qualified as incentive stock options ("nonqualified stock
options"). Incentive stock options may only be granted to persons who are
employees of the Company at the time of grant, which may include officers and
directors who are also employees. Nonqualified stock options may be granted to
persons who are officers, directors
18
<PAGE>
or employees of or consultants or advisors to the Company or persons who are in
a position to contribute to the long-term success and growth of the Company at
the time of grant. Directors who are not employees of the Company or who are
members of the Compensation Committee of the Board of Directors (the
"Compensation Committee") are not eligible to participate in the 2000 Plan.
Currently, all of the Company's employees may be determined to be key employees
entitled to grants of incentive stock options under the 2000 Plan.
The 2000 Plan is administered by the Compensation Committee. Subject to the
terms of the 2000 Plan, the Board of Directors or the Compensation Committee
determines the persons to whom options are granted, the number of shares covered
by the option, the term of any option and the time during which any option is
exercisable. The standard terms for grants under the 2000 Plan generally provide
that options become exercisable in 48 equal monthly installments. Options under
the 2000 Plan may not be granted after April 12, 2010. No option under the 2000
Plan may be exercised subsequent to ten years from the date of grant (five years
after the date of grant for incentive stock options granted to holders of more
than 10% of the Company's Common Stock). No incentive stock option granted
pursuant to the 2000 Plan may be exercised more than three months after the
option holder ceases to be an employee of the Company, except that in the event
of death or permanent and total disability of the option holder, the option may
be exercised by the holder of his estate for a period of up to one year after
the date of such death or permanent and total disability.
Nonqualified stock options may be granted at an exercise price greater or
lesser than the fair market value of the Common Stock on the date of the grant,
in the discretion of the Compensation Committee. Incentive stock options,
however, may not be granted at less than the fair market value of the Common
Stock and may be granted to holders of more than 10% of the Common Stock only at
an exercise price of at least 110% of the fair market value of the Common Stock
on the date of grant.
In order to assist an optionee in the acquisition of shares of Common Stock
pursuant to the exercise of an option granted under the 2000 Plan, the
Compensation Committee may authorize payment (i) in cash, (ii) by delivery of
shares of Common Stock having a fair market value equal to the purchase price of
the shares, (iii) by any other property (valued at its fair market value on the
date of such exercise), or (iv) any combination of cash, stock and other
property.
A total of 5,000,000 shares of Common Stock is available for issuance under
the 2000 Plan, subject to adjustment for any change in the Common Stock or to
any Stock Option granted under the 2000 Plan through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split or other change in
the corporate structure of the Company. The shares issued may include either
authorized but unissued shares of Common Stock or treasury shares. Shares
subject to an option that ceases to be exercisable for any reason will be
available for subsequent option grants. As described above, the Board of
Directors has approved the 2000 Plan, subject to stockholder approval.
As of October 31, 2000, options to purchase 4,020,200 shares of Common
Stock had been granted under the 2000 Plan, including 95,000 options to the five
named directors listed below, 355,000 options to employees (none of whom are
officers) and an additional 3,570,200 options (all of which have been exercised)
to consultants and other vendors of the Company (none of whom are directors or
officers of the Company). Options were granted to the named directors as
follows: 25,000 to Luther H. Hodges with an average exercise price of $0.5312,
25,000 to Russell B. Stevenson, Jr. with an average exercise price of $0.7812,
15,000 to John L. Caldwell with an average exercise price of $1.1875, 15,000 to
Donald P. Knode with an average exercise price of $1.1875 and 15,000 to Andrew
Lee with an average exercise price of $1.1875. The last quoted price of our
common stock was $0.26 on October 31, 2000, as quoted on the National
Association of Securities Dealers, Inc.'s OTC Bulletin Board.
Options granted under the 2000 Plan may not be assigned or transferred
except by will or the laws of descent and distribution or pursuant to a
"qualified domestic relations order" as defined by the Internal Revenue Code of
1986, as it may be amended from time to time, or Title 1 of ERISA.
The Board of Directors may amend, suspend or terminate the 2000 Plan;
provided, however, that neither the Board of Directors nor the Compensation
Committee may materially increase the number of securities which may be issued
under the 2000 Plan, extend the term of the 2000 Plan, materially modify the
requirements to be a participant in the 2000 Plan, materially increase the
benefits accruing to participants in the 2000 Plan, or otherwise modify the 2000
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Plan in any way or manner requiring the approval of stockholders without such
approval and compliance with any applicable law, rules or regulations.
FEDERAL TAX CONSEQUENCES. The following general discussion of the Federal
income tax consequences of the issuance and exercise of options granted under
the 2000 Plan is based upon the provisions of the Internal Revenue Code as in
effect on the date of this proxy statement (the "Code"), current regulations
thereunder, and existing administrative rulings of the Internal Revenue Service.
It is not intended to be a complete discussion of all of the Federal income tax
consequences of the 2000 Plan or of the requirements that must be met in order
to qualify for the described tax treatment. Changes in the law and regulations
may modify the discussion, and in some cases the changes may be retroactive. No
information is provided as to the state tax laws. The 2000 Plan is not qualified
under Section 401 of the Code and is not subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended.
INCENTIVE STOCK OPTIONS UNDER THE 2000 PLAN. An option holder generally
will not recognize taxable income upon either the grant or the exercise of an
incentive stock option. However, under certain circumstances, there may be
alternative minimum tax or other tax consequences, as discussed below.
An option holder will recognize taxable income upon the disposition of the
shares of Common Stock received upon exercise of an incentive stock option. Any
gain recognized upon a disposition that is not a "disqualifying disposition" (as
defined below) will be taxable as long-term capital gain.
A "disqualifying disposition" means any disposition of shares of Common
Stock acquired on the exercise of an incentive stock option within two years of
the date the stock option was granted or within one year of the date the shares
were transferred to the option holder. The use of the shares acquired pursuant
to the exercise of an incentive stock option to pay the option exercise price
under another incentive stock option is treated as a disposition for this
purpose. In general, if an option holder makes a disqualifying disposition, an
amount equal to the excess of (i) the lessor of (a) the fair market value of the
shares on the date of exercise or (b) the amount actually realized on the
disposition over (ii) the option exercise price will be taxable as ordinary
income and the balance of the gain recognized, if any, will be taxable as either
long-term, mid-term or short-term capital gain, depending on the option holder's
holding period for the shares. In the case of a gift or certain other transfers,
the amount of ordinary income taxable to the option holder is not limited to the
amount of gain which would be recognized in the case of a sale. Instead, it is
equal to the excess of the fair market value of the shares on the date of
exercise over the option exercise price.
Certain option holders are generally subject to Section 16(b) of the
Securities Exchange Act of 1934 ("Section 16(b)") upon their sale of shares of
Common Stock. This may affect their tax liability if they make a disqualifying
disposition of shares acquired on exercise of an incentive stock option. If an
option holder subject to Section 16(b) makes a disqualifying disposition, the
date on which the fair market value of the shares is determined may be
postponed. The date on which the fair market value of the shares is determined
(the "Determination Date") will be the earlier of (i) the date six months after
the date the stock option was granted, or, if earlier, (ii) the first day on
which the sale of the shares would not subject the individual to liability under
Section 16(b). It is possible that the six month period will instead run from
the option holder's most recent grant or purchase of Common Stock prior to his
or her exercise of the stock option. On the Determination Date, the option
holder will generally recognize ordinary taxable income in an amount equal to
the excess of the fair market value of the shares of Common Stock at that time
over the option exercise price. Despite the general rule, if there is a
disqualifying disposition and the Determination Date is after the date of
exercise, the option holder may make an election pursuant to Section 83(b) of
the Code in which case the option holder will recognize ordinary taxable income
at the time the stock option is exercised and not on the later date. In order to
be effective, the 83(b) election must be made and filed with the IRS within 30
days after exercise.
In general, in the year of exercise of an incentive stock option, an option
holder must compute the excess of the fair market value of the shares issued
upon exercise over the exercise price and include this amount in the calculation
of his or her alternative minimum taxable income. The application of the
alternative minimum tax rules for an option holder subject to Section 16(b) or
who receives shares that are not "substantially vested" are more complex and may
depend upon whether the holder makes a Section 83(b) election, as described
above. Because of the many adjustments that apply to the computation of the
alternative minimum tax, it is not possible to predict the application of the
tax to any particular option holder. However, an option holder may owe
alternative minimum tax even though he or she has not disposed of the shares or
otherwise received any cash with which to pay the tax.
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The Company will not be entitled to any deduction with respect to the grant
or exercise of an incentive stock option, provided the option holder does not
make a disqualifying disposition. If the option holder does make a disqualifying
disposition, the Company will generally be entitled to a deduction for Federal
income tax purposes in an amount equal to the taxable income recognized by the
option holder, provided the Company reports the income on a timely provided and
filed Form W-2 or 1099, which ever is applicable.
NON-QUALIFIED STOCK OPTIONS UNDER THE 2000 PLAN. The recipient of a
non-qualified stock option under the 2000 Plan will not recognize any taxable
income at the time the stock option is granted. Upon exercise, the option holder
will generally recognize ordinary taxable income in an amount equal to the
excess of the fair market value of the shares of Common Stock received on the
date of exercise over the option exercise price. Upon a subsequent sale of the
shares, long-term, mid-term or short-term capital gain or loss (depending upon
the holding period) will generally be recognized equal to the excess of the
difference between the amount realized over the fair market value of the shares
on the date of exercise.
The Company will generally be entitled to a compensation deduction for
Federal income tax purposes in an amount equal to the taxable income recognized
by the option holder, provided the Company reports the income on a timely
provided and filed Form W-2 or 1099, whichever is applicable.
An option holder who pays the option exercise price, in whole or in part,
by delivering shares of Common Stock already owned by him or her will generally
recognize no gain or loss for Federal income tax purposes on the shares
surrendered, but otherwise will be taxed according to the rules described above.
However, if shares received on the exercise of an incentive stock option are
used within the time periods that apply to a disqualifying disposition, then the
rules for disqualifying dispositions, described above, will apply. To the extent
the shares acquired upon exercise are equal to the basis of the shares
surrendered, the basis of the shares received will be equal to the basis of the
shares surrendered. The basis of the shares received in excess of the shares
surrendered upon exercise will be equal to the fair market value of the shares
on the date of exercise, and the holding period for the shares received will
commence on that date.
The affirmative vote of a majority of the votes of holders of the Common
Stock present in person or by proxy at the Meeting is required for adoption of
Proposal No. 4.
Your Board of Directors recommends that stockholders vote FOR the proposal
to approve the 2000 Combination Stock Option Plan. Proxies solicited by
management will be voted FOR Proposal No. 4 unless a vote against the proposal
or abstention is specifically indicated.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Pursuant to Rules of the Securities and Exchange Commission, proposals
submitted by eligible stockholders which are intended to be presented at the
Company's Annual Meeting of Stockholders to be held in 2001 must be received at
the Company's principal executive offices in Tempe, Arizona on or before July
17, 2001. Receipt by the Company of any such proposal from a qualified
stockholder in a timely manner will not ensure its inclusion in the proxy
materials. The Board of Directors of the Company will determine whether any such
proposal will be included in its 2001 proxy solicitation materials.
OTHER MATTERS
Management knows of no matters which may properly be and are likely to be
brought before the meeting other than the matters discussed herein. However, if
any other matters properly come before the meeting, the persons named in the
enclosed proxy will vote in accordance with their best judgment.
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INCORPORATION BY REFERENCE
To the extent that this Proxy Statement has been or will be specifically
incorporated by reference into any filing by the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, the
report of the Board of Directors on executive compensation included in the
section of the Proxy Statement entitled "Report A. Lewis Burridge and the Board
of Directors on Executive Compensation and Repricing of Options," shall not be
deemed to be so incorporated, unless specifically otherwise provided in any such
filing.
10-KSB REPORT
THE COMPANY WILL PROVIDE EACH BENEFICIAL OWNER OF ITS SECURITIES WITH A
COPY OF AN ANNUAL REPORT ON FORM 10-KSB, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE FISCAL YEAR ENDED MAY 31, 2000, WITHOUT CHARGE, UPON RECEIPT
OF A WRITTEN REQUEST FROM SUCH PERSON. SUCH REQUEST SHOULD BE SENT TO AMELIA
ULEP, CONSYGEN, INC., 125 SOUTH 52nd STREET, TEMPE, ARIZONA 85281.
VOTING PROXIES
The Board of Directors recommends an affirmative vote on all proposals
specified. Proxies will be voted as specified. If signed proxies are returned
without specifying an affirmative or negative vote on any proposal, the shares
represented by such proxies will be voted in favor of the Board of Directors'
recommendation, its consideration of the best interests of the Company based
upon the factors described above and the other factors they deem material at the
time of the meeting.
By order of the Board of Directors
Amelia C. Ulep, Secretary
Tempe, Arizona
November 13, 2000
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[GRAPHIC OF MAP]
HOW TO GET TO CONSYGEN
CONSYGEN IS LOCATED AT 125 SOUTH 52ND STREET
FROM SKY HARBOR AIRPORT
202 East to Priest Dr. exit
Right at Priest Dr (South) to University Dr.
Right at University Dr. (West) to 52nd Street
Right at 52nd Street (North) to ConSyGen (approximately1/2mile on East
side of the street)
FROM FIESTA INN
Take Priest Dr. North to University Dr.
Left at University Dr. (West) to 52nd Street
Right at 52nd Street (North) to ConSyGen (approximately1/2mile on East
side of the street)
HOW TO GET TO FIESTA INN
FIESTA INN IS LOCATED AT 2100 S PRIEST DR. (SOUTHWEST CORNER OF PRIEST DR. AND
BROADWAY RD.)
FROM SKY HARBOR AIRPORT
202 East to Priest Dr. exit
Right at Priest Dr. to Broadway Rd.
FROM CONSYGEN
Left on 52nd Street (South) to University Dr.
Left at University Dr. (east) to Priest Dr.
Right at Priest Dr. (South) to Broadway Rd.
FIESTA INN CONFERENCE FACILITY
The Fiesta Inn Conference facility is detached from Fiesta Inn. It is located on
the South side of Fiesta Dr. Fiesta Dr. is the first street South of Broadway
Rd. It is an easy walk from Fiesta Inn's lobby.
[GRAPHIC OF MAP]
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[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
1. Election of Directors:
NOMINEES: Robert L. Stewart, A. Lewis Burridge, Andrew Lee, Donald P. Knode,
John L. Caldwell, Luther H. Hodges, Jr. and Russell B. Stevenson, Jr.
[ ] FOR all nominees [ ] WITHHOLD authority from all nominees
[ ] FOR all except
(Instructions: To withhold Authority to vote for any individual, mark the "For
All Except" box and write that person's name in the space provided below.)
--------------------------------------------------------------------------------
2. To ratify the Board of Directors' selection of King, Weber & Associates,
P.C. as independent public accountants for the fiscal year ended May 31,
2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To increase the Company's authorized shares from 40,000,000 to 69,000,000
shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To approve the Company's 2000 Combination Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
RECORD DATE SHARES: _____________________
Mark box at right if you plan to attend the Meeting in person. [ ]
Mark box at right if an address change or comment has been
noted on the reverse side of this card. [ ]
Please be sure to sign and date this Proxy DATE: ___________________, 2000
----------------------------------------
Stockholder sign here
----------------------------------------
Co-owner sign here
Please sign this proxy exactly as your name(s) appear on the books of the
Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more than
one name appears, a majority must sign. If a corporation, the signature should
be that of an authorized officer who should state his or her title.
DETACH CARD DETACH CARD
CONSYGEN, INC.
Dear Stockholder:
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Company that require your immediate attention and approval. These are discussed
in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the 2000 Annual Meeting of Stockholders to
be held on December 11, 2000.
Thank you in advance for your prompt consideration of these matters.
<PAGE>
Sincerely,
ConSyGen, Inc.
CONSYGEN, INC.
ANNUAL MEETING OF STOCKHOLDERS - DECEMBER 11, 2000
The undersigned hereby appoints A. Lewis Burridge and Luther H. Hodges, Jr., and
each of them acting singly, with full power of substitution, proxies to
represent the undersigned at the 2000 Annual Meeting of Stockholders of
CONSYGEN, INC. to be held December 11, 2000 at 4:30 p.m. at Fiesta Inn, 2100
South Priest Drive, Tempe, AZ 85282 and at any adjournment or adjournments
thereof, to vote in the name and place of the undersigned, with all powers which
the undersigned would possess if personally present, all the shares of CONSYGEN,
INC. standing in the name of the undersigned upon the matters set forth in the
Notice of and Proxy Statement for the Meeting in accordance with the
instructions on the reverse side and upon such other business as may properly
come before the Meeting.
SHARES WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES
REPRESENTED WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF
DIRECTORS (I) FOR THE ELECTION OF DIRECTORS, (II) FOR THE SELECTION OF
INDEPENDENT ACCOUNTANTS, (III) FOR THE INCREASE OF THE AUTHORIZED NUMBER OF
SHARES FROM 40,000,000 TO 69,000,000 SHARES, AND (IV), FOR THE APPROVAL OF THE
2000 COMBINATION STOCK OPTION PLAN ALL AS SET FORTH IN THE PROXY STATEMENT.
PLEASE DATE AND SIGN THIS PROXY IN THE SPACE PROVIDED AND RETURN IT IN THE
ENCLOSED ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
------------------------- -------------------------
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(Continued and to be signed on the reverse side)
