<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
[ ] Definitive Proxy Statement Commission Only (as
[ ] Definitive Additional Materials permitted by Rule 14a-
[ ] Soliciting Material Pursuant to 6(e)(2))
Rule 14a-11(c) or Rule 14a-12
PROJECTAVISION, 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>
PRELIMINARY PROXY STATEMENT
PROJECTAVISION, INC.
ONE EVERTRUST PLAZA, 11TH FLOOR
JERSEY CITY, NEW JERSEY 07302
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
FEBRUARY 19, 1999
TO THE STOCKHOLDERS:
Notice is hereby given that the annual meeting of stockholders (the
"Annual Meeting") of Projectavision, Inc. (the "Company") has been called for
and will be February 19, 1999, at [insert location and address] for the
following purposes:
1. To elect, Jules Zimmerman, Mr. Flavio Peralda and Mr. Emillio Baj
Macario to the Board of Directors, each for a one (1) year term, and until each
of their respective successors shall have been elected and qualified;
2. To obtain stockholder approval for the issuance of an aggregate of
6,500 shares of a new series of a convertible preferred security, having an
aggregate liquidation preference of $6,500,000, 5,500 shares to be issued to
those investors who provided and facilitated the necessary capital for the
Company to effect the acquisition of substantially all of the assets of Vidikron
Industries S.p.A. (the "Vidikron Acquisition") in December 1998 and 1,000 shares
to be issued as partial consideration in connection with the Vidikron
Acquisition;
3. To obtain stockholder approval to (A) amend the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock by 50,000,000 shares, such that the aggregate number of authorized
shares of Common Stock would increase from 50,000,000 shares to 500,000,000
shares; and simultaneously therewith, (B) grant the Company's Board of Directors
the authority to effect a one-time reverse stock split of the Company's issued
and outstanding common stock of up to 40-to-1 in order to increase the price of
the Company's common stock so as to assure compliance with the $1.00 minimum bid
price requirement of the Nasdaq Stock Market (the proposed increase in
authorized capital and proposed simultaneous reverse stock split of up to
40-to-1 is sometimes hereinafter collectively referred to as the "Proposed
Recapitalization" of the Company);
<PAGE>
4. To obtain stockholder approval to amend the Company's Certificate of
Incorporation to change the name of the Company from "Projectavision, Inc." to
"Vidikron Technologies Group, Inc."
5. To approve the adoption of the Company's 1999 Incentive Stock Option
Plan;
6. To ratify the appointment by the Board of Directors of Deloitte &
Touche, LLP to serve as the Company's independent certified public accountants
for the current calendar year; and
7. To consider and transact such other business as may properly come
before the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on Company
January 14, 1999 as the record date for the determination of the stockholders
entitled to notice of, and to vote at, the Annual Meeting or any adjournments
thereof. The list of stockholders entitled to vote at the Annual Meeting will be
available for the examination of any stockholder at the Company's offices at One
Evertrust Plaza Jersey City, New Jersey commencing February 19, 1998.
By Order of the Board of Directors
/s/ Martin Holleran
-------------------------------------
Martin Holleran, President and Chief
Executive Officer
Dated January ______, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE FILL IN, SIGN,
AND DATE THE PROXY SUBMITTED HEREWITH AND RETURN IT IN THE ENCLOSED STAMPED
ENVELOPE. THE GIVING OF SUCH PROXY WILL NOT AFFECT YOUR RIGHT TO REVOKE SUCH
PROXY IN PERSON SHOULD YOU LATER DECIDE TO ATTEND THE MEETING. THE ENCLOSED
PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS.
<PAGE>
PROJECTAVISION, INC.
PRELIMINARY PROXY STATEMENT
GENERAL
This proxy statement is furnished by the Board of Directors of
Projectavision, Inc., a Delaware corporation (the "Company"), with offices
located at One Evertrust Plaza, 11th floor, Jersey City, NJ 07302 in connection
with the solicitation of proxies to be used at the annual meeting of
stockholders of the Company to be held on February 19, 1999, and at any
adjournments thereof (the "Annual Meeting"). This proxy statement will be mailed
to stockholders beginning approximately [insert mailing date]. If a proxy in the
accompanying form is properly executed and returned, the shares represented
thereby will be voted as instructed on the proxy. Any proxy may be revoked by a
stockholder prior to its exercise upon written notice to the President of the
Company, or by a stockholder voting in person at the Annual Meeting.
All properly executed proxies received prior to the Annual Meeting will
be voted at the Annual Meeting in accordance with the instructions marked
thereon or otherwise as provided therein. Unless instructions to the contrary
are indicated, proxies forwarded to those stockholders who hold their voting
securities in "street name" will be voted FOR the election of Messrs. Zimmerman,
Peralda, Baj Macario to the Board of Directors for a [one (1) year] term, FOR
the ratification of the selection by the Board of Directors of Deloitte &
Touche, LLP as the independent certified public accountants of the Company for
the current calendar year, and FOR the amendment of the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock by
50,000,000 such that the aggregate number of authorized shares of Common Stock
would increase from 50,000,000 shares to 500,000,000 shares.
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, and Quarterly Report on Form 10-Q for the periods ended March
31, 1998, June 30, 1998, and September 30, 1998 accompanies this proxy
statement.
An "abstention" on any proposal will be counted as present for purposes
of determining whether a quorum of shares is present at the Annual Meeting with
respect to the proposal on which the abstention is noted. Abstentions will be
counted as a vote "against" such proposal, except in the case of the election of
directors where an abstention will not be counted as a vote and will not affect
the outcome of the election. Under the Rules of
<PAGE>
the New York Stock Exchange, which apply in part to the Annual Meeting,
proposals 2, 3(B), 4 and 5 are considered "discretionary" proposals, which means
that brokers who hold Company shares in "street name" for customers are
authorized to vote on such proposals on behalf of their customers unless
expressly advised to the contrary. However, each other proposal is considered a
"non-discretionary" proposal, which means that such brokers are not authorized
to vote on such proposals without specific voting instructions as to such
proposal. Therefore, "broker non-votes" on such non-discretionary proposals will
not be counted as present for purposes of determining whether a quorum of shares
is present at the Annual Meeting.
The Board of Directors does not know of any matter to be proposed for
action at the meeting other than those described in this proxy statement. If
other matters properly come before the meeting, the persons named in the
accompanying proxy will act in accordance with their best judgment.
The cost of preparing, assembling and mailing this notice of meeting,
proxy statement, the enclosed annual report and proxy will be borne by the
Company. In addition to the solicitation of the proxies by use of the mails,
some of the officers and regular employees of the Company, without extra
remuneration, may solicit proxies personally or by telephone, telegraph, or
cable. The Company may also request brokerage houses, nominees, custodians and
fiduciaries to forward soliciting material to the beneficial owners of stock
held of record. The Company will reimburse such persons for their expenses in
forwarding soliciting material.
2
<PAGE>
VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF
The Board of Directors has fixed the close of business on January
14, 1999 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of, and to vote at, the Annual Meeting. Only
stockholders of the Company's common stock, par value $.001 per share (the
"Common Stock") on the Record Date will be able to vote at the Annual Meeting,
and each holder of record will be entitled to one vote for each share of Common
Stock held.
As of the Record Date, there were [insert number of shares] shares of
the Common Stock issued and outstanding, all of which are entitled to one (1)
vote per share at the Annual Meeting. Holders of the Common Stock are entitled
to vote on all matters. Unless otherwise indicated herein, a majority of the
votes represented by shares present or represented by proxy at the Annual
Meeting is required for approval of each matter which will be submitted to
stockholders.
Management of the Company knows of no business other than that
specified in Items 1-6 of the Notice of Annual Meeting which will be presented
for consideration at the Annual Meeting. If any other matter is properly
presented, it is the intention of the persons named in the enclosed proxy to
vote in accordance with their best judgment.
The following table sets forth certain information, as of January
14, 1999, known to the Company regarding beneficial ownership of the
Company's Common Stock, which is the only class of the Company's voting
securities, by: (i) any holder of more than five percent of the outstanding
shares of the Common Stock; (ii) the Company's directors and director nominees;
and (iii) the directors and officers of the Company as a group:
Shares of Percentage of
Common Total
Stock Common
Name Owned(1)(2) Stock(3)
---- ---------- -------------
Martin D. Fife (4) 211,668
405 Lexington Avenue
New York, NY 10174
Marvin Maslow (5) 1,403,073
Projectavision, Inc.
Two Penn Plaza
Suite 640
New York, NY 10121
3
<PAGE>
Jules Zimmerman (6) 120,000
20 West 64th Street
New York, NY 10023
Martin Holleran (7) (7)
Projectavision, Inc.
Two Penn Plaza
Suite 640
New York, NY 10121
Sherman Langer (8) 152,000
Projectavision, Inc.
Two Penn Plaza
Suite 640
New York, NY 10121
Flavio Peralda (9) (9)
Vidikron Industries S.p.A.
Via Dei Guasti, 29
20020 Misinto (Milano)
C.so Venezia, 16-20121
Milano, Italy
Emillo Baj Macario (9) (9)
Vidikron Industries S.p.A.
Via Dei Guasti, 29
20020 Misinto (Milano)
C.so Venezia, 16-20121
Milano, Italy
All Directors
and Officers as a Group
(consisting of
11 persons) (4) (5)(6)
(7)(8)(9) __________ ____________
(1) Except as otherwise indicated, all shares of Common Stock are
beneficially owned, and sole investment and voting power is held, by
the persons named. The share information with respect to the number of
shares and corresponding percentage ownership interest, unless
expressly stated herein to the contrary, does not give effect to the
Proposed Recapitalization.
(2) Gives effect to the reverse stock split of one-for- 11.3467611 shares
of Common Stock in February, 1990, two-for-three shares of Common Stock
in July, 1990, and two-for-the proposed reverse stock split for which
stockholder
4
<PAGE>
approval is being sought in accordance with Proposal 3(B) of this Proxy
Statement.
(3) In accordance with Rule 13d-3(d) of the Securities Act of 1933, as
amended, includes in addition to 1,645,000 shares of the Common
Stock outstanding, all of the shares of Common Stock issuable upon the
issuance of options held by officers and directors within sixty (60)
days.
(4) Includes 150,000 non-qualified options granted to and beneficially
owned by Mr. Fife to acquire 150,000 shares of Common Stock.
(5) Includes 1,375,000 shares of Common Stock subject to 1,375,000
non-qualified stock options. Does not include 28,073 shares of Common
Stock owned by Mr. Maslow's adult child. Mr. Maslow disclaims
beneficial ownership of the shares of Common Stock owned by his adult
child.
(6) Includes 120,000 non-qualified options granted to and beneficially
owned by Mr. Zimmerman to acquire 120,000 shares of the Company's
Common Stock.
(7) In December, 1998, in connection with the Vidikron Acquisition, Mr.
Holleran, in exchange for his currently existing 1,250,000
non-qualified stock options which are to be returned to the Company and
cancelled, was granted such number of non-qualified stock options that
are equal to seven percent (7%) of the Company after giving effect to
the Proposed Recapitalization. The exercise price of these newly
granted options is $.09 per share, which is the same price at which
the proposed Series I Preferred Stock that is subject to stockholder
approval is convertible into shares of the Company's Common Stock.
These newly issued options vest as follows: one-third immediately,
one-third on the one (1) year anniversary of the Vidikron Acquisition
and one- third on the two (2) year anniversary of the Vidikron
Acquisition.
(8) Includes 152,000 non-qualified options granted to an beneficially owned
by Mr. Langer to acquire 152,000 shares of Common Stock.
(9) Includes such number of shares of Common Stock issuable upon the
conversion of Series I Preferred Stock representing approximately 4.4%
of the issued and outstanding shares of Common Stock on a fully diluted
basis of the Company after giving effect to the Proposed
Recapitalization. These shares are to be issued to Grangeover Limited
as consideration for the transfer to the Company of certain
5
<PAGE>
trademarks and attendant intellectual property rights in connection
with the Vidikron Acquisition. Messrs. Peralda and Baj Macario, the
former principals of Vidikron Industries, S.p.A., are also the
principals of Grangeover Limited.
6
<PAGE>
PROPOSAL NO. 1:
General
The Board of Directors consisted of eight (8) persons in each of the
fiscal years ended 1996 and 1997. In July 1998, Dr. Craig Fields resigned from
the Company's Board of Directors. In October 1998, Arthur Lipper III resigned
from the Company's Board of Directors for personal reasons. In November 1998,
Mr. Richard Hickok resigned from the Company's Board of Directors for personal
reasons. In connection with the Company effecting the acquisition of
substantially all of the assets of Vidikron Industries, S.p.A. ("Vidikron"), the
Company agreed to expand its Board to no more than eleven (11) individuals. The
new individuals who the Company has agreed to nominate for election to the
Company's Board of Directors are Mr. Flavio Peralda and Mr. Emillio Baj Macario,
the former principals of Vidikron. In addition, each of Sovereign Partners, L.P.
and Dominion Capital Fund, Ltd., on one hand, and The Zanett Securities
Corporation on the other hand, obtained the right, in connection with providing
financing for the Vidikron Acquisition, to appoint up to two (2) members to the
Company's Board of Directors. Sovereign Partners, L.P. and Dominion Capital Fund
Ltd. provided $1,275,000 and $1,375,000 of financing, respectively, to the
Company in connection with the Vidikron Acquisition. Prior to providing such
financing, each of Sovereign Partners, L.P. and Dominion Capital Fund, had
provided $2,550,000 in financing to the Company. In connection with the Vidikron
Acquisition, The Zanett Securities Corporation facilitated the financing of an
aggregate of $2,350,000: $1,204,000 from Goldman Sachs Performance Partners,
L.P.; $946,000 from Goldman Sachs Performance Partners, (Offshore) L.P. and
$100,000 from Zanett Lombardier, Ltd., an entity which had previously invested
$2,850,000 in the Company. Each of The Zanett Securities Corporation, Sovereign
Partners, L.P. and Dominion Capital Fund, Ltd. have advised the Company that
they do not presently intend to nominate any individuals to the Company's Board
of Directors until subsequent to the Company's Annual Meeting.
The Company has a classified Board of Directors which is divided into
three classes which means that the Company's Directors may be elected for up to
a three-year term or until their successors are elected and qualify with a
plurality of votes cast in favor of their election.
Each of Mr Jules Zimmerman, Mr. Flavio Peralda, and Mr. Emillo Baj
Macario are being nominated for a one (1)year term.
The Board of Directors recommends a vote FOR the election as
7
<PAGE>
directors of the nominees named herein. Unless otherwise directed by the
stockholder giving the proxy, the proxies forwarded to those stockholders who
hold their voting securities in "street name" will be voted "FOR" the election
of the nominees named above as directors. If any of the nominees should
subsequently become unavailable for election, the persons voting the
accompanying proxy may in their discretion vote for a substitute.
Board of Directors
The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance of the Company. Although in
their capacity as Board members, they are not involved in day-to-day operating
details, members of the Board are kept informed of the Company's business by
various reports and documents sent to them as well as by operating and financial
reports made at Board meetings. The Board also held three (3) regular and three
(3) special meetings in 1998. All of the current members of the Board attended
at least seventy-five (75%) percent of the Board meetings in 1998.
The directors and executive officers of the Company are listed below,
followed by a brief description of their business experience during the past
five years.
<TABLE>
<CAPTION>
Term
Name Age Position Expires
- ---- --- -------- --------
<S> <C> <C> <C>
Marvin Maslow 61 Chairman of the Board 1999
of Directors
Martin Holleran 56 President, Chief Executive
Officer and Director 2000
Martin D. Fife 71 Director 2000
Jules Zimmerman (2) 63 Chief Financial Officer, 1998
Secretary and Director
Sherman Langer 51 Director 1999
Flavio Peralda 49 Director nominee 2000
Emillio Baj Macario 53 Director nominee 2000
</TABLE>
8
<PAGE>
Marvin Maslow, a co-founder of the Company, has served as Chairman of
the Board of Directors of the Company since its inception. Mr. Maslow also
served as the Company's Chief Executive Officer from inception through September
30, 1996, when he voluntarily resigned as Chief Executive Officer of the
Company, endorsing the appointment by the Board of Mr. Martin Holleran as Chief
Executive Officer of the Company. Mr. Maslow also served as an officer and a
director of DKY, Inc. ("DKY"), the Company's predecessor in interest from
October 1988 until June 12, 1990, when DKY was merged into the Company. Mr.
Maslow also served as Chief Financial Officer of the Company from its inception
until the consummation of its initial public offering in August, 1990. Prior to
founding the Company, Mr. Maslow was a principal in a private investment
company, with responsibility for investing capital in privately held, emerging
growth companies.
Martin J. Holleran, has served as President of the Company since
November, 1993. On September 30, 1996, Mr. Holleran became Chief Executive
Officer of the Company, at which time, he retained the title of President but
resigned as the Chief Operating Officer of the Company, a position which he had
also held since November, 1993. Prior to 1993, Mr. Holleran served as President
and Chief Executive Officer of Thomson Consumer Electronics Marketing and Sales
Company ("Thomson") from 1988 to 1992. At Thomson, Mr. Holleran had overall
responsibility for the marketing, sales and distribution of the RCA and GE
brands of consumer electronic products sold in North and South America. From
1992 until 1993, Mr. Holleran was President and Chief Operating Officer of
Emerson Radio.
Jules Zimmerman has served as a Director since January 1993, as
Secretary of the Company since February 1994 and as the Chief Financial Officer
of the Company since 1990. From October 1989 to December 31, 1996, Mr. Zimmerman
served as President and Chief Executive Officer of Hickok Associates, a company
that provided financial consulting services. Mr. Zimmerman was employed by Avon
Products Inc. for 12 years and served as Avon's Senior Vice President and Chief
Financial Officer from 1984 to 1988. From 1992 through 1995, Mr. Zimmerman was a
member of the Board of Directors of Winners All International, as well as its
predecessor-in-interest, National Child Care Company. He is a Director of the GP
Financial and was the President of the New York Chapter of the National
Association of Corporate Directors from September 1990 through December 1992.
Sherman Langer has been the Company's Senior Vice President of
Marketing and Sales since October 1994 and has served as a member of the Board
since February, 1996. Mr. Langer was a consultant to the Company from February
1994 until October 1994. From June 1988 through January 1994, Mr. Langer was the
General
9
<PAGE>
Manager of the Consumer LCD Products Division of the Sharp Electronics
Corporation.
Flavio Peralda was appointed to the Company's Board of Directors in connection
with the Vidikron Acquisition. Prior thereto, Mr. Peralda was the founder, and
for the last twenty (20) years, the chief executive officer and majority
stockholder of Vidikron Industries, S.p.A.
Emillio Baj Macario was appointed to the Company's Board of Directors in
connection with the Vidikron Acquisition. For the last ten (10) years, Mr. Baj
Macario was an executive and principal of Vidikron Industries, S.p.A.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
its Common Stock, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission") and the National
Association of Securities Dealers, Inc. Officers, directors and greater than ten
percent stockholders are required by the Commission to furnish the Company with
copies of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no reports on
Form 5 were required for those persons, the Company believes that during 1998
all filing requirements applicable to its officers, directors and greater than
ten percent stockholders were complied with.
10
<PAGE>
Executive Compensation
The following table sets forth the cash compensation paid by the Company to
executive officers of the Company for the year ended December 31, 1998 whose
total annual salary and bonus exceeded $100,000:
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other Re- All
Annual stricted other
Compen- Stock LTIP Compen-
Name and sation Awards Options/ Payouts sation
Principal Position Year Salary($) Bonus($) $ $ SARs(#) $ $
- ------------------ ---- --------- -------- ------- ------- ------- ------- -------
Marvin Maslow, 1998 $150,000 $ -0- $ -0- $ -0- -0- $ -0- $ -0-(1)
Chief Executive 1997 $150,000 $ -0- $ -0- $ -0- -0- $ -0- $ -0-
Officer, Chairman 1996 $150,000 $ -0- $ -0- $ -0- 1,000,000(1) $ -0- $100,000
of the Board of
Directors
Martin Holleran, 1998 $220,000 $ -0-(2)
President, Chief 1997 $220,000 $ -0- $ -0- $ -0- -0- $ -0- $ -0-
Operating Officer 1996 $180,000 $ -0- $ -0- $ -0- 1,000,000 $ -0- $100,000
and Director
Sherman Langer
Senior Vice 1998 $165,000 $ -0- $ -0- $ -0- -0- $ -0- $ -0-
President of 1997 $165,000 $ -0- $ -0- $ -0- -0- $ -0- $ -0-
Marketing and 1996 $130,000 $30,000 $ -0- $ -0- 100,000 $ -0- $ -0-
Sales and
Director
</TABLE>
11
<PAGE>
(1) Mr. Maslow also receives a non-accountable expense allowance of $2,000 per
month plus a car allowance with respect to the use of an Acura.
(2) In December, 1998, in connection with the Vidikron Acquisition, Mr.
Holleran, in exchange for his currently existing 1,250,000 non-qualified
stock options which are to be returned to the Company and cancelled, was
granted such number of non-qualified stock options that are equal to seven
percent (7%) of the Company after giving effect to the Vidikron Acquisition
and the Proposed Recapitalization. The exercise price of these newly
granted options is $.09 per share, which is the same price at which the
proposed Series I Preferred Stock that is subject to stockholder approval
is convertible into shares of the Company's Common Stock. These newly
issued options vest as follows: one-third immediately, one-third on the one
(1) year anniversary of the Vidikron Acquisition and one-third on the two
(2) year anniversary of the Vidikron Acquisition.
12
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Value of Unexercised
Number of Unexercised In-the-Money
Options/SARs at Options/SARs at
Fiscal Year End (#) Fiscal Year End ($)
Name and Shares Acquired Value Realized Exercisable/ Exercisable/
Principal Position on Exercise (#) ($) Unexercisable Unexercisable
- --------------------------- --------------- -------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
Marvin Maslow, -0- N/A 1,375,000 Exercisable 0/0
Chief Executive
Officer, President of
the Board of
Directors
Martin Holleran, -0- N/A (1) 0/0
President and Chief
Operating Officer
Martin Fife, -0- N/A 15,000 Exercisable 0/0
Vice Chairman of the
Board of Directors
Jules Zimmerman, -0- N/A 120,000 Exercisable 0/0
Chief Financial
Officer and Director
Sherman Langer, -0- N/A 152,000 Exercisable 0/0
Senior Vice President
of Marketing Sales
and Director
</TABLE>
13
<PAGE>
(1) In December, 1998, in connection with the Vidikron Acquisition, Mr.
Holleran, in exchange for his currently existing 1,250,000 non-qualified
stock options which are to be returned to the Company and cancelled, was
granted such number of non-qualified stock options that are equal to seven
percent (7%) of the Company after giving effect to the Vidikron Acquisition
and the Proposed Recapitalization. The exercise price of these newly
granted options is $[.09] per share, which is the same price at which the
proposed Series I Preferred Stock that is subject to stockholder approval
is convertible into shares of the Company's Common Stock. These newly
issued options vest as follows: one-third immediately, one-third on the one
(1) year anniversary of the Vidikron Acquisition and one-third on the two
(2) year anniversary of the Vidikron Acquisition.
14
<PAGE>
Performance Graph
[To be inserted]
15
<PAGE>
Board Classification and Committees and Advisory Board
The Company adopted a classified Board of Directors in February, 1990. The
Board of Directors presently consists of eight members divided into three
classes. Having a classified Board of Directors may be viewed as inhibiting a
change in control of the Company and having possible anti-takeover effects.
Officers of the Company serve at the discretion of the Board of Directors.
The Company has an Audit Committee, a Compensation Committee and an
Executive Committee. The Audit Committee reviews the engagement of the
independent accountants, reviews and approves the scope of the annual audit
undertaken by the independent accountants and reviews the independence of the
accounting firm. The Audit Committee also reviews the audit and non-audit fees
of the independent accountants and the adequacy of the Company's internal
control procedures. The Audit Committee is presently comprised of Jules
Zimmerman and Martin D. Fife. Mr. Richard Hickok also served on the Audit
Committee in 1998 until he resigned from the Board for personal reasons. The
Audit Committee held one (1) meeting during 1998. The Compensation Committee
reviews compensation issues relating to executive management and makes
recommendations with respect thereto to the Board of Directors. The Compensation
Committee is presently comprised of Jules Zimmerman and Martin Fife. Mr. Hickok
and Mr. Fields also served on the Compensation Committee in 1998 until each of
them resigned from the Board for personal reasons. The Compensation Committee
held two (2) meetings in 1997.
In 1998, except for Mr. Arthur Lipper, and Dr. Craig Fields each of whom
resigned from the Board in October and July of 1998, respectively, for personal
reasons, each member of the Board of Directors who was not an officer or
employee of the Company received $8,000 per year, plus $1,000 for each Board of
Directors or committee meetings attended for serving as Director. The Company
reimburses its Directors for out-of-pocket expenses incurred in connection with
meetings of the Board of Directors or committee meetings attended. Further, in
1998, Arthur Lipper III, a former director who resigned from the Board in
October 1998, received (or his affiliated entities received) an aggregate of
$24,000 from the Company and Dr. Craig Fields, a former director who
resigned from the Board in July 1998, received an aggregate of $12,000 from
the Company in 1998. Both Arthur Lipper (and his affiliated entities) and Dr.
Fields received these sums for various consulting services provided to the
Company, which services were in addition to Mr. Lipper's and Dr. Field's duties
as an outside Director. There are no family relationships among any Directors or
officers.
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Executive Employment Agreements
The Company entered into an employment agreement in July 1990 with Marvin
Maslow to serve as Chief Executive Officer of the Company. Mr. Maslow's
employment agreement, which was to initially expire in July, 1995, was
automatically extended in January 1995 by its terms for an additional 30 months.
That employment agreement was terminated and replaced with a new executive
employment agreement effective March 1, 1997. The term of Mr. Maslow's new
employment agreement is six (6) years with a two-year extension, and it contains
certain change in control provisions. Mr. Maslow is currently paid $150,000 per
year under his employment agreement, and in addition, receives a non-accountable
expense allowance of $2,000 per month and a car allowance for an Acura.
The Company entered into a three (3) year employment agreement with Mr.
Martin Holleran in November 1993 to serve as the Company's President and Chief
Operating Officer. Upon the expiration of this agreement (which was orally
extended by the parties subsequent to its term), the Company entered into a new
executive employment agreement with Mr. Holleran effective March 1, 1997. The
term of Mr. Holleran's new executive employment agreement is six (6) years with
a two-year extension, and it contains certain change in control provisions. Mr.
Holleran is currently paid $220,000 per year under his employment agreement.
Effective January 1, 1997, the Company entered into an executive employment
agreement with Mr. Sherman Langer. The term of Mr. Langer's employment agreement
is three (3) years and provides for a salary of $165,000 per year and also
contains certain change in control provisions.
Each of Messrs. Maslow, Holleran and Langer have agreed not to compete with
the Company during the term of his respective employment agreement or for a
period of two years after the termination thereof. All of the executive
employment agreements contain termination for cause provisions.
Since 1996, Mr. Zimmerman has provided his services to the Company as Chief
Financial Officer on an hourly basis.
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PROPOSAL NO. 2:
AUTHORIZATION TO AMEND THE COMPANY'S
CERTIFICATE OF INCORPORATION TO PROVIDE FOR THE
ISSUANCE OF 6,500 SHARES OF SERIES I PREFERRED STOCK
On December 8, 1998 the Company effected the closing of the Vidikron
Acquisition in which the Company acquired a high-end, world-renowned, video
concern that has a successful track record of sales and profitability.
Specifically, Vidikron has been in business for eighteen (18) years and enjoys
revenues of approximately $20,000,000 per annum and is profitable. Moreover, the
reputation of Vidikron throughout the industry is that of the highest caliber,
and the Company believes that with its own marketing expertise and access to
capital markets, the Company will be able to effectively and profitably expand
its business and operations.
In order to finance the Vidikron Acquisition, the Company raised
$5,500,000 in additional capital from or through the efforts of investors who
had previously invested in the Company. Specifically, Sovereign Partners, L.P.
which had previously invested $2,550,000 in the Company invested additional
$1,275,000 in the Company. Dominion Capital, Ltd., which had previously invested
$2,550,000 in the Company, invested an additional $1,375,000 in the Company.
Willora Company which had previously invested $1,600,000 in the Company invested
an additional $250,000 in the Company. Mr. Zubair Kazi, an individual who had
previously invested $2,000,000 in the Company invested an additional $250,000 in
the Company. The Zanett Securities Corporation facilitated the investment of an
aggregate of $2,350,000: $1,204,000 by Goldman Sachs Performance Partners
L.P.;$946,000 by Goldman Sachs Performance Partners (Offshore) L.P.; and
$100,000 from Zanett Lombardier Ltd. which had previously invested $2,850,000 in
the Company. In addition, each of Sovereign Partners, L.P. Dominion Capital,
Ltd., the Willora Company (and its affiliate), Mr. Kazi and Zanett Lombardier,
Ltd. agreed, subject to obtaining stockholder approval, to have their various
securities (collectively, the "Prior Convertible Securities")) redeemed by the
Company in exchange for Series I Preferred Stock. The Prior Convertible
Securities were convertible into shares of the Company's common stock at varying
"floating" discounts to the Company's market price at the time of conversion.
The Series I Preferred Stock is convertible into shares of the Company's Common
Stock at the fixed price of $.09 per share.
In exchange for the aggregate investment of $5,500,000, the new investors
received secured promissory notes (the "Notes"), which, if not converted into
Series I Preferred Stock of the
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Company on or before April 6, 1999, holders representing 75% of the principal
amount of the Notes (i.e., $4,125,000), may declare all of the Notes to be in
default, in which event the noteholders would have the right to foreclose on all
of the assets of Vidikron acquired by the Company in the Vidikron Acquisition.
In the event that the stockholders approve the Proposed Racapitalization and
the issuance of the Series I Preferred Stock, the conversion of the Notes into
Series I Convertible Preferred Stock, and the redemption of the Prior
Convertible Securities in exchange for shares of Series I Preferred Stock, will
result in the issuance of Series I Convertible Preferred Stock that will be, in
the aggregate, convertible into shares of the Company representing, on a fully
diluted basis, approximately 72% of the issued and outstanding voting securities
of the Company. Specifically, assuming the conversion of the Notes and
redemption of the Prior Convertible Securities, each of the following entities
and individuals will own such number of Series I Convertible Preferred Stock
that will represent, on a fully diluted basis, the following percentage
ownership interest in the Company: Sovereign Partners, L.P. - approximately
14.3%; Dominion Capital Fund, Ltd. - approximately 15.02%; Zanett Lombardier
Ltd., - approximately 11.7%; Mr. Zubair Kazi - approximately 9.3%; Goldman Sachs
Performance Partners, L.P. - approximately 4.7%; Goldman Sachs Performance
Partners (Offshore) L.P. - approximately 4.2%; and the Willora Company -
approximately 7.8%. Accordingly, current stockholders of the Company would
experience substantial dilution in their ownership interest in the Company. Not
withstanding the foregoing, the Series I Preferred Stock contains a provision,
however, that in no event is any holder of the Series I Preferred Stock entitled
to convert the Series I Preferred Stock such that it would result in the
beneficial ownership by a holder of more than 4.99% of the Company's issued and
outstanding shares of Common Stock.
In addition, in connection with the Vidikron Acquisition, $1,000,000 of the
purchase price is to be in the form of securities of the Company. Accordingly,
subject to obtaining the requisite stockholder approval, the Company has agreed
to issue to Grangeover Limited, the entity from which the Company acquired
certain trademarks and intellectual property rights with respect to the Vidikron
name, $1,000,000 worth of its securities which would be in the form of Series I
Preferred Stock, and which, if approved, would represent approximately 4.4% of
the Company on a fully diluted basis.
The rules of The Nasdaq SmallCap Market (the market on which the Company's
securities are traded) require the Company to obtain the approval of its
stockholders in the event that the Company issues shares of Common Stock (or a
security convertible into shares of Common Stock) which may result in the
holders thereof acquiring 20% or more of the issued and outstanding shares of
Common Stock at a price per share which is less than the greater of the per
share book value or the per share market value of the Common Stock. The issuance
of, in the aggregate, Series I Preferred Stock will result in the holders
thereof acquiring a security convertible into 20% or more of the issued and
outstanding shares of Common Stock at a price of $.09 per
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share of Common Stock which is less than the greater of the per share book value
or per share market value of the Common Stock.
Accordingly, a majority of the votes represented by shares present or
represented by proxy at the Annual Meeting is necessary to amend the Company's
Certificate of Incorporation to adopt the Series I Preferred Stock and to issue
the Series I Preferred Stock in exchange for the Notes and the redemption of the
Prior Convertible Securities.
The terms and conditions of the Series I Convertible Preferred Stock are
set forth in Annex I attached hereto.
The Board of Directors recommends a vote FOR the approval of the issuance of the
Series I Preferred Stock.
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PROPOSAL NO. 3(A):
AMENDMENT OF CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK
The Company is presently authorized to issue 50,000,000 shares of Common
Stock. As of the Record Date, of the 50,000,000 shares authorized, [ ] shares
were issued and outstanding, and [ ] shares were reserved for issuance under the
Company's various benefit plans. The Company's Common Stock has no preemptive or
other subscription rights, and there are no conversion rights or redemption or
sinking fund provisions with respect to such shares. An affirmative vote of at
least a majority of the outstanding shares of Common Stock is necessary for
approval.
The Board of Directors of the Company at a meeting held on December 31,
1998 adopted resolutions to amend, subject to stockholder approval, ARTICLE
FOURTH of the Company's Certificate of Incorporation to authorize an additional
450,000,000 shares of Common Stock. Other than increasing the aggregate number
of authorized shares of Common Stock from 50,000,000 shares to 500,000,000
shares, the amendment in no way changes the Company's Certificate of
Incorporation.
Other than the [ ] shares to be reserved for issuances discussed above, and
in the event that the issuance of the Series I Preferred Stock is approved in
accordance with Proposal No.2 above, for which [ ] shares are to be reserved
therefor, the Company has no specific plans, arrangements, or understandings for
the issuance of the additional shares of Common Stock. The additional authorized
shares would be available for raising additional capital, employee benefit
plans, acquisitions, stock splits and other purposes, at the discretion of the
Board of Directors of the Company without, in most cases, the delays and
expenses attendant to obtaining further stockholder approval, thus enabling the
Company to provide needed flexibility for future financial and capital
requirements so that proper advantage could be taken of propitious market
conditions. While any additional issuances of the Company's securities (except
in the event of a stock split) would dilute the ownership of existing security
holders, the Board believes that potential dilution is outweighed by the
flexibility and access to capital afforded by the additional authorized capital.
The Board of Directors recommends a vote FOR the approval of the amendment
to the Certificate of Incorporation to increase the number of authorized shares
of Common Stock. Unless otherwise directed by the stockholder giving the proxy,
proxies forwarded
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to those stockholders who hold their voting securities in "street name" will be
voted "FOR" the amendment to the Company's Certificate of Incorporation
increasing the number of authorized shares of Common Stock.
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PROPOSAL NO. 3(B)
AUTHORIZATION TO AMEND THE CERTIFICATE OF INCORPORATION,
IN THE DISCRETION OF THE BOARD OF DIRECTORS, TO ENABLE THE BOARD
OF DIRECTORS TO EFFECT, AT THEIR DISCRETION, A ONE TIME
REVERSE SPLIT OF UP TO ONE-FOR-FORTY OF THE
OUTSTANDING SHARES OF THE COMPANY'S COMMON STOCK
Under the rules of The Nasdaq Stock Market, in order for the Company to
qualify the Common Stock for continued quotation on The Nasdaq SmallCap Market
(the market on which the Common Stock is presently traded), the Company, among
other things, must have a minimum bid price of $1.00 per share of Common Stock.
As of the Record Date, the bid price of the Common Stock was $[] per share.
On May 27th, the Company was notified in writing by The Nasdaq Stock Market that
it had failed to meet the minimum bid price requirement and unless it was in
compliance (i.e., its Common Stock traded over $1.00 per share) or requested a
hearing on or before August 25th, that its securities would be de-listed from
The Nasdaq SmallCap Market. In August the Company requested a hearing, which
took place before a Nasdaq listing qualifications panel on October 16, 1998.
Following the October 16, 1998 hearing the Company was granted a temporary
exception from the minimum bid price requirement until December 22, 1998, which
exception was subsequently extended by The Nasdaq Stock Market to February 22,
1999.
The Board of Directors has determined that it may be advisable to amend the
Company's Certificate of Incorporation to (i) effect a one time reverse stock
split of the Company's Common Stock of up to one-for-forty and the payment of
cash in lieu of fractional shares otherwise issuable.
Subject to stockholder approval of the proposed Amendment, the Board of
Directors will, if and when it deems it in the best interests of the Company,
authorize the filing of the Amendment with the Secretary of State of the State
of Delaware. Such an Amendment to the Company's Certificate of Incorporation
would result, in conjunction with the approval sought in Proposal 3(A) above,
and assuming that the Board of Directors effected the maximum reverse split
authorized by the Company's stockholders in one post-split share of Common Stock
being issued in exchange for every 40 shares of Common Stock issued and
outstanding on the effective date of the reverse split. If the Amendment is
authorized by the stockholders and the Board of Directors determines to proceed
with the reverse split, the Board will use its discretion to determine when to
file the Amendment and the precise reverse stock split ratio.
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The Board of Directors reserves the right in its sole discretion to proceed
with or to abandon the proposed Amendment and reverse split without further
action by the stockholders at any time.
Although the Company's board of directors believes that the reverse split
of the Common Stock will allow the Company to qualify the Common Stock for
continued quotation on The Nasdaq SmallCap Market, there can be no assurance
that the reverse split will ensure that the Common Stock remains listed on The
Nasdaq SmallCap Market.
In the event that the Company does not effect a reverse split of the Common
Stock and the minimum bid price does not equal or exceed $1.00 per share, the
Common Stock would be delisted from The Nasdaq SmallCap Market, and trading of
the Common Stock would be conducted in the over-the-counter market in what are
commonly referred to as the "pink sheets" or the NASD Bulletin Board. As a
result, an investor may find it more difficult to dispose of, or to obtain
accurate quotations of the price of, the Common Stock.
In addition, if the Common stock is not quoted on The Nasdaq SmallCap
Market, or if the Company does not meet the other exceptions to the penny stock
regulations discussed in the next paragraph, trading in the Common Stock would
be covered by Rule 15g-9 promulgated under the Securities Exchange Act of 1934,
as amended, for non-Nasdaq and non-national securities exchange listed
securities. Under such rule, broker/dealers who recommend such securities to
persons other than established customers and accredited investors must make a
special written suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale. Securities also
are exempt from this rule if the market price is at least $5.00 per share.
If the Common Stock becomes subject to the regulations applicable to penny
stocks, the market liquidity for the Common Stock could be adversely affected.
In such event, the regulations on penny stocks could limit the ability of
broker/dealers to sell the Common Stock and thus the ability of purchasers of
the Common Stock to sell their securities in the secondary market. The
Securities and Exchange Commission has adopted regulations which define a "penny
stock" to be any equity security that has a market price (as defined) less than
$5.00 per share, subject to certain exceptions. For any transaction involving a
penny stock, unless exempt, the rules require the delivery, prior to the
transaction, of a disclosure schedule prepared by the Securities and Exchange
Commission relating to the penny stock market. The broker-dealer also must
disclose the commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and, if the
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broker-dealer is the sole marketmaker, the broker-dealer must disclose this fact
and the broker-dealer's presumed control of the market. Finally, monthly
statements must be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in the penny stock.
Transactions in a Nasdaq-listed security would be exempt from all but the sole
marketmaker provision for (i) issuers who have $2,000,000 in tangible assets
($5,000,000 if the issuer has not been in continuous operation for three years
or average annual return of at least $6,000,000 if the issuer has been in
continuous operation for less than three years), (ii) transactions in which the
customer is an institutional accredited investor and (iii) transactions that are
not recommended by the broker-dealer. In addition, transactions in a Nasdaq
security directly with a Nasdaq marketmaker for such securities would be subject
only to the sole marketmaker disclosure and the disclosure with respect to
commissions to be paid to the broker-dealer and the registered representative.
Based upon the ______________ shares of Common Stock outstanding as of
January 14, 1999, and giving effect to, and assuming stockholder approval of
Proposal 3(A) above, assuming the maximum reverse split that the Board is
seeking authorization to effect, a one for forty reverse split would would
result in approximately ___________ post-split shares of Common Stock
outstanding, subject to adjustment as a result of the elimination of fractional
shares. Similarly, the aggregate number of shares of Common Stock reserved for
issuance upon exercise of warrants and options would decrease, and the exercise
price of these options and accruals would increase, proportionally.
Each outstanding option or warrant will automatically become an option or
warrant, as the case may be, to purchase one-fortieth (1/40) of the number of
shares subject to the option or warrant immediately prior to the reverse split
at an exercise price which will be appropriately adjusted to reflect the reverse
split, subject to adjustment as a result of the elimination of fractional
shares. In addition, the shares available for issuance under the Company's
Incentive Stock Option Plan and non-qualified Stock Option Plan will be reduced
by approximately one-fortieth (1/40) to reflect the reverse split, subject to
adjustments required to eliminate fractional shares, and the other relevant
terms and provisions of the Company's stock option plans will be appropriately
adjusted to reflect the reverse split.
The reverse split will not affect the aggregate par value of the
outstanding shares of Common Stock but the par value of each authorized and
unissued, and each outstanding share of common
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stock, will be $.01 par value per share. The reverse split will not affect the
number or par value of the authorized Preferred Shares, which will remain at
2,000,000 Preferred Shares, $.001 par value per share. If filed, the Amendment
would decrease the number of shares outstanding and reserved for issuance
pursuant to the exercise of options and warrants and will result in an increase
in the number of shares available for issuance. Subject to the provisions for
the elimination of fractional shares, consummation of the reverse split will not
result in a change in the relative equity interest in the Company or the voting
power or other rights, preferences or privileges of the holders of Common Stock.
The Company has been advised that: (i) the proposed stock split will not be
a taxable transaction to the Company; (ii) the Company's stockholders who do not
receive any cash will not recognize any gain or loss as a result of the reverse
stock split; (iii) the aggregate tax basis of the Common Stock received by the
stockholders pursuant to the reverse stock split will equal the aggregate tax
basis of the stockholders' Common Stock prior to the reverse stock split; and
(iv) the holding period of the Common Stock received by the Company's
stockholders will include the holding period of the stockholders' Common Stock
before the reverse stock split, provided the Common Stock was a capital asset in
the hands of such stockholder. This discussion should not be considered as tax
or investment advice, and the tax consequences of the reverse split may not be
the same for all stockholders. Stockholders should consult their own tax
advisors to ascertain their individual federal, state, local and foreign tax
consequences.
The reverse stock split would decrease the number of shares of Common Stock
outstanding and presumably increase the per share market price for the
post-split shares. The decrease in the number of shares of Common Stock
outstanding resulting from the reverse split and the anticipated corresponding
increased price per share may stimulate interest in the Company's Common Stock,
promote greater liquidity for the Company's stockholders and result in a price
level for the post-split Common Stock that will help it to maintain its Nasdaq
SmallCap Market listing. However, there is no assurance that the reverse split
will achieve these results. In addition, it is possible that the liquidity of
the post-split shares of Common Stock may be adversely affected by the reduced
number of shares outstanding if the proposed maximum reverse stock split is
effected. In addition, the reverse split might leave some stockholders with one
or more "odd-lots" of the Company's Common Stock (stock in amounts of less than
100 shares). These shares may be more difficult to sell, or require a greater
commission per share to sell, than shares in even multiples of 100.
If the reverse split becomes effective, the additional
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shares of post-split Common Stock available for issuance by the Board of
Directors of the Company may be used for raising additional capital, stock
options, acquisitions, stock splits, stock dividends or other corporate
purposes. There are no arrangements, understandings or plans for the issuance of
any such additional shares, other than shares reserved for issuance upon the
exercise of stock options and warrants outstanding or authorized for issuance
under existing plans.
If the proposed Amendment becomes effective, assuming the maximum reverse
split that the Board is seeking authorization to effect, each every forty (40)
pre-split shares of Common Stock will automatically be combined and changed into
one (1) post-split share of Common Stock and each certificate representing
pre-split shares of Common Stock will represent for all purposes one-tenth of
that number of post-split shares of Common Stock. Stockholders will then be
requested to exchange their certificates representing Common Stock held prior to
the reverse split for new certificates representing Common Stock issued as a
result of the reverse split. Stockholders will be furnished the necessary
materials and instructions to effect such exchange. Stockholders should not
submit any certificates until requested to do so.
No scrip or fractional post-split Common Stock will be issued to any
stockholder in connection with the reverse split. Accordingly, all stockholders
of record who would otherwise be entitled to receive fractional post-split
Common Stock, will, upon surrender of their certificates representing pre-split
Common Stock, receive a cash payment in lieu thereof equal to the fair value of
such fractional share. Holders of less than forty (40) pre-split shares of
Common Stock as a result of the reverse split, will on the effective date of the
reverse split no longer be stockholders of the Company. The fair value of the
Common Stock will be based on the closing price of the Common Stock on The
Nasdaq SmallCap Market on the effective date, or, if there are no reported sales
on such date, the average of the last reported high bid and low asked prices on
such day shall be used.
The Company's Annual Report on Form 10-KSB for the year ended December 31,
1997 includes the Company's audited financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," which
are incorporated by reference in this Proxy Statement. A copy of the Annual
Report on Form 10-KSB accompanies this Proxy Statement.
The Board of Directors recommends a vote FOR the approval of granting the
Board of Directors the authority to effect a one-time reverse stock split of up
to one for forty of the Company's Common Stock.
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PROPOSAL NO. 4:
In connection with effecting the Vidikron Acquisition, the Company acquired
trademark and other similar intellectual property rights with respect to
Vidikron. The Company believes that Vidikron's name and reputation in the
high-end audio-video technology field is incomparable. Moreover, the Company
believes that the future direction, growth and reputation of the Company will
rest with the worldwide assets that it acquired in the Vidikron Acquisition much
as with the Company's own proprietary products and technologies. Accordingly,
the Company believes that it is in the best interests of the Company's
stockholders to amend the Company's Articles of Incorporation to change the name
of the Company from Projectavision, Inc. to Vidikron Technologies Group, Inc.
Approval of this Amendment to the Company's Certificate of Incorporation
requires the affirmative vote of the holders of the majority of the outstanding
shares of the Company's Common Stock.
The Board of Directors recommends a vote FOR the approval of the amendment
to the Company's Articles of Incorporation changing the name of the Company from
Projectavision, Inc. to Vidikron Technologies Group, Inc.
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PROPOSAL NO. 5
APPROVAL OF THE COMPANY'S
1999 INCENTIVE STOCK OPTION PLAN
TO REPLACE THE COMPANY'S
1990 STOCK OPTION AND ALLOCATION PLAN
At the Annual Meeting a vote will be taken on a proposal to approve the
adoption of the Company's 1999 Incentive Stock Option Plan (the "1999 Option
Plan") inasmuch as the Company's currently existing 1990 Incentive Stock Option
and Allocation Plan (the "1990 Option Plan")will, by its terms in accordance
with applicable Federal Income Tax provisions, expire in February 2000.
The purpose of the 1999 Option Plan, like the 1990 Plan, is to encourage
and enable employees and consultants of the Company and its subsidiaries to
acquire a proprietary interest in the Company through the ownership of the
Company's Common Stock. The Option Plan is designed to provide employees and
consultants with a more direct stake in the Company's future welfare and an
incentive to remain with the Company. It is also expected that the Option Plan
will encourage qualified persons to seek employment with the Company.
The 1999 Option Plan will be, in most material respects, substantially
similar if not identical to the 1990 Option Plan. Like the 1990 Option Plan, the
1990 Option Plan will provide for grants of "Incentive Stock Options," meeting
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") and "Non-qualified Stock Options."
The 1999 Option Plan will be administered by the Compensation Committee of
the Board of Directors (the "Committee") which is comprised of not less than two
disinterested directors within the meaning of Rule 16b-3 of the Exchange Act.
The Option Plan permits the Committee to determine which employees or
consultants or other eligible personnel shall receive options and the times when
options are to be granted. The Committee also determines the purchase price of
Common Stock covered by each option, the term of each option, the number of
shares of Common Stock to be covered by each option and any performance
objectives or vesting standards applicable to each option. The Committee also
designates whether the options shall be Incentive Stock Options or Non-qualified
Stock Options. The Plan would have a term of ten (10) years and expire in
February 2009.
The purchase price per share under each Incentive Stock Option or
Non-qualified Stock Option is the "Market Price" (i.e., the average of the high
and low reported consolidated trading
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sales price for such day) of the Common Stock on the date the option is granted,
except that the exercise price for an Incentive Stock Option granted to a 10%
stockholder may not be less than 100% of the Market Price of the Common Stock on
the date of the grant. The aggregate Market Price of the Common Stock
exercisable under Incentive Stock Options held by any optionee during any
calendar year may not exceed $100,000. Incentive Stock Options granted to
employees under the Option Plan have a maximum term of ten years. Incentive
Stock Options granted to 10% stockholders have a maximum term of five years.
Options are not transferable except by will or pursuant to the applicable laws
of descent and distribution. Notwithstanding the general restriction on
transferability, in the sole discretion of the Committee, Non-qualified Stock
Options may be made transferable subject to the requirements of Rule 16b-3.
In the event that an employee is terminated for any reason other than
death, Disability, Retirement or Cause (as such terms are defined in the Option
Plan), to the extent that the employee had the right to exercise an option, such
option will be exercisable until the earlier of the expiration date of the
option, or within 30 days of the date of such termination. Options held on the
date of Disability or Retirement, whether or not exercisable on such date, are
exercisable within one year of the date of Disability or Retirement. Options
held by an employee at the date of death, whether or not exercisable on the date
of death, are exercisable by the beneficiary of the employee within one year
from the date of death. The Committee may, in its sole discretion, cause any
option to be forfeited upon an employee's termination for Cause (as defined in
the Option Plan). In the event of a Change of Control (as such term is defined
in the Plan) of the Company, all outstanding options will vest and appropriate
provisions shall be made for the protection of options by substitution on an
equitable basis of appropriate stock of the Company or appropriate stock of the
merged, consolidated or otherwise reorganized corporation, as the case may be.
The Board is permitted to suspend, terminate, modify or amend the Option
Plan, provided that any amendment that would (i) materially increase the
aggregate number of shares, (ii) materially increase benefits accruing to
employees, or (iii) materially modify the eligibility requirements for
participation shall be subject to stockholder approval, provided, however, that
stockholder approval is not required for adjustments to the Option Plan or to
the number of shares available thereunder which are deemed appropriate by the
Committee to prevent dilution or expansion of rights.
The Company's 1999 Option Plan would have available options exercisable for
shares of Common Stock of the Company in an amount equal to twenty percent (20%)
of the Company's issued and
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outstanding shares after giving effect to the Proposed Recapitalization.
Federal Income Tax Consequences
For federal income tax purposes, an optionee is not subject to tax upon the
grant of an option. If the option is a Nonqualified Stock Option, the optionee
will generally recognize ordinary income at the time of exercise of the option
in an amount equal to the difference between the fair market value of the shares
received and the exercise price. Such optionee's basis in any shares acquired
upon such exercise will equal their fair market value on the exercise date. A
subsequent sale of shares will result in a capital gain or loss equal to the
difference between the amount realized and such basis. In the event that the
option is an Incentive Stock Option, the optionee will generally not recognize
income until the sale of shares. In the event the shares are held for the
requisite holding periods, all gain on the sale will be treated as long-term
capital gain. in the event that the holding periods are not satisfied (a
"disqualifying disposition"), then the portion of the gain equal to the
difference between the market value of the shares at the time of exercise and
the exercise price will generally be treated as ordinary income.
Reference is made to Annex B to this Proxy Statement, which is incorporated
by reference herein, and sets forth the full text of the 1999 Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE COMPANY'S 1999
INCENTIVE STOCK OPTION PLAN AMENDMENT TO THE INCREASE IN THE NUMBER OF SHARES
AVAILABLE UNDER THE OPTION PLAN.
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PROPOSAL NO. 6:
RATIFICATION OF SELECTION
OF DELOITTE & TOUCHE, LLP
AS INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Deloitte & Touche, LLP to
serve as independent certified public accountants and to audit the accounts for
the Company for 1998. The firm of Deloitte & Touche, LLP has previously audited
the Company's financial statements. The Company is advised that neither that
firm nor any of its partners has any material direct or indirect relationship
with the Company. The Board of Directors considers Deloitte & Touche, LLP to be
well qualified for the function of serving as the Company's auditors. The
Delaware Business Corporation Law does not require the approval of the selection
of auditors by the Company's stockholders, but in view of the importance of the
financial statement to stockholders, the Board of Directors deems it desirable
that they pass upon its selection of auditors. In the event the stockholders
disapprove of the selection, the Board of Directors will consider the selection
of other auditors. The Board of Directors recommends that you vote in favor of
the above proposal in view of the familiarity of Deloitte & Touche LLP with the
Company's financial and other affairs due to its previous service as auditors
for the Company.
A representative of Deloitte & Touche, LLP is expected to be present at the
Annual Meeting with the opportunity to make a statement if he desires to do so,
and is expected to be available to respond to appropriate questions.
The Board of Directors recommends a vote FOR the ratification of the
selection of Deloitte & Touche, LLP as the Company's independent auditors.
Unless otherwise directed by the stockholder giving the proxy, proxies forwarded
to those stockholders who hold their voting securities in "street name" will be
voted "FOR" the ratification of the selection by the Board of Directors of
Deloitte & Touche LLP as the Company's independent certified public auditors for
1998.
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STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1999 annual
meeting must be received in writing, by the President of the Company at its
offices by June 1, 1999, in order to be considered for inclusion in the
Company's proxy statement relating to its next annual meeting of stockholders.
By Order of the Board of Directors
/s/ Martin Holleran
----------------------------------------
Martin Holleran, Chief Executive Officer
and President
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ANNEX I
Section 1. Designation. Six Thousand Five Hundred (6,500) shares of Preferred
Stock are hereby designated as Series I Convertible Preferred Stock (the
"Preferred Stock"). The rights, preferences, privileges and qualifications,
limitations and restrictions of the Preferred Stock are set forth in Sections 2
through 7 below. The rights, preferences, privileges and qualifications,
limitations and restrictions of the remaining shares of Preferred Stock shall be
determined by the board of Directors, from time to time after the date of the
adoption of this Resolution, pursuant to the provisions of Article Fourth of the
Certificate of Incorporation.
Section 2. Dividends. The holders of the Preferred Stock are entitled to
receive if, when and as declared by the Board of Directors out of funds legally
available therefor, cumulative dividends, payable in cash or common stock of the
Corporation, par value $.0001 per share (the "Common Stock") at the
Corporation's election, at the rate of 9% per annum of the Liquidation Value of
the Preferred Stock until the "Maturity Date" (as defined below); provided,
however, that in the event that the Corporation elects to pay the dividend in
shares of Common Stock, the dividend rate shall be 13.5% per annum of the
Liquidation Value of the Preferred Stock. The dividend is payable annually
within ten(10) business days after each December 31st of each year, commencing
December 31, 1999 (each, a "Dividend Payment Date"); provided that the first
dividend payable on December 31, 1999 shall also include dividends from December
7, 1998 through December 31, 1998, and; provided further, that dividends accrued
as of the date of the giving of a "Conversion Notice" (as that term is defined
in Section 3(d) below) shall be paid as of the date of such Conversion Notice
with respect to those shares of Preferred Stock being converted pursuant to such
Conversion Notice. Dividends shall be paid only with respect to shares of
Preferred Stock actually issued and outstanding on a Dividend Payment Date and
to the holders of record as of the Dividend Payment Date. Dividends shall accrue
from the first day of the annual period in which such dividend may be payable,
except with respect to the first annual dividend which shall accrue from
December 7, 1998. In the event that the Corporation elects to pay dividends in
Common Stock (on an Dividend Payment Date or in connection with the conversion
of Preferred Stock into the Common Stock), each holder of Preferred Stock shall
receive shares of Common Stock equal to the number of days that have elapsed
since the immediately preceding Dividend Payment Date (or December 7, 1998 in
the case of the First Dividend Payment Date / 365 multiplied by the quotient of
(i) the
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product of 13.5% multiplied by the Liquidation Value of the Preferred Stock
outstanding on the applicable Dividend Payment Date divided by (ii) the average
of the closing bid quotation of the Common Stock as reported on the
over-the-counter market, or the closing sale price if quoted on The Nasdaq
SmallCap Market or listed on a national exchange, for the five (5) trading days
immediately prior to the Dividend Payment Date (the "Stock Dividend Price").
Section 3. Conversion. Subject to the provisions of this Section 3 below,
the holders of the Preferred Stock shall have right to convert each of its
shares of Preferred Stock (the "Conversion Rights") into a number of fully paid
and nonassessable shares of Common Stock determined in accordance with the
following formula:
Liquidation Preference + Accrued Dividends
Conversion Price
(h) Right to Convert and Sell. The
Preferred Stock, and accrued but unpaid dividends as of the date of any
conversion, shall not be convertible at any time until after the 120th day after
the Company effects the acquisition of substantially all of the assets of
Vidikron Industries, S.p.A. (the "Vidikron Acquisition"). Thereafter, 12.5% of
the Preferred Stock may be converted and the shares of Common Stock, issuable
thereon may be sold during each thirty (30) calendar day period thereafter (and
which right of conversion shall be cumulative with respect to successive thirty
(30) day periods); provided, however, that in the event that the registration
statement covering all of the shares of Common Stock has not been declared
effective by the Securities and Exchange Commission by the 120th day after the
Vidikron Acquisition, the holders Conversion Rights with respect to the
Preferred Stock under this Section 3(a) shall be adjusted such that the
Preferred Stock can thereafter be converted and the shares of Common Stock
issuable thereon may be sold in "equal percentages" during the "remaining time
period." As used herein, the term "equal percentages" shall be the percentage
resulting from the fraction in which the numerator is 100 and the denominator of
which is the number of 30 day periods (or portions thereof) that comprise the
remaining time period. As used herein, the term "remaining time period" shall be
the date commencing the effective date of the registration statement and
concluding the one (1) year anniversary of the closing of the Vidikron
Acquisition..
In the event that the registration statement required
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by this Section 3(a) above is not declared effective by the Commission within
120 days after the date the Company effects the acquisition of substantially all
of the shares of Vidikron Industries, S.p.A. (the "Vidikron Acquisition"):(i)
Holder shall be entitled to receive additional shares of Preferred Stock in an
amount equal to one (1%) percent of the aggregate liquidation preference of the
Holder's Preferred Stock which will be added to the Preferred Stock acquired by
purchase or redemption provided that the Registrable Securities are registered
by the 150th day after the closing of the Vidikron Acquisition (or a pro rated
portion thereof if registered prior to said 150th day); (ii) Holder shall be
entitled to receive additional shares of Preferred Stock in an amount equal to
two (2%) of the aggregate liquidation preference of the Holder's Preferred Stock
which will be added to the Preferred Stock acquired by purchase or redemption or
pursuant to clause (b)(i) preceding (provided that the Registrable Securities
are registered on or after the 151st day after the closing of the Vidikron
Acquisition up through the 180th day (or a pro rated portion thereof if
registered prior to said 180th day) and;(iii) Holder shall be entitled to
receive additional shares of Preferred Stock in an amount equal to three (3%)
percent of the aggregate liquidation preference of the Holder's Preferred Stock
which will be added to the Preferred Stock acquired by purchase or redemption or
pursuant to clause (b)(i), b(ii) or b(iii) hereof for each 30 day period
subsequent to the 180th day (or a pro rated portion thereof) after the closing
of the Vidikron Acquisition that the Registrable Securities are not registered.
Furthermore, notwithstanding any other provisions
of this Section 3(a), in the event that for any 5 consecutive trading days, the
price of the Common Stock closes in excess of 200.0% (the "Threshold Price") of
the "Conversion Price" (as that term is defined in Section 3(c) below) there
will be no restriction upon the conversion of the Preferred Stock or the resale
of shares of Common Stock issuable thereon for so long as the price of the
Common Stock remains above 125.0% of the Conversion Price(the "Minimum
Unrestricted Resale Price"). In the event that, thereafter, the share price of
the Common Stock closes below the Minimum Unrestricted Resale Price, the
conversion and resale provisions set forth in the first paragraph of this
Section 3(a) shall automatically once again go into effect. Thereafter, a new
consecutive 5 day trading period above the Minimum Unrestricted Resale Price
will be required to lift such restrictions on conversion or resale.
Notwithstanding the foregoing, in no event shall
a holder of Preferred Stock be entitled to receive shares of
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Common Stock upon a conversion to the extent that the sum of (x) the number of
shares of Common Stock beneficially owned by the holder and its affiliates
(exclusive of shares issuable upon conversion of the unconverted portion of the
shares of Preferred Stock or the unexercised or unconverted portion of any other
securities of the Corporation subject to a limitation on conversion or exercise
analogous to the limitations contained herein) and (y) the number of shares of
Common Stock issuable upon the conversion of the Preferred Stock with respect to
which the determination of this subparagraph is being made, would result in
beneficial ownership by the holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock. For purposes of this subparagraph,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13 D-G thereunder,
except as otherwise provided in clause (x) above. The restriction contained in
this Paragraph shall not be altered, amended, deleted or changed in any manner
whatsoever unless the holders of a majority of the outstanding shares of Common
Stock and each holder of outstanding shares of Preferred Stock shall approve
such alteration, amendment, deletion or change.
(i) Automatic Conversion. All unconverted shares of
Preferred Stock on the four (4) year anniversary date of the date of the closing
of the Vidikron Acquisition the "Maturity Date", along with all accrued and
unpaid dividends, shall automatically be converted into shares of Common Stock
at the Conversion Price.
(j) Conversion Price. As used herein, the term
Conversion Price shall be $.09, subject to adjustment as hereinbelow set
forth.
(k) Mechanics of Conversion. Failure to Convert
Any holder of Preferred Stock who wishes to exercise its Conversion Rights
pursuant to paragraph (a) of this Section 3, must surrender the certificate
therefor at the principal executive office of the Corporation, and give written
notice, which may be via facsimile transmission, to the Corporation at its
principal executive office that it elects to convert the same (the "Conversion
Notice"). No Conversion Notice with respect to any shares of Preferred Stock can
be given prior to the time such shares of Preferred Stock are eligible for
conversion in accordance with the provisions of Section 3(a) above. Any such
premature Conversion Notice shall automatically be null and void. The
Corporation shall, within three (3) business day after receipt of an appropriate
and timely Conversion Notice (the "Conversion Deadline"), issue to such holder
of Preferred Stock a
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certificate for the number of shares of Common Stock to which the holder shall
be entitled (which may include shares with respect to accrued but unpaid
dividends as of the date of the Conversion Notice if so specified in the
Conversion Notice). Such conversion shall be deemed to have been made only after
both the certificate for the shares of Preferred Stock to be converted have been
surrendered and the Conversion Notice is received by the Corporation (the
"Conversion Documents"), and the person entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder of such shares of Common Stock at and after such time. In the
event that the Conversion Notice is sent via facsimile transmission, the
Corporation shall be deemed to have received such Conversion Notice on the first
business day on which such facsimile Conversion Notice is actually received,
provided that the necessary certificates are actually received by the
Corporation within three (3) business days thereafter.
In the event that the Corporation fails to deliver to holder any of the
shares of Common Stock entitled to be delivered pursuant to a conversion of
Preferred Stock on or prior to the Conversion Deadline, then in such event, in
addition to the Corporation's obligation to deliver said shares of Common Stock,
the Corporation shall also be obligated to pay to holder, for every ten (10)
business day period after the Conversion Deadline that it fails to deliver the
shares of Common Stock underlying the Preferred Stock requested to be converted
(the "Unconverted Preferred Stock"), as liquidated damages, an amount equal to
one percent (1%) of the outstanding face amount of the Unconverted Preferred
Stock payable in cash or shares of Common Stock at the option of the holder.
Such deliveries of additional shares pursuant to this subparagraph shall be made
every seven (7) business days until the Corporation is in compliance with all
lawful conversions hereunder.
(l) Adjustments to Conversion Price for Stock
Dividends and for Combinations or Subdivisions of Common Stock. If the
Corporation at any time or from time to time while shares of Preferred Stock are
issued and outstanding shall declare or pay any dividend on the Common Stock
payable in Common Stock, or shall effect a subdivision of the outstanding shares
of Common Stock into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or if the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification or otherwise, into
a lesser number of shares of Common Stock, then the Conversion Price in effect
immediately before such event shall, concurrently
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with the effectiveness of such event, be proportionately decreased or increased,
as appropriate. If the Corporation shall declare or pay any dividend on the
Common Stock payable in any right to acquire Common Stock for no consideration,
then the Corporation shall be deemed to have made a dividend payable in Common
Stock in an amount of shares equal to the maximum number of shares issuable upon
exercise of such rights to acquire Common Stock.
(m) Adjustments for Reclassification and
Reorganization. If the Common Stock issuable upon conversion of the Preferred
Stock shall be changed into the same or a different number of shares of any
other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
provided for in paragraph (e) of this Section 3), the Conversion Price then in
effect shall, concurrently with the effectiveness of such reorganization or
reclassification, be proportionately adjusted so that the Preferred Stock shall
be convertible into, in lieu of the number of shares of Common Stock which the
holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock equivalent to the number of shares of
Common Stock that would have been subject to receipt by the holders upon
conversion of the Preferred Stock immediately before that change.
(n) No Impairment. The Corporation will not, by
amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issuance or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all of the provisions of this Section 3 and in the taking of all such action as
may be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Preferred Stock against impairment. The provisions of this
paragraph (g) may be waived by the affirmative vote of the holders of at least a
majority of the then outstanding shares of Preferred Stock voting together as a
single class and taken in advance of any action that would conflict with this
paragraph (g).
(o) Notice of Adjustments. Upon the occurrence
of each adjustment or readjustment of any Conversion Price pursuant to this
Section 3, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and prepare and furnish to
each holder of
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Preferred Stock a notice setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
(p) Notices of Record Date. If the Corporation
shall propose at any time: (i) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other securities, other than a
regular cash dividend out of earnings or earned surplus or a dividend as to
which adjustment of the Conversion Price will be made under paragraph (f) of
this Section 3; (ii) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any class or
series or other rights; (iii) to effect any reclassification or recapitalization
of its Common Stock outstanding involving a change in the Common Stock other
than one as to which adjustments of the Conversion Price will be made under
paragraph (e) of this Section 3; or (iv) to merge or consolidate with or into
any other corporation, or sell all or substantially all of its assets, or to
liquidate, dissolve or wind up; then, in connection with such event, the
Corporation shall send to the holders of the Preferred Stock;
(1) at least ten (10) days' prior written notice of
the Date on which a record shall be taken for
such dividend, distribution or subscription
rights (and specifying the Date on which the
holders of Common Stock shall be entitled
thereto) or for determining rights;
to vote, if any, in respect of the matters
referred to in clauses (iii) and (iv) above;
and
(2) in the case of the matters referred to in
clauses (iii) and (iv) above, at least ten
(10) days' prior written notice of the Date
when the same shall take place (and
specifying the Date on which the holders of
Common Stock shall be entitled to exchange
their Common Stock for securities or other
property deliverable upon the occurrence of
such event).
(q) Issue Taxes. The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Preferred Stock pursuant hereto; provided,
however, that the Corporation shall not be obligated to pay any transfer taxes
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resulting from any transfer requested by any holder in connection
with any such conversion.
(r) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Preferred Stock, the
Corporation will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose, including, without limitation, engaging in best
efforts to obtain the requisite stockholder approval of any necessary amendment
to its Certificate of Incorporation. Upon the filing of this Certificate of
Designation the Holder of the Preferred Stock acknowledges that the Company does
not have sufficient authorized shares of Common Stock and shall seek the
requisite stockholder approval of the necessary amendment to the Certificate of
Incorporation.
(s) Fractional Shares. No fractional share shall be issued upon
the conversion of any share or shares of Preferred Stock. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Preferred Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of a fractional share of Common Stock, such fractional
share shall be rounded up to the nearest whole share.
(t) Notices. Except as otherwise specified herein to the contrary,
all notices, requests, demands and other communications required or desired to
be given hereunder shall only be effective if given in writing by hand, by
certified or registered mail, return receipt requested, postage prepaid, or by
U.S. express mail service, or by private overnight mail service (e.g. Federal
Express), or by facsimile transmission. Any such notice shall be deemed to have
been given (a) on the business day actually received if given by hand or
facsimile transmission, (b) on the business day immediately subsequent to
mailing, if sent by U.S. express mail service or private overnight mail service,
or (c) three (3) business days following the mailing thereof, if
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mailed by certified or registered mail, postage prepaid, return receipt
requested, and all such notices shall be sent to the following addresses (or to
such other address or addresses as aparty may have advised the other in the
manner provided herein):
If to the Company:
Martin J. Holleran
President and Chief Executive Officer
One Evertrust Plaza
11th Floor
Jersey City, New Jersey 07302
with copies simultaneously by like means to:
Clifford A. Brandeis, Esq.
Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, NY 10022
If to the Subscriber, to the address of Subscriber as set forth in
the Subscription Agreement.
(n) Business Day. As used herein, the term
"business day" shall mean any day other than a Saturday, Sunday or a day when
the federal and state banks located in the State of New York are required or
permitted to close.
Section 4. Voting Rights. The holders of the Preferred Stock shall have no
voting rights whatsoever, except as otherwise provided by the Delaware General
Corporation Law (the "Delaware Law"), and as expressly set forth in this Section
4 and in Section 7(b) below. To the extent that under Delaware Law the vote of
the holders of the Preferred Stock, voting separately as a class or series as
applicable, is required to authorize a given action of the Corporation, the
affirmative vote or consent of the holders of at least a majority of the shares
of the Preferred Stock represented at a duly held meeting at which a quorum is
present or by written consent of a majority of the shares of Preferred Stock
(except as otherwise may be required under Delaware Law) shall constitute the
approval of such action by the class. To the extent that under Delaware Law the
holders of the Preferred Stock are entitled to vote on a matter with holders of
Common Stock, voting together as one class, each share of Preferred Stock shall
be entitled to a number of votes equal to the number of shares of Common Stock
into which it is then convertible using the record date for the taking of such
vote of stockholders as the date as of which the Conversion Price is
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calculated and conversion is effected. Holders of the Preferred Stock shall be
entitled to notice of (and copies of proxy materials and other information sent
to shareholders) all shareholder meetings or written consents with respect to
which they would be entitled to vote, which notice would be provided pursuant to
the Corporation's by-laws and applicable statutes.
Section 5. Liquidation Preference. The holders of shares of Preferred Stock
will be entitled to receive, in the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, out of or to
the extent of the net assets of the Corporation legally available for such
distribution, before any distributions are made with respect to any Common Stock
or any stock ranking junior to the Preferred Stock, and parri passu with the
Company's Series I Convertible Preferred Stock, $1000.00 per share, plus any
declared but unpaid dividends (the "Liquidation Preference"). After payment of
the full amount of the Liquidation Preference, the holders of shares of
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Corporation.
Section 6. Restrictions and Limitations.
(a) Shares of Preferred Stock acquired by the
Corporation by reason of purchase, conversion, redemption or otherwise shall be
retired and shall become authorized but unissued shares of Preferred Stock,
which may be reissued as part of a new series of Preferred Stock hereafter
created under Article Fourth of the Certificate of Incorporation.
(b) So long as shares of Preferred Stock remain
outstanding, the Corporation shall not, without the affirmative vote of the
holders of at least a majority of the then outstanding shares of Preferred Stock
voting together as a separate class, amend the terms of this Resolution. The
holders of the outstanding shares of the Preferred Stock shall be entitled to
vote as a separate class upon a proposed amendment of the Certificate of
Incorporation if the amendment would alter or change the powers, preferences or
special rights of the shares of Preferred Stock so as to affect them adversely.
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ANNEX B
PROJECTAVISION, INC.
1999 STOCK OPTION PLAN
1. PURPOSES. The purposes of this Stock Option Plan (the "Plan") are to
attract and retain the best qualified personnel for positions of substantial
responsibility, to provide additional incentive to the Employees of the Company
or its Subsidiaries, if any (as such terms are defined in Section 2 below), as
well as other individuals who perform services for the company or its
Subsidiaries, and to promote the success of the company's business.
Options granted hereunder may be either "incentive stock options,"
as defined in Section 422 of the Internal Revenue Code of 1986, as amended, or
"non-qualified stock options," at the discretion of the Board and as reflected
in the terms of the written instrument evidencing an option.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Committee, if one has been appointed, or
the Board of Directors of the Company, if no committee is appointed.
(b) "Common Stock" shall mean the common stock of the Company, par
value $.01 per share.
(c) "Company" shall mean Projectavision, Inc.
(d) "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed.
(e) "Continuous Status as an Employee" shall mean the absence of
any interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of sick leave or any
other leave of absence approved by the Board.
(f) "Employee" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(h) "Incentive Stock Option" shall mean a stock option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended.
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(i) "Non-Qualified Stock Option" shall mean a stock option not
intended to qualify as an Incentive Stock Option.
(j) "Option" shall mean a stock option granted pursuant to the Plan.
(k) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(1) "Optionee" shall mean an Employee or other person who receives
an Option.
(m) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Internal Revenue Code of
1986, as amended.
(n) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(o) "SEC" shall mean the Securities and Exchange Commission.
(p) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(q) "Subsidiary" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Internal Revenue Code
of 1986, as amended.
3. STOCK
Subject to the provisions of Section 11 of the Plan, the maximum
aggregate number of shares which may be optioned and sold under the Plan is up
to twenty percent (20%) of the Company's authorized shares of Common Stock.
If an option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
further grant under the Plan.
4. ADMINISTRATION
(a) Procedure. The Company's Board of Directors may appoint a
Committee to administer the Plan. The Committee shall consist of not less
than two members of the Board of Directors who shall administer the Plan on
behalf of the Board of Directors, subject to such terms and conditions as the
Board of Directors may prescribe. Once appointed, the Committee shall
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continue to serve until otherwise directed by the Board of Directors. From time
to time the Board of Directors may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause), and
appoint new members in substitution therefor, fill vacancies however caused, or
remove all members of the Committee and thereafter directly administer the Plan.
If a majority of the Board of Directors is eligible to be granted
Options or has been eligible at any time within the preceding year, a Committee
must be appointed to administer the Plan. The Committee must consist of not less
than two members of the Board of Directors, all of whom are "disinterested
persons" as defined in Rule 16b-3 of the General Rules and Regulations
promulgated under the Exchange Act.
(b) Powers of the Board. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant Incentive Stock
Options, in accordance with Section 422 of the Internal Revenue Code of 1986, as
amended, or to grant Non-Qualified Stock Options; (ii) to determine, upon review
of relevant information and in accordance with Section 8(b) of the Plan, the
fair market value of the Common Stock; (iii) to determine the exercise price per
share of Options to be granted, which exercise price shall be determined in
accordance with Section 8(a) of the Plan; (iv) to determine the persons to whom,
and the time or times at which, Options shall be granted and the number of
shares to be represented by each Option; (v) to interpret the Plan; (vi) to
prescribe, amend and rescind rules and regulations relating to the Plan; (vii)
to determine the terms and provisions of each Option granted (which need not be
identical) and, with the consent of the holder thereof, accelerate, modify or
amend each option; (viii) to accelerate or defer (with the consent of the
Optionee) the exercise date of any option; (ix) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the grant
of an Option previously granted by the Board; and (x) to make all other
determinations deemed necessary or advisable for the administration of the Plan.
(c) Effect of the Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
5. ELIGIBILITY. Incentive Stock Options may be granted only to
Employees. Non-Qualified Stock Options may be granted to employees as well as
directors (subject to the limitations set forth in Section 4), independent
contractors and agents, as determined by the Board. Any person who has been
granted an Option may, if he is otherwise eligible, be granted an additional
Option or Options.
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No Incentive Stock Option may be granted to an Employee if, as a
result of such grant, the aggregate fair market value (determined at the time
each Option was granted) of the Shares with respect to which such Incentive
Stock Options are exercisable for the first time by such Employee during any
calendar year (under all such plans of the Company and any Parent and
Subsidiary) shall exceed One Hundred Thousand Dollars ($100,000).
The Plan shall not confer upon any Optionee any right with respect to
continuation of employment by the Company, nor shall it interfere in any way
with his right or the Company's right to terminate his employment at any time.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of (i) its adoption by the Board of Directors, or (ii) its approval by
vote of the holders of a majority of the outstanding shares of the Company
entitled to vote on the adoption of the Plan. The Plan shall continue in effect
until February _, 2009, unless sooner terminated under Section 13 of the Plan.
7. TERM OF OPTION. The term of each Option shall be ten (10) years from
the date of grant thereof or such shorter term as may be provided in the
instrument evidencing the option. However, in the case of an Incentive Stock
Option granted to an Employee who, immediately before the Incentive Stock Option
is granted, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the date of
grant thereof or such shorter time as may be provided in the instrument
evidencing the option.
8. EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price for the Shares to be issued pursuant
to the exercise of an Option shall be such price as is determined by the Board,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, immediately before the grant
of such Incentive Stock Option, owns stock representing
more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no
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less than 110% of the fair market value per Share on the
date of grant; or, as the case may be,
(B) granted to an Employee not subject to the provisions of
Section 8(a)(i)(A), the per Share exercise price shall be
no less than one hundred percent (100%) of the fair
market value per Share on the date of grant.
(ii) In the case of a Non-Qualified Stock Option, the per Share
exercise price shall be no less than one hundred percent
(100%) of the fair market value per Share on the date of
grant.
(b) The fair market value shall be determined by the Board in its
discretion; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid and
asked prices or, if applicable, the closing price of the Common Stock on the
date of grant, as reported by the National Association of Securities Dealers
Automated Quotation (NASDAQ) System or, in the event the Common Stock is listed
on a stock exchange, the fair market value per Share shall be the closing price
on such exchange on the date of grant of the Option, as reported in the Wall
Street Journal.
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option or in payment of any withholding taxes thereon, including
the method of payment, shall be determined by the Board and may consist entirely
of (i) cash, check or promissory note; (ii) other Shares of Common Stock owned
by the Employee that have a fair market value on the date of surrender equal to
the aggregate exercise price of the Shares as to which said Option shall be
exercised; (iii) an assignment by the Employee of the net proceeds to be
received from a registered broker upon the sale of the Shares or the proceeds of
a loan from such broker in such amount; or (iv) any combination of such methods
of payment, or such other consideration and method of payment for the issuance
of Shares to the extent permitted under Delaware Law and meeting the rules and
regulations of the SEC applicable to plans meeting the requirements of Section
16(b)(3) of the Exchange Act.
9. EXERCISE OF OPTION.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times and subject to such
conditions as may be determined by the Board, including performance criteria
with respect to the Company and/or the Optionees, and as shall be permissible
under the terms of the Plan.
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An Option nay not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
instrument evidencing the Option by the person entitled to exercise the option
and full payment for the Shares with respect to which the Option is exercised
has been received by the Company. Full payment may, as authorized by the Board,
consist of any consideration and method of payment allowable under Section 8(c)
of the Plan; it being understood that the Company shall take such action as
maybe be reasonably required to permit use of an approved payment method. Until
the issuance, which in no event will be delayed more than thirty (30) days from
the date of the exercise of the Option (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the Company),
of the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. No adjustment will
be made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for the purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as an Employee. If any Employee ceases to
serve as an Employee, he may, but only within thirty (30) days (or such other
period of time not exceeding three (3) months as is determined by the Board)
after the date he ceases to be an Employee of the Company, exercise his Option
to the extent that he was entitled to exercise it as of the date of such
termination. To the extent that he was not entitled to exercise the Option at
the date of such termination, or if he does not exercise such Option (which he
was entitled to exercise) within the time specified herein, the Option shall
terminate.
(c) Notwithstanding the provisions of Section 9(b) above, in the event
an Employee is unable to continue his employment with the Company as a result of
his total and permanent disability, he may, but only within three (3) months (or
such other period of time not exceeding twelve (12) months as in determined by
the Board) from the date of disability, exercise his Option to the extent he
was entitled to exercise it at the date of such disability. To the extent that
he was not entitled to exercise the Option at the date of disability, or if he
does not exercise such Option (which he was entitled to exercise) within the
time specified herein, the Option shall terminate.
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For purposes of Section 9, an Employee is permanently and totally disabled if he
is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months.
(d) Death of Optionee. In the event of the death of an Optionee:
(i) during the term of the Option who is at the time of his
death an Employee of the Company and who shall have been in
Continuous Status as an Employee since the date of grant of
the Option, the Option may be exercised, at any time within
twelve (12) months following the date of death, by the
Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that would have accrued
had the Optionee continued living one (1) month after the
date of death; or
(ii) within thirty (30) days (or such other period of time not
exceeding three (3) months as is determined by the Board)
after the termination of Continuous Status as an Employee,
the Option may be exercised, at any time within three (3)
months following the date of death, by the Optionee's
estate or by a person who acquired the right to exercise
the Option by bequest or inheritance, but only to the
extent of the right to exercise that had accrued at the
date of termination.
10. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution or in connection with
estate planning purposes as may be permitted from time to time by the Committee,
and may be exercised, during the lifetime of the Optionee, only by the Optionee.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to any
required action by the stockholders of the Company, the number of shares which
have been authorized for issuance under the Plan but as to which no Options have
yet been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock or any other increase
or decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have
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been "effected without receipt of consideration." Such adjustment shall be made
by the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company,
or in the event of a proposed sale of all or substantially all of the assets of
the Company, or the merger of the company with or into another corporation, the
Board of Directors of the Company shall, as to outstanding Options, either (i)
make appropriate provision for the protection of any such outstanding Options by
the substitution on an equitable basis of appropriate stock of the Company or of
the merged, consolidated or otherwise reorganized corporation which will be
issuable in respect to one share of Common Stock of the Company; provided, only
that the excess of the aggregate fair market value of the shares subject to the
Options immediately after such substitution over the purchase price thereof is
not more than the excess of the aggregate fair market value of the shares
subject to such Options immediately before such substitution over the purchase
price thereof, or (ii) upon written notice to an Optionee, provide that all
unexercised Options must be exercised within a specified number of days of such
notice or they will be terminated. In any such case, the Board of Directors may,
in its discretion, advance the lapse of any waiting or installment periods and
exercise dates.
12. TIME FOR GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Board makes the determination granting
such Option. Notice of the determination shall be given to each person to whom
an Option is so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) The Board may amend or terminate the Plan from time to time in
such respect as the Board may does advisable; provided, however, that the
following revisions or amendments shall require approval of the holders of a
majority of the outstanding shares of the Company entitled to vote:
(i) any increase in the number of Shares subject to the Plan,
other than in connection with an adjustment under
Section 11 of the Plan;
(ii) any change in the designation of the class of persons
eligible to be granted options; or
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(iii) any material increase in the benefits accruing to
participants under the Plan.
(b) Stockholder Approval. If any amendment requiring stockholder
approval under Section 13(a) of the Plan is made, such stockholder approval
shall be solicited as described in Section 17(a) of the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by, or
appropriate under, any of the aforementioned relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares As to which such requisite authority shall not have been obtained.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
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17. STOCKHOLDER APPROVAL. Continuation of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. If such stockholder approval is obtained at
a duly held stockholders' meeting, it may be obtained by the affirmative vote of
the holders of a majority of the outstanding shares of the Company present or
represented and entitled to vote thereon. The approval of such stockholders of
the Company shall be (1) solicited substantially in accordance with Section
14(a) of the Exchange Act and the rules and regulations promulgated thereunder,
or (2) solicited after the Company has furnished in writing to the holders
entitled to vote substantially the same information concerning the Plan as that
which would be required by the rules and regulations in effect under Section
14(a) of the Exchange Act at the time such information is furnished.
18. OTHER PROVISIONS. The Stock Option Agreement authorized under the
Plan shall contain such other provisions, including, without limitation,
restrictions upon the exercise of the Option, as the Board of Directors of the
Company shall deem advisable. Any Incentive Stock Option Agreement shall contain
such limitations and restrictions upon the exercise of the Incentive Stock
Option as shall be necessary in order that such option will be an Incentive
Stock Option as defined in Section 422 of the Internal Revenue Code of 1986, an
amended.
19. INDEMNIFICATION OF BOARD. In addition to such other rights of
indemnification as they may have as directors or as members of the Board, the
members of the Board shall be indemnified by the Company against the reasonable
expenses, including attorneys' fees actually and necessarily incurred in
connection with the defense of any action suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan or
any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by then in satisfaction of a judgment
in any such action, suit or proceeding that such Board member is liable for
negligence or misconduct in the performance of his duties, provided that within
60 days after institution of any such action, suit or proceeding a Board member
shall, in writing, offer the Company the opportunity, at its own expense, to
handle and defend the same.
20. OTHER COMPENSATION PLANS. The adoption of the Plan shall not affect
any other stock option or incentive or other compensation plans in effect for
the Company or any Subsidiary, nor shall the Plan preclude the Company from
establishing any other forms of incentive or other compensation for employees
and directors of the Company or any Subsidiary.
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21. SINGULAR, PLURAL; GENDER. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall include the
feminine gender.
22. HEADINGS, ETC., NO PART OF PLAN. Headings of Articles and Sections
hereof are inserted for convenience and reference; they constitute no part of
the Plan.
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