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 (Amendment No. )
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 Commission Only (as permitted by
Rule 14a-6(e)2)
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14(a)-12
CPX Corp.
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(Name of Registrant as Specified in Charter)
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(Name of Person(s) filing Proxy Statement, if other than 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(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:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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CPX CORP.
150 East 52nd Street, 21st Floor
New York, New York 10022
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of CPX CORP., a Delaware corporation (the "Company"), will be held at
the offices of Olshan Grundman Frome Rosenzweig & Wolosky LLP, 505 Park Avenue,
New York, New York 10022, on August __, 2000, at 12:00 P.M., Local Time, for the
following purposes:
1. To elect three (3) members of the Board of Directors
to serve until the next annual meeting of
stockholders and until their successors have been
duly elected and qualified;
2. To consider and act upon a proposal to amend the
Company's Restated Certificate of Incorporation to
effect a reverse stock split followed by a forward
stock split of the Company's Common Stock;
3. To consider and act upon a proposal to adopt the
Company's 1999 Stock Option Plan;
4. To consider and act upon a proposal to adopt the
Company's 1999 Directors Stock Option Plan;
5. To ratify the appointment of Grant Thornton LLP as
the Company's independent auditors for the fiscal
year ending March 31, 2001; and
6. To transact such other business as may properly be
brought before the meeting or any adjournment
thereof.
The Board of Directors has fixed the close of business on July __, 2000
as the record date for the Meeting. Only stockholders of record on the stock
transfer books of the Company at the close of business on that date are entitled
to notice of, and to vote at, the Meeting.
YOU ARE REQUESTED, WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE
MEETING, TO MARK, DATE, SIGN AND RETURN PROMPTLY THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED
STATES.
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You may revoke your proxy for any reason at any time prior to the
voting thereof, and if you attend the meeting in person you may withdraw the
proxy and vote your own shares.
By Order of the Board of Directors
Warren G. Lichtenstein
Chairman and Chief Executive Officer
Dated: New York, New York
July __, 2000
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CPX CORP.
150 East 52nd Street, 21st Floor
New York, New York 10022
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
INTRODUCTION
This Proxy Statement is being furnished to stockholders by the Board of
Directors of CPX Corp., a Delaware corporation (the "Company"), in connection
with the solicitation of the accompanying Proxy for use at the 2000 Annual
Meeting of Stockholders of the Company (the "Meeting") to be held at the offices
of Olshan Grundman Frome Rosenzweig & Wolosky LLP, 505 Park Avenue, New York,
New York 10022, on August __, 2000, at 12:00 P.M., local time, or at any
adjournment thereof.
The principal executive offices of the Company are located at150 East
52nd Street, 21st Floor, New York , New York 10022. The approximate date on
which this Proxy Statement and the accompanying Proxy will first be sent or
given to stockholders is July __, 2000.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on July __, 2000,
the record date (the "Record Date") for the Meeting, will be entitled to notice
of, and to vote at, the Meeting and any adjournment thereof. As of the close of
business on the Record Date, there were [14,633,985] outstanding shares of the
Company's common stock, $0.001 par value per share (the "Common Stock"). Each of
such shares is entitled to one vote. There was no other class of voting
securities of the Company outstanding on that date. A majority of the
outstanding shares present in person or by proxy is required for a quorum.
VOTING OF PROXIES
Shares of Common Stock represented by Proxies, which are properly
executed, duly returned and not revoked will be voted in accordance with the
instructions contained therein. If no specification is indicated on the Proxy,
the shares of Common Stock represented thereby will be voted (i) for the
election as Directors of the persons who have been nominated by the Board of
Directors, (ii) in favor of amending the Company's Restated Certificate of
Incorporation to effect the reverse stock split followed by a forward stock
split of the Company's Common Stock, (iii) in favor of adopting the 1999 Stock
Option Plan of the Company (the "1999 Plan") (iv) in favor of adopting the 1999
Directors Stock Option Plan (the "Directors Plan"), (v) for the ratification of
the appointment of Grant Thornton LLP as the Company's independent auditors for
the year ending March 31, 2001 and (vi) for any other matter that may properly
be brought before the Meeting in accordance with the judgment of the person or
persons voting the Proxies. The execution of a Proxy will in no way affect a
stockholders' right to attend the Meeting and vote in person. Any Proxy executed
and returned by a stockholder may be revoked at any time thereafter if written
notice of revocation is given to the Secretary of the Company prior to the vote
to be taken at the Meeting, or by execution of a subsequent proxy which is
presented to the Meeting, or if the stockholder attends the Meeting and votes by
ballot, except as to any matter or matters upon which a vote shall have been
cast pursuant to the authority conferred by such Proxy prior to such revocation.
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The cost of solicitation of the Proxies being solicited on behalf of
the Board of Directors will be borne by the Company. In addition to the use of
the mails, proxy solicitation may be made by telephone, telegraph and personal
interview by officers, directors and employees of the Company. The Company will,
upon request, reimburse brokerage houses and persons holding Common Stock in the
names of their nominees for their reasonable expenses in sending soliciting
material to their principals.
The Company has retained Mackenzie Partners, Inc. ("Mackenzie") to
solicit proxies at a cost of approximately $[_____], plus certain out-of-pocket
expenses. If the Company requests Mackenzie to perform additional services,
Mackenzie will bill the Company at its usual rate.
VOTING RIGHTS
Holders of shares of Common Stock are entitled to one vote for each
share held on all matters.
The holders of a majority of the outstanding shares of Common Stock,
whether present in person or represented by proxy, will constitute a quorum for
each of the matters identified in the notice of meeting, as well as for any
other matters that may come before the meeting.
Broker "non-votes" and the shares as to which a stockholder abstains
from voting are included for purposes of determining whether a quorum of shares
is present at a meeting. A broker "non-vote" occurs when a nominee holding
shares for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary voting power with respect to that item and
has not received instructions from the beneficial owner.
A plurality of the votes cast is required for the election of
directors. In tabulating the vote on the election of directors, abstentions and
broker "non-votes" will be disregarded and will have no effect on the outcome of
such vote.
The affirmative vote of a majority of the outstanding shares of Common
Stock is required to approve the reverse stock split followed by a forward stock
split. Accordingly, abstentions and broker non-votes will have the same effect
as a negative vote with respect to this proposal.
The affirmative vote of a majority of the votes cast by holders of
Common Stock is required to approve the adoption of the 1999 Plan, the Directors
Plan and the proposal to ratify the appointment of Grant Thornton LLP. In
tabulating the vote on the proposals to approve the adoption of the 1999 Plan,
the Directors Plan and ratify the appointment of Grant Thornton LLP,
abstentions, withholding of authority to vote or broker non-votes are not
considered shares entitled to vote on the proposal and are not included in
determining whether the adoption of the 1999 Plan, the Directors Plan or the
appointment of Grant Thornton LLP is approved.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning ownership of the
Company's Common Stock, as of the Record Date, by each person known to be the
beneficial owner of more than five percent of the Common Stock and the address
of such individuals or entities, each director, nominees for director, and by
all directors and executive officers of the Company as a group:
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Percentage of
Name Shares Outstanding
of Beneficial Owner Beneficially Owned Common Stock
------------------- ------------------ ------------
Warren G. Lichtenstein (1)(2)
150 E. 52nd Street, 21st Floor
New York, New York 10022 [4,341,862 29.7%
Steel Partners II, L.P.
150 E. 52nd Street, 21st Floor
New York, New York 10022 2,180,362 14.9%
J. Ezra Merkin
Gabriel Capital Corp.
450 Park Avenue 740,797(3) 5.1%
New York, New York 10022
Brian Lorber -0- -0-
Larry Callahan -0- -0-
Steven Wolosky -0- -0-
All directors and executive officers as 4,341,862 29.7%]
a group (4 persons)
(1) Includes: (i) 2,180,362 shares owned by Steel Partners II, L.P., an entity
controlled by Mr. Lichtenstein, and (ii) 2,161,500 shares owned directly by
Mr. Lichtenstein.
(2) More than one beneficial owner is listed above for the same securities,
since the shares owned beneficially by Steel Partners II, L.P. are included
in the shares beneficially owned by Mr. Lichtenstein. See note (1) above.
(3) Based on Schedule 13G filed jointly in February 2000 by J. Ezra Merkin and
Gabriel Capital Corporation ("Gabriel"). Mr. Merkin is deemed the
beneficial owner of 740,797 shares of Common Stock by virtue of (i) his
position as General Partner, president and sole stockholder of Gabriel,
which owns 299,282 shares of Common Stock and (ii) Gabriel, as the
investment advisor to Ariel Fund Limited ("Ariel"), having the power to
vote and to direct the voting of and the power to dispose and direct the
disposition of the 441,515 shares of Common Stock owned by Ariel.
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PROPOSAL 1
ELECTION OF DIRECTORS
Nominees
Unless otherwise specified, all Proxies received will be voted in favor
of the election of the persons named below as directors of the Company, to serve
until the next Annual Meeting of Stockholders of the Company and until their
successors shall be duly elected and qualified. Directors shall be elected by a
plurality of the votes cast, in person or by proxy, at the Meeting. The terms of
the current directors expire at the Meeting and when their successors are duly
elected and qualified. Management has no reason to believe that any of the
nominees will be unable or unwilling to serve as a director, if elected. Should
any of the nominees not remain a candidate for election at the date of the
Meeting, the Proxies will be voted in favor of those nominees who remain
candidates and may be voted for substitute nominees selected by the Board of
Directors. All nominees are currently directors of the Company. The names of the
nominees and certain information concerning them are set forth below:
<TABLE>
<CAPTION>
First Year
Name Principal Occupation Age Became Director
---- -------------------- --- ---------------
<S> <C> <C> <C>
Warren G. Lichtenstein Director. President and Chief Executive 34 1999
Officer of the Company since June 23, 1999.
Chairman of the Board, Secretary and
Managing Member of Steel Partners, L.L.C.,
the general partner of Steel Partners II, L.P.
since January 1996. Chairman and director
of Steel Partners, Ltd., the general partner of
Steel Partners Associates, L.P., which was
the general partner of Steel Partners II, L.P.
from 1993 to January 1996. Mr.
Lichtenstein has also served as President and
director of Marsel Mirror and Glass Products,
Inc. ("Marsel"), a subsidiary of Gateway
Industries, Inc. ("Gateway"), from Marsel's
inception in July 1995 until shortly after the
acquisition of its business by Gateway in
November 1995, and continued as a director
until its disposition in December 1996.
Marsel filed for protection under Chapter 11
of the United States Bankruptcy Code shortly
following Gateway's disposition of its interest
in Marsel. Mr. Lichtenstein is a member of
the board of directors of Gateway Industries,
Inc., WebFinancial Corporation, PLM
International, Inc., Puroflow Incorporated,
Tech-Sym Corporation, ECC International
Corp. and Saratoga Beverage Group, Inc.
Mr. Lichtenstein is a graduate of the
University of Pennsylvania.
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Steven Wolosky Director. Partner, Olshan Grundman Frome 44 1999
Rosenzweig & Wolosky LLP, counsel to
Steel Partners II, L.P., since prior to 1995.
Mr. Wolosky is also Assistant Secretary of
WHX Corporation.
Larry Callahan Director. Special situations analyst, 38 1999
Huntleigh Securities since February 1998.
Prior to that Mr. Callahan was a portfolio manager
with Linder Funds since prior to 1995.
</TABLE>
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF
THE NOMINEES.
Board Meetings and Committees
The Board of Directors held [ ] meetings during the year ended March
31, 2000. All Directors attended at least 75% of such meetings and committees on
which he served during the fiscal year ended March 31, 2000 ("Fiscal 1999").
From time to time, the members of the Board of Directors act by unanimous
written consent pursuant to the laws of the State of Delaware.
The Board of Directors has a Stock Option and Compensation Committee,
which administers the 1999 Plan and the Directors Plan, and makes
recommendations concerning salaries and incentive compensation for employees of
and consultants to the Company, and an Audit Committee, which reviews the
Company's financial statements and accounting policies, resolves potential
conflicts of interest, receives and reviews the recommendations of the Company's
independent auditors and confers with the Company's independent auditors with
respect to the training and supervision of internal accounting personnel and the
adequacy of internal accounting controls. The Stock Option and Compensation
Committee is currently composed of Steven Wolosky and Larry Callahan and the
Audit Committee is currently composed of Steven Wolosky and Larry Callahan.
Neither the Stock Option and Compensation Committee or the Audit Committee held
any meetings during Fiscal 1999.
The Company does not presently have a nominating committee, the
customary functions of such committee being performed by the entire Board of
Directors.
Board of Directors Compensation
The Company does not currently compensate the members of the Board of
Directors. Directors are reimbursed for their expenses incurred in attending
meetings of the Board of Directors. In connection with their appointment to the
Board of Directors and subject to stockholder approval, Steven Wolosky and Larry
Callahan each received options to purchase 150,000 shares of Common Stock
pursuant to the terms of the Directors Plan. See "Proposal 4 - Approval of
Adoption of 1999 Directors Plan" for a summary description of the Directors
Plan.
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MANAGEMENT
Executive Officers of the Company
The following table contains the names, positions and ages of the
executive officers of the Company who are not directors.
Principal Occupation for the Past Five
Name Years and Current Public Directorships Age
---- -------------------------------------- ---
Brian Lorber Secretary and Treasurer. Secretary and
Treasurer of the Company since June 25
1999. Analyst with Steel Partners II, L.P.
since January 1998. Mr. Lorber graduated
from The George Washington University
in 1997 with a degree in business
administration.
Executive Compensation
Mr. Lichtenstein became President and Chief Executive Officer of the
Company on June 23, 1999. Mr. Lichtenstein did not receive any compensation from
the Company for the fiscal year ended March 31, 2000 and no officer of the
Company at March 31, 2000 received compensation in excess of $100,000 for the
fiscal year ended March 31, 2000.
Stock Option Grants and Option Values
During the fiscal years ended March 31, 2000, 1999 and 1998, there were
no stock options granted to the Chief Executive Officer of the Company. At March
31, 2000, the Chief Executive Officer of the Company did not hold any stock
options and the Chief Executive Officer did not exercise any options in Fiscal
1999.
Employment Agreements
The Company currently has no employment agreements with any executive
officer.
Common Stock Performance
The following graph compares the total return on the Common Stock to
the total returns of the Nasdaq Market Index and a selection of peer issuers
with similar market capitalizations as the Company. In previous years, the
Company had compared its Common Stock performance to that of the Standard &
Poor's SmallCap 600 and the Hambrecht & Quist Healthcare Index; however, since
the Company currently has no operating business and its shares are traded in the
over-the-counter market, the Company believes that it is a more meaningful to
use the Nasdaq Market Index and a peer group comprised of entities with similar
market capitalizations as the Company as a useful basis for comparison.
[insert graph]
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Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act, as amended, requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission"). Officers, directors and greater than ten percent
stockholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file. During Fiscal 1999, to the
best knowledge of the Company, all of such forms were filed in a timely manner.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company, under its former name, "CellPro", filed a voluntary
petition for reorganization under Chapter 11 of the United States Bankruptcy
Code on October 28, 1998, Case No. 98-13604 in the United States Bankruptcy
Court for the Western District of Washington, Judge Karen Overstreet presiding,
and the Company commenced liquidation shortly thereafter. On May 21, 1999, the
Bankruptcy Court issued an order confirming the Company's Second Amended Plan of
Reorganization (the "Plan") dated as of May 10, 1999. The effective date of the
Plan occurred on June 1, 1999. Under such Plan, certain pre-petition creditors
of the Company were issued cash and property for extinguishing their claims
against the Company. The Company entered into a Settlement Agreement dated
September 1998, with The John Hopkins University, Becton Dickinson and Company
and Baxter Healthcare Corporation, pursuant to which the Company made a cash
payment to settle certain patent litigation. The Company also entered into a
Securities Settlement Agreement to extinguish a certain securities class action
claim and a Florida Securities Settlement Agreement to extinguish a state
securities action, both for cash payments.
The Company announced in June 1999 that it had changed its name to CPX
Corp. from CellPro, Incorporated. Also during June 1999 the Company distributed
funds to equity holders and in September 1999 made final distribution of funds
to equity holders having received the $1.4 million proceeds from a legal
settlement.
Steven Wolosky, a director of the Company, is a member of the law firm
of Olshan Grundman Frome Rosenzweig & Wolosky LLP, which law firm has been
retained by the Company during the last fiscal year. Fees received from the
Company by such firm during the last fiscal year did not exceed 5% of such
firm's or the Company's revenues.
PROPOSAL 2 - PROPOSAL TO AMEND THE COMPANY'S AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A
REVERSE STOCK SPLIT FOLLOWED BY A FORWARD
STOCK SPLIT OF THE COMMON STOCK
The Board of Directors has unanimously adopted resolutions declaring
the advisability of, and submits to the stockholders for approval, an amendment
(the "Split Amendment") to the Restated Certificate of Incorporation effecting
(a) a reverse stock split of the outstanding Common Stock as of 6:00 p.m.
(Eastern Time) on the date the Split Amendment is filed with the Secretary of
State of the State of Delaware (the "Effective Date") pursuant to which each ___
shares of Common Stock then outstanding will be converted into one share of
Common Stock (the "Reverse Split") and (b) a forward
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split of the Common Stock as of 7:00 p.m. (Eastern Time) on the Effective Date
pursuant to which each share (or fraction thereof, excluding holdings of less
than one share resulting from the Reverse Split) of Common Stock then
outstanding will be converted into a number of shares of Common Stock at a rate
of ___-for-1 (the "Forward Split"). In lieu of issuing the fractional shares
that will result from (i) the Reverse Split to stockholders of record of less
than ___ shares immediately prior to the Reverse Split or (ii) the Reverse Split
and the Forward Split to stockholders of record of an odd number of shares
greater than ___ shares immediately prior to the Reverse Split, the Company will
make a cash payment based on the average daily closing price per share of the
Common Stock on the NASD OTC Bulletin Board (the "Bulletin Board") for the 10
trading days immediately preceding the Effective Date, as discussed below. The
Reverse Split and the Forward Split, however, will take effect only in the event
that the Purchase Price (as defined below) is $____ or less. The Effective Date,
which determines the amount of the Purchase Price, shall in no event occur later
than 30 days following the date of the Meeting. The text of the Split Amendment
is attached as Appendix A hereto. The filing of the Split Amendment and the
consummation of the Reverse Split and the Forward Split, including the making of
cash payments to stockholders whose shares of Common Stock are converted into
less than a whole share of Common Stock in the Reverse Split, are collectively
referred to herein as the "Transaction."
The effect of the Transaction on the holders of Common Stock will be as
follows:
(a) The shares of Common Stock of each holder of record of
less than [___] shares of Common Stock immediately prior to the Reverse Split
will be converted in the Reverse Split into the right to receive cash according
to the formula set forth below. See "Cash Payment in Lieu of Shares" below.
(b) The shares of Common Stock of each holder of record of
[___] or more shares of Common Stock immediately prior to the Reverse Split will
first be converted in the Reverse Split into a number of shares of Common Stock
equal to the number of shares held immediately prior to the Reverse Split
divided by [___]. One hour after the Reverse Split, the number of shares of
Common Stock of each holder (other than the fractional shares held of record by
persons who held less than [___] shares immediately prior to the Reverse Split)
will be converted in the Forward Split into multiple shares of Common Stock on
the basis of [___] shares of Common Stock for each share or fraction thereof
then held. As a result, the number of shares held by each holder of record of
[___] or more shares immediately prior to the Reverse Split will be reduced by
half upon completion of the Transaction. With respect to stockholders of record
of an odd number of shares greater than [___] shares immediately prior to the
Reverse Split, the Company will make a cash payment in lieu of issuing any
fractional shares. See "Cash Payment in Lieu of Shares" below.
ANY HOLDER OF RECORD OF LESS THAN [___] SHARES OF COMMON STOCK WHO
DESIRES TO RETAIN AN EQUITY INTEREST IN THE COMPANY AFTER THE EFFECTIVE DATE MAY
DO SO BY PURCHASING, PRIOR TO THE EFFECTIVE DATE, A SUFFICIENT NUMBER OF SHARES
OF COMMON STOCK IN THE OPEN MARKET SUCH THAT THE TOTAL NUMBER OF SHARES HELD OF
RECORD IN HIS NAME IMMEDIATELY PRIOR TO THE REVERSE SPLIT IS EQUAL TO OR GREATER
THAN [___]. ANY BENEFICIAL OWNER OF LESS THAN [___] SHARES WHO IS NOT A HOLDER
OF RECORD AND WHO DESIRES TO HAVE HIS SHARES EXCHANGED FOR CASH PURSUANT TO THE
TRANSACTION SHOULD INSTRUCT HIS BROKER TO TRANSFER HIS SHARES INTO HIS NAME IN A
TIMELY MANNER SUCH THAT SUCH BENEFICIAL OWNER WILL BE DEEMED A HOLDER OF RECORD
IMMEDIATELY PRIOR TO THE REVERSE SPLIT.
Cash Payment in Lieu of Shares
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In lieu of issuing the fraction of a share of Common Stock that will
result from (i) the Reverse Split to each holder of record of less than [___]
shares or (ii) the Reverse Split and the Forward Split to each holder of record
of an odd number of shares greater than [___] shares, the Company will value
each outstanding share of Common Stock held at the close of business on the
Effective Date at the average daily last sales price per share of the Common
Stock on the Bulletin Board for the 10 trading days immediately preceding the
Effective Date. Such per share price is hereinafter referred to as the "Purchase
Price." In no event shall the Effective Date be later than 30 days following the
date of the Meeting, although the Effective Date may be less than 30 days
following the date of the Meeting. The Transaction shall be effected only if the
Purchase Price is $[__] or less. If the Purchase Price is more than $[__], even
if the stockholders have approved the Split Amendment at the Meeting, the Split
Amendment will not be filed with the Secretary of State of the State of Delaware
and the Transaction will not occur.
If the Transaction does take place, each stockholder who holds of
record less than [___] shares immediately prior to the Reverse Split will be
entitled to receive, in lieu of the fraction of a share resulting from the
Reverse Split, cash in the amount of the Purchase Price multiplied by the number
of shares of Common Stock held by such stockholder immediately prior to the
Reverse Split. Each stockholder who holds of record an odd number of shares
greater than [___] shares immediately prior to the Reverse Split will be
entitled to receive, in lieu of the fraction of a share resulting from the
Reverse Split and the Forward Split, cash in the amount of the Purchase Price
multiplied by the fraction of a share of Common Stock that would otherwise be
issuable to such stockholder after giving effect to the Reverse Split and the
Forward Split. All amounts payable to stockholders will be subject to applicable
state laws relating to abandoned property. No service charges or brokerage
commissions will be payable by stockholders in connection with the Transaction.
The Company will pay no interest on cash sums due any such stockholder pursuant
to the Transaction.
Assuming the consummation of the Transaction, as soon as practical
after the Effective Date, the Company will mail a letter of transmittal to each
holder of record of less than [___] shares of Common Stock immediately prior to
the Reverse Split. The letter of transmittal will contain instructions for the
surrender of such certificate or certificates to the Company's exchange agent in
exchange for a cash payment in lieu of the fractional share into which each such
holder's shares of Common Stock were converted in the Reverse Split. No cash
payment will be made to any such stockholder until he has surrendered his
outstanding certificate(s), together with the letter of transmittal, to the
Company's exchange agent. See "Exchange of Stock Certificates" below. The
Company's exchange agent is American Stock Transfer & Trust Company.
Effect of the Proposed Reverse Split and Forward Split
Upon consummation of the Reverse Split at 6:00 p.m. (Eastern Time) on
the Effective Date, each stockholder who owned of record less than [___] shares
of Common Stock immediately prior to the Reverse Split will have only the right
to receive cash based upon the Purchase Price in lieu of receiving a fractional
share resulting from the Reverse Split. The interest of each such stockholder in
the Company will be terminated thereby, and each such stockholder will have no
right to vote as a stockholder or share in the Company's assets, earnings, or
profits following the Reverse Split.
Upon consummation of the Reverse Split at 6:00 p.m. (Eastern Time) on
the Effective Date, each stockholder who owned of record [___] or more shares of
Common Stock immediately prior to the Reverse Split will continue as a
stockholder with respect to the share or shares of Common Stock resulting from
the Reverse Split. As of 7:00 p.m. (Eastern Time) on the Effective Date, each
such share, including any fraction thereof held by such record holder
immediately after the Reverse Split, will be converted into multiple shares of
Common Stock on the basis of [___] shares of Common Stock for each share or
fraction thereof then held. Each such stockholder will continue to share in the
Company's assets,
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earnings or profits, if any, to the extent of each such stockholder's ownership
of Common Stock following the Transaction.
For stockholders of record who hold [___] or more shares of Common
Stock immediately prior to the Reverse Split, the net effect of the Transaction
will be a one-for-___ reverse split of the Common Stock. Except for the payment
of cash in lieu of fractional shares to holders of an odd number of shares
greater than [___] shares, after the Transaction such stockholders will hold
[half] as many shares of Common Stock as such stockholders held immediately
prior to the Reverse Split. In addition, excluding the reduction in outstanding
shares of Common Stock due to the payment of cash for fractional shares (as
described in the preceding sentence) and due to the payment of cash to record
holders of less than [___] shares in lieu of fractional shares resulting from
the Reverse Split, the total number of outstanding shares of Common Stock will
decrease by [_____].
The Amended and Restated Certificate of Incorporation currently
authorizes the issuance of 29,000,000 shares of Common Stock and 1,000,000
shares of Preferred Stock, for an aggregate of 30,000,000 shares. As of the
Record Date, the number of outstanding shares of Common Stock was [14,633,985]
and no shares of Preferred Stock were issued or outstanding. Based upon the
Company's best estimates (without giving effect to the halving of the number of
shares resulting from the net one-for-___ reverse stock split), if the
Transaction had been consummated as of such date, the number of outstanding
shares of Common Stock would have been reduced by the Transaction from ________
to approximately [ ] or by approximately [_____] shares, and the number of
holders of record of Common Stock would have been reduced from approximately
[___] to approximately [_] or by approximately [___] stockholders.
The Common Stock is currently registered under Section 12(g) of the
Exchange Act and, as a result, the Company is subject to the periodic reporting
and other requirements of the Exchange Act. The Transaction will not affect the
registration of the Common Stock under the Exchange Act; [provided, however, in
the future, should the Company determine that it has less than 300 holders of
record of its Common Stock, then the Board of Directors could determine to
terminate its registration under the Exchange Act to become a "private" company.
However, no such determination has been made at the present time or is
contemplated immediately after the Reverse Split and Forward Split]. In
addition, consummation of the Transaction is not expected to affect adversely
the eligibility of the Common Stock to be traded on the Bulletin Board.
Based on the aggregate number of shares owned by holders of record of
less than [___] shares as of [_________________] and the average daily [closing
price] per share of the Common Stock on the Bulletin Board for the 10 trading
days immediately preceding such date, the Company estimates that payments of
cash in lieu of the issuance of fractional shares to persons who held less than
[___] shares of Common Stock immediately prior to the Reverse Split will total
approximately $[________] in the aggregate ([_____] shares multiplied by an
assumed Purchase Price of $[____] per share).
The par value of the Common Stock will remain at $.001 per share
following consummation of the Transaction, and although the total number of
shares of Common Stock will be reduced by [____] following the consummation of
the Transaction, the ratio of the number of shares authorized but unissued to
the total number of shares authorized will be increased. This increase in the
relative number of authorized but unissued shares of Common Stock resulting from
the Transaction could have an anti-takeover effect. Shares of Common Stock
could, within the limits imposed by applicable law, be issued by the Company in
one or more transactions that would make more difficult, and therefore less
likely, a takeover of the Company. Any such issuance of additional shares of
Common Stock could have the effect of diluting the earnings per share and book
value per share of outstanding shares of Common Stock, and such additional
shares could be used to dilute the stock ownership or voting rights of persons
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seeking to obtain control of the Company. Because the number of shares subject
to redemption pursuant to the Transaction represents only approximately [__]% of
the total number of shares outstanding as of the record date, the dilutive
effect of re-issuing any of such redeemed shares could be expected to be
correspondingly small.
Purpose of the Reverse Split and Forward Split
As of [________________], each of approximately [___] record holders of
Common Stock, or approximately [___]% of the total number of record holders,
owned less than [___] shares of Common Stock. In addition, such stockholders
owning less than [___] shares own in the aggregate approximately [__]% of the
outstanding shares of Common Stock. Based on the average daily [closing price]
per share of the Common Stock on the Bulletin Board for the 10 trading days
immediately preceding [________________] of $[____], ownership of [___] shares
of Common Stock has a market value of approximately $[____].
The cost of administering each stockholder's account and the amount of
time spent by management of the Company in responding to stockholder requests is
the same regardless of the number of shares held in the account. Accordingly,
the cost to the Company of maintaining many small accounts is disproportionately
high when compared with the total number of shares involved. In view of the
disproportionate cost to the Company of maintaining small stockholder accounts,
management of the Company believes that it would be beneficial to the Company
and its stockholders as a whole to eliminate the administrative burden and cost
associated with the approximately [___] accounts containing less than ___ shares
of Common Stock. It is expected that the direct cost of administering
stockholder accounts will be reduced by up to approximately $[____] per year if
the Transaction is consummated.
In addition, since the Company is unable to locate certain of its
stockholders with small holdings, the Company believes it would be unable to
acquire the shares of Common Stock of such stockholders, and realize the savings
described above, by making a tender offer to acquire such shares. Accordingly,
if the Company is to acquire these shares, the Company believes it must do so by
means of the Reverse Split. Funds otherwise payable pursuant to the Transaction
to a stockholder who cannot be located will be held until proper claim therefor
is made, subject to applicable escheat laws.
Further, the Reverse Split will enable holders of record of less than
[___] shares to dispose of their investment at market value and, in effect,
avoid brokerage fees on the transaction. Stockholders owning a small number of
shares would, if they chose to sell their shares otherwise, likely incur
brokerage fees disproportionately high relative to the market value of their
shares. In some cases, stockholders might encounter difficulty in finding a
broker willing to handle such small transactions.
The number of shares of Common Stock held by the Company as treasury
shares and available for subsequent issuance would, due solely to the redemption
of fractional shares in the Transaction, increase by approximately [____] shares
(on a post-split basis), based on record ownership of Common Stock as of
[___________, 2000]. While the Company has no current specific plans to issue
Common Stock other than pursuant to the 1999 Plan and the Directors Plan, the
additional treasury shares would provide the Board with flexibility in the
management of the Company's capitalization and the provision of incentives to
the Company's officers and other employees. The additional Common Stock could be
used by the Company in connection with (i) the establishment of director or
employee stock compensation plans in addition to the 1999 Plan and the Directors
Plan, (ii) future acquisitions by the Company, (iii) future capital raising by
the Company, and (iv) other corporate purposes. Unless required by law or
regulatory authorities, no further authorization by vote of stockholders will be
sought for any
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future Common Stock issuances. No stockholder will have any preemptive or other
preferential right to purchase any Common Stock that may be issued and sold by
the Company in the future.
The Board of Directors believes that the decrease in outstanding shares
as a result of the Transaction is in the best interests of the Company, and that
the high number of outstanding shares of Common Stock and the low trading price
thereof impairs the acceptability of the stock by the financial community and
the investing public. The Company believes that the Split Amendment, by reducing
the number of outstanding shares, should increase the per share market price
accordingly. It is possible, however, that any increase in per share market
price may be proportionately less than the decrease in the number of outstanding
shares.
Exchange of Stock Certificates
As soon as practicable after the Effective Date, assuming the
consummation of the Transaction, the Company will send letters of transmittal,
for use in transmitting stock certificates to the Company's designated exchange
agent, to all stockholders of record who held less than [___] shares of Common
Stock immediately prior to the Reverse Split. Upon proper completion and
execution of a letter of transmittal and return thereof to the exchange agent,
together with certificates, each such stockholder will receive cash in the
amount to which the holder is entitled, as described above, in lieu of the
fractional share into which such stockholder's shares were converted in the
Reverse Split. After the Reverse Split and until surrendered, each outstanding
certificate held by a stockholder of record who held less than [___] shares
immediately prior to the Reverse Split will be deemed for all purposes to
represent only the right to receive the amount of cash to which the holder is
entitled pursuant to the Transaction.
In connection with the Transaction, the Common Stock will be identified
by a new CUSIP number, which will appear on all certificates representing shares
of Common Stock issued after the Effective Date. After the Effective Date, each
certificate representing shares of Common Stock that was outstanding prior to
the Effective Date and that was held by a stockholder of record of [___] or more
shares immediately prior to the Reverse Split, until surrendered and exchanged
for a new certificate, will be deemed for all corporate purposes to evidence
ownership of [_____] the number of shares as is set forth on the face of the
certificate, rounded down to the next whole number, with a stockholder entitled
to receive cash in lieu of any fractional share resulting from the Transaction.
Any stockholder desiring to receive a new certificate bearing the new CUSIP
number can do so at any time by contacting the exchange agent at the address set
forth above for instructions for surrendering his old certificates. After the
Effective Date, an old certificate presented to the exchange agent in settlement
of a trade will be exchanged for a new certificate bearing the new CUSIP number.
All amounts payable to stockholders will be subject to applicable state
laws relating to abandoned property. No service charges or brokerage commissions
will be payable by stockholders in connection with the Transaction. The Company
will pay no interest on cash sums due any stockholder pursuant to the
Transaction. See "Cash Payment in Lieu of Shares" above.
Certain Federal Income Tax Consequences
The following is a summary of the material anticipated Federal income
tax consequences of the reverse stock split and forward stock split to
stockholders of the Company. It should be noted that this summary is based upon
the Federal income tax laws currently in effect and as currently interpreted.
This summary does not take into account possible changes in such laws or
interpretations, including any amendments to applicable statutes, regulations
and proposed regulations, or changes in judicial or administrative rulings, some
of which may have retroactive effect. The summary is provided for general
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information only, and does not purport to address all aspects of the range of
possible Federal income tax consequences of the reverse stock split and forward
stock split and is not intended as tax advice to any person. In particular, and
without limiting the foregoing, this summary does not account for or consider
the Federal income tax consequences to stockholders of the Company in light of
their individual investment circumstances or to holders subject to special
treatment under the Federal income tax laws (for example, life insurance
companies, regulated investment companies, and foreign taxpayers). This summary
does not discuss any consequence of the reverse stock split and forward stock
split under any state, local or foreign tax laws.
No ruling from the Internal Revenue Service or opinion of counsel will
be obtained regarding the Federal income tax consequences to the stockholders of
the Company in connection with the reverse stock split and forward stock split.
Accordingly, each stockholder is encouraged to consult its tax adviser regarding
the specific tax consequences of the proposed reverse stock split and forward
stock split to such stockholder, including the application and effect of
federal, state, local and foreign taxes, and any other tax laws.
The Board of Directors believes that the reverse stock split and
forward stock split would be a tax-free recapitalization to the Company and its
stockholders. If the reverse stock split and forward stock split qualify as a
recapitalization described in Section 368(a)(1)(E) of the Internal Revenue Code
of 1986, as amended (the "Code"), (i) no gain or loss will be recognized by a
stockholder of Common Stock who exchanges (or is deemed to exchange) its Common
Stock for new Common Stock, except that a holder of Common Stock who receives
cash proceeds from the sale of fractional shares of Common Stock will recognize
a gain or loss equal to the difference, if any, between such proceeds and the
basis of its Common Stock allocated to its fractional share interests, and such
gain or loss, if any, will generally constitute capital gain or loss if its
fractional share interests are held as capital assets at the time of their sale,
(ii) the tax basis of the new Common Stock received by holders of Common Stock
will be the same as the tax basis of the Common Stock exchanged therefor, less
the tax basis allocated to fractional share interests and (iii) the holding
period of the new Common Stock in the hands of holders of new Common Stock will
include the holding period of their Common Stock exchanged therefor, provided
that such Common Stock was held as a capital asset immediately prior to the
exchange.
Generally, the stockholders receiving cash for fractional shares will
not be subject to backup withholding or informational reporting with respect to
the cash distributed unless the cash distributed is twenty dollars or more.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR
OF THE PROPOSAL APPROVING THE SPLIT AMENDMENT.
PROPOSAL 3 -- APPROVAL OF ADOPTION OF 1999 STOCK OPTION PLAN
The Board of Directors of the Company has unanimously approved for
submission to a vote of the stockholders a proposal to adopt the 1999 Plan.
The purpose of the 1999 Plan is to retain in the employ of and as
directors, consultants and advisors to the Company persons of training,
experience and ability, to attract new employees, directors, advisors and
consultants whose services are considered valuable, to encourage the sense of
proprietorship and to stimulate the active interest of such persons in the
development and financial
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<PAGE>
success of the Company and its subsidiaries. As the Company continues to develop
its plans to acquire or develop a business, it believes that the grants of
options and other forms of equity participation will become a more important
means to retain and compensate employees, directors, advisors and consultants.
Each option granted pursuant to the 1999 Plan shall be designated at
the time of grant as either an "incentive stock option" or as a "non-statutory
stock option." The following description of the 1999 Plan is a summary and does
not purport to fully describe the 1999 Plan.
Administration of the Plan
The 1999 Plan is administered by a committee consisting of two or more
directors who are "Non-Employee Directors" (as such term is defined in Rule
16b-3) and "Outside Directors" (as such term is defined in Section 162(m) of the
Code) (the "Committee"). The Committee determines to whom among those eligible,
and the time or times at which options will be granted, the number of shares to
be subject to options, the duration of options, any conditions to the exercise
of options, and the manner in and price at which options may be exercised. In
making such determinations, the Committee may take into account the nature and
period of service of eligible persons, their level of compensation, their past,
present and potential contributions to the Company and such other factors as the
Committee in its discretion deems relevant.
The Committee is authorized to amend, suspend or terminate the 1999
Plan, except that it is not authorized without stockholder approval (except with
regard to adjustments resulting from changes in capitalization) to (i)
materially increase the number of shares that may be issued under the 1999 Plan;
(ii) materially increase the benefits accruing to the option holders under the
1999 Plan; (iii) materially modify the requirements as to eligibility for
participation in the 1999 Plan; (iv) decrease the exercise price of an Incentive
Option to less than 100% of the Fair Market Value per share of Stock on the date
of grant thereof, decrease the exercise price of a Nonqualified Option to less
than 80% of the Fair Market Value per share of Stock on the date of grant
thereof; or (v) extend the term of any option beyond ten years.
Unless the 1999 Plan is terminated earlier by the Committee, it will
terminate on October 11, 2009.
Common Stock Subject to the 1999 Plan
The 1999 Plan provides that options may be granted with respect to a
total of 1,500,000 shares of Common Stock. Under certain circumstances involving
a change in the number of shares of Common Stock, such as a stock split, stock
consolidation or payment of a stock dividend, the class and aggregate number of
shares of Common Stock in respect of which options may be granted under the 1999
Plan, the class and number of shares subject to each outstanding option and the
option price per share will be proportionately adjusted. If any option expires
or terminates for any reason, without having been exercised in full, the
unpurchased shares subject to such option will be available again for the
purposes of the 1999 Plan.
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Participation
Any employee, officer, director of, and any consultant and advisor to
the Company or any of its subsidiaries shall be eligible to receive stock
options under the 1999 Plan. Only employees of the Company or its subsidiaries
shall be eligible to receive incentive stock options.
Option Price
The exercise price of each option is determined by the Committee, but
may not be less than 100% of the Fair Market Value (as defined in the 1999 Plan)
of the shares of Common Stock covered by the option on the date the option is
granted in the case of an incentive stock option, nor less than 80% of the Fair
Market Value of the shares of Common Stock covered by the option on the date the
option is granted in the case of a non-statutory stock option. If an incentive
stock option is to be granted to an employee who owns over 10% of the total
combined voting power of all classes of the Company's capital stock, then the
exercise price may not be less than 110% of the Fair Market Value of the Common
Stock covered by the option on the date the option is granted.
Terms of Options
The Committee shall, in its discretion, fix the term of each option,
provided that the maximum term of each option shall be ten years. The 1999 Plan
provides for the earlier expiration of options of a participant in the event of
certain terminations of employment or engagement. In the event of any merger,
reorganization, consolidation, recapitalization, stock dividend, or other change
in corporate structure affecting the common stock of the Company, the Stock
Option and Compensation Committee shall make an appropriate and equitable
adjustment in the number and kind of shares reserved for issuance under the 1999
Plan and in the number and option price of shares subject to outstanding options
granted under the 1999 Plan, to the end that after such event each option
holder's proportionate interest shall be maintained as immediately before the
occurrence of such event.
Restrictions on Grant and Exercise
Generally, an option may not be transferred or assigned other than by
will or the laws of descent and distribution or pursuant to a qualified domestic
relations order and, during the lifetime of the option holder, may be exercised
solely by him. The aggregate Fair Market Value (determined at the time the
incentive stock option is granted) of the shares as to which an employee may
first exercise incentive stock options in any one calendar year under all
incentive stock option plans of the Company and its subsidiaries may not exceed
$100,000. The Committee may impose any other conditions to exercise as it deems
appropriate.
Registration of Shares
The Company intends to file a registration statement under the
Securities Act of 1933, as amended, with respect to the Common Stock issuable
pursuant to the 1999 Plan subsequent to the approval of the 1999 Plan by the
Company's stockholders.
Rule 16b-3 Compliance
In all cases, the terms, provisions, conditions and limitations of the
1999 Plan shall be construed and interpreted consistent with the provisions of
Rule 16b-3 of the Securities Exchange Act of 1934, as amended.
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Tax Treatment of Incentive Options
No taxable income will be recognized by an option holder upon receipt
of an incentive stock option, and the Company will not be entitled to a tax
deduction in respect of such grant.
In general, no taxable income for Federal income tax purposes will be
recognized by an option holder upon receipt or exercise of an incentive stock
option and the Company will not then be entitled to any tax deduction. Assuming
that the option holder does not dispose of the option shares before the
expiration of the longer of (i) two years after the date of grant, or (ii) one
year after the transfer of the option shares, upon disposition, the option
holder will recognize capital gain equal to the difference between the sale
price on disposition and the exercise price.
If, however, the option holder disposes of his option shares prior to
the expiration of the required holding periods, he will recognize ordinary
income for Federal income tax purposes in the year of disposition equal to the
lesser of (i) the difference between the fair market value of the shares at date
of exercise and the exercise price, or (ii) the difference between the sale
price upon disposition and the exercise price. Any additional gain on such
disqualifying disposition will be treated as capital gain. In addition, if such
a disqualifying disposition is made by the option holder, the Company will be
entitled to a deduction equal to the amount of ordinary income recognized by the
option holder provided such amount constitutes an ordinary and reasonable
expense of the Company.
The amount by which the fair market value of the shares at the time of
exercise exceeds the exercise price of an incentive stock option will be a tax
preference item for purposes of the alternative maximum tax, which, in general,
imposes a 26% tax rate on the initial $175,000 (and a 28% rate in excess of
$175,000) of the excess of (i) an individual's taxable income with certain
adjustments and increased by certain tax preference items over (ii) $33,750
($45,000 for joint returns) reduced by $.25 for each $1.00 by which the
alternative minimum taxable income exceeds $112,500 ($150,000 for joint
returns). Special rules apply to capital gain income. An individual will be
liable for the alternative minimum tax only to the extent that the amount of
such tax exceeds the liability for regular Federal income tax.
Tax Treatment of Non-Statutory Options
No taxable income will be recognized by an option holder upon receipt
of a non-statutory stock option, and the Company will not be entitled to a tax
deduction for such grant.
Upon the exercise of a non-statutory stock option, the option holder
will include in taxable income for Federal income tax purposes the excess in
value on the date of exercise of the shares acquired upon exercise of the
non-qualified stock option over the exercise price. Upon a subsequent sale of
the shares, the option holder will derive short-term or long-term gain or loss,
depending upon the option holder's holding period for the shares, commencing
upon the exercise of the option, and upon the subsequent appreciation or
depreciation in the value of the shares.
The Company generally will be entitled to a corresponding deduction at
the time that the participant is required to include the value of the shares in
his income.
Withholding of Tax
The Company is permitted to deduct and withhold amounts required to
satisfy its withholding tax liabilities with respect to its employees or, in its
discretion, permit the withholding of shares otherwise issuable to the option
holder.
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Option Grants
No options have heretofore been granted under the 1999 Plan.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
ADOPTION OF THE 1999 PLAN.
-------------------------
PROPOSAL 4 - APPROVAL OF THE ADOPTION OF THE 1999 DIRECTORS STOCK
OPTION PLAN
The Board of Directors of the Company has unanimously approved for
submission to a vote of the stockholders a proposal to adopt the Directors Plan.
The Directors Plan is intended to assist the Company in securing and
retaining Directors of the Company by allowing them to participate in the
ownership and growth of the Company through the grant of stock options
("Directors Options"). The Directors Plan will provide a means whereby such
Directors may purchase Common Stock pursuant to Directors Options granted in
accordance with the Directors Plan.
Administration and Grants
The Directors Plan will be administered by the Board of Directors of
the Company in accordance with the express provisions of the Directors Plan. The
Board of Directors will have full and complete authority to adopt such rules and
regulations and to make all such other determinations not inconsistent with the
Directors Plan as may be necessary for the administration of the Directors Plan.
On the date an eligible Director is elected to the Board of Directors,
such Director will receive the grant of an option to purchase 150,000 shares of
Common Stock. On each anniversary date of the appointment of an eligible
Director to the Board of Directors, such Director will receive the grant of an
option to purchase 10,000 shares of Common Stock. The terms for the grant of
Directors Options to an eligible Director may only be changed if permitted under
Rule 16b-3 of the 1934 Act.
Common Stock Subject to the Plan
The Common Stock to be issued under the Directors Plan will be
currently authorized but unissued Common Stock. The number of shares of Common
Stock available under the Directors Plan will be subject to adjustment to
prevent dilution in the event of a stock split, combination of shares, stock
dividend or certain other events. Shares of Common Stock subject to unexercised
Directors Options that expire or are terminated prior to the end of the period
during which Directors Options may be granted will be restored to the number of
shares of Common Stock available for issuance under the Directors Plan.
The Company is authorized under the Directors Plan to issue shares of
Common Stock pursuant to the exercise of Directors Options with respect to a
maximum of 750,000 shares of Common Stock. As of the date hereof, options to
purchase 300,000 shares of Common Stock at an exercise price of $0.15 per share,
vesting over a three year period have been granted pursuant to, and subject to
approval by the
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affirmative vote of the holders of a majority of the outstanding shares of
Common Stock, the Directors Plan and are held by Directors of the Company, as
follows:
Steven Wolosky 150,000 Shares
Larry Callahan - 150,000 Shares
Eligibility
The Committee is authorized to grant Directors Options under the
Directors Plan only to Directors who are not full or part time employees of the
Company or its subsidiaries or affiliates of the Company (directors who directly
or indirectly own more than 10% of the outstanding shares of Common Stock of the
Company). The term of the Directors Option shall be five (5) years from the
grant date of each Directors' Option, subject to earlier termination in
accordance with the Directors Plan.
Description of Options
The exercise price for each share of Common Stock subject to a
Directors Option shall be the closing price or last sale price on the date of
issuance.
Directors Options granted under the Directors Plan are exercisable at
such time or times and subject to such terms or conditions as shall be
determined by the Board, provided, however, that except in the event of death or
disability upon which events the Directors Options are immediately exercisable,
unless a longer vesting period is otherwise determined by the Board of Directors
at grant, Directors Options are exercisable as follows: one-third of the
aggregate shares of Common Stock purchasable thereunder commencing one year
after the date of grant, an additional one-third exercisable commencing two
years after the date of grant and the balance commencing on the third
anniversary from the date of grant. The Board of Directors may waive such
installment exercise provision at any time in whole or in part based on
performance and/or such other factors as the Board of Directors may determine in
its sole discretion, however no Directors Options shall be exercisable until
after six months from the date of grant.
Directors Options may be exercised in whole or in part at any time
during the option period, by written notice of exercise and payment of the full
purchase price as follows: in cash or by check, bank draft or money order
payable to the Company; by delivery of shares of Common Stock already owned by
an eligible director (based on the fair market value of the Common Stock on the
date of exercise); or through the written election of the Director to have
shares of Common Stock withheld from the shares of Common Stock otherwise to be
received (based on the fair market value of the Common Stock on the date of
exercise).
Transferability; Termination of Directorship
All Directors Options granted under the Directors Plan are
non-transferable and non-assignable except by will or by the laws of descent and
distribution, and may be exercised during the lifetime of the optionee only by
the optionee, his guardian or legal representative.
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Termination and Amendment
The Directors Plan will terminate on October 11, 2009, but may be
terminated by the Board of Directors at any time before such date. The Directors
Plan may be amended at any time by the Board of Directors. However, without the
approval of the stockholders of the Company, no such amendment may (i) increase
the number of shares of Common Stock which may be issued under the Directors
Plan; (ii) modify the requirements as to eligibility for participation in the
Directors Plan; (iii) change the minimum option exercise price; or (iv) extend
the Directors Option term. Any termination or amendment of the Directors Plan
will not impair the rights of optionees under outstanding Directors Options
without the consent of the affected optionees.
Federal Income Tax Consequences
No taxable income will be recognized by an option holder upon receipt
of a non-statutory stock option, and the Company will not be entitled to a tax
deduction for such grant.
Upon the exercise of a non-statutory stock option, the option holder
will include in taxable income for Federal income tax purposes the excess in
value on the date of exercise of the shares acquired upon exercise of the
non-qualified stock option over the exercise price. Upon a subsequent sale of
the shares, the option holder will derive short-term or long-term gain or loss,
depending upon the option holder's holding period for the shares, commencing
upon the exercise of the option, and upon the subsequent appreciation or
depreciation in the value of the shares.
The Company generally will be entitled to a corresponding deduction at
the time that the participant is required to include the value of the shares in
his income.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
ADOPTION OF THE DIRECTORS PLAN.
-------------------------
PROPOSAL 5 - RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
On November 24, 1998, PricewaterhouseCoopers LLP resigned as the
auditors for the Company.
During the fiscal years ending March 31, 1998 and March 31, 1997, there
were no disagreements with PricewaterhouseCoopers LLP on any matter of
accounting principles or practices, financial statement disclosure, auditing
scope or procedure or any other reportable event which, if not resolved to the
satisfaction of PricewaterhouseCoopers LLP, would have caused them to make
reference to the matter in their report.
PricewaterhouseCoopers LLP's report on the Company's financial
statements for the fiscal year ended March 31, 1998, contained a qualification
and explanatory paragraph with respect to the Company's ability to continue as a
going concern. Except with respect to the qualification and explanatory
paragraph for the fiscal year ended March 31, 1998, the reports of
PricewaterhouseCoopers LLP for the fiscal years ended March 31, 1998 and March
31, 1997 did not contain an adverse opinion or disclaimer of opinion, and were
not qualified or modified as to uncertainty, audit scope, or accounting
principles.
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PricewaterhouseCoopers LLP previously furnished the Company with a
letter addressed to the SEC stating that it agreed with the above statements.
In June 1999, the Company engaged Grant Thornton LLP as the Company's
auditors. The Company has not consulted with Grant Thornton LLP during the past
two fiscal years concerning the application of accounting principles or any
issues related to accounting, auditing or financial reporting.
Although the selection of auditors does not require ratification, the
Board has directed that the appointment of Grant Thornton LLP be submitted
stockholders for ratification due to the significance of such appointment to the
Company. If stockholders do not ratify the appointment of Grant Thornton LLP,
the Board will consider the appointment of other certified public accountants.
The approval of the proposal to ratify the appointment of Grant Thornton LLP
requires the affirmative vote of a majority of votes cast by holders of the
Common Stock.
The Company's auditors for Fiscal 1999 were Grant Thornton LLP. The
Company does not expect a representative of Grant Thornton LLP to be present at
the Meeting.
Annual Report
All stockholders of record as of the Record Date, have been sent, or
are concurrently herewith being sent, a copy of the Company's 2000 Annual Report
for the year ended March 31 2000, which contains certified consolidated
financial statements of the Company and its subsidiaries for the year ended
March 31, 2000.
ANY STOCKHOLDER OF THE COMPANY MAY OBTAIN, WITHOUT CHARGE, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED MARCH 31, 2000
(WITHOUT EXHIBITS) AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BY
WRITTEN REQUEST TO THE COMPANY'S SECRETARY, CPX CORP., 150 EAST 52ND STREET,
21ST FLOOR, NEW YORK, NEW YORK 10022.
STOCKHOLDER PROPOSALS
In order to be considered for inclusion in the proxy materials to be
distributed in connection with the next Annual Meeting of Stockholders of the
Company, stockholders proposals for such meeting must be submitted to the
Company no later than February 5, 2001.
On May 21, 1998 the Securities and Exchange Commission adopted an
amendment to Rule 14a- 4, as promulgated under the Securities and Exchange Act
of 1934, as amended. The amendment to Rule 14a-4(c)(1) governs the Company's use
of its discretionary proxy voting authority with respect to a stockholder
proposal which is not addressed in the Company's proxy statement. The new
amendment provides that if a proponent of a proposal fails to notify the Company
at least 45 days prior to the month and day of mailing of the prior year's proxy
statement, then the Company will be allowed to use its discretionary voting
authority when the proposal is raised at the meeting, without any discussion of
the matter in the proxy statement.
With respect to the Company's 2001 Annual Meeting of Stockholders, if
the Company is not provided notice of a stockholder proposal, which the
stockholder has not previously sought to include in the Company's proxy
statement, by May 20, 2001, the Company will be allowed to use its voting
authority as outlined above.
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OTHER MATTERS
As of the date of this Proxy Statement, management knows of no matters
other than those set forth herein which will be presented for consideration at
the Meeting. If any other matter or matters are properly brought before the
Meeting or any adjournment thereof, the persons named in the accompanying Proxy
will have discretionary authority to vote or otherwise act, with respect to such
matters in accordance with their judgment. Proxy will have discretionary
authority to vote or otherwise act, with respect to such matters in accordance
with their judgment.
Warren G. Lichtenstein
Chairman and
Chief Executive Officer
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF CPX CORP.
PROXY -- Annual Meeting of Stockholders August __, 2000
The undersigned, a stockholder of CPX Corp., a Delaware Company (the
"Company"), does hereby constitute and appoint Warren G. Lichtenstein and Steven
Wolosky the true and lawful attorneys and proxies with full power of
substitution, for and in the name, place and stead of the undersigned, to vote
all of the shares of Common Stock of the Company that the undersigned would be
entitled to vote if personally present at the 2000 Annual Meeting of
Stockholders of the Company to be held at the offices of Olshan Grundman Frome
Rosenzweig & Wolosky LLP at 505 Park Avenue, New York, New York 10022 on August
__, 2000 at 12:00 p.m., local time, or at any adjournment or adjournments
thereof.
The undersigned hereby instructs said proxies or their substitutes as
set forth below.
1. ELECTION OF DIRECTORS:
The election of Warren G. Lichtenstein, Steven Wolosky and Larry
Callahan.
/ / FOR / / TO WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S), PRINT
NAME(S) BELOW:
--------------------------------
2. APPROVAL AND ADOPTION OF THE PROPOSED AMENDMENT TO ARTICLE IV OF THE
COMPANY'S CERTIFICATE OF INCORPORATION TO EFFECT A 1-FOR-[____] REVERSE
SPLIT FOLLOWED BY A [___]-FOR-1 FORWARD STOCK SPLIT.
/ / FOR / / AGAINST / / ABSTAIN
3. APPROVAL AND ADOPTION OF THE 1999 PLAN.
/ / FOR / / AGAINST / / ABSTAIN
4. APPROVAL AND ADOPTION OF THE DIRECTORS PLAN
/ / FOR / / AGAINST / / ABSTAIN
5. TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS:
/ / FOR / / AGAINST / / ABSTAIN
6. DISCRETIONARY AUTHORITY:
In their discretion, the proxies are authorized to vote upon such other
and further business as may properly come before the Meeting.
(Continued on the reverse side)
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THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS HEREINBEFORE
GIVEN. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO ELECT THE
NOMINEES AS DIRECTORS, IN FAVOR OF THE APPROVAL AND ADOPTION OF THE REVERSE
SPLIT FOLLOWED BY THE FORWARD SPLIT, IN FAVOR OF THE APPROVAL AND ADOPTION OF
THE 1999 STOCK OPTION PLAN AND THE DIRECTORS PLAN, TO RATIFY THE APPOINTMENT OF
GRANT THORNTON LLP AS THE COMPANY'S INDEPENDENT AUDITOR AND IN FAVOR OF AND IN
ACCORDANCE WITH THE DISCRETION OF THE PROXIES OR PROXY WITH RESPECT TO ANY OTHER
BUSINESS TRANSACTED AT THE ANNUAL MEETING.
The undersigned hereby revokes any proxy or proxies heretofore given
and acknowledges receipt of a copy of the Notice of Annual Meeting and Proxy
Statement, both dated July __, 2000, and a copy of the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 2000.
Please mark, date, sign and mail this proxy in the envelope provided for this
purpose. No postage is required if mailed in the United States.
, 2000
------------------------------------(L.S.)
------------------------------------(L.S.)
Signature(s)
NOTE: Please sign exactly as your name or names appear hereon. When signing as
attorney, executor, administrator, trustee or guardian, please indicate the
capacity in which signing. When signing as joint tenants, all parties in the
joint tenancy must sign. When a proxy is given by a Company, it should be signed
with full corporate name by a duly authorized officer.
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