SCHEDULE 14A
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
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11 or Section 240.14a-2.
Computer Concepts Corp.
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(Name of Registrant as Specified in its Charter)
Computer Concepts Corp.
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j) (2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)3.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
- -------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- -------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------------
[ ] 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) Dated Filed:
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<PAGE>
COMPUTER CONCEPTS CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
November 26, 1997
To the Stockholders of:
COMPUTER CONCEPTS CORP.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Computer
Concepts Corp. will be held at The Ritz Carlton, 17th and Chestnut Streets at
Liberty Place, Philadelphia, Pennsylvania 19103, on Wednesday, November 26,
1996, at 3:00 p.m., or at any adjournment thereof (the "Annual Meeting"), for
the following purposes: (Computer Concepts Corp. is also providing shareholder
information meetings on December 4, 1997 at 10:00 a.m. at the Huntington Hilton,
598 Broadhollow Road, Melville, New York 11747 and on December 11, 1997 at 10:00
a.m. at Softworks, 5845 Richmond Highway, Alexandria, Virginia 22303).
1. To elect five directors to the Board of Directors.
2. To consider and act upon a proposal to amend the Certificate of
Incorporation to provide for a classified Board of Directors, as set forth
in Exhibit A.
3. To consider and act upon a proposal to amend the Company's Certificate of
Incorporation to authorize 1 million shares of preferred stock, the voting
powers, full or limited, or no voting powers, and the designations,
preferences and relative, participating, optional or other special rights,
and qualifications or restrictions thereof, of which may be determined by
the Board of Directors, as set forth in Exhibit B.
Note: Of the following proposals 4 through 12 to authorize a reverse stock
split of differing ratios, only one such ratio may ultimately be put into
effect pursuant to this vote.
4. To consider and act upon a proposal to grant the Board of Directors
authority to amend the Certificate of Incorporation to effect a "one-for
two reverse stock split" of the Common Stock, as set forth in Exhibit C;
5. To consider and act upon a proposal to grant the Board of Directors
authority to amend the Certificate of Incorporation to effect a "one-for
three reverse stock split" of the Common Stock, as set forth in Exhibit D;
6. To consider and act upon a proposal to grant the Board of Directors
authority to amend the Certificate of Incorporation to effect a "one-for
four reverse stock split" of the Common Stock, as set forth in Exhibit E;
7. To consider and act upon a proposal to grant the Board of Directors
authority to amend the Certificate of Incorporation to effect a "one-for
five reverse stock split" of the Common Stock, as set forth in Exhibit F;
8. To consider and act upon a proposal to grant the Board of Directors
authority to amend the Certificate of Incorporation to effect a
"one-for-six reverse stock split" of the Common Stock, as set forth in
Exhibit G;
<PAGE>
9. To consider and act upon a proposal to grant the Board of Directors
authority to amend the Certificate of Incorporation to effect a
"one-for-seven reverse stock split" of the Common Stock, as set forth in
Exhibit H;
10. To consider and act upon a proposal to grant the Board of Directors
authority to amend the Certificate of Incorporation to effect a
"one-for-eight reverse stock split" of the Common Stock, as set forth in
Exhibit I;
11. To consider and act upon a proposal to grant the Board of Directors
authority to amend the Certificate of Incorporation to effect a
"one-for-nine reverse stock split" of the Common Stock, as set forth in
Exhibit J;
12. To consider and act upon a proposal to grant the Board of Directors
authority to amend the Certificate of Incorporation to effect a
"one-for-ten reverse stock split" of the Common Stock, as set forth in
Exhibit K;
13. To consider and act upon a proposal to adopt a 1997 Stock Incentive Plan,
as set forth in Exhibit L.
14. To consider and act upon a proposal to grant the Board of Directors
authority to amend the Certificate of Incorporation to increase the
authorized shares of Common Stock from 150,000,000 to 300,000,000 as set
forth in Exhibit M.
15. To ratify the appointment by the Board of Directors of Hayes & Co. as the
Company's independent certified public accountants for fiscal/calendar year
1997.
16. To consider and act upon such other business as may properly come before
this meeting or any adjournment thereof.
The above matters are set forth in the Proxy Statement attached to this
Notice to which your attention is directed.
You are cordially invited to attend the Annual Meeting of Stockholders.
Only stockholders of record on the books of the Company at the close of business
on October 3, 1997, will be entitled to vote at the Annual Meeting of
Stockholders or at any adjournment thereof. Whether or not you plan to attend
the meeting, it is important that your shares be represented. Accordingly, you
are requested to sign, date and return the enclosed Proxy in the enclosed
envelope which requires no postage if mailed in the United States, at your
earliest convenience in order that your shares may be voted for you as
specified.
Dated October 14, 1997 By Order of the Board of Directors,
Bohemia, New York
DANIEL DEL GIORNO, SR.
Chief Executive Officer
YOUR VOTE IS IMPORTANT
To ensure your vote is being counted, you are requested to complete, sign and
date the enclosed Proxy card as promptly as possible and mail it in the enclosed
envelope. You should carefully review the materials attached hereto, including
the attached Proxy Statement and the exhibits attached to the Proxy Statement,
before casting your vote.
<PAGE>
COMPUTER CONCEPTS CORP.
80 Orville Drive
Bohemia, New York 11716
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
Wednesday, November 26, 1997
---------------
The Annual Meeting of Stockholders of Computer Concepts Corp. (the
"Company") will be held on Wednesday, November 26, 1997, at The Ritz Carlton,
17th and Chestnut Streets at Liberty Place, Philadelphia, Pennsylvania 19103, at
3:00 p.m. for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders. (Computer Concepts Corp. is also providing shareholder
information meetings on December 4, 1997 at 10:00 a.m. at the Huntington Hilton,
598 Broadhollow Road, Melville, New York 11747 and on December 11, 1997 at 10:00
a.m. at Softworks, 5845 Richmond Highway, Alexandria, Virginia 22303).
The enclosed proxy is solicited by and on behalf of the Board of Directors
of Computer Concepts Corp. for use at the Annual Meeting of Stockholders. The
approximate date on which this proxy statement and the enclosed proxy are
anticipated to be first mailed to stockholders is October 15, 1997.
The Company's 1996 Annual Report, a copy of which is also enclosed
herewith, contains the Company's financial statements for its fiscal year ended
December 31, 1996. A copy of the Company's most recent quarterly report
(unaudited) for the period ended June 30, 1997, is also enclosed herewith.
If a proxy in the accompanying form is duly executed and returned, the
shares represented by such proxy will be voted as specified. Any person
executing the proxy may revoke it prior to its exercise either by letter
directed to the Company or in person at the Annual Meeting.
Voting Rights
Only stockholders of record on October 3, 1997 (the "Record Date") will be
entitled to vote at the Annual Meeting or any adjournment thereof. The Company
has outstanding at the Record Date one class of voting capital stock, namely
150,000,000 shares of Common Stock, $.0001 par value per share, of which
120,715,318 shares are outstanding and entitled to vote. Stockholders are
entitled to one vote for each share registered in their names at the close of
business on the Record Date. The affirmative vote of a majority of the votes
cast at the Annual Meeting is required for approval of each matter to be
submitted to a vote of the shareholders, except that the votes of the holders of
a majority of all shares entitled to vote is required to approve the proposals
to amend the Company's Certificate of Incorporation to: reclassify its board of
directors and require a two-thirds vote to amend that article of the Articles of
Incorporation, authorize a reverse stock split, authorize the board of directors
to increase the number of authorized shares of Common Stock and authorize a new
class of Preferred Stock.
For purposes of determining whether proposals have received a majority
vote, abstentions will not be included in the vote totals and, in instances
where brokers are prohibited from exercising discretionary authority for
beneficial owners who have not returned a proxy (so called "broker non-votes"),
those votes will not be included in the vote totals. Therefore, abstentions and
<PAGE>
broker non-votes will have no effect on the vote, but will be counted in the
determination of a quorum. The cost of the solicitation will be borne by the
Company. In addition to solicitation by mail, proxies may be solicited in person
or by telephone or electronic means by officers, directors or employees of the
Company without additional compensation.
If a preference is not indicated as to any particular proposal on a signed
and dated Proxy delivered by any stockholder, the Proxy will be counted as FOR
such Proposals.
A form of proxy is enclosed. If properly executed and received in time for
voting, and not revoked, the enclosed proxy will be voted as indicated in
accordance with the instructions thereon. If no directions to the contrary are
indicated, the persons named in the enclosed proxy will vote all shares of
Common Stock For the election of the nominee for directorship hereinafter named
and For the approval of the each of the other proposals being voted upon.
The enclosed proxy confers discretionary authority to vote with respect to
any and all of the following matters that may come before the meeting: (i)
matters which the Company's Board of Directors does not know, a reasonable time
before proxy solicitation, are to be presented; (ii) approval of the minutes of
a prior meeting of shareholders, if such approval does not constitute
ratification of the action taken at that meeting; (iii) the election of any
person to any office for which a bona fide nominee is unable to serve or for
good cause will not serve; (iv) any proposal omitted from this proxy statement
and the form of proxy pursuant to Rules 14a-8 or 14a-9 under the Securities
Exchange Act of 1934, as amended; and (v) matters incidental to the conduct of
the Annual meeting.
The Board of Directors currently is not aware of any matters (other than
procedural matters) which will be brought before the meeting and which are not
referred to in the enclosed meeting notice. If any such matters are properly
brought before the meeting, the persons named in the enclosed proxy will act or
vote in accordance with their best judgment.
Any shareholder who executes and returns a proxy may revoke it by
submitting written revocation to the Secretary of the Company at any time before
the proxy is exercised, by submitting another duly executed proxy with a later
date, or by appearing and voting in person at the Annual Meeting.
<PAGE>
SECURITY OWNERSHIP
The following table sets forth as of December 31, 1996 certain information
with regard to ownership of the Company's Common Stock by (i) each beneficial
owner of 5% or more of the Company's Common Stock, to the knowledge of the
Company based upon filings with the Securities and Exchange Commission; (ii)
each current and proposed director and the current executive officers named in
the "Summary Compensation Table" below; and (iii) all executive officers and
directors of the Company as a group:
<TABLE>
<CAPTION>
Common Stock % of Outstanding
Name of Beneficial Owner Beneficially Owned(1) Shares (2)
- ------------------------ ------------------ ---------------
<S> <C> <C>
Daniel Del Giorno, Sr. (3)(5) 2,876,500 2.84%
Daniel Del Giorno, Jr. (3)(4)(5) 2,755,048 2.72%
Russell Pellicano (3)(6) 681,000 *
Jack S. Beige (3) 330,555 *
Augustin Medina (3) 163,055 *
George Aronson(3)(7) 550,000 *
Ed Warman(3)(8) 1,435,000 1.50%
- -------
<FN>
* Less than 1%
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission and, accordingly, may
include securities owned by or for, among others, the wife and/or minor children
of the individual and any other relative who has the same home as such
individual, as well as other securities as to which the individual has or shares
voting or investment power or has the right to acquire within 60 days after the
Record Date. The same shares may be beneficially owned by more than one person.
Beneficial ownership may be disclaimed as to certain of the securities.
(2) Based on 101,335,272 shares outstanding as of December 31, 1996.
(3) The address of the holder is 80 Orville Drive, Suite 200, Bohemia, New
York 11716.
(4) Includes shares held by his spouse. Daniel Del Giorno, Jr. has majority
control of Tech Marketing Group which owns 174,048 shares.
(5) Includes 680,000 options (exercisable at $0.50 per share), and 600,000
options (exercisable at $.01).
(6) Includes 100,000 options (exercisable at $1.50 per share).
(7) Includes 25,000 options (exercisable at $.01 per share).
(8) Includes 200,000 options (exercisable at $1.50 per share) and 80,000
options (exercisable at $.50 per share).
</FN>
</TABLE>
<PAGE>
ELECTION OF DIRECTORS
The Company's Bylaws provides for a Board of Directors consisting of not
less than three nor more than seven directors. The Company's Board of Directors
now consists of five directors as set forth below:
<TABLE>
<CAPTION>
Director
Name Position Held Since:
---- ------------- --------
<S> <C> <C>
Daniel Del Giorno, Sr. Chief Executive Officer, Director 1989
Daniel Del Giorno, Jr. President, Treasurer and Director 1989
Russell Pellicano (1) Secretary, Director 1989
Jack S. Beige, Esq. (1) Director 1996
Augustin Medina (1) Director 1996
- ------
<FN>
(1) Member of the Audit and Compensation Committees, established in January,
1996.
</FN>
</TABLE>
If the proposal to classify the Board of Directors is adopted, the persons
named in the accompanying form of Proxy intend to vote for the election of the
nominees named below for terms expiring at the Annual Meeting in the years set
forth opposite their names. If the proposal to classify the Board of Directors
is not adopted, the directors will be elected to hold office until the next
annual meeting of shareholders or until his successor is chosen and qualified.
In the event that any nominee at the time of election shall be unable or
unwilling to serve or is otherwise unavailable for election (which contingency
is not now contemplated or foreseen), and in consequence other nominees shall be
nominated, the persons named in the form of Proxy shall have the discretion or
authority at this Annual Meeting to vote or refrain from voting in accordance
with the direction of the Board of Directors on such other nominations. The
Board of Directors has no reason to believe that any of the nominees will be
unavailable, or, if elected, will decline to serve.
The Board of Directors held twenty-nine meetings during the Company's year
ended December 31, 1996. Each director attended or participated in at least 75%
of such meetings of the Board of Directors. The Company's Audit Committee's
functions involve discussions with the Company's independent public accountants
with respect to the year end audited financial statements, and the Compensation
Committee' functions involve making recommendations for executive compensation
including the granting of stock or options to key employees.
Principal Occupations of Directors
The following is a brief account of the business experience for the past
five years of the Company's directors:
<PAGE>
Daniel Del Giorno, Sr. is Chairman, Assistant Secretary and a director of
the Company since April 1989, and is the father of Daniel Del Giorno, Jr., the
Company's President and also a director. During the period 1987 to April 1989,
Mr. Del Giorno, Sr. together with Mr. Pellicano (director of the Company) was
engaged in the research and development of d.b.Express . Prior thereto, during
the period 1985 to May 1987, Mr. Del Giorno, Sr. was the Chief Executive Officer
of Myotech, Inc. ("Myotech"), a privately held corporation which produced
computerized muscle testing equipment for chiropractors and physical therapists.
Myotech was sold to Hemodynamics, Inc. in May 1987 and later became a public
corporation. Mr. Del Giorno, Sr. was a practicing chiropractor for many years
and had founded a chiropractic clinic employing 4 chiropractors and 6
technicians in addition to administrative personnel. He also successfully
collaborated with Mr. Pellicano in connection with the design and development of
medical equipment for comparative muscle testing. A patent has been granted to
Mr. Pellicano and Mr. Del Giorno, Sr. in connection therewith. In addition, Mr.
Del Giorno, Sr. is the holder of a patent for a digital myograph for the testing
of muscles by computer.
Daniel Del Giorno, Jr., the Company's President and Chief Executive
Officer, Treasurer and a director, is the son of Daniel Del Giorno, Sr. and has
been with the Company since April 1989. Prior to joining the Company and during
the period 1987 to 1989 Mr. Del Giorno, Jr. was involved in providing the
management and financial support for and collaborated with Mr. Del Giorno, Sr.
and Russell Pellicano in connection with the development of d.b.Express . During
the period 1984 to May 1987, he was the President of Myotech, a privately held
Company producing muscle testing equipment. He is also the President and
principal shareholder of Tech Marketing Group Corp., a privately held
corporation which is a shareholder of the Company.
Russell Pellicano is a director and Secretary of the Company since April,
1989 and served as Vice President since April 1989 through February 1994. Mr.
Pellicano was the original founder and principal of RAMP Associates Inc.
("RAMP"), which was acquired by the Company in October 1990, through which he
has engaged in consulting to major corporations and others for the design of
software and hardware for computers. A major customer of RAMP since its
inception has been Grumman Corporation. Mr. Pellicano, through RAMP, has been
consulting for Grumman and other corporations. He is the chief architect and
designer of d.b.Express and has been involved in designing and developing
computer software and hardware for the past 30 years. Among many noteworthy
projects for which he was responsible at Grumman was the design and installation
of the Orbiting Astronomical Observatory Space Craft Ground Station, and he was
a member of the launch team at Cape Kennedy in conjunction therewith. He was
also Senior Systems Analyst for Grumman in connection with the test
instrumentation for the forward sweep wing (X29) experimental aircraft on-board
computer system, and the F-14D and the A-6E production aircraft. Mr. Pellicano
is a graduate of C. W. Post College in 1973 with a degree in Electrical
Engineering.
Jack S. Beige, D.C., J. D. has been a director since January, 1996, and was
appointed as a member of the Audit Committee and the Compensation Committee,
also effective January, 1996. Mr. Beige received his Juris Doctor degree in 1993
and has been a practicing attorney, primarily in business related matters, on
<PAGE>
Long Island, New York, since then. Prior thereto, Mr. Beige practiced
chiropractic medicine, was President of BSJ Realty Corporation, President of All
Travel, Ltd. and was President of Comp Consulting, Inc. During his practice as a
chiropractic doctor, he was elected a Fellow of the International College of
Chiropractors, was appointed as Chairman of the New York State Worker's
Compensation Board, Chiropractic Practice Committee and was elected President of
the New York State Chiropractic Association in 1987. Mr. Beige is admitted to
the New York State Bar and is a member of the New York State Bar Association,
the Nassau and Suffolk County Bar Associations and is a member of the American
Arbitration Association.
Augustin Medina has been a director since January, 1996, and was appointed
as a member of the Audit Committee and the Compensation Committee, also
effective January, 1996. During the last five years and previously, Mr. Medina
has been an independent business broker associated with the Montecristi
Corporation, Gallagher Associates and Anderson Credit and Leasing, on Long
Island, New York. Mr. Medina's business background includes advising and
assisting businesses in computer and non-computer related businesses in their
development and structuring of sales and marketing programs.
MANAGEMENT
The following sets forth information concerning each executive officer of
the Company who is not also a candidate nominated for election as a director.
The officers of the Company serve at the pleasure of the Board of Directors or
until their successors are chosen and qualify.
<TABLE>
<CAPTION>
Position Held
Name Age With the Company
- ---- --- ----------------
<S> <C> <C>
Daniel Del Giorno, Sr. 64 Chairman, Assistant Secretary,
Director
Daniel Del Giorno, Jr. 42 President and CEO, Treasurer,
Director
Russell Pellicano 56 Secretary, Director
Jack S. Beige 53 Director
Augustin Medina 57 Director
George Aronson 48 Chief Financial Officer
Edward Warman 54 Executive Vice President, Products
and Services
- ------------------
</TABLE>
George Aronson, C.P.A., has been the Chief Financial Officer of the
Company since August, 1995. From March, 1989, to August, 1995, he was the Chief
Financial Officer of Hayim & Co., an importer/distribution organization. Mr.
Aronson graduated from Long Island University with a major in accounting in
1972, receiving a Bachelor of Science degree and is a Certified Public
Accountant.
<PAGE>
Edward Warman joined the Company in September 1993 as Vice President of
Products and Services. From 1989 to 1993, he served as Vice President, Product
Development for Comdisco Disaster Recovery Services, Inc. where he was
responsible for the design and implementation of a new product line of disaster
recovery software. From 1984 to 1989, Mr. Warman was Vice President of Research
and Development at Intersolv, Inc., with responsibility for a software
development staff exceeding 100 people. Prior to 1984, he served in various
software development management positions at organizations including Cincom
Systems, Inc., Computer Resources, and Monsanto. Mr. Warman possesses degrees in
systems analysis, economics and chemical engineering.
Compensation of Directors
Directors of the Company are not compensated for their services as directors,
however, outside directors receive a formula award annually pursuant to the
Outside Directors Stock Option Plan approved by the shareholders of the Company
in 1996. Further, it has been the policy of the Company not to pay its directors
for attending Board or committee meetings, but the Company may reimburse
directors for travel expenses incurred in attending such meetings. No director
fees or expense reimbursements were paid or reserved for payment to the
Company's directors in 1996. Executive Compensation
Compensation Committee Interlocks and Insider Participation
From 1989 through 1995, the Company had three directors, Messrs. Del
Giorno, Sr., Del Giorno, Jr. and Pellicano, and did not have a compensation
committee. In conjunction with the expansion of the Board of Directors to five
directors effective January 1, 1996, audit and compensation committees were
appointed. The audit and compensation committees which meet at varying intervals
consist of Russell Pellicano, Secretary of the Company, who served without
compensation during 1994 and 1995, and Jack S. Beige, Esq. and Augustin Medina,
neither of whom has any relationship requiring disclosure in this Proxy
Statement, except as otherwise noted. The Audit Committee provides oversight of
the Company's accounting methods and internal controls and assists in reviewing
recommendation made by the Company's independent public accountants. The Audit
Committee held three meetings in 1996. The compensation of the Company's
executives has historically been determined by the Board of Directors, which
includes the Company's senior executives, however, the Compensation Committee
now provides recommendations on structuring compensation arrangements and
incentive plans for action by the entire Board. The Compensation Committee held
four meetings in 1996. Included within the proposals presented for approval by
the stockholders is the adoption of the 1997 Long Term Incentive compensation
Plan (covering officers, employees, consultants and directors) which has been
recommended by the Compensation Committee and adopted by the Board. See Board of
Directors Report on Executive Compensation and Proposal 13.
Employment Agreements
The Company does not have employment agreements with any of the senior
management of the Company. The Company does have employment agreements with
certain of the officers of its subsidiaries, including Judy Carter, President of
Softworks, Inc. and Claude Kinsey, Vice President of Softworks, Inc., each with
a base salary of $150,000, expiring October, 1998, however, such officers are
not involved with establishing significant policies of the Company.
<PAGE>
Incentive Stock Plans
1993 and 1995 Stock Option Plans
The Company adopted a 1993 Non-Qualified Stock Option Plans for directors,
officers, consultants and employees of the Company, which authorized the Board
of Directors to make a one time grant of an unspecified number of shares or
options in regard to past services, and to grant annually up to ten percent of
the outstanding shares at prices equal to or above market prices and up to an
additional ten percent at prices below market. At December 31, 1996, no options
had been granted at prices below market under the plan, and an aggregate of
12,702,500 options were granted with exercise prices at or above market prices
from $.50 to $4.63, of which approximately 774,599 have been exercised (724,599
by non-affiliates and ex-employees and 50,000 by employees) and 1,532,524 have
terminated without exercise. 4,200,000 of the options previously granted under
the plan were repriced to $.50 per share in 1995, when the Company's market
price was $.28 per share and 2,425,000 of those options were repriced to $.01 in
1997, when the Company's market price was $.50 per share. In 1995, the Chief
Executive Officer and President were each granted 300,000 shares and 180,000
options exercisable at $.50 and 600,000 options exercisable at $1.50 per share
(repriced to $.01 per shares in 1997), which issuances were given shareholder
approval in 1996. As of December 31, 1996, under the 1995 Stock Option Plan
(approved by the shareholders in 1996) 8,813,500 shares and options to purchase
159,000 shares had been granted under the Plan with exercise prices from $.50 to
$1.80, none of which have been exercised or terminated. As of December 31, 1996,
15,009,542 options and/or warrants had been granted outside of the Plans, at
prices ranging between $.25 and $4.65 per share, of which 1,624,370 have been
exercised (by non-affiliates) and 1,149,940 have terminated without exercise. At
December 31, 1996, an aggregate of 22,789,609 options and/or warrants were
outstanding, of which 15,404,439 are outstanding as of October 10, 1997.
The Company has proposed the 1997 Incentive Stock Plan, and requests
shareholder approval at this meeting. See discussion below and Proposal 13, and
Exhibit L.
Certain Transactions
Since the inception of the Company, the Company has from time to time
borrowed from or advanced funds to Messrs. Daniel Del Giorno, Sr. and Daniel Del
Giorno, Jr. At December 31, 1996, the loan balance due from these officers was
approximately $682,000. Effective January, 1997, these advances are interest
bearing at the rate of 7% per annum. During the fourth quarter of 1996, the
Company advanced approximately $126,000 to Russell Pellicano. The advance was
settled with the Company prior to year end December 31, 1996, through the
transfer of marketable securities to the Company with a market value of
$126,000. During the year ended December 31, 1996, the Company paid director
Beige, fees for legal services aggregating $127,000.
In accordance with rules promulgated by the Securities and Exchange
Commission, the information included under the captions "Compensation
Committee Report on Executive Compensation" and "Performance Graph"
will not be deemed to be filed or to be proxy soliciting material or
incorporated by reference in any prior or future filings by the Company
under the Securities Act of 1933 or the Securities Exchange Act.
<PAGE>
Board of Director Report On Executive Compensation
The compensation of the Company's executive officers will be generally
determined by the Board of Directors based on the recommendation of the
Compensation Committee, subject to applicable employment agreements. The
majority of the members of the Compensation Committee are directors who are not
employees of the Company or any of its affiliates. Set forth below is the
Committee's report on the compensation policies for 1996 as they affected
executive officers of the Company.
With regard to executive compensation, it is the philosophy of the
Company to provide a program which attracts and retains executive officers and
other key employees critical to the Company's success, and to reward executive
officers for corporate, group and individual performance. Executive
compensation, including the Chairman and CEO, is evaluated by the Board using
the aforementioned subjective criteria and is not based solely on specific
objective criteria such as profitability of the corporation or market value of
its stock, however, it is noted that management has followed a policy of
granting compensation which is largely tied to shareholder values by the
issuance of restricted stock and/or stock options whereby the value to the
parties receiving such grants is thereby tied directly to increases in all
shareholders' market values. Of the three senior officers of the Company, Daniel
DelGiorno, Sr., Daniel DelGiorno, Jr., and Russell Pellicano, none of them
received cash compensation during 1994, only Daniel DelGiorno, Sr. received cash
compensation in 1995, and only Daniel DelGiorno, Sr. and Russell Pellicano in
1996. The Company anticipates that until such time as the Company has generated
significant cash reserves from operations from which to pay cash compensation,
the compensation committee will continue a policy of compensation primarily
through stock or options, thereby tying executive compensation to increases in
shareholder market values without depletion of the Company's cash resources. The
Company's compensation programs are intended to enable the Company to attract,
motivate, reward and retain the management talent required to achieve aggressive
corporate objectives in a rapidly changing industry, and thereby increase
stockholder value. It is the Company's policy to provide incentives to its
senior management to achieve both short-term and long-term objectives and also
to reward exceptional performance and contributions to the development of the
Company's business. To attain these objectives, the Company's executive
compensation program includes a competitive base salary, coupled with executive
bonus arrangements which are "at risk" based on the performance of the Company's
business, primarily as reflected in the achievement of certain revenue, earnings
and growth goals, as well as standard company benefit programs such as health
insurance and a 401k plan. The Company's employees and consultants, including
its executive officers, also are eligible to be granted stock and/or stock
options and other awards periodically in order to more directly align their
interests with the long-term financial interests of the Company's stockholders.
Base Salary
Each year the Committee examines the salaries of the officers of the
Company. Except for the senior executives of the Company's Softworks subsidiary,
the executive officers do not have employment agreements which provide for a
base salary, however, the Committee has recommended that the Board consider
entering into employment agreements with all of its key personnel. The Committee
provides recommendations for salary levels based on information available about
salaries in the Company's industry, inflation and the performance of the
individuals. In 1996, no increases in base salary occurred, however, Mr.
Pellicano began to draw a base salary. It is noted that Daniel Del Giorno, Jr.
has continued not to accept or draw a salary. See Summary Compensation Table,
below.
<PAGE>
Stock and/or Stock Options
Stock and /or stock options are awarded to executives in order to
encourage future management actions aimed at improving the Company's sales
efforts, client development and service quality, revenues and ultimately
profitability. If the Company is successful in improving these areas, it is
anticipated that these actions will generate a positive impact on the value of
the Company's common stock for all stockholders, and the individuals will be
given the opportunity to share in the increased value of the results of their
efforts. In 1996, shares valued at $232,000 were granted to each of the Del
Giorno's, and no options were granted. The Committee and Board believe that
these grants are in appropriate amounts in light of the contributions to, and
sacrifices made on behalf of, the Company, and provide an incentive for
management to maximize long-term shareholder value.
Chief Executive Officer Compensation
In establishing Mr. Del Giorno, Jr.'s compensation level, consideration
is given to his individual performance level as well as to factors discussed
above for all executive officers. Although the Committee has recommended a base
salary, he has not accepted the recommendation, requesting instead that he
continue to be compensated through stock or options which directly align his
interests and rewards with the stockholders of the Company.
Section 162(m) of the Federal Income Tax Code
Generally, Section 162(m) denies deduction to any publicly held company
such as the Company for certain compensation exceeding $1,000,000 paid to the
chief executive officer and the four other highest paid executive officers,
excluding among other things certain performance-based compensation. The
Compensation Committee and Board intend that the stock options issued qualify
for the performance-based exclusion under Section 162(m). The Compensation
Committee will continually evaluate to what extent Section 162 will apply to its
other compensation programs.
Respectively submitted,
The Compensation Committee
R. Pellicano
A. Medina
J. S. Beige
The following table sets forth the annual and long-term compensation
with respect to the Chairman and Chief Executive Officer and each of the other
executive officers of the Company who earned more than $100,000 for services
rendered for the years ended December 31, 1996, 1995 and 1994.
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long-Term Compensation
--------------------------------- ----------------------------------
Securities All
Other Restricted Underlying Other
Name and Fiscal Annual Stock Option Options/ Compen-
Principal Position Year Salary Bonus Compensation Awards (4) SARS(#) sation
- ------------------ ------ ------ ----- ------------ ------------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Daniel DelGiorno,Sr., (1) 1996 $259,000 $232,000 - - - -
Chief Executive Officer 1995 240,000 84,000 - 1,280,000 1,280,000 -
Director 1994 - - - - - -
Daniel DelGiorno, Jr.(1) 1996 - 232,000 - - - -
Director 1995 - 84,000 - 1,280,000 1,280,000 -
President, Treasurer 1994 - - - - -
Russell Pellicano(2) 1996 195,000 - - - - -
Secretary 1995 - - - 100,000 100,000 -
Director 1994 - - - - - -
George Aronson (3) 1996 144,000 187,000 - - - -
Chief Financial Officer 1995 31,000 - - - - -
1994 - - - - - -
Ed Warman(4) 1996 116,000 53,000 - - - -
Vice President of Products 1995 117,000 - - 200,000 200,000 -
& Services 1994 105,000 - - - - -
- -----------
<FN>
(1) 500,000 Stock options had an original exercise price of $2.56 per
share, their fair market value at date of grant, and were repriced to reflect an
exercise price of $.50 per share in 1995. D. Del Giorno, Sr., and D. Del Giorno,
Jr. were each granted an aggregate of 300,000 shares of stock and 180,000
options exercisable at $.50 in May, 1995, and 600,000 options exercisable at
$1.50 in November 1995 (repriced to $.01 in 1997)
(2) R. Pellicano was granted 100,000 options exercisable at $1.50 in 1995.
(3) Mr. Aronson was granted 25,000 options exercisable at $1.50 in 1995
which were repriced to $.01 in 1997.
(4) Mr. Warman was granted 80,000 options in 1994 exercisable at $2.56
which were repriced in 1995 to $.50, and 200,000 options in 1995 exercisable at
$1.50.
</FN>
</TABLE>
Option/SAR Grants in Last Fiscal Year
No options or stock appreciation rights (SAR) were granted to named
officers or directors in 1996.
Compliance with Sections 10(b) and 16 of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act requires the Company's
executive officers, directors and persons who own more than ten percent of a
registered class of the Company's equity securities ("Reporting Persons") to
file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission (the "SEC") and the National Association of
Securities Dealers, Inc. (which operates the National Association of Securities
Dealers Automated Quotation system) (the "NASDAQ"). These Reporting Persons are
required by SEC regulation to furnish the Company with copies of all Forms 3, 4
and 5 they file with the SEC and the NASDAQ. Based solely upon the Company's
review of the copies of the forms it has received, none of the named parties has
sold any of the Company's securities, however through an oversight, the Del
Giorno's, Mr. Aronson, and Mr. Warman each failed to timely file a report of one
stock grant received, and as to Mr. Del Giorno, Sr. and Mr. Pellicano, of gift
transfers.
<PAGE>
In order to assist officers, directors and beneficial owners of more
than ten percent of any class of equity securities of the Company ("Insiders"),
the Company has adopted a policy statement that it will distribute annually to
the Insiders with the request that they sign a certificate regarding compliance
with the policy statement. The policy statement suggests the circumstances under
which insiders may trade and conduct transactions involving equity securities of
the Company so as to comply with Sections 10(b) and 16 of the Securities
Exchange Act of 1934.
The policy statement recommends that transactions be made either
through participation in a periodic investment program where individual
investment decisions are outside the insider's direct control or, if this is not
practicable, that insiders refrain from purchase or sale of Company securities
where a development of major importance is expected in the next several weeks,
and prior to press releases. It recommends that insiders purchase or sell
Company securities only during the thirty days commencing at least one day after
the annual or quarterly report has been issued or otherwise broadly circulated,
where such report adequately reports corporate developments; only during a
period of relatively stable demand for the Company's securities; and only when
there has been wide dissemination of information concerning the status of the
Company and its current operating results.
PERFORMANCE GRAPH
The following graph sets forth the cumulative total return to the
Company's stockholders during the period indicated as well as an overall stock
market index (S & P 500 Index) and the Company's peer group index (S & P
Computer Software & Services):
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
<TABLE>
<CAPTION>
Cumulative Total Return
-------------------------------------------------------
8/27/92 12/92 12/93 12/94 12/95 12/96 9/97
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Computer Concepts Corp. CCEE 100 87 72 12 40 8 11
S & P 500 1500 100 104 115 116 160 196 255
S & P Computers (Software & Services) ICSF 100 119 152 179 252 392 580
</TABLE>
* * *
<PAGE>
1. PROPOSAL TO ELECT FIVE DIRECTORS
The Board of Directors has proposed and recommended to its stockholders a
proposal for the election of the following five individuals as the directors of
the Company: Daniel Del Giorno, Sr., Daniel Del Giorno, Jr., Russell Pellicano,
Jack S. Beige and Augustin Medina.
Board Position and Required Vote
The Board of Directors believes that the proposed amendment is in the
best interests of the Company and its stockholders and unanimously recommends
its adoption.
Each outstanding share of Common Stock will be entitled to one vote for
or against each proposed nominee as listed on the Proxy card. Each director will
be elected only if a quorum is present at the Annual Meeting and he receives the
affirmative vote of a majority of the outstanding shares present. The Board
urges that you vote FOR the proposed nominees. Proxies received will be voted in
favor of the proposed nominees unless otherwise instructed.
2. PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
TO PROVIDE FOR A CLASSIFIED BOARD OF DIRECTORS
This proposed amendment, as more specifically set forth in Exhibit B to
this Proxy Statement, provides for a classified Board of not less than three nor
more than nine directors.
Classified Board
This amendment provides for a Board consisting of not less than three nor
more than nine directors on a classified basis, in contrast to the By-Laws which
provides for a Board of not less than three nor more than nine directors on a
non-classified basis. This amendment provides for the classification of
Directors into three classes as nearly equal in number as possible whose terms
of office expire at different times in annual succession.
Initially, the Board will consist of five directors now holding office with
one or two directors in each class. The directors in Class I will serve until
the 1998 Annual Meeting, those in Class II until the 1999 Annual Meeting and
those in Class III until the 2000 Annual Meeting. At present, all of the
directors are elected at each Annual Meeting to serve for one year or until the
next election, whereas under the proposed amendment a minimum of one director
will be required to be elected each year, and directors will serve for terms of
three years with the exception that by approving this amendment the terms of the
present directors will expire variously in 1998, 1999 and 2000. If this proposal
is approved, for the initial classified board, the Board of Directors intends to
appoint Daniel Del Giorno, Sr. to serve in Class II, Daniel Del Giorno, Jr. to
serve in Class III, Russell Pellicano to serve in Class I, Jack S. Beige to
serve in Class III and Augustin Medina to serve in Class II. When the number of
directors is increased by the Board and any newly created directorships are
filled by the Board, there shall be no classification of the additional
directors until the next Annual Meeting of Stockholders. Subject to the
foregoing, directors elected by the Board to fill vacancies will hold office for
the unexpired portion of the term of directors whose places they have been
elected to fill even though their terms may thereby extend beyond the next
Annual Meeting of Stockholders.
<PAGE>
Possible Advantages
The Board of Directors believes that classification of the Board of
Directors as provided in the proposed amendment will promote continuity and
stability in the Company's management and policies and permit it to represent
effectively the interests of all stockholders and to respond prudently to
circumstances created by the demand or actions of a minority stockholder group.
Absent the removal or resignation of directors, two annual elections would be
required to replace a majority of classified board of Directors and effect a
forced change in the business and affairs of the Company. The proposed amendment
may therefore discourage an individual or entity from acquiring a significant
position in the Company with the intention of obtaining immediate control of the
Board of Directors. The acquiror could, however, immediately effect a change in
control of the Board of Directors by garnering the affirmative vote of the votes
necessary to amend the Certificate of Incorporation of the Company to eliminate
classification of the Board.
In the opinion of the Board of Directors, this provision will serve to
moderate the pace of any change in control of the Company by perpetuating in
office the present directors of the Company. A classified board also serves to
assure continuity and stability in leadership and policy since approximately
two-thirds of the directors at any time will have had prior experience on the
Board. The amendment, therefore, while providing stability in the management of
the Company, will also make it difficult to take over control of the Company.
The Board of Directors is presently unaware of any efforts to obtain control of
the Company.
Possible Disadvantages
The amendment also makes it more difficult to change directors, even when
it may be considered advantageous or desirable. In particular, stockholders may
be precluded from replacing a director by simply voting for an alternative
candidate at an annual election, in that each director will stand for election
only once every three years. Accordingly, a classified Board of Directors limits
stockholder participation in determining the management of the Company and
modifies the present ability of stockholders to replace board members.
Stockholder Vote Necessary for Approval
The proposed amendment to the Certificate of Incorporation must be approved
by an affirmative vote of the holders of a majority of the outstanding shares of
Common Stock of the Corporation. The Board of Directors unanimously recommends
that you vote FOR this proposed amendment.
Each outstanding share of Common Stock will be entitled to one vote for or
against each the proposal as listed on the Proxy card. The proposal will be
approved only if a quorum is present at the Annual Meeting and the proposal
receives the affirmative vote of a majority of the outstanding shares. The Board
urges that you vote FOR the proposal. Proxies received will be voted in favor of
the proposal unless otherwise instructed.
3. PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO
AUTHORIZE 1 MILLION SHARES OF SERIAL PREFERRED STOCK
<PAGE>
General
The Board of Directors has proposed and recommended to its stockholders a
proposal which authorizes the Board in its discretion to file a Certificate of
Amendment to the Company's Certificate of Incorporation which amends Article
Fourth of the Certificate of Incorporation to authorize 1,000,000 shares of
Serial Preferred Stock, the voting powers, full or limited, or no voting powers,
and the designations, preferences and relative, participating, optional or other
special rights, and qualifications or restrictions thereof, of which may be
determined by the Board of Directors.
Purpose of Authorized Shares of Serial Preferred Stock
The authorization of 1,000,000 shares of Serial Preferred Stock is intended
to provide additional flexibility to the Company for possible capital
reorganization, acquisitions, refinancing, exchange of securities, public
offerings and other corporate purposes. In recent years, the Company has issued
a substantial number of shares of Common Stock, which has significantly
decreased the number of shares of Common Stock presently available for issuance
for such purposes.
The Board of Directors, which recommends approval of this amendment,
believes it would be advantageous to the Company to be in a position to
authorize and issue new classes or series of Preferred Stock without the
necessary delay of calling a stockholders' meeting or seeking written consents
in lieu thereof if one or more suitable opportunities present themselves to the
company.
Upon approval of this Proposal, classes or series of Serial Preferred Stock
can be created and shares thereof can be issued, in the discretion of the Board
of Directors without stockholder approval of each issuance. After this proposal
is approved by the stockholders, the Board does not intend to solicit further
stockholder approval prior to the issuance of any shares of the Serial Preferred
Stock. If applicable law or regulation does not require stockholder approval as
a condition to the issuance of such shares in any particular transaction, it is
expected that such approval will not be sought.
Possible Advantages
The authorization of 1,000,000 shares of Serial Preferred Stock is intended
to provide additional flexibility to the Company for possible capital
reorganization, acquisitions, refinancing, exchange of securities, public
offerings and other corporate purposes. The Company may fund its obligations by
raising capital through the sale of shares of Preferred Stock. The Board of
Directors believes it would be advantageous to the Company to be in a position
to authorize and issue new classes or series of Preferred Stock without the
necessary delay and expense of calling a stockholders meeting or seeking written
consents in lieu thereof if one or more suitable opportunities present
themselves to the Company. The issuance of Preferred Stock could be used to
discourage or prevent efforts to acquire control of the Company through the
acquisition of shares of the Company's Common Stock for a purchase price which
the Board of Directors determines is not in the best interest of the
shareholders.
Possible Disadvantages
Any increase in the number of shares of capital stock authorized, the
creation of any class or series of Preferred Stock or issuance or increase in
the number of outstanding shares of Preferred Stock may depress the price of
shares of common Stock or the value or price of other shares of Preferred Stock.
<PAGE>
In addition, the issuance may be on terms that are dilutive to stockholders.
Issuance of shares of Preferred Stock, particularly to the extent such shares of
Preferred Stock are convertible into shares of common stock, also could have the
effect of diluting the earnings per share and book value per share of shares
outstanding. In the event that the Board of Directors authorizes and issues
shares of Preferred Stock, it may exercise its discretion in establishing the
terms of such Preferred Stock. In the exercise of such discretion, the Board of
Directors may determine the voting rights, if any, of the series of Preferred
Stock being issued, which could include the right to vote separately or as a
single class with the Common stock and/or other series or classes of Preferred
Stock; to have more or less voting power per share than that possessed by the
Common Stock or other series or classes of Preferred Stock; and to vote on
certain specified matters presented to the stockholders or on all of such
matters or upon the occurrence of any specified event or condition. On
liquidation, dissolution or winding down of the Company, the holders of shares
of Preferred Stock may be entitled to receive preferential cash distributions
fixed by the Board of Directors when creating the particular series thereof
before the holders of the common Stock or other series or classes of Preferred
Stock are entitled to receive anything. Preferred Stock authorized by the Board
of Directors could be redeemable or convertible into shares of any other class
or series of stock of the Company. The authorization and issuance of Preferred
Stock by the Board of Directors could adversely affect the rights of holders of
the Common Stock or other classes or series of Preferred Stock by, among other
things, establishing preferential dividends, liquidation rights or voting
powers. The issuance of Preferred Stock could be used to discourage or prevent
efforts to acquire control of the Company through the acquisition of shares of
Common Stock or other classes or series of Preferred Stock.
Board Position and Required Vote
The proposal will be adopted only if it receives the affirmative vote of a
majority of the outstanding shares of Common Stock. The Board of Directors
believes that the proposed amendment is in the best interests of the Company and
its stockholders and recommends a vote FOR its adoption. Proxies received will
be voted in favor of the proposed amendment unless otherwise indicated.
NOTE: IF MORE THAN ONE OF THE FOLLOWING PROPOSALS 4 THROUGH 12 IS
APPROVED, ONLY ONE OF SUCH APPROVED PROPOSALS MAY BE EFFECTED.
REVERSE STOCK SPLIT AUTHORIZATION
The Board of Directors believes it would be in the best interests of the Company
for the Stockholders to give consent as recommended to effect an amendment (the
"Amendment") of the Company's Certificate of Incorporation to effect a reverse
stock split. The intent of the Board of Directors insofar as recommending a
reverse stock split is to enable the Company to maintain its NASDAQ SmallCap
listing and to increase the long-term marketability and liquidity of the Common
Stock. (Note: To provide the Board with flexibility in determining the most
appropriate reverse ratio if one is ultimately effected, NINE separate proposals
to authorize reverse stock splits of differing ratios from 1 for 2, up to 1 for
10, are being presented, however, election by the Board to effect any one of the
proposals, will act to terminate the approved status of any other approved
reverse stock split proposal(s); i.e., only one reverse ratio may be effected.
This discussion is applicable to all such proposals; i.e., Proposal 4, 5, 6, 7,
8, 9, 10, 11 and 12, with the only difference in each proposal being the ratio
of the reverse which may be effected.)
<PAGE>
4. AUTHORIZATION TO ADOPT AN AMENDMENT TO THE CERTIFICATE
OF INCORPORATION EFFECTING A ONE FOR TWO REVERSE STOCK SPLIT
In conjunction with the new listing standards adopted by the National
Association of Securities Dealers, Inc. in August, 1997, for its NASDAQ market
listings, the Company must meet the new listing maintenance criteria in order to
maintain its current listing on the NASDAQ SmallCap Market. One of the requisite
criteria is maintenance of a share price of at least $1.00 per share. The
Company's share price has recently averaged approximately $.75, with a range of
$.31 to $1.03 during the last 12 months. A reverse stock split, in addition to
decreasing the number of shares outstanding, also automatically increases the
stock price per share in an inverse ratio to the reverse ratio, however, there
is no assurance the price will not thereafter decrease. For example, if a
reverse stock split is effected at a one for two ratio, then one half as many
shares will be outstanding, and the share price will automatically be increased
by a multiple of two.
The Board of Directors believes that the relatively low per share market
price of the Common Stock impairs the marketability of the Common Stock to
institutional investors and members of the investing public and creates a
negative impression with respect to the Company when compared with the Company's
competitors. Another potential benefit from a reverse stock split is the effect
a lower number of outstanding shares can have on many valuation formulas, such
as earnings per share, and the concurrent increase in price per share may have
the effect of increasing the attractiveness of the shares for certain
institutional investors which impose minimum price levels for inclusion in their
portfolios. While the number of shares of Common Stock outstanding should not
affect the marketability of the Common Stock, or the type of investor who
acquires it or the Company's reputation in the financial community, in practice
many investors look upon low priced stock as unduly speculative in nature and,
as a matter of policy, avoid investing in these stocks. Thus, any increase in
trading price resulting from a reverse split is intended to be attractive to the
financial community, the investing public, and to the Company's shareholders.
If a one for three reverse stock split is approved by the stockholders of
the Company, the Board, in lieu of effecting any other reverse stock split
amendment, at an appropriate time within nine months after authorization by the
stockholders, may effect the amendment as approved with the resulting
combination of two outstanding shares of old common stock ("Old Common Stock")
to be reclassified into one share each of new common stock ("New Common Stock")
(the "1 for 2 Ratio"). The stockholders are requested to approve the 1 for 2
Ratio Reverse Stock Split and in separate proposals ratios from 1 for 3 to 1 for
10 (see proposals 4 through 12), and the Board will have authority to choose any
one or none of these alternatives in its discretion; and the remaining
alternative Reverse Stock Splits would be abandoned by the Board pursuant to
Section 242(c) of the General Corporation Law of Delaware without further action
by the Stockholders of the Company. A Reverse Stock Split will be effected only
upon determination by the Board of Directors that a Reverse Stock Split is in
the best interests of the Company and the Stockholders. A Reverse Stock Split
would become effective on any date (the "Effective Date") selected by the Board
of Directors occurring within the nine months after authorization by
stockholders upon the filing of a Certificate of Amendment of the Articles of
Incorporation with the State of Delaware.
The Board intends to examine this issue in light of all relevant
requirements for continued listing of the New Common Stock for trading on NASDAQ
as well as in consideration of all other relevant economic and market factors .
In determining which ratio to select, or whether to effect any reverse ratio,
the Board may consider the advice of financial advisors and factors deemed
relevant by the Board, which may include but not be limited to belief as to
future marketability and liquidity of the Common Stock, prevailing market
conditions, the likely effect on the market price of the Common Stock and other
relevant factors.
<PAGE>
Effects of the Reverse Stock Split
As proposed in the Amendment (See Exhibit C) the consummation of a Reverse
Stock Split will not increase or decrease the percentage ownership position of
any stockholder. Only the number of shares outstanding (or issuable upon
exercise of outstanding options or warrants) will be decreased by the reverse
ratio, and, at least, initially, the per share price will be increased by the
inverse ratio, so the value of the shares will also initially be the same
(however, there can be no assurance that the share price will remain at that
level). See the chart following Proposal 12 for the effect of each of the
possible reverse ratios.). This action will not effect (neither increase nor
decrease) the effective or percentage ownership of any security holder, which
remains the same. As proposed in the Amendment consummation of a Reverse Stock
Split will also not alter the par value of Common Stock which will remain at
$.0001 per share of Common Stock.
As noted above, effective upon a reverse stock split, the conversion rate
of outstanding options and warrants would be adjusted proportionately (e.g.; if
a one-for-three Reverse Stock Split is effected, each outstanding option or
warrant would thereafter be convertible into one-third as many shares of New
Common Stock; if a one for five Reverse Stock Split is effected, each
outstanding option or warrant would thereafter be convertible into one-fifth as
many shares of New Common Stock, and if a one-for-ten Reverse Stock Split is
effected, each outstanding option or warrant would thereafter be convertible
into one-tenth as many shares of Common Stock, etc.. This proposal is for a one
for two ratio resulting, if effected, in one half as many shares outstanding.
Proportionate voting rights and other rights of Stockholders will not be
altered by any Reverse Stock Split.
Consummation of a Reverse Stock Split should have no material federal tax
consequences to most Stockholders; however, tax effects, which are especially
dependent upon a stockholder's individual circumstances, may be material to you;
and each Stockholder must obtain his or her own tax advice; and the general
description below is not tax advice.
The Common Stock is listed for trading on the NASDAQ Small Cap market under
the symbol CCEE. On the Record Date, the reported closing price of the Common
Stock on NASDAQ was $.6875 per share. No assurance can be made as to the future
price of New Common Stock.
Liquidation of Fractional Shares
At the Effective Date, each share of the Common Stock issued and outstanding
immediately prior thereto (the "Old Common Stock"), will be reclassified as and
change into the appropriate fraction of a share of the Company's Common Stock
(the "New Common Stock"). All fractional share interests that are not combined
into whole shares will be subject to the treatment of fractional share interests
as described below. Shortly after the Effective Date, the Company will send
transmittal forms to the holders of the Old Common Stock to be used in
forwarding their certificates formerly representing shares of Old Common Stock
for (i) surrender and exchange for certificates representing whole shares of New
Common Stock and (ii) cash in lieu of any fraction of a share of New Common
Stock to which such holders would otherwise be entitled.
<PAGE>
Manhattan Transfer Registrar Co. will act as the Company's exchange agent (the
"Exchange Agent") to act for holders of Old Common Stock in implementing the
exchange of their certificates. Do not send certificates until you receive a
notice requesting you to transmit them to the Exchange Agent.
If this proposal is approved by the stockholders and the Company files an
amendment to its Certificate of Incorporation, stockholders will be notified and
requested to surrender their certificates representing shares of Old Common
Stock to the Exchange Agent in exchange for certificates representing New Common
Stock. Beginning on the Effective Date, each certificate representing shares of
the Company's Old Common Stock will be deemed for all corporate purposes to
evidence ownership of a proportionate number of shares of New Common Stock and a
right to payment in cash for fractional interests.
The Company will either deposit sufficient cash with the Exchange Agent or set
aside sufficient cash for the purchase of the above-referenced fractional
interests. Stockholders are encouraged to surrender their certificates to the
Exchange Agent for certificates evidencing whole shares of the New Common Shares
and to claim the sums, if any, due them for fractional interests, as promptly as
possible following the Effective Date. No interest will accrue or be payable to
Stockholders on account of such deposit. The Company shall be entitled to
earnings, if any, on funds deposited.
The ownership of a fractional interest will not give the holder thereof any
voting, dividend, or other rights except to receive payment therefor as
described herein. No service charge will be payable by Stockholders in
connection with the exchange of certificates or the issuance of cash for
fractional interests, all of which will be borne and paid by the Company.
The number of holders of the Common Stock on the Record Date was approximately
1,700 holder of record and approximately 18,000 stockholders with shares held in
broker accounts. The Company does not anticipate that the payment in cash in
lieu of fractional shares following any Reverse Stock Split would result in a
significant reduction in the number of such holders.
Board Position and Required Vote
Under Delaware law, approval of the foregoing proposal requires the
affirmative vote of a majority of the shares of Common Stock outstanding.
The Board of Directors believes that the proposed amendment is in the best
interests of the Company and its stockholders and recommends a vote FOR the
proposal to authorize the Board of Directors to amend the Certificate of
Incorporation to effect a 1 for 2 reverse stock split.
Each outstanding share of Common Stock will be entitled to one vote for or
against each the proposal as listed on the Proxy card. The proposal will be
approved only if a quorum is present at the Annual Meeting and the proposal
receives the affirmative vote of a majority of the outstanding shares. The Board
urges that you vote FOR the proposal. Proxies received will be voted in favor of
the proposal unless otherwise instructed.
<PAGE>
5. AUTHORIZATION TO ADOPT AN AMENDMENT TO THE CERTIFICATE
OF INCORPORATION EFFECTING A ONE FOR THREE REVERSE STOCK SPLIT
In conjunction with the new listing standards adopted by the National
Association of Securities Dealers, Inc. in August, 1997, for its NASDAQ market
listings, the Company must meet the new listing maintenance criteria in order to
maintain its current listing on the NASDAQ SmallCap Market. One of the requisite
criteria is maintenance of a share price of at least $1.00 per share. The
Company's share price has recently averaged approximately $.75, with a range of
$.31 to $1.03 during the last 12 months. A reverse stock split, in addition to
decreasing the number of shares outstanding, also automatically increases the
stock price per share in an inverse ratio to the reverse ratio, however, there
is no assurance the price will not thereafter decrease. For example, if a
reverse stock split is effected at a one for three ratio, then one third as many
shares will be outstanding, and the share price will automatically be increased
by a multiple of three.
The Board of Directors believes that the relatively low per share market price
of the Common Stock impairs the marketability of the Common Stock to
institutional investors and members of the investing public and creates a
negative impression with respect to the Company when compared with the Company's
competitors. Another potential benefit from a reverse stock split is the effect
a lower number of outstanding shares can have on many valuation formulas, such
as earnings per share, and the concurrent increase in price per share may have
the effect of increasing the attractiveness of the shares for certain
institutional investors which impose minimum price levels for inclusion in their
portfolios. While the number of shares of Common Stock outstanding should not
affect the marketability of the Common Stock, or the type of investor who
acquires it or the Company's reputation in the financial community, in practice
many investors look upon low priced stock as unduly speculative in nature and,
as a matter of policy, avoid investing in these stocks. Thus, any increase in
trading price resulting from a reverse split is intended to be attractive to the
financial community, the investing public, and to the Company's shareholders.
If a one for three reverse stock split is approved by the stockholders of the
Company, the Board, in lieu of effecting any other reverse stock split
amendment, at an appropriate time within nine months after authorization by the
stockholders, may effect the amendment as approved with the resulting
combination of three outstanding shares of old common stock ("Old Common Stock")
to be reclassified into one share each of new common stock ("New Common Stock")
(the "1 for 3 Ratio"). The stockholders are requested to approve the 1 for 3
Ratio Reverse Stock Split and in separate proposals ratios from 1 for 2 to 1 for
10 (see proposals 4 through 12), and the Board will have authority to choose any
one or none of these alternatives in its discretion; and the remaining
alternative Reverse Stock Splits would be abandoned by the Board pursuant to
Section 242(c) of the General Corporation Law of Delaware without further action
by the Stockholders of the Company. A Reverse Stock Split will be effected only
upon determination by the Board of Directors that a Reverse Stock Split is in
the best interests of the Company and the Stockholders. A Reverse Stock Split
would become effective on any date (the "Effective Date") selected by the Board
of Directors occurring within the nine months after authorization by
stockholders upon the filing of a Certificate of Amendment of the Articles of
Incorporation with the State of Delaware.
The Board intends to examine this issue in light of all relevant requirements
for continued listing of the New Common Stock for trading on NASDAQ as well as
<PAGE>
in consideration of all other relevant economic and market factors . In
determining which ratio to select, or whether to effect any reverse ratio, the
Board may consider the advice of financial advisors and factors deemed relevant
by the Board, which may include but not be limited to belief as to future
marketability and liquidity of the Common Stock, prevailing market conditions,
the likely effect on the market price of the Common Stock and other relevant
factors.
Effects of the Reverse Stock Split
As proposed in the Amendment (See Exhibit D) the consummation of a Reverse
Stock Split will not increase or decrease the percentage ownership position of
any stockholder. Only the number of shares outstanding (or issuable upon
exercise of outstanding options or warrants) will be decreased by the reverse
ratio, and, at least, initially, the per share price will be increased by the
inverse ratio, so the value of the shares will also initially be the same
(however, there can be no assurance that the share price will remain at that
level). See the chart following Proposal 12 for the effect of each of the
possible reverse ratios.). This action will not effect (neither increase nor
decrease) the effective or percentage ownership of any security holder, which
remains the same. As proposed in the Amendment consummation of a Reverse Stock
Split will also not alter the par value of Common Stock which will remain at
$.0001 per share of Common Stock.
As noted above, effective upon a reverse stock split, the conversion rate of
outstanding options and warrants would be adjusted proportionately (e.g.; if a
one-for-three Reverse Stock
Split is effected, each outstanding option or warrant would thereafter be
convertible into one-third as many shares of New Common Stock; if a one for five
Reverse Stock Split is effected, each outstanding option or warrant would
thereafter be convertible into one-fifth as many shares of New Common Stock, and
if a one-for-ten Reverse Stock Split is effected, each outstanding option or
warrant would thereafter be convertible into one-tenth as many shares of Common
Stock, etc.. This proposal is for a one for three ratio resulting, if effected,
in one third as many shares outstanding.
Proportionate voting rights and other rights of Stockholders will not be
altered by any Reverse Stock Split.
Consummation of a Reverse Stock Split should have no material federal tax
consequences to most Stockholders; however, tax effects, which are especially
dependent upon a stockholder's individual circumstances, may be material to you;
and each Stockholder must obtain his or her own tax advice; and the general
description below is not tax advice.
The Common Stock is listed for trading on the NASDAQ Small Cap market under
the symbol CCEE. On the Record Date, the reported closing price of the Common
Stock on NASDAQ was $.6875 per share. No assurance can be made as to the future
price of New Common Stock.
Liquidation of Fractional Shares
At the Effective Date, each share of the Common Stock issued and outstanding
immediately prior thereto (the "Old Common Stock"), will be reclassified as and
change into the appropriate fraction of a share of the Company's Common Stock
(the "New Common Stock"). All fractional share interests that are not combined
into whole shares will be subject to the treatment of fractional share interests
<PAGE>
as described below. Shortly after the Effective Date, the Company will send
transmittal forms to the holders of the Old Common Stock to be used in
forwarding their certificates formerly representing shares of Old Common Stock
for (i) surrender and exchange for certificates representing whole shares of New
Common Stock and (ii) cash in lieu of any fraction of a share of New Common
Stock to which such holders would otherwise be entitled.
Manhattan Transfer Registrar Co. will act as the Company's exchange agent (the
"Exchange Agent") to act for holders of Old Common Stock in implementing the
exchange of their certificates. Do not send certificates until you receive a
notice requesting you to transmit them to the Exchange Agent.
If this proposal is approved by the stockholders and the Company files an
amendment to its Certificate of Incorporation, stockholders will be notified and
requested to surrender their certificates representing shares of Old Common
Stock to the Exchange Agent in exchange for certificates representing New Common
Stock. Beginning on the Effective Date, each certificate representing shares of
the Company's Old Common Stock will be deemed for all corporate purposes to
evidence ownership of a proportionate number of shares of New Common Stock and a
right to payment in cash for fractional interests.
The Company will either deposit sufficient cash with the Exchange Agent or set
aside sufficient cash for the purchase of the above-referenced fractional
interests. Stockholders are encouraged to surrender their certificates to the
Exchange Agent for certificates evidencing whole shares of the New Common Shares
and to claim the sums, if any, due them for fractional interests, as promptly as
possible following the Effective Date. No interest will accrue or be payable to
Stockholders on account of such deposit. The Company shall be entitled to
earnings, if any, on funds deposited.
The ownership of a fractional interest will not give the holder thereof any
voting, dividend, or other rights except to receive payment therefor as
described herein. No service charge will be payable by Stockholders in
connection with the exchange of certificates or the issuance of cash for
fractional interests, all of which will be borne and paid by the Company.
The number of holders of the Common Stock on the Record Date was approximately
1,700 holder of record and approximately 18,000 stockholders with shares held in
broker accounts. The Company does not anticipate that the payment in cash in
lieu of fractional shares following any Reverse Stock Split would result in a
significant reduction in the number of such holders.
Board Position and Required Vote
Under Delaware law, approval of the foregoing proposal requires the
affirmative vote of a majority of the shares of Common Stock outstanding.
The Board of Directors believes that the proposed amendment is in the best
interests of the Company and its stockholders and recommends a vote FOR the
proposal to authorize the Board of Directors to amend the Certificate of
Incorporation to effect a 1 for 3 reverse stock split.
Each outstanding share of Common Stock will be entitled to one vote for or
against each the proposal as listed on the Proxy card. The proposal will be
approved only if a quorum is present at the Annual Meeting and the proposal
receives the affirmative vote of a majority of the outstanding shares. The Board
<PAGE>
urges that you vote FOR the proposal. Proxies received will be voted in favor of
the proposal unless otherwise instructed.
6. AUTHORIZATION TO ADOPT AN AMENDMENT TO THE CERTIFICATE
OF INCORPORATION EFFECTING A ONE FOR FOUR REVERSE STOCK SPLIT
In conjunction with the new listing standards adopted by the National
Association of Securities Dealers, Inc. in August, 1997, for its NASDAQ market
listings, the Company must meet the new listing maintenance criteria in order to
maintain its current listing on the NASDAQ SmallCap Market. One of the requisite
criteria is maintenance of a share price of at least $1.00 per share. The
Company's share price has recently averaged approximately $.75, with a range of
$.31 to $1.03 during the last 12 months. A reverse stock split, in addition to
decreasing the number of shares outstanding, also automatically increases the
stock price per share in an inverse ratio to the reverse ratio, however, there
is no assurance the price will not thereafter decrease. For example, if a
reverse stock split is effected at a one for four ratio, then one fourth as many
shares will be outstanding, and the share price will automatically be increased
by a multiple of four.
The Board of Directors believes that the relatively low per share market price
of the Common Stock impairs the marketability of the Common Stock to
institutional investors and members of the investing public and creates a
negative impression with respect to the Company when compared with the Company's
competitors. Another potential benefit from a reverse stock split is the effect
a lower number of outstanding shares can have on many valuation formulas, such
as earnings per share, and the concurrent increase in price per share may have
the effect of increasing the attractiveness of the shares for certain
institutional investors which impose minimum price levels for inclusion in their
portfolios. While the number of shares of Common Stock outstanding should not
affect the marketability of the Common Stock, or the type of investor who
acquires it or the Company's reputation in the financial community, in practice
many investors look upon low priced stock as unduly speculative in nature and,
as a matter of policy, avoid investing in these stocks. Thus, any increase in
trading price resulting from a reverse split is intended to be attractive to the
financial community, the investing public, and to the Company's shareholders.
If a one for four reverse stock split is approved by the stockholders of the
Company, the Board, in lieu of effecting any other reverse stock split
amendment, at an appropriate time within nine months after authorization by the
stockholders, may effect the amendment as approved with the resulting
combination of four outstanding shares of old common stock ("Old Common Stock")
to be reclassified into one share each of new common stock ("New Common Stock")
(the "1 for 4 Ratio"). The stockholders are requested to approve the 1 for 4
Ratio Reverse Stock Split and in separate proposals ratios from 1 for 2 to 1 for
10 (see proposals 4 through 12), and the Board will have authority to choose any
one or none of these alternatives in its discretion; and the remaining
alternative Reverse Stock Splits would be abandoned by the Board pursuant to
Section 242(c) of the General Corporation Law of Delaware without further action
by the Stockholders of the Company. A Reverse Stock Split will be effected only
upon determination by the Board of Directors that a Reverse Stock Split is in
the best interests of the Company and the Stockholders. A Reverse Stock Split
would become effective on any date (the "Effective Date") selected by the Board
of Directors occurring within the nine months after authorization by
stockholders upon the filing of a Certificate of Amendment of the Articles of
Incorporation with the State of Delaware.
<PAGE>
The Board intends to examine this issue in light of all relevant requirements
for continued listing of the New Common Stock for trading on NASDAQ as well as
in consideration of all other relevant economic and market factors . In
determining which ratio to select, or whether to effect any reverse ratio, the
Board may consider the advice of financial advisors and factors deemed relevant
by the Board, which may include but not be limited to belief as to future
marketability and liquidity of the Common Stock, prevailing market conditions,
the likely effect on the market price of the Common Stock and other relevant
factors.
Effects of the Reverse Stock Split
As proposed in the Amendment (See Exhibit E) the consummation of a Reverse
Stock Split will not increase or decrease the percentage ownership position of
any stockholder. Only the number of shares outstanding (or issuable upon
exercise of outstanding options or warrants) will be decreased by the reverse
ratio, and, at least, initially, the per share price will be increased by the
inverse ratio, so the value of the shares will also initially be the same
(however, there can be no assurance that the share price will remain at that
level). See the chart following Proposal 12 for the effect of each of the
possible reverse ratios.). This action will not effect (neither increase nor
decrease) the effective or percentage ownership of any security holder, which
remains the same. As proposed in the Amendment consummation of a Reverse Stock
Split will also not alter the par value of Common Stock which will remain at
$.0001 per share of Common Stock.
As noted above, effective upon a reverse stock split, the conversion rate of
outstanding options and warrants would be adjusted proportionately (e.g.; if a
one-for-three Reverse Stock
Split is effected, each outstanding option or warrant would thereafter be
convertible into one-third as many shares of New Common Stock; if a one for five
Reverse Stock Split is effected, each outstanding option or warrant would
thereafter be convertible into one-fifth as many shares of New Common Stock, and
if a one-for-ten Reverse Stock Split is effected, each outstanding option or
warrant would thereafter be convertible into one-tenth as many shares of Common
Stock, etc.. This proposal is for a one for four ratio resulting, if effected,
in one fourth as many shares outstanding.
Proportionate voting rights and other rights of Stockholders will not be
altered by any Reverse Stock Split.
Consummation of a Reverse Stock Split should have no material federal tax
consequences to most Stockholders; however, tax effects, which are especially
dependent upon a stockholder's individual circumstances, may be material to you;
and each Stockholder must obtain his or her own tax advice; and the general
description below is not tax advice.
The Common Stock is listed for trading on the NASDAQ Small Cap market under
the symbol CCEE. On the Record Date, the reported closing price of the Common
Stock on NASDAQ was $.6875 per share. No assurance can be made as to the future
price of New Common Stock.
Liquidation of Fractional Shares
At the Effective Date, each share of the Common Stock issued and outstanding
immediately prior thereto (the "Old Common Stock"), will be reclassified as and
change into the appropriate fraction of a share of the Company's Common Stock
<PAGE>
(the "New Common Stock"). All fractional share interests that are not combined
into whole shares will be subject to the treatment of fractional share interests
as described below. Shortly after the Effective Date, the Company will send
transmittal forms to the holders of the Old Common Stock to be used in
forwarding their certificates formerly representing shares of Old Common Stock
for (i) surrender and exchange for certificates representing whole shares of New
Common Stock and (ii) cash in lieu of any fraction of a share of New Common
Stock to which such holders would otherwise be entitled.
Manhattan Transfer Registrar Co. will act as the Company's exchange agent (the
"Exchange Agent") to act for holders of Old Common Stock in implementing the
exchange of their certificates. Do not send certificates until you receive a
notice requesting you to transmit them to the Exchange Agent.
If this proposal is approved by the stockholders and the Company files an
amendment to its Certificate of Incorporation, stockholders will be notified and
requested to surrender their certificates representing shares of Old Common
Stock to the Exchange Agent in exchange for certificates representing New Common
Stock. Beginning on the Effective Date, each certificate representing shares of
the Company's Old Common Stock will be deemed for all corporate purposes to
evidence ownership of a proportionate number of shares of New Common Stock and a
right to payment in cash for fractional interests.
The Company will either deposit sufficient cash with the Exchange Agent or set
aside sufficient cash for the purchase of the above-referenced fractional
interests. Stockholders are encouraged to surrender their certificates to the
Exchange Agent for certificates evidencing whole shares of the New Common Shares
and to claim the sums, if any, due them for fractional interests, as promptly as
possible following the Effective Date. No interest will accrue or be payable to
Stockholders on account of such deposit. The Company shall be entitled to
earnings, if any, on funds deposited.
The ownership of a fractional interest will not give the holder thereof any
voting, dividend, or other rights except to receive payment therefor as
described herein. No service charge will be payable by Stockholders in
connection with the exchange of certificates or the issuance of cash for
fractional interests, all of which will be borne and paid by the Company.
The number of holders of the Common Stock on the Record Date was approximately
1,700 holder of record and approximately 18,000 stockholders with shares held in
broker accounts. The Company does not anticipate that the payment in cash in
lieu of fractional shares following any Reverse Stock Split would result in a
significant reduction in the number of such holders.
Board Position and Required Vote
Under Delaware law, approval of the foregoing proposal requires the
affirmative vote of a majority of the shares of Common Stock outstanding.
The Board of Directors believes that the proposed amendment is in the best
interests of the Company and its stockholders and recommends a vote FOR the
proposal to authorize the Board of Directors to amend the Certificate of
Incorporation to effect a 1 for 4 reverse stock split.
<PAGE>
Each outstanding share of Common Stock will be entitled to one vote for or
against each the proposal as listed on the Proxy card. The proposal will be
approved only if a quorum is present at the Annual Meeting and the proposal
receives the affirmative vote of a majority of the outstanding shares. The Board
urges that you vote FOR the proposal. Proxies received will be voted in favor of
the proposal unless otherwise instructed.
7. AUTHORIZATION TO ADOPT AN AMENDMENT TO THE CERTIFICATE
OF INCORPORATION EFFECTING A ONE FOR FIVE REVERSE STOCK SPLIT
In conjunction with the new listing standards adopted by the National
Association of Securities Dealers, Inc. in August, 1997, for its NASDAQ market
listings, the Company must meet the new listing maintenance criteria in order to
maintain its current listing on the NASDAQ SmallCap Market. One of the requisite
criteria is maintenance of a share price of at least $1.00 per share. The
Company's share price has recently averaged approximately $.75, with a range of
$.31 to $1.03 during the last 12 months. A reverse stock split, in addition to
decreasing the number of shares outstanding, also automatically increases the
stock price per share in an inverse ratio to the reverse ratio, however, there
is no assurance the price will not thereafter decrease. For example, if a
reverse stock split is effected at a one for five ratio, then one fifth as many
shares will be outstanding, and the share price will automatically be increased
by a multiple of five.
The Board of Directors believes that the relatively low per share market price
of the Common Stock impairs the marketability of the Common Stock to
institutional investors and members of the investing public and creates a
negative impression with respect to the Company when compared with the Company's
competitors. Another potential benefit from a reverse stock split is the effect
a lower number of outstanding shares can have on many valuation formulas, such
as earnings per share, and the concurrent increase in price per share may have
the effect of increasing the attractiveness of the shares for certain
institutional investors which impose minimum price levels for inclusion in their
portfolios. While the number of shares of Common Stock outstanding should not
affect the marketability of the Common Stock, or the type of investor who
acquires it or the Company's reputation in the financial community, in practice
many investors look upon low priced stock as unduly speculative in nature and,
as a matter of policy, avoid investing in these stocks. Thus, any increase in
trading price resulting from a reverse split is intended to be attractive to the
financial community, the investing public, and to the Company's shareholders.
If a one for five reverse stock split is approved by the stockholders of the
Company, the Board, in lieu of effecting any other reverse stock split
amendment, at an appropriate time within nine months after authorization by the
stockholders, may effect the amendment as approved with the resulting
combination of five outstanding shares of old common stock ("Old Common Stock")
to be reclassified into one share each of new common stock ("New Common Stock")
(the "1 for 5 Ratio"). The stockholders are requested to approve the 1 for 5
Ratio Reverse Stock Split and in separate proposals ratios from 1 for 2 to 1 for
10 (see proposals 4 through 12), and the Board will have authority to choose any
one or none of these alternatives in its discretion; and the remaining
alternative Reverse Stock Splits would be abandoned by the Board pursuant to
Section 242(c) of the General Corporation Law of Delaware without further action
by the Stockholders of the Company. A Reverse Stock Split will be effected only
upon determination by the Board of Directors that a Reverse Stock Split is in
the best interests of the Company and the Stockholders. A Reverse Stock Split
would become effective on any date (the "Effective Date") selected by the Board
<PAGE>
of Directors occurring within the nine months after authorization by
stockholders upon the filing of a Certificate of Amendment of the Articles of
Incorporation with the State of Delaware.
The Board intends to examine this issue in light of all relevant requirements
for continued listing of the New Common Stock for trading on NASDAQ as well as
in consideration of all other relevant economic and market factors . In
determining which ratio to select, or whether to effect any reverse ratio, the
Board may consider the advice of financial advisors and factors deemed relevant
by the Board, which may include but not be limited to belief as to future
marketability and liquidity of the Common Stock, prevailing market conditions,
the likely effect on the market price of the Common Stock and other relevant
factors.
Effects of the Reverse Stock Split
As proposed in the Amendment (See Exhibit F) the consummation of a Reverse
Stock Split will not increase or decrease the percentage ownership position of
any stockholder. Only the number of shares outstanding (or issuable upon
exercise of outstanding options or warrants) will be decreased by the reverse
ratio, and, at least, initially, the per share price will be increased by the
inverse ratio, so the value of the shares will also initially be the same
(however, there can be no assurance that the share price will remain at that
level). See the chart following Proposal 12 for the effect of each of the
possible reverse ratios.). This action will not effect (neither increase nor
decrease) the effective or percentage ownership of any security holder, which
remains the same. As proposed in the Amendment consummation of a Reverse Stock
Split will also not alter the par value of Common Stock which will remain at
$.0001 per share of Common Stock.
As noted above, effective upon a reverse stock split, the conversion rate of
outstanding options and warrants would be adjusted proportionately (e.g.; if a
one-for-three Reverse Stock
Split is effected, each outstanding option or warrant would thereafter be
convertible into one-third as many shares of New Common Stock; if a one for five
Reverse Stock Split is effected, each outstanding option or warrant would
thereafter be convertible into one-fifth as many shares of New Common Stock, and
if a one-for-ten Reverse Stock Split is effected, each outstanding option or
warrant would thereafter be convertible into one-tenth as many shares of Common
Stock, etc.. This proposal is for a one for five ratio resulting, if effected,
in one fifth as many shares outstanding.
Proportionate voting rights and other rights of Stockholders will not be
altered by any Reverse Stock Split.
Consummation of a Reverse Stock Split should have no material federal tax
consequences to most Stockholders; however, tax effects, which are especially
dependent upon a stockholder's individual circumstances, may be material to you;
and each Stockholder must obtain his or her own tax advice; and the general
description below is not tax advice.
The Common Stock is listed for trading on the NASDAQ Small Cap market under
the symbol CCEE. On the Record Date, the reported closing price of the Common
Stock on NASDAQ was $.6875 per share. No assurance can be made as to the future
price of New Common Stock.
<PAGE>
Liquidation of Fractional Shares
At the Effective Date, each share of the Common Stock issued and outstanding
immediately prior thereto (the "Old Common Stock"), will be reclassified as and
change into the appropriate fraction of a share of the Company's Common Stock
(the "New Common Stock"). All fractional share interests that are not combined
into whole shares will be subject to the treatment of fractional share interests
as described below. Shortly after the Effective Date, the Company will send
transmittal forms to the holders of the Old Common Stock to be used in
forwarding their certificates formerly representing shares of Old Common Stock
for (i) surrender and exchange for certificates representing whole shares of New
Common Stock and (ii) cash in lieu of any fraction of a share of New Common
Stock to which such holders would otherwise be entitled.
Manhattan Transfer Registrar Co. will act as the Company's exchange agent (the
"Exchange Agent") to act for holders of Old Common Stock in implementing the
exchange of their certificates. Do not send certificates until you receive a
notice requesting you to transmit them to the Exchange Agent.
If this proposal is approved by the stockholders and the Company files an
amendment to its Certificate of Incorporation, stockholders will be notified and
requested to surrender their certificates representing shares of Old Common
Stock to the Exchange Agent in exchange for certificates representing New Common
Stock. Beginning on the Effective Date, each certificate representing shares of
the Company's Old Common Stock will be deemed for all corporate purposes to
evidence ownership of a proportionate number of shares of New Common Stock and a
right to payment in cash for fractional interests.
The Company will either deposit sufficient cash with the Exchange Agent or set
aside sufficient cash for the purchase of the above-referenced fractional
interests. Stockholders are encouraged to surrender their certificates to the
Exchange Agent for certificates evidencing whole shares of the New Common Shares
and to claim the sums, if any, due them for fractional interests, as promptly as
possible following the Effective Date. No interest will accrue or be payable to
Stockholders on account of such deposit. The Company shall be entitled to
earnings, if any, on funds deposited.
The ownership of a fractional interest will not give the holder thereof any
voting, dividend, or other rights except to receive payment therefor as
described herein. No service charge will be payable by Stockholders in
connection with the exchange of certificates or the issuance of cash for
fractional interests, all of which will be borne and paid by the Company.
The number of holders of the Common Stock on the Record Date was approximately
1,700 holder of record and approximately 18,000 stockholders with shares held in
broker accounts. The Company does not anticipate that the payment in cash in
lieu of fractional shares following any Reverse Stock Split would result in a
significant reduction in the number of such holders.
Board Position and Required Vote
Under Delaware law, approval of the foregoing proposal requires the
affirmative vote of a majority of the shares of Common Stock outstanding.
The Board of Directors believes that the proposed amendment is in the best
interests of the Company and its stockholders and recommends a vote FOR the
<PAGE>
proposal to authorize the Board of Directors to amend the Certificate of
Incorporation to effect a 1 for 5 reverse stock split.
Each outstanding share of Common Stock will be entitled to one vote for or
against each the proposal as listed on the Proxy card. The proposal will be
approved only if a quorum is present at the Annual Meeting and the proposal
receives the affirmative vote of a majority of the outstanding shares. The Board
urges that you vote FOR the proposal. Proxies received will be voted in favor of
the proposal unless otherwise instructed.
8. AUTHORIZATION TO ADOPT AN AMENDMENT TO THE CERTIFICATE
OF INCORPORATION EFFECTING A ONE FOR SIX REVERSE STOCK SPLIT
In conjunction with the new listing standards adopted by the National
Association of Securities Dealers, Inc. in August, 1997, for its NASDAQ market
listings, the Company must meet the new listing maintenance criteria in order to
maintain its current listing on the NASDAQ SmallCap Market. One of the requisite
criteria is maintenance of a share price of at least $1.00 per share. The
Company's share price has recently averaged approximately $.75, with a range of
$.31 to $1.03 during the last 12 months. A reverse stock split, in addition to
decreasing the number of shares outstanding, also automatically increases the
stock price per share in an inverse ratio to the reverse ratio, however, there
is no assurance the price will not thereafter decrease. For example, if a
reverse stock split is effected at a one for six ratio, then one sixth as many
shares will be outstanding, and the share price will automatically be increased
by a multiple of six.
The Board of Directors believes that the relatively low per share market price
of the Common Stock impairs the marketability of the Common Stock to
institutional investors and members of the investing public and creates a
negative impression with respect to the Company when compared with the Company's
competitors. Another potential benefit from a reverse stock split is the effect
a lower number of outstanding shares can have on many valuation formulas, such
as earnings per share, and the concurrent increase in price per share may have
the effect of increasing the attractiveness of the shares for certain
institutional investors which impose minimum price levels for inclusion in their
portfolios. While the number of shares of Common Stock outstanding should not
affect the marketability of the Common Stock, or the type of investor who
acquires it or the Company's reputation in the financial community, in practice
many investors look upon low priced stock as unduly speculative in nature and,
as a matter of policy, avoid investing in these stocks. Thus, any increase in
trading price resulting from a reverse split is intended to be attractive to the
financial community, the investing public, and to the Company's shareholders.
If a one for six reverse stock split is approved by the stockholders of the
Company, the Board, in lieu of effecting any other reverse stock split
amendment, at an appropriate time within nine months after authorization by the
stockholders, may effect the amendment as approved with the resulting
combination of six outstanding shares of old common stock ("Old Common Stock")
to be reclassified into one share each of new common stock ("New Common Stock")
(the "1 for 6 Ratio"). The stockholders are requested to approve the 1 for 6
Ratio Reverse Stock Split and in separate proposals ratios from 1 for 2 to 1 for
10 (see proposals 4 through 12), and the Board will have authority to choose any
one or none of these alternatives in its discretion; and the remaining
alternative Reverse Stock Splits would be abandoned by the Board pursuant to
Section 242(c) of the General Corporation Law of Delaware without further action
by the Stockholders of the Company. A Reverse Stock Split will be effected only
upon determination by the Board of Directors that a Reverse Stock Split is in
<PAGE>
the best interests of the Company and the Stockholders. A Reverse Stock Split
would become effective on any date (the "Effective Date") selected by the Board
of Directors occurring within the nine months after authorization by
stockholders upon the filing of a Certificate of Amendment of the Articles of
Incorporation with the State of Delaware.
The Board intends to examine this issue in light of all relevant requirements
for continued listing of the New Common Stock for trading on NASDAQ as well as
in consideration of all other relevant economic and market factors . In
determining which ratio to select, or whether to effect any reverse ratio, the
Board may consider the advice of financial advisors and factors deemed relevant
by the Board, which may include but not be limited to belief as to future
marketability and liquidity of the Common Stock, prevailing market conditions,
the likely effect on the market price of the Common Stock and other relevant
factors.
Effects of the Reverse Stock Split
As proposed in the Amendment (See Exhibit G) the consummation of a Reverse
Stock Split will not increase or decrease the percentage ownership position of
any stockholder. Only the number of shares outstanding (or issuable upon
exercise of outstanding options or warrants) will be decreased by the reverse
ratio, and, at least, initially, the per share price will be increased by the
inverse ratio, so the value of the shares will also initially be the same
(however, there can be no assurance that the share price will remain at that
level). See the chart following Proposal 12 for the effect of each of the
possible reverse ratios.). This action will not effect (neither increase nor
decrease) the effective or percentage ownership of any security holder, which
remains the same. As proposed in the Amendment consummation of a Reverse Stock
Split will also not alter the par value of Common Stock which will remain at
$.0001 per share of Common Stock.
As noted above, effective upon a reverse stock split, the conversion rate of
outstanding options and warrants would be adjusted proportionately (e.g.; if a
one-for-three Reverse Stock
Split is effected, each outstanding option or warrant would thereafter be
convertible into one-third as many shares of New Common Stock; if a one for five
Reverse Stock Split is effected, each outstanding option or warrant would
thereafter be convertible into one-fifth as many shares of New Common Stock, and
if a one-for-ten Reverse Stock Split is effected, each outstanding option or
warrant would thereafter be convertible into one-tenth as many shares of Common
Stock, etc.. This proposal is for a one for six ratio resulting, if effected, in
one sixth as many shares outstanding.
Proportionate voting rights and other rights of Stockholders will not be
altered by any Reverse Stock Split.
Consummation of a Reverse Stock Split should have no material federal tax
consequences to most Stockholders; however, tax effects, which are especially
dependent upon a stockholder's individual circumstances, may be material to you;
and each Stockholder must obtain his or her own tax advice; and the general
description below is not tax advice.
The Common Stock is listed for trading on the NASDAQ Small Cap market under
the symbol CCEE. On the Record Date, the reported closing price of the Common
Stock on NASDAQ was $.6875 per share. No assurance can be made as to the future
price of New Common Stock.
<PAGE>
Liquidation of Fractional Shares
At the Effective Date, each share of the Common Stock issued and outstanding
immediately prior thereto (the "Old Common Stock"), will be reclassified as and
change into the appropriate fraction of a share of the Company's Common Stock
(the "New Common Stock"). All fractional share interests that are not combined
into whole shares will be subject to the treatment of fractional share interests
as described below. Shortly after the Effective Date, the Company will send
transmittal forms to the holders of the Old Common Stock to be used in
forwarding their certificates formerly representing shares of Old Common Stock
for (i) surrender and exchange for certificates representing whole shares of New
Common Stock and (ii) cash in lieu of any fraction of a share of New Common
Stock to which such holders would otherwise be entitled.
Manhattan Transfer Registrar Co. will act as the Company's exchange agent (the
"Exchange Agent") to act for holders of Old Common Stock in implementing the
exchange of their certificates. Do not send certificates until you receive a
notice requesting you to transmit them to the Exchange Agent.
If this proposal is approved by the stockholders and the Company files an
amendment to its Certificate of Incorporation, stockholders will be notified and
requested to surrender their certificates representing shares of Old Common
Stock to the Exchange Agent in exchange for certificates representing New Common
Stock. Beginning on the Effective Date, each certificate representing shares of
the Company's Old Common Stock will be deemed for all corporate purposes to
evidence ownership of a proportionate number of shares of New Common Stock and a
right to payment in cash for fractional interests.
The Company will either deposit sufficient cash with the Exchange Agent or set
aside sufficient cash for the purchase of the above-referenced fractional
interests. Stockholders are encouraged to surrender their certificates to the
Exchange Agent for certificates evidencing whole shares of the New Common Shares
and to claim the sums, if any, due them for fractional interests, as promptly as
possible following the Effective Date. No interest will accrue or be payable to
Stockholders on account of such deposit. The Company shall be entitled to
earnings, if any, on funds deposited.
The ownership of a fractional interest will not give the holder thereof any
voting, dividend, or other rights except to receive payment therefor as
described herein. No service charge will be payable by Stockholders in
connection with the exchange of certificates or the issuance of cash for
fractional interests, all of which will be borne and paid by the Company.
The number of holders of the Common Stock on the Record Date was approximately
1,700 holder of record and approximately 18,000 stockholders with shares held in
broker accounts. The Company does not anticipate that the payment in cash in
lieu of fractional shares following any Reverse Stock Split would result in a
significant reduction in the number of such holders.
Board Position and Required Vote
Under Delaware law, approval of the foregoing proposal requires the
affirmative vote of a majority of the shares of Common Stock outstanding.
<PAGE>
The Board of Directors believes that the proposed amendment is in the best
interests of the Company and its stockholders and recommends a vote FOR the
proposal to authorize the Board of Directors to amend the Certificate of
Incorporation to effect a 1 for 6 reverse stock split.
Each outstanding share of Common Stock will be entitled to one vote for or
against each the proposal as listed on the Proxy card. The proposal will be
approved only if a quorum is present at the Annual Meeting and the proposal
receives the affirmative vote of a majority of the outstanding shares. The Board
urges that you vote FOR the proposal. Proxies received will be voted in favor of
the proposal unless otherwise instructed.
9. AUTHORIZATION TO ADOPT AN AMENDMENT TO THE CERTIFICATE
OF INCORPORATION EFFECTING A ONE FOR SEVEN REVERSE STOCK SPLIT
In conjunction with the new listing standards adopted by the National
Association of Securities Dealers, Inc. in August, 1997, for its NASDAQ market
listings, the Company must meet the new listing maintenance criteria in order to
maintain its current listing on the NASDAQ SmallCap Market. One of the requisite
criteria is maintenance of a share price of at least $1.00 per share. The
Company's share price has recently averaged approximately $.75, with a range of
$.31 to $1.03 during the last 12 months. A reverse stock split, in addition to
decreasing the number of shares outstanding, also automatically increases the
stock price per share in an inverse ratio to the reverse ratio, however, there
is no assurance the price will not thereafter decrease. For example, if a
reverse stock split is effected at a one for seven ratio, then one seventh as
many shares will be outstanding, and the share price will automatically be
increased by a multiple of seven.
The Board of Directors believes that the relatively low per share market price
of the Common Stock impairs the marketability of the Common Stock to
institutional investors and members of the investing public and creates a
negative impression with respect to the Company when compared with the Company's
competitors. Another potential benefit from a reverse stock split is the effect
a lower number of outstanding shares can have on many valuation formulas, such
as earnings per share, and the concurrent increase in price per share may have
the effect of increasing the attractiveness of the shares for certain
institutional investors which impose minimum price levels for inclusion in their
portfolios. While the number of shares of Common Stock outstanding should not
affect the marketability of the Common Stock, or the type of investor who
acquires it or the Company's reputation in the financial community, in practice
many investors look upon low priced stock as unduly speculative in nature and,
as a matter of policy, avoid investing in these stocks. Thus, any increase in
trading price resulting from a reverse split is intended to be attractive to the
financial community, the investing public, and to the Company's shareholders.
If a one for seven reverse stock split is approved by the stockholders of the
Company, the Board, in lieu of effecting any other reverse stock split
amendment, at an appropriate time within nine months after authorization by the
stockholders, may effect the amendment as approved with the resulting
combination of seven outstanding shares of old common stock ("Old Common Stock")
to be reclassified into one share each of new common stock ("New Common Stock")
(the "1 for 7 Ratio"). The stockholders are requested to approve the 1 for 7
Ratio Reverse Stock Split and in separate proposals ratios from 1 for 2 to 1 for
<PAGE>
10 (see proposals 4 through 12), and the Board will have authority to choose any
one or none of these alternatives in its discretion; and the remaining
alternative Reverse Stock Splits would be abandoned by the Board pursuant to
Section 242(c) of the General Corporation Law of Delaware without further action
by the Stockholders of the Company. A Reverse Stock Split will be effected only
upon determination by the Board of Directors that a Reverse Stock Split is in
the best interests of the Company and the Stockholders. A Reverse Stock Split
would become effective on any date (the "Effective Date") selected by the Board
of Directors occurring within the nine months after authorization by
stockholders upon the filing of a Certificate of Amendment of the Articles of
Incorporation with the State of Delaware.
The Board intends to examine this issue in light of all relevant requirements
for continued listing of the New Common Stock for trading on NASDAQ as well as
in consideration of all other relevant economic and market factors . In
determining which ratio to select, or whether to effect any reverse ratio, the
Board may consider the advice of financial advisors and factors deemed relevant
by the Board, which may include but not be limited to belief as to future
marketability and liquidity of the Common Stock, prevailing market conditions,
the likely effect on the market price of the Common Stock and other relevant
factors.
Effects of the Reverse Stock Split
As proposed in the Amendment (See Exhibit H) the consummation of a Reverse
Stock Split will not increase or decrease the percentage ownership position of
any stockholder. Only the number of shares outstanding (or issuable upon
exercise of outstanding options or warrants) will be decreased by the reverse
ratio, and, at least, initially, the per share price will be increased by the
inverse ratio, so the value of the shares will also initially be the same
(however, there can be no assurance that the share price will remain at that
level). See the chart following Proposal 12 for the effect of each of the
possible reverse ratios.). This action will not effect (neither increase nor
decrease) the effective or percentage ownership of any security holder, which
remains the same. As proposed in the Amendment consummation of a Reverse Stock
Split will also not alter the par value of Common Stock which will remain at
$.0001 per share of Common Stock.
As noted above, effective upon a reverse stock split, the conversion rate of
outstanding options and warrants would be adjusted proportionately (e.g.; if a
one-for-three Reverse Stock
Split is effected, each outstanding option or warrant would thereafter be
convertible into one-third as many shares of New Common Stock; if a one for five
Reverse Stock Split is effected, each outstanding option or warrant would
thereafter be convertible into one-fifth as many shares of New Common Stock, and
if a one-for-ten Reverse Stock Split is effected, each outstanding option or
warrant would thereafter be convertible into one-tenth as many shares of Common
Stock, etc.. This proposal is for a one for seven ratio resulting, if effected,
in one seventh as many shares outstanding.
Proportionate voting rights and other rights of Stockholders will not be
altered by any Reverse Stock Split.
Consummation of a Reverse Stock Split should have no material federal tax
consequences to most Stockholders; however, tax effects, which are especially
dependent upon a stockholder's individual circumstances, may be material to you;
and each Stockholder must obtain his or her own tax advice; and the general
description below is not tax advice.
<PAGE>
The Common Stock is listed for trading on the NASDAQ Small Cap market under
the symbol CCEE. On the Record Date, the reported closing price of the Common
Stock on NASDAQ was $.6875 per share. No assurance can be made as to the future
price of New Common Stock.
Liquidation of Fractional Shares
At the Effective Date, each share of the Common Stock issued and outstanding
immediately prior thereto (the "Old Common Stock"), will be reclassified as and
change into the appropriate fraction of a share of the Company's Common Stock
(the "New Common Stock"). All fractional share interests that are not combined
into whole shares will be subject to the treatment of fractional share interests
as described below. Shortly after the Effective Date, the Company will send
transmittal forms to the holders of the Old Common Stock to be used in
forwarding their certificates formerly representing shares of Old Common Stock
for (i) surrender and exchange for certificates representing whole shares of New
Common Stock and (ii) cash in lieu of any fraction of a share of New Common
Stock to which such holders would otherwise be entitled.
Manhattan Transfer Registrar Co. will act as the Company's exchange agent (the
"Exchange Agent") to act for holders of Old Common Stock in implementing the
exchange of their certificates. Do not send certificates until you receive a
notice requesting you to transmit them to the Exchange Agent.
If this proposal is approved by the stockholders and the Company files an
amendment to its Certificate of Incorporation, stockholders will be notified and
requested to surrender their certificates representing shares of Old Common
Stock to the Exchange Agent in exchange for certificates representing New Common
Stock. Beginning on the Effective Date, each certificate representing shares of
the Company's Old Common Stock will be deemed for all corporate purposes to
evidence ownership of a proportionate number of shares of New Common Stock and a
right to payment in cash for fractional interests.
The Company will either deposit sufficient cash with the Exchange Agent or set
aside sufficient cash for the purchase of the above-referenced fractional
interests. Stockholders are encouraged to surrender their certificates to the
Exchange Agent for certificates evidencing whole shares of the New Common Shares
and to claim the sums, if any, due them for fractional interests, as promptly as
possible following the Effective Date. No interest will accrue or be payable to
Stockholders on account of such deposit. The Company shall be entitled to
earnings, if any, on funds deposited.
The ownership of a fractional interest will not give the holder thereof any
voting, dividend, or other rights except to receive payment therefor as
described herein. No service charge will be payable by Stockholders in
connection with the exchange of certificates or the issuance of cash for
fractional interests, all of which will be borne and paid by the Company.
The number of holders of the Common Stock on the Record Date was approximately
1,700 holder of record and approximately 18,000 stockholders with shares held in
broker accounts. The Company does not anticipate that the payment in cash in
lieu of fractional shares following any Reverse Stock Split would result in a
significant reduction in the number of such holders.
<PAGE>
Board Position and Required Vote
Under Delaware law, approval of the foregoing proposal requires the
affirmative vote of a majority of the shares of Common Stock outstanding.
The Board of Directors believes that the proposed amendment is in the best
interests of the Company and its stockholders and recommends a vote FOR the
proposal to authorize the Board of Directors to amend the Certificate of
Incorporation to effect a 1 for 7 reverse stock split.
Each outstanding share of Common Stock will be entitled to one vote for or
against each the proposal as listed on the Proxy card. The proposal will be
approved only if a quorum is present at the Annual Meeting and the proposal
receives the affirmative vote of a majority of the outstanding shares. The Board
urges that you vote FOR the proposal. Proxies received will be voted in favor of
the proposal unless otherwise instructed.
10. AUTHORIZATION TO ADOPT AN AMENDMENT TO THE CERTIFICATE
OF INCORPORATION EFFECTING A ONE FOR EIGHT REVERSE STOCK SPLIT
In conjunction with the new listing standards adopted by the National
Association of Securities Dealers, Inc. in August, 1997, for its NASDAQ market
listings, the Company must meet the new listing maintenance criteria in order to
maintain its current listing on the NASDAQ SmallCap Market. One of the requisite
criteria is maintenance of a share price of at least $1.00 per share. The
Company's share price has recently averaged approximately $.75, with a range of
$.31 to $1.03 during the last 12 months. A reverse stock split, in addition to
decreasing the number of shares outstanding, also automatically increases the
stock price per share in an inverse ratio to the reverse ratio, however, there
is no assurance the price will not thereafter decrease. For example, if a
reverse stock split is effected at a one for eight ratio, then one eighth as
many shares will be outstanding, and the share price will automatically be
increased by a multiple of eight.
The Board of Directors believes that the relatively low per share market price
of the Common Stock impairs the marketability of the Common Stock to
institutional investors and members of the investing public and creates a
negative impression with respect to the Company when compared with the Company's
competitors. Another potential benefit from a reverse stock split is the effect
a lower number of outstanding shares can have on many valuation formulas, such
as earnings per share, and the concurrent increase in price per share may have
the effect of increasing the attractiveness of the shares for certain
institutional investors which impose minimum price levels for inclusion in their
portfolios. While the number of shares of Common Stock outstanding should not
affect the marketability of the Common Stock, or the type of investor who
acquires it or the Company's reputation in the financial community, in practice
many investors look upon low priced stock as unduly speculative in nature and,
as a matter of policy, avoid investing in these stocks. Thus, any increase in
trading price resulting from a reverse split is intended to be attractive to the
financial community, the investing public, and to the Company's shareholders.
If a one for eight reverse stock split is approved by the stockholders of the
Company, the Board, in lieu of effecting any other reverse stock split
amendment, at an appropriate time within nine months after authorization by the
stockholders, may effect the amendment as approved with the resulting
combination of eight outstanding shares of old common stock ("Old Common Stock")
<PAGE>
to be reclassified into one share each of new common stock ("New Common Stock")
(the "1 for 8 Ratio"). The stockholders are requested to approve the 1 for 8
Ratio Reverse Stock Split and in separate proposals ratios from 1 for 2 to 1 for
10 (see proposals 4 through 12), and the Board will have authority to choose any
one or none of these alternatives in its discretion; and the remaining
alternative Reverse Stock Splits would be abandoned by the Board pursuant to
Section 242(c) of the General Corporation Law of Delaware without further action
by the Stockholders of the Company. A Reverse Stock Split will be effected only
upon determination by the Board of Directors that a Reverse Stock Split is in
the best interests of the Company and the Stockholders. A Reverse Stock Split
would become effective on any date (the "Effective Date") selected by the Board
of Directors occurring within the nine months after authorization by
stockholders upon the filing of a Certificate of Amendment of the Articles of
Incorporation with the State of Delaware.
The Board intends to examine this issue in light of all relevant requirements
for continued listing of the New Common Stock for trading on NASDAQ as well as
in consideration of all other relevant economic and market factors . In
determining which ratio to select, or whether to effect any reverse ratio, the
Board may consider the advice of financial advisors and factors deemed relevant
by the Board, which may include but not be limited to belief as to future
marketability and liquidity of the Common Stock, prevailing market conditions,
the likely effect on the market price of the Common Stock and other relevant
factors.
Effects of the Reverse Stock Split
As proposed in the Amendment (See Exhibit I) the consummation of a Reverse
Stock Split will not increase or decrease the percentage ownership position of
any stockholder. Only the number of shares outstanding (or issuable upon
exercise of outstanding options or warrants) will be decreased by the reverse
ratio, and, at least, initially, the per share price will be increased by the
inverse ratio, so the value of the shares will also initially be the same
(however, there can be no assurance that the share price will remain at that
level). See the chart following Proposal 12 for the effect of each of the
possible reverse ratios.). This action will not effect (neither increase nor
decrease) the effective or percentage ownership of any security holder, which
remains the same. As proposed in the Amendment consummation of a Reverse Stock
Split will also not alter the par value of Common Stock which will remain at
$.0001 per share of Common Stock.
As noted above, effective upon a reverse stock split, the conversion rate
of outstanding options and warrants would be adjusted proportionately (e.g.; if
a one-for-three Reverse Stock Split is effected, each outstanding option or
warrant would thereafter be convertible into one-third as many shares of New
Common Stock; if a one for five Reverse Stock Split is effected, each
outstanding option or warrant would thereafter be convertible into one-fifth as
many shares of New Common Stock, and if a one-for-ten Reverse Stock Split is
effected, each outstanding option or warrant would thereafter be convertible
into one-tenth as many shares of Common Stock, etc.. This proposal is for a one
for eight ratio resulting, if effected, in one eighth as many shares
outstanding.
Proportionate voting rights and other rights of Stockholders will not be
altered by any Reverse Stock Split.
Consummation of a Reverse Stock Split should have no material federal tax
consequences to most Stockholders; however, tax effects, which are especially
<PAGE>
dependent upon a stockholder's individual circumstances, may be material to you;
and each Stockholder must obtain his or her own tax advice; and the general
description below is not tax advice.
The Common Stock is listed for trading on the NASDAQ Small Cap market under
the symbol CCEE. On the Record Date, the reported closing price of the Common
Stock on NASDAQ was $.6875 per share. No assurance can be made as to the future
price of New Common Stock.
Liquidation of Fractional Shares
At the Effective Date, each share of the Common Stock issued and outstanding
immediately prior thereto (the "Old Common Stock"), will be reclassified as and
change into the appropriate fraction of a share of the Company's Common Stock
(the "New Common Stock"). All fractional share interests that are not combined
into whole shares will be subject to the treatment of fractional share interests
as described below. Shortly after the Effective Date, the Company will send
transmittal forms to the holders of the Old Common Stock to be used in
forwarding their certificates formerly representing shares of Old Common Stock
for (i) surrender and exchange for certificates representing whole shares of New
Common Stock and (ii) cash in lieu of any fraction of a share of New Common
Stock to which such holders would otherwise be entitled.
Manhattan Transfer Registrar Co. will act as the Company's exchange agent (the
"Exchange Agent") to act for holders of Old Common Stock in implementing the
exchange of their certificates. Do not send certificates until you receive a
notice requesting you to transmit them to the Exchange Agent.
If this proposal is approved by the stockholders and the Company files an
amendment to its Certificate of Incorporation, stockholders will be notified and
requested to surrender their certificates representing shares of Old Common
Stock to the Exchange Agent in exchange for certificates representing New Common
Stock. Beginning on the Effective Date, each certificate representing shares of
the Company's Old Common Stock will be deemed for all corporate purposes to
evidence ownership of a proportionate number of shares of New Common Stock and a
right to payment in cash for fractional interests.
The Company will either deposit sufficient cash with the Exchange Agent or set
aside sufficient cash for the purchase of the above-referenced fractional
interests. Stockholders are encouraged to surrender their certificates to the
Exchange Agent for certificates evidencing whole shares of the New Common Shares
and to claim the sums, if any, due them for fractional interests, as promptly as
possible following the Effective Date. No interest will accrue or be payable to
Stockholders on account of such deposit. The Company shall be entitled to
earnings, if any, on funds deposited.
The ownership of a fractional interest will not give the holder thereof any
voting, dividend, or other rights except to receive payment therefor as
described herein. No service charge will be payable by Stockholders in
connection with the exchange of certificates or the issuance of cash for
fractional interests, all of which will be borne and paid by the Company.
The number of holders of the Common Stock on the Record Date was approximately
1,700 holder of record and approximately 18,000 stockholders with shares held in
<PAGE>
broker accounts. The Company does not anticipate that the payment in cash in
lieu of fractional shares following any Reverse Stock Split would result in a
significant reduction in the number of such holders.
Board Position and Required Vote
Under Delaware law, approval of the foregoing proposal requires the
affirmative vote of a majority of the shares of Common Stock outstanding.
The Board of Directors believes that the proposed amendment is in the best
interests of the Company and its stockholders and recommends a vote FOR the
proposal to authorize the Board of Directors to amend the Certificate of
Incorporation to effect a 1 for 8 reverse stock split.
Each outstanding share of Common Stock will be entitled to one vote for or
against each the proposal as listed on the Proxy card. The proposal will be
approved only if a quorum is present at the Annual Meeting and the proposal
receives the affirmative vote of a majority of the outstanding shares. The Board
urges that you vote FOR the proposal. Proxies received will be voted in favor of
the proposal unless otherwise instructed.
11. AUTHORIZATION TO ADOPT AN AMENDMENT TO THE CERTIFICATE
OF INCORPORATION EFFECTING A ONE FOR NINE REVERSE STOCK SPLIT
In conjunction with the new listing standards adopted by the National
Association of Securities Dealers, Inc. in August, 1997, for its NASDAQ market
listings, the Company must meet the new listing maintenance criteria in order to
maintain its current listing on the NASDAQ SmallCap Market. One of the requisite
criteria is maintenance of a share price of at least $1.00 per share. The
Company's share price has recently averaged approximately $.75, with a range of
$.31 to $1.03 during the last 12 months. A reverse stock split, in addition to
decreasing the number of shares outstanding, also automatically increases the
stock price per share in an inverse ratio to the reverse ratio, however, there
is no assurance the price will not thereafter decrease. For example, if a
reverse stock split is effected at a one for nine ratio, then one ninth as many
shares will be outstanding, and the share price will automatically be increased
by a multiple of nine.
The Board of Directors believes that the relatively low per share market price
of the Common Stock impairs the marketability of the Common Stock to
institutional investors and members of the investing public and creates a
negative impression with respect to the Company when compared with the Company's
competitors. Another potential benefit from a reverse stock split is the effect
a lower number of outstanding shares can have on many valuation formulas, such
as earnings per share, and the concurrent increase in price per share may have
the effect of increasing the attractiveness of the shares for certain
institutional investors which impose minimum price levels for inclusion in their
portfolios. While the number of shares of Common Stock outstanding should not
affect the marketability of the Common Stock, or the type of investor who
acquires it or the Company's reputation in the financial community, in practice
many investors look upon low priced stock as unduly speculative in nature and,
as a matter of policy, avoid investing in these stocks. Thus, any increase in
trading price resulting from a reverse split is intended to be attractive to the
financial community, the investing public, and to the Company's shareholders.
<PAGE>
If a one for nine reverse stock split is approved by the stockholders of the
Company, the Board, in lieu of effecting any other reverse stock split
amendment, at an appropriate time within nine months after authorization by the
stockholders, may effect the amendment as approved with the resulting
combination of nine outstanding shares of old common stock ("Old Common Stock")
to be reclassified into one share each of new common stock ("New Common Stock")
(the "1 for 9 Ratio"). The stockholders are requested to approve the 1 for 9
Ratio Reverse Stock Split and in separate proposals ratios from 1 for 2 to 1 for
10 (see proposals 4 through 12), and the Board will have authority to choose any
one or none of these alternatives in its discretion; and the remaining
alternative Reverse Stock Splits would be abandoned by the Board pursuant to
Section 242(c) of the General Corporation Law of Delaware without further action
by the Stockholders of the Company. A Reverse Stock Split will be effected only
upon determination by the Board of Directors that a Reverse Stock Split is in
the best interests of the Company and the Stockholders. A Reverse Stock Split
would become effective on any date (the "Effective Date") selected by the Board
of Directors occurring within the nine months after authorization by
stockholders upon the filing of a Certificate of Amendment of the Articles of
Incorporation with the State of Delaware.
The Board intends to examine this issue in light of all relevant requirements
for continued listing of the New Common Stock for trading on NASDAQ as well as
in consideration of all other relevant economic and market factors . In
determining which ratio to select, or whether to effect any reverse ratio, the
Board may consider the advice of financial advisors and factors deemed relevant
by the Board, which may include but not be limited to belief as to future
marketability and liquidity of the Common Stock, prevailing market conditions,
the likely effect on the market price of the Common Stock and other relevant
factors.
Effects of the Reverse Stock Split
As proposed in the Amendment (See Exhibit J) the consummation of a Reverse
Stock Split will not increase or decrease the percentage ownership position of
any stockholder. Only the number of shares outstanding (or issuable upon
exercise of outstanding options or warrants) will be decreased by the reverse
ratio, and, at least, initially, the per share price will be increased by the
inverse ratio, so the value of the shares will also initially be the same
(however, there can be no assurance that the share price will remain at that
level). See the chart following Proposal 12 for the effect of each of the
possible reverse ratios.). This action will not effect (neither increase nor
decrease) the effective or percentage ownership of any security holder, which
remains the same. As proposed in the Amendment consummation of a Reverse Stock
Split will also not alter the par value of Common Stock which will remain at
$.0001 per share of Common Stock.
As noted above, effective upon a reverse stock split, the conversion rate
of outstanding options and warrants would be adjusted proportionately (e.g.; if
a one-for-three Reverse Stock Split is effected, each outstanding option or
warrant would thereafter be convertible into one-third as many shares of New
Common Stock; if a one for five Reverse Stock Split is effected, each
outstanding option or warrant would thereafter be convertible into one-fifth as
many shares of New Common Stock, and if a one-for-ten Reverse Stock Split is
effected, each outstanding option or warrant would thereafter be convertible
into one-tenth as many shares of Common Stock, etc.. This proposal is for a one
for nine ratio resulting, if effected, in one ninth as many shares outstanding.
<PAGE>
Proportionate voting rights and other rights of Stockholders will not be
altered by any Reverse Stock Split.
Consummation of a Reverse Stock Split should have no material federal tax
consequences to most Stockholders; however, tax effects, which are especially
dependent upon a stockholder's individual circumstances, may be material to you;
and each Stockholder must obtain his or her own tax advice; and the general
description below is not tax advice.
The Common Stock is listed for trading on the NASDAQ Small Cap market under
the symbol CCEE. On the Record Date, the reported closing price of the Common
Stock on NASDAQ was $.6875 per share. No assurance can be made as to the future
price of New Common Stock.
Liquidation of Fractional Shares
At the Effective Date, each share of the Common Stock issued and outstanding
immediately prior thereto (the "Old Common Stock"), will be reclassified as and
change into the appropriate fraction of a share of the Company's Common Stock
(the "New Common Stock"). All fractional share interests that are not combined
into whole shares will be subject to the treatment of fractional share interests
as described below. Shortly after the Effective Date, the Company will send
transmittal forms to the holders of the Old Common Stock to be used in
forwarding their certificates formerly representing shares of Old Common Stock
for (i) surrender and exchange for certificates representing whole shares of New
Common Stock and (ii) cash in lieu of any fraction of a share of New Common
Stock to which such holders would otherwise be entitled.
Manhattan Transfer Registrar Co. will act as the Company's exchange agent (the
"Exchange Agent") to act for holders of Old Common Stock in implementing the
exchange of their certificates. Do not send certificates until you receive a
notice requesting you to transmit them to the Exchange Agent.
If this proposal is approved by the stockholders and the Company files an
amendment to its Certificate of Incorporation, stockholders will be notified and
requested to surrender their certificates representing shares of Old Common
Stock to the Exchange Agent in exchange for certificates representing New Common
Stock. Beginning on the Effective Date, each certificate representing shares of
the Company's Old Common Stock will be deemed for all corporate purposes to
evidence ownership of a proportionate number of shares of New Common Stock and a
right to payment in cash for fractional interests.
The Company will either deposit sufficient cash with the Exchange Agent or set
aside sufficient cash for the purchase of the above-referenced fractional
interests. Stockholders are encouraged to surrender their certificates to the
Exchange Agent for certificates evidencing whole shares of the New Common Shares
and to claim the sums, if any, due them for fractional interests, as promptly as
possible following the Effective Date. No interest will accrue or be payable to
Stockholders on account of such deposit. The Company shall be entitled to
earnings, if any, on funds deposited.
The ownership of a fractional interest will not give the holder thereof any
voting, dividend, or other rights except to receive payment therefor as
<PAGE>
described herein. No service charge will be payable by Stockholders in
connection with the exchange of certificates or the issuance of cash for
fractional interests, all of which will be borne and paid by the Company.
The number of holders of the Common Stock on the Record Date was approximately
1,700 holder of record and approximately 18,000 stockholders with shares held in
broker accounts. The Company does not anticipate that the payment in cash in
lieu of fractional shares following any Reverse Stock Split would result in a
significant reduction in the number of such holders.
Board Position and Required Vote
Under Delaware law, approval of the foregoing proposal requires the
affirmative vote of a majority of the shares of Common Stock outstanding.
The Board of Directors believes that the proposed amendment is in the best
interests of the Company and its stockholders and recommends a vote FOR the
proposal to authorize the Board of Directors to amend the Certificate of
Incorporation to effect a 1 for 9 reverse stock split.
Each outstanding share of Common Stock will be entitled to one vote for or
against each the proposal as listed on the Proxy card. The proposal will be
approved only if a quorum is present at the Annual Meeting and the proposal
receives the affirmative vote of a majority of the outstanding shares. The Board
urges that you vote FOR the proposal. Proxies received will be voted in favor of
the proposal unless otherwise instructed.
12. AUTHORIZATION TO ADOPT AN AMENDMENT TO THE CERTIFICATE
OF INCORPORATION EFFECTING A ONE FOR TEN REVERSE STOCK SPLIT
In conjunction with the new listing standards adopted by the National
Association of Securities Dealers, Inc. in August, 1997, for its NASDAQ market
listings, the Company must meet the new listing maintenance criteria in order to
maintain its current listing on the NASDAQ SmallCap Market. One of the requisite
criteria is maintenance of a share price of at least $1.00 per share. The
Company's share price has recently averaged approximately $.75, with a range of
$.31 to $1.03 during the last 12 months. A reverse stock split, in addition to
decreasing the number of shares outstanding, also automatically increases the
stock price per share in an inverse ratio to the reverse ratio, however, there
is no assurance the price will not thereafter decrease. For example, if a
reverse stock split is effected at a one for ten ratio, then one tenth as many
shares will be outstanding, and the share price will automatically be increased
by a multiple of ten.
The Board of Directors believes that the relatively low per share market price
of the Common Stock impairs the marketability of the Common Stock to
institutional investors and members of the investing public and creates a
negative impression with respect to the Company when compared with the Company's
competitors. Another potential benefit from a reverse stock split is the effect
a lower number of outstanding shares can have on many valuation formulas, such
as earnings per share, and the concurrent increase in price per share may have
the effect of increasing the attractiveness of the shares for certain
institutional investors which impose minimum price levels for inclusion in their
portfolios. While the number of shares of Common Stock outstanding should not
affect the marketability of the Common Stock, or the type of investor who
acquires it or the Company's reputation in the financial community, in practice
<PAGE>
many investors look upon low priced stock as unduly speculative in nature and,
as a matter of policy, avoid investing in these stocks. Thus, any increase in
trading price resulting from a reverse split is intended to be attractive to the
financial community, the investing public, and to the Company's shareholders.
If a one for ten reverse stock split is approved by the stockholders of the
Company, the Board, in lieu of effecting any other reverse stock split
amendment, at an appropriate time within nine months after authorization by the
stockholders, may effect the amendment as approved with the resulting
combination of ten outstanding shares of old common stock ("Old Common Stock")
to be reclassified into one share each of new common stock ("New Common Stock")
(the "1 for 10 Ratio"). The stockholders are requested to approve the 1 for 10
Ratio Reverse Stock Split and in separate proposals ratios from 1 for 2 to 1 for
10 (see proposals 4 through 12), and the Board will have authority to choose any
one or none of these alternatives in its discretion; and the remaining
alternative Reverse Stock Splits would be abandoned by the Board pursuant to
Section 242(c) of the General Corporation Law of Delaware without further action
by the Stockholders of the Company. A Reverse Stock Split will be effected only
upon determination by the Board of Directors that a Reverse Stock Split is in
the best interests of the Company and the Stockholders. A Reverse Stock Split
would become effective on any date (the "Effective Date") selected by the Board
of Directors occurring within the nine months after authorization by
stockholders upon the filing of a Certificate of Amendment of the Articles of
Incorporation with the State of Delaware.
The Board intends to examine this issue in light of all relevant requirements
for continued listing of the New Common Stock for trading on NASDAQ as well as
in consideration of all other relevant economic and market factors . In
determining which ratio to select, or whether to effect any reverse ratio, the
Board may consider the advice of financial advisors and factors deemed relevant
by the Board, which may include but not be limited to belief as to future
marketability and liquidity of the Common Stock, prevailing market conditions,
the likely effect on the market price of the Common Stock and other relevant
factors.
Effects of the Reverse Stock Split
As proposed in the Amendment (See Exhibit K) the consummation of a Reverse
Stock Split will not increase or decrease the percentage ownership position of
any stockholder. Only the number of shares outstanding (or issuable upon
exercise of outstanding options or warrants) will be decreased by the reverse
ratio, and, at least, initially, the per share price will be increased by the
inverse ratio, so the value of the shares will also initially be the same
(however, there can be no assurance that the share price will remain at that
level). See the chart following Proposal 12 for the effect of each of the
possible reverse ratios.). This action will not effect (neither increase nor
decrease) the effective or percentage ownership of any security holder, which
remains the same. As proposed in the Amendment consummation of a Reverse Stock
Split will also not alter the par value of Common Stock which will remain at
$.0001 per share of Common Stock.
As noted above, effective upon a reverse stock split, the conversion rate
of outstanding options and warrants would be adjusted proportionately (e.g.; if
a one-for-three Reverse Stock Split is effected, each outstanding option or
warrant would thereafter be convertible into one-third as many shares of New
Common Stock; if a one for five Reverse Stock Split is effected, each
outstanding option or warrant would thereafter be convertible into one-fifth as
many shares of New Common Stock, and if a one-for-ten Reverse Stock Split is
effected, each outstanding option or warrant would thereafter be convertible
into one-tenth as many shares of Common
<PAGE>
Stock, etc.. This proposal is for a one for ten ratio resulting, if effected, in
one tenth as many shares outstanding.
Proportionate voting rights and other rights of Stockholders will not be
altered by any Reverse Stock Split.
Consummation of a Reverse Stock Split should have no material federal tax
consequences to most Stockholders; however, tax effects, which are especially
dependent upon a stockholder's individual circumstances, may be material to you;
and each Stockholder must obtain his or her own tax advice; and the general
description below is not tax advice.
The Common Stock is listed for trading on the NASDAQ Small Cap market under
the symbol CCEE. On the Record Date, the reported closing price of the Common
Stock on NASDAQ was $.6875 per share. No assurance can be made as to the future
price of New Common Stock.
Liquidation of Fractional Shares
At the Effective Date, each share of the Common Stock issued and outstanding
immediately prior thereto (the "Old Common Stock"), will be reclassified as and
change into the appropriate fraction of a share of the Company's Common Stock
(the "New Common Stock"). All fractional share interests that are not combined
into whole shares will be subject to the treatment of fractional share interests
as described below. Shortly after the Effective Date, the Company will send
transmittal forms to the holders of the Old Common Stock to be used in
forwarding their certificates formerly representing shares of Old Common Stock
for (i) surrender and exchange for certificates representing whole shares of New
Common Stock and (ii) cash in lieu of any fraction of a share of New Common
Stock to which such holders would otherwise be entitled.
Manhattan Transfer Registrar Co. will act as the Company's exchange agent (the
"Exchange Agent") to act for holders of Old Common Stock in implementing the
exchange of their certificates. Do not send certificates until you receive a
notice requesting you to transmit them to the Exchange Agent.
If this proposal is approved by the stockholders and the Company files an
amendment to its Certificate of Incorporation, stockholders will be notified and
requested to surrender their certificates representing shares of Old Common
Stock to the Exchange Agent in exchange for certificates representing New Common
Stock. Beginning on the Effective Date, each certificate representing shares of
the Company's Old Common Stock will be deemed for all corporate purposes to
evidence ownership of a proportionate number of shares of New Common Stock and a
right to payment in cash for fractional interests.
The Company will either deposit sufficient cash with the Exchange Agent or set
aside sufficient cash for the purchase of the above-referenced fractional
interests. Stockholders are encouraged to surrender their certificates to the
Exchange Agent for certificates evidencing whole shares of the New Common Shares
and to claim the sums, if any, due them for fractional interests, as promptly as
possible following the Effective Date. No interest will accrue or be payable to
Stockholders on account of such deposit. The Company shall be entitled to
earnings, if any, on funds deposited.
<PAGE>
The ownership of a fractional interest will not give the holder thereof any
voting, dividend, or other rights except to receive payment therefor as
described herein. No service charge will be payable by Stockholders in
connection with the exchange of certificates or the issuance of cash for
fractional interests, all of which will be borne and paid by the Company.
The number of holders of the Common Stock on the Record Date was approximately
1,700 holder of record and approximately 18,000 stockholders with shares held in
broker accounts. The Company does not anticipate that the payment in cash in
lieu of fractional shares following any Reverse Stock Split would result in a
significant reduction in the number of such holders.
Board Position and Required Vote
Under Delaware law, approval of the foregoing proposal requires the
affirmative vote of a majority of the shares of Common Stock outstanding.
The Board of Directors believes that the proposed amendment is in the best
interests of the Company and its stockholders and recommends a vote FOR the
proposal to authorize the Board of Directors to amend the Certificate of
Incorporation to effect a 1 for 10 reverse stock split.
Each outstanding share of Common Stock will be entitled to one vote for or
against each the proposal as listed on the Proxy card. The proposal will be
approved only if a quorum is present at the Annual Meeting and the proposal
receives the affirmative vote of a majority of the outstanding shares. The Board
urges that you vote FOR the proposal. Proxies received will be voted in favor of
the proposal unless otherwise instructed.
THE FOLLOWING TABLES APPLY TO PROPOSALS 4 THROUGH 12
The following Table sets forth the number of shares of Common Stock that
would be outstanding (based on the 120,715,318 shares outstanding as of the
Record Date) immediately after a Reverse Stock Split of the respective ratio.
The reduction of the number of shares outstanding in each Reverse Stock Split
has the inverse effect on authorized and unissued shares. The table does not
attempt to account for cashing out fractional shares, nor does it account for
the proposed increase in the Company's authorized capital stock.
<TABLE>
<CAPTION>
Ratio of Reverse Common Stock Authorized and
Stock Split Outstanding Reserved(1) Unissued Common Stock
- ---------------- -----------------------------
Before Reverse After Reverse
Stock Split Stock Split
-------------- --------------
<S> <C> <C> <C> <C>
None 120,715,318 15,761,939 13,522,743 NA
1 for 2 60,357,659 7,880,970 NA 81,761,372
1 for 3 40,238,439 5,253,980 NA 104,507,581
1 for 4 30,178,830 3,940,485 NA 115,880,686
1 for 5 24,143,064 3,152,388 NA 122,704,549
1 for 6 20,119,220 2,626,990 NA 127,253,791
1 for 7 17,245,045 2,251,706 NA 130,503,249
1 for 8 15,089,415 1,970,242 NA 132,940,343
1 for 9 13,412,813 1,751,327 NA 134,835,860
1 for 10 12,071,532 1,576,194 NA 136,352,274
<FN>
(1) As of October 3, 1997, unaudited
</FN>
</TABLE>
<PAGE>
Upon determination and adoption of the exact ratio of the Reverse Stock
Split by the Board of Directors and the filing of appropriate documents to
effect such Reverse Stock Split, the Company will promptly notify Stockholders
that the Reverse Stock Split has been effected. In addition, the Board shall
have authority to determine the exact timing of the Reverse Stock Split, which
may be effected at any time within nine months following the meeting date.
The Board of Directors reserves the right, notwithstanding Stockholder
approval and without further action by the Stockholders, to abandon the Reverse
Stock Split, if, at any time prior to filing the Amendment with the Delaware
Secretary of State, the Board of Directors, in its sole discretion, determines
that the Reverse Stock Split is no longer in the best interests of the Company
and its Stockholders. Nevertheless, no assurance will be made that a Reverse
Stock Split, if approved, will be effected only under favorable conditions. The
Board of Directors may also take into account any factors deemed material in the
Board's discretion.
The Board of Directors believes that leaving the discretion to the Board of
Directors in these regards will permit flexibility to make an attempt to
effectuate the Reverse Stock Split in an appropriate and well-planned manner in
the best interests of the Company and its stockholders.
The Company's reporting obligations under the Securities exchange Act of
1934 should not be affected by the changes in capitalization contemplated
pursuant to the Reverse Stock Split because no significant reduction should be
anticipated in the number of record holders of the Common Stock below its Record
Date level of approximately 1,700, or the approximately 18,000 non-record
holders (shareholders whose shares are held in brokerage "street name"
accounts), or, of course, below the Securities Exchange Act of 1934's
going-private threshold of fewer than 300 record holders.
If a Reverse Stock Split is declared, it will require that an amount equal
to the number of fewer shares issued times such shares' par value be transferred
to the Company's Surplus Account (specifically, its Capital Surplus Account) and
from its Capital Account. The number of shares of Common Stock outstanding will
be reduced. As a consequence, the aggregate par value of the outstanding Common
Stock will be reduced, while the aggregate capital in excess of par value
attributable to the outstanding Common Stock for statutory and accounting
purposes will be increased correspondingly. The resolutions approving the
Reverse Stock Splits provide that this increase in capital in excess of par
value will be treated as capital for statutory purposes. However, under Delaware
law, the Board of Directors of the Company will have the authority, subject to
various limitations, to transfer some or all of such increased capital in excess
of par value from capital to surplus, which additional surplus could be
distributed to Stockholders as dividends or used by the Company to repurchase
outstanding stock. The Company currently has no plans to use any surplus so
created to pay any such dividend or to repurchase stock so created to pay any
such dividend or to repurchase stock.
The following tables illustrate the principal effects of the Reverse Stock
Split to the Company's capital accounts on a pro forma basis as at December 31,
1996:
<PAGE>
<TABLE>
<CAPTION>
Prior to After 1-for-2 After 1-for3 After 1-for-4
Reverse Stock Reverse Stock Reverse Stk Reverse Stock
Number of Shares Split Split Split Split
- ---------------- ------------- ------------- ------------ -------------
Common Stock
<S> <C> <C> <C> <C>
Authorized . . . . . . . 150,000,000 150,000,000 150,000,000 150,000,000
Outstanding. . . . . . . 101, 335,272 50,667,636 33,778,424 25,333,818
Reserved . . . . . . . . 22,789,609 11,394,805 7,596,536 5,697,402
Available for Future
Issuance . . . . . . . 25,875,119 87,937,559 108,625,040 118,968,780
(In thousands Prior to After 1-for-2 After 1-for3 After 1-for-4
except share data) Reverse Stock Reverse Stock Reverse Stk Reverse Stock
Financial Data Split Split Split Split
------------- ------------ ------------ -------------
Stockholders' Equity
Common Stock,
$.0001 par value . . . . . $ 10 $ 5 $ 3 $ 3
Additional Paid-in
Capital. . . . . . . . . 78,870 78,875 78,877 78,877
Retained Earnings. . . . . (69,356) (69,356) (69,356) (69,356)
Total Stockholders' Equity 9,524 9,524 9,524 9,524
Book Value per common
share. . . . . . . . . . $ .0767 $ .1535 $ .2302 $ .3069
Prior to After 1-for-5 After 1-for-6 After 1-for-7
Reverse Stock Reverse Stock Reverse Stk Reverse Stock
Number of Shares Split Split Split Split
---------------- ------------- ------------- ------------- -------------
Common Stock
Authorized . . . . . . . 150,000,000 150,000,000 150,000,000 150,000,000
Outstanding. . . . . . . 101,335,272 20,267,054 16,889,212 14,476,467
Reserved . . . . . . . . 22,789,609 4,557,922 3,798,268 3,255,658
Available for Future
Issuance . . . . . . . 25,875,119 125,175,024 129,312,520 132,267,875
Prior to After 1-for-5 After 1-for-6 After 1-for-7
Reverse Stock Reverse Stock Reverse Stk Reverse Stock
Financial Data Split Split Split Split
-------------- ------------- ------------- ------------- -------------
Stockholders' Equity
Common Stock,
$.0001 par value . . . . . $ 10 $ 2 $ 2 $ 1
Additional Paid-in
Capital. . . . . . . . . 78,870 78,878 78,878 78,879
Retained Earnings. . . . (69,356) (69,356) (69,356) (69,356)
Total Stockholders' Equity 9,524 9,524 9,524 9,524
Book Value per common
share. . . . . . . . . . $ .0767 $ .3836 $ .4604 $ .5371
<PAGE>
Prior to After 1-for-8 After 1-for9 After 1-for-10
Reverse Stock Reverse Stock Reverse Stk Reverse Stock
Number of Shares Split Split Split Split
---------------- ------------- ------------ ----------- --------------
Common Stock
Authorized . . . . . . . 150,000,000 150,000,000 150,000,000 150,000,000
Outstanding. . . . . . . 101,335,272 12,666,909 11,259,475 10,133,527
Reserved . . . . . . . . 22,789,609 2,848,701 2,532,179 2,278,512
Available for Future
Issuance . . . . . . . 25,875,119 134,484,390 136,208,346 137,587,512
Prior to After 1-for-8 After 1-for9 After 1-for-10
Reverse Stock Reverse Stock Reverse Stk Reverse Stock
Financial Data Split Split Split Split
-------------- ------------- ------------- ------------ --------------
Stockholders' Equity
Common Stock,
$.0001 par value . . . . . $ 10 $ 1 $ 1 $ 1
Additional Paid-in
Capital. . . . . . . . . 78,877 78,879 78,879 78,879
Retained Earnings. . . . . (69,356) (69,356) (69,356) (69,356)
Total Stockholders' Equity 9,524 9,524 9,524 9,524
Book Value per common
share. . . . . . . . . . $ .0767 $ .6139 $ .6906 $ .7673
</TABLE>
13. PROPOSAL TO ADOPT THE 1997 STOCK INCENTIVE PLAN
Eligible participants in the 1997 Stock Incentive Plan are officers and
employees of the Company or any of its subsidiaries or affiliates, and
consultants to the Company. Options granted under the 1997 Stock Incentive Plan
may be incentive stock options qualified under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or may be non-qualified stock
options. In addition, under the 1997 Incentive Plan, the Board of Directors or a
committee thereof may also grant restricted stock, stock appreciation rights,
performance grants or such other types of awards as it may determine.
Management believes that the Company's long-term success is dependent upon the
ability of the Company to attract and retain qualified officers, employees and
consultants and to motivate their best efforts on behalf of the Company's
interests. The Company has adopted incentive plans to provide compensation in
stock or options in order to conserve the cash resources of the Company while at
the same time tying the interests of the recipients to the future growth of the
Company which would also benefit all of the Company's shareholders. The Board of
Directors compensation policy has primarily been to grant stock or options
thereby insuring that all shareholders' value must increase before such grants
have value to the recipients, and providing an incentive for the recipients to
continue to work to increase such values for all shareholders. The full text of
the 1997 Stock Incentive Plan appears in Exhibit L to this Proxy Statement. The
principal features of the 1997 Stock Incentive Plan are summarized below, but
such summary is qualified in its entirety by the full text of the 1997 Stock
Incentive Plan.
<PAGE>
Stock Subject to the Plan
The stock to be offered under the 1997 Stock Incentive Plan consists of
shares, whether authorized but unissued or reacquired by the Company, of Common
Stock of the Company. The total number of shares of Common Stock issuable upon
the exercise of all stock options under the 1997 Incentive Plan may not exceed
10,000,000 shares, subject to adjustments upon the occurrence of certain events,
including stock dividends, stock splits, mergers, consolidations,
reorganizations, recapitalizations, or other capital adjustments.
Administration of the Plan
The 1997 Stock Incentive Plan is to be administered by the Board of Directors
of the Company; provided, however, that the Board may, in the exercise of its
discretion, designate from among its members a Compensation Committee (the
"Committee") consisting of no fewer than two independent directors. The Board
has appointed Russell Pellicano, Jack S. Beige and Augustin Medina as the
members of the Compensation Committee. The Board intends that its Compensation
Committee will administer the 1997 Stock Incentive Plan.
Subject to the terms of the 1997 Stock Incentive Plan, the Board of Directors
or the Committee may determine and designate those officers, employees and
consultants who are to be granted stock options, restricted stock or other
awards under the 1997 Stock Incentive Plan and the number of shares to be
subject to such options, grants or other awards and, as hereinafter described,
the nature and terms of the options or other awards to be granted. The Board of
Directors or the Committee shall also, subject to the express provisions of the
1997 Stock Incentive Plan, have authority to interpret the 1997 Stock Incentive
Plan and to prescribe, amend and rescind the rules and regulations relating to
the 1997 Stock Incentive Plan.
Grant of Options
Officers, employees and Consultants of the Company or any of its subsidiaries
or affiliates are eligible to participate in the 1997 Stock Incentive Plan. The
exercise price for incentive stock options granted under the 1997 Stock
Incentive Plan will be the fair market value of the Company's Common Stock on
the date of grant of the stock option (or in the case of incentive stock options
granted to any individual who owns stock possessing more than 10% of the total
combined voting power of all voting stock of the Company [a "Principal
Stockholder"] , 110% of such fair market value). The exercise price for
Non-Qualified Stock Options granted under the 1997 Stock Incentive Plan will be
not less than such fair market value. The option price, as well as the number of
shares subject to such option, shall be appropriately adjusted by the Committee
in the event of stock splits, stock dividends, recapitalizations, and certain
other events involving a change in the Company's capital.
Exercise of Stock Options
Stock options granted under the 1997 Stock Incentive Plan shall expire not
later than ten years from the date of grant, or in the case of any incentive
stock option granted to a Principal Stockholder, five years from the date of
<PAGE>
grant or such shorter period as the Committee may determine. Stock options
granted under the 1997 Stock Incentive Plan may become exercisable in one or
more installments in the manner and at the time or times specified by the Board
of Directors or the Committee. Subject to this power of the Committee, and
except in the manner described below upon the death of the Optionee, a qualified
incentive stock option may be exercised for all of the subject shares on and
after the first such anniversary of the date of the grant of such Option, but in
no event later than the expiration of the term of the Option.
Upon the exercise of a stock option, Optionees may pay the exercise price in
cash, by certified or bank cashiers check or, at the option of the Company, in
shares of Common Stock of the Company valued at its fair market value on the
date of exercise, or a combination thereof. Withholding and other employment
taxes applicable to the exercise of an option shall be paid by the optionee at
such time as the Board of Directors or the Committee determines that the
optionee has recognized gross income under the Code resulting from such
exercise. These taxes may, at the option of the Company, be paid in shares of
Common Stock.
An Incentive Stock Option shall be exercisable during the Optionee's lifetime
only by the Optionee and shall not be exercisable by the Optionee unless, at all
times since the date of grant and at the time of exercise, such Optionee is an
employee or consultant of the Company, or any subsidiary or affiliate, except
that, upon termination of all employment (other than by death or by Total
Disability followed by death in the circumstances provided below) with the
Company, any subsidiary or any affiliate, the Optionee may exercise an Incentive
Stock Option at any time within three months thereafter but only to the extent
such Option is exercisable on the date of such termination.
In the event of the death of an Optionee (i) while an employee of the Company,
any parent corporation of the Company or any subsidiary, or (ii) within three
months after termination of all employment with the Company, any parent
corporation of the Company and any subsidiary (other than for Total Disability)
or (iii) within three months after termination on account of Total Disability of
all employment with the Company, any parent corporation of the Company and any
Subsidiary, such optionee's estate or any person who acquires the right to
exercise such option by bequest or inheritance or by reason of the death of the
optionee may exercise such Optionee's Option at any time within the period of
one year from the date of death. Such Options shall be exercisable only to the
extent exercisable on the date of such termination.
To the extent the aggregate market value of the Common Stock (determined as of
the date of grant) with respect to which any options granted are intended to be
designated as Incentive Stock Options under the 1995 Incentive Plan (or any
other incentive stock option plan of the Company or any subsidiary) which may be
exercisable for the first time by the optionee in any calendar year exceeds
$100,000, such options shall not be considered Incentive Stock Options.
Stock options granted under the 1997 Stock Incentive Plan may not be
transferred by the holder other than by will or the laws of descent and
distribution and may be exercised during the holder's lifetime only by the
holder.
<PAGE>
Change in Control
In the event of a Change in Control (as defined), (a) all options outstanding
on the date of such Change in Control shall become immediately and fully
exercisable, and (b) all restrictions thereon shall lapse.
Federal Income Tax Consequences
Incentive stock options granted under the 1997 Stock Incentive Plan are
intended to be qualified incentive stock options in accordance with the
provisions of Section 422 of the Code. All other options granted under the 1997
Stock Incentive Plan are non-qualified options not entitled to special tax
treatment under Section 422 of the Code. Generally, the grant of an incentive
stock option will not result in taxable income to the recipient at the time of
the grant, and the Company will not be entitled to an income tax deduction at
such time. The grant of non-qualified options will not result in taxable income
to the recipient at the time of the grant to the extent that it is granted at
100% of the fair market value of the Company's Common Stock at such time. So
long as such option does not result in taxable income to the recipient at the
time of the grant, the Company will not be entitled to an income tax deduction.
Upon the exercise of an incentive stock option granted under the 1997 Stock
Incentive Plan, the recipient will not be treated as receiving any taxable
income, and the Company will not be entitled to an income tax deduction. Upon
the exercise of a non-qualified option, an employee who is not a director or
officer of the Company will be treated as receiving compensation, taxable as
ordinary income, in an amount equal to the excess of the fair market value of
the underlying shares of the Company's Common Stock at the time of exercise,
over the exercise price. The date of recognition and determination of the
ordinary compensation income attributable to shares received upon exercise of an
option by an officer of the Company, while he or she is subject to Section 16(b)
of the Securities Exchange Act of 1934, is generally delayed until six months
after such exercise, unless that person elects to be taxed as of the date of
exercise. The Company will receive an income tax deduction for the amount
treated as compensation income to the recipient at the time and in the amount
that the recipient recognizes such income.
Upon subsequent disposition of the shares subject to the option, any
differences between the tax basis of the shares and the amount realized on the
disposition is generally treated as long-term or short-term capital gain or
loss, depending on the holding period of the shares of Common Stock; provided,
that if the shares subject to an incentive stock option are disposed of prior to
the expiration of two years from the date of grant and one year from the date of
exercise, the gain realized on the disposition will be treated as ordinary
compensation income to the Optionee.
Upon any grant of restricted stock or other award under the 1997 Stock
Incentive Plan, taxable income generally will be recognized by the recipient
thereof to the extent that there is no substantial risk of forfeiture thereof.
The satisfaction of any of the restrictions thereon generally will result in the
recipient thereof being deemed to have received taxable income to the extent of
the value of such award with respect to which such restrictions have been
satisfied.
<PAGE>
The foregoing analysis is only a general statement of the tax consequences of
awards under the 1997 Stock Incentive Plan, and each recipient of awards under
the 1997 Stock Incentive Plan should consult his or her own tax advisor with
regard to the tax consequences to such persons of any awards granted under the
1997 Stock Incentive Plan. The foregoing does not constitute tax advice.
Board Position and Required Vote
The affirmative vote of a majority of the outstanding voting stock present in
person or by proxy at the Annual Meeting is required for ratification of the
1997 Stock Incentive Plan.
The Board of Directors recommends a vote FOR approval of the 1997 Stock
Incentive Plan.
Each outstanding share of Common Stock will be entitled to one vote for or
against each the proposal as listed on the Proxy card. The proposal will be
approved only if a quorum is present at the Annual Meeting and the proposal
receives the affirmative vote of a majority of the outstanding shares. The Board
urges that you vote FOR the proposal. Proxies received will be voted in favor of
the proposal unless otherwise instructed.
See Exhibit L
14. PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
General
The Board of Directors has proposed and recommended to its stockholders a
proposal which authorizes the Board in its discretion to approve an amendment to
Article Fourth of the Company's Certificate of Incorporation increasing the
total number of shares which the Company has authority to issue from 150,000,000
shares of Common Stock, par value $.0001 per share, to 300,000,0000 shares, par
value $.0001 per share. This action will not modify (neither increase nor
decrease) a stockholder's percentage or effective ownership interest in the
Company. See Exhibit M.
Purpose to Increase Authorized Shares of Common Stock and Possible Advantages
The Board of Directors believes the authorization to increase the authorized
number of shares of Common Stock is necessary and will be beneficial to the
future of the Company. An increased authorization to 300,000,000 shares of
Common Stock is intended to provide flexibility to the Company for possible
technology or business acquisitions, capital reorganizations, refinancing,
exchange of securities, public offerings, other appropriate corporate purposes
including compensation in lieu of cash compensation. In recent years, the
Company has issued a substantial number of shares of Common Stock, which has
significantly decreased the number of shares of Common Stock presently available
for issuance for such purposes. The Board believes it to be in the Company's
best interest to provide incentives to officers, employees and consultants in
<PAGE>
the form of equity where the value to the recipient is tied to market values for
all shareholders.
The authorization to increase the authorized capital of the Company to
300,000,000 shares of Common Stock (plus 1,000,000 shares of preferred stock, if
Proposal 3 is approved) is intended to provide additional flexibility to the
Company for possible capital reorganization, acquisitions, financing, exchange
of securities, public offerings and other corporate purposes including those
discussed above. In recent years, the Company has issued a substantial number of
shares of Common Stock, which has significantly decreased the number of shares
of Common Stock presently available for issuance for such purposes.
Common Stock is authorized to be issued in the discretion of the Board of
Directors without Stockholder approval of each issuance. After this proposal is
approved by the Stockholders, the Board does not intend to solicit further
Stockholder approval prior to the issuance of any additional shares of Common
Stock unless applicable law or regulation requires Stockholder approval as a
condition to the issuance of such shares in any particular transaction. The
Company may fund its existing obligations by raising capital through the sale or
conversion of shares. Any increase in the number of shares authorized or
outstanding may depress the price of shares and impair the liquidity of
Stockholders. In addition, the issuance may be on terms that are dilutive to
Stockholders. Issuance of additional shares also could have the effect of
diluting the earnings per share and book value per share of shares outstanding.
Regardless of those factors, the Board believes the ability of the Company to
expand and carry on its operations may be negatively impacted if the amendment
to increase it authorized capital is not approved, whereas the benefits
anticipated to be generated from the authorized capital increase are anticipated
to benefit all shareholders and the value of the Company.
The following table sets forth as of January 31, 1996, the approximate number
of shares of Common Stock authorized, outstanding, reserved and available for
issuance. The table further sets forth the approximate number of shares which
will be available for issuance if this amendment to increase the authorized
capital stock to 300,000,000 shares is approved, however, there is no assurance
that all of the options or warrants for which shares are reserved will be
exercised, which means the Company may not receive the exercise proceeds and as
options or warrants expire without being exercised, the shares reserved in
regard thereto will become available for issuance for other corporate purposes.
<TABLE>
<CAPTION>
Common Stock Available
------------ Upon Approval
Authorized Outstanding Reserved(1)(2) Available Of Amendment
---------- ----------- ------------- --------- -------------
<S> <C> <C> <C> <C>
150,000,000. . . . . 120,715,318 15,761,939 13,522,743 NA
300,000,000. . . . . 120,715,318 15,761,939 NA 163,522,743
- ------
<FN>
(1) Includes shares currently issuable upon exercise of outstanding stock
options and warrants.
(2) Does not include shares available for issuance under the 1997 Stock Option
Plan assuming approval of this plan.
</FN>
</TABLE>
<PAGE>
Board Position and Required Vote
The Board of Directors believes that the proposed amendment is in the best
interests of the Company and its stockholders and unanimously recommends its
adoption.
Each outstanding share of Common Stock will be entitled to one vote for or
against this proposed amendment. The proposal will be adopted only if it
receives the affirmative vote of a majority of the outstanding shares of Common
Stock. The Board urges that you vote FOR the proposed amendment. Proxies
received will be voted in favor of the proposed amendment unless otherwise
instructed.
15. Appointment of Independent Public Accountants
The Board of Directors recommends that the shareholders approve the
appointment of Hayes & Co. as the Company's independent public accountants to
examine the financial statements of the Company for the fiscal/calendar year
ending December 31, 1997. Grant Thornton LLP, whose services were terminated by
the Company in May of 1997, acted as the Company's independent public
accountants for the fiscal years ended December 31, 1992, through December 31,
1996.
A representative of Hayes & Co. plans to be present at the Annual Meeting with
the opportunity to make a statement, if he desires to do so, and will be
available to respond to appropriate questions.
Board Position and Required Vote
The affirmative vote of the holders of a majority of the outstanding Common
Stock present at the meeting in person or by proxy is necessary for ratification
of the appointment of Hayes & Co. as the Company's independent public
accountants.
The Board of Directors recommends a vote FOR the ratification of the
appointment.
Each outstanding share of Common Stock will be entitled to one vote for or
against each the proposal as listed on the Proxy card. The proposal will be
approved only if a quorum is present at the Annual Meeting and the proposal
receives the affirmative vote of a majority of the outstanding shares present at
the meeting. The Board urges that you vote FOR the proposal. Proxies received
will be voted in favor of the proposal unless otherwise instructed.
BOARD OF DIRECTORS' DISCRETION AND RESERVATION OF RIGHTS
The Board of Directors reserves the right, notwithstanding Stockholders'
approval and without further action by the Stockholders, to elect not to proceed
with any of the proposed actions, if at any time prior to filing the Company's
<PAGE>
Amended Certificate of Incorporation with the Secretary of State of the State of
Delaware, the Board of Directors, in its sole discretion determines that the
proposed action is no longer action is no longer in the best interests of the
Company and its Stockholders. Pursuant to Section 242(c) of the General
Corporation Law of Delaware, the reservation by the Board of Directors of this
right to abandon a proposed amendment of the Company's Certificate of
Incorporation is set forth in the resolutions adopting the Amendments.
Under each of the Proposals for amendments to the Company's Articles of
Incorporation, the Board reserves the right to delay the filing of the Amendment
for up to nine months following the meeting date.
NO DISSENTERS' RIGHTS
Under Delaware law, stockholders are not entitled to dissenter's rights of
appraisal with respect to the proposed amendments to the Company's Certificate
of Incorporation under any of the Proposals.
INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton LLP acted as the Company's independent public accountants for
the period ended December 31, 1996. Hayes & Co. has been retained to act as the
Company's independent public accountants for the fiscal year ended December 31,
1997.
FINANCIAL STATEMENTS
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1996, including the Company's Form 10-K for said period, and
the Company's Quarterly Report on Form 10-Q for the three and six-month periods
ended June 30, 1997, has been provided to all stockholders as of the Record
Date. Stockholders are referred to the report for financial and other
information about the Company, but such report, is not incorporated in this
proxy statement and is not a part of the proxy soliciting material.
MISCELLANEOUS INFORMATION
As of the date of this Proxy Statement, the Board of Directors does not
know of any business other than that specified above to come before the meeting,
but, if any other business does lawfully come before the meeting, it is the
intention of the persons named in the enclosed Proxy to vote in regard thereto
in accordance with their judgment.
The Company will provide without charge to any stockholder as of the
Record Date, copies of the Company's Annual Report on Form 10-K and any of the
Company's Quarterly Reports on Form 10-Q, including the financial statements and
financial statement schedules included therein, upon written request delivered
to George Aronson, Chief Financial Officer, at the Company's offices at 80
Orville Drive, Suite 200, Bohemia, New York 11716.
<PAGE>
The Company will pay the cost of soliciting proxies in the accompanying
form. In addition to solicitation by use of the mails, certain officers and
regular employees of the Company may solicit proxies by telephone, telegraph or
personal interview. The Company may also request brokerage houses and other
custodians, and, nominees and fiduciaries, to forward soliciting material to the
beneficial owners of stock held of record by such persons, and may make
reimbursement for payments made for their expense in forwarding soliciting
material to such beneficial owners.
Stockholder proposals with respect to the Company's next Annual Meeting
of Stockholders must be received by the Company no earlier than April 20, 1998,
and no later than May 15, 1998 to be considered for inclusion in the Company's
next Proxy Statement.
By Order of the Board of Directors,
DANIEL DEL GIORNO, SR.
Chief Executive Officer
Dated: Bohemia, New York
October 14, 1997
<PAGE>
EXHIBIT A
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
PROVIDING FOR A CLASSIFIED BOARD OF DIRECTORS
The following sets forth the addition of Article "____" (the Article number
will be determined by the Board of Directors depending on which, if any, of the
other Article amendment proposals are approved) to the Company's Certificate of
Incorporation if the proposed Amendment is approved:
"_____": The number of directors of the Corporation shall be not less
than three nor more than nine and the number to be chosen within such
limits shall be determined in the manner prescribed by the by-laws of this
Corporation. Any director may be removed from office with cause at any time
by the affirmative vote of stockholders of record holding a majority of the
outstanding shares of stock of the Corporation entitled to vote, given at a
meeting of the stockholders called for that purpose.
The Board of Directors shall be divided into three (3) classes as
nearly equal in number as possible, and no class shall include less than
one (1) director. The terms of office of the directors initially classified
shall be as follows: that of Class I shall expire at the next annual
meeting of stockholders in 1998, Class II at the second succeeding annual
meeting of shareholders in 1999, and Class III at the third succeeding
annual meeting of shareholders in 2000. The foregoing notwithstanding, each
director shall serve until his successor shall have been duly elected and
qualified, unless he shall resign, become disqualified, disabled or shall
otherwise be removed. Whenever a vacancy occurs on the Board of Directors,
a majority of the remaining directors have the power to fill the vacancy by
electing a successor director to fill that portion of the unexpired term
resulting from the vacancy. The Board of Directors shall determine which
directors shall serve in each class of the initial classified Board of
Directors.
At any annual meeting of shareholders after such initial
classification, directors chosen to succeed those whose terms then expire
at such annual meeting shall be elected for a term of office expiring at
the third succeeding annual meeting of shareholders after their election.
When the number of directors is increased by the Board of Directors, there
shall be no classification of the additional directors until the next
annual meeting of shareholders. Directors elected, whether by the Board of
Directors or by the shareholders, to fill a vacancy, subject to the
foregoing, shall hold office for a term expiring at the annual meeting at
which the term of the Class to which they shall have been elected expires.
Any newly created directorships or any decrease in directorships shall be
so apportioned among the classes as to make all classes as nearly equal in
number as possible.
<PAGE>
EXHIBIT B
If Proposal 3 is approved, the following will be included in an amendment
to the Certificate of Incorporation of the Company, in Article Fourth, thereof:
Fourth: (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is THREE HUNDRED ONE MILLION
(301,000,000) shares. [If Proposal 14 is not approved, to read: "The total
number of shares of all classes of stock which the Corporation shall have
authority to issue is ONE HUNDRED FIFTY ONE MILLION (151,000,000) shares.] Of
these (i) THREE HUNDRED MILLION (300,000,000) shares shall be shares of Common
Stock of the par value of $.0001 per share; and (ii) ONE MILLION (1,000,000)
shares shall be shares of Serial Preferred Stock of the par value of $.0001 per
share. [If Proposal 14 is not approved, to read: "Of these (i) ONE HUNDRED FIFTY
MILLION (150,000,000) shares shall be shares of Common Stock of the par value of
$.0001 per share; and (ii) ONE MILLION (1,000,000) shares shall be shares of
Serial Preferred Stock of the par value of $.0001 per share.]
...
(c) The statement of the relative rights, preferences and limitations of the
shares of each class is as follows [If Proposal 3 is not approved, to be
denominated "(b)"]:
A. Serial Preferred Stock. The Serial Preferred Stock may be issued from
time to time in classes or series and shall have such voting powers, full or
limited, or no voting powers, and such designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, as shall be stated and expressed in the resolution or
resolutions of the Board of Directors providing for the issuance of such stock.
B. Common Stock. Subject to the rights, privileges, preferences and
priorities of any holders of Serial Preferred Stock, the Common Stock shall be
entitled to dividends out of funds legally available therefor, when, as and if
declared and paid to the holders of Common Stock, and upon liquidation,
dissolution or winding up of the Corporation, to share ratably in the assets of
the Corporation available for distribution to the holders of Common Stock.
Except as otherwise provided herein or by law, the holders of the Common Stock
shall have full voting rights and powers, and each share of Common Stock shall
be entitled to one vote. All shares of Common Stock shall be identical with each
other in every respect. [If Proposal 3 is not approved, to read: The Common
Stock shall be entitled to dividends out of funds legally available therefor,
when, as and if declared and paid to the holders of Common Stock, and upon
liquidation, dissolution or winding up of the Corporation, to share ratably in
the assets of the Corporation available for distribution to the holders of
Common Stock. Except as otherwise provided herein or by law, the holders of the
Common Stock shall have full voting rights and powers, and each share of Common
Stock shall be entitled to one vote. All shares of Common Stock shall be
identical with each other in every respect.]
<PAGE>
EXHIBIT C
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
TO EFFECT A 1 for 2 REVERSE STOCK SPLIT
The following sets forth the addition of a second paragraph to Article
"FOURTH" of the Company's Certificate of Incorporation if the proposed Amendment
is approved:
"Any and all previously issued shares (including shares issuable upon
exercise of outstanding options or warrants) of Common Stock of the par
value of $.0001 per share as of _______________ (date to be inserted) shall
be combined and reclassified on a ratio of one share for two shares of
Common Stock with a par value of $.0001 per share."
<PAGE>
EXHIBIT D
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
TO EFFECT A 1 for 3 REVERSE STOCK SPLIT
The following sets forth the addition of a second paragraph to Article
"FOURTH" of the Company's Certificate of Incorporation if the proposed Amendment
is approved:
"Any and all previously issued shares (including shares issuable upon
exercise of outstanding options or warrants) of Common Stock of the par
value of $.0001 per share as of _______________ (date to be inserted) shall
be combined and reclassified on a ratio of one share for three shares of
Common Stock with a par value of $.0001 per share."
<PAGE>
EXHIBIT E
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
TO EFFECT A 1 for 4 REVERSE STOCK SPLIT
The following sets forth the addition of a second paragraph to Article
"FOURTH" of the Company's Certificate of Incorporation if the proposed Amendment
is approved:
"Any and all previously issued shares (including shares issuable upon
exercise of outstanding options or warrants) of Common Stock of the par
value of $.0001 per share as of _______________ (date to be inserted) shall
be combined and reclassified on a ratio of one share for four shares of
Common Stock with a par value of $.0001 per share."
<PAGE>
EXHIBIT F
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
TO EFFECT A 1 for 5 REVERSE STOCK SPLIT
The following sets forth the addition of a second paragraph to Article
"FOURTH" of the Company's Certificate of Incorporation if the proposed Amendment
is approved:
"Any and all previously issued shares (including shares issuable upon
exercise of outstanding options or warrants) of Common Stock of the par
value of $.0001 per share as of _______________ (date to be inserted) shall
be combined and reclassified on a ratio of one share for five shares of
Common Stock with a par value of $.0001 per share."
<PAGE>
EXHIBIT G
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
TO EFFECT A 1 for 6 REVERSE STOCK SPLIT
The following sets forth the addition of a second paragraph to Article
"FOURTH" of the Company's Certificate of Incorporation if the proposed Amendment
is approved:
"Any and all previously issued shares (including shares issuable upon
exercise of outstanding options or warrants) of Common Stock of the par
value of $.0001 per share as of _______________ (date to be inserted) shall
be combined and reclassified on a ratio of one share for six shares of
Common Stock with a par value of $.0001 per share."
<PAGE>
EXHIBIT H
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
TO EFFECT A 1 for 7 REVERSE STOCK SPLIT
The following sets forth the addition of a second paragraph to Article
"FOURTH" of the Company's Certificate of Incorporation if the proposed Amendment
is approved:
"Any and all previously issued shares (including shares issuable upon
exercise of outstanding options or warrants) of Common Stock of the par
value of $.0001 per share as of _______________ (date to be inserted) shall
be combined and reclassified on a ratio of one share for seven shares of
Common Stock with a par value of $.0001 per share."
<PAGE>
EXHIBIT I
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
TO EFFECT A 1 for 8 REVERSE STOCK SPLIT
The following sets forth the addition of a second paragraph to Article
"FOURTH" of the Company's Certificate of Incorporation if the proposed Amendment
is approved:
"Any and all previously issued shares (including shares issuable upon
exercise of outstanding options or warrants) of Common Stock of the par
value of $.0001 per share as of _______________ (date to be inserted) shall
be combined and reclassified on a ratio of one share for eight shares of
Common Stock with a par value of $.0001 per share."
<PAGE>
EXHIBIT J
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
TO EFFECT A 1 for 9 REVERSE STOCK SPLIT
The following sets forth the addition of a second paragraph to Article
"FOURTH" of the Company's Certificate of Incorporation if the proposed Amendment
is approved:
"Any and all previously issued shares (including shares issuable upon
exercise of outstanding options or warrants) of Common Stock of the par
value of $.0001 per share as of _______________ (date to be inserted) shall
be combined and reclassified on a ratio of one share for nine shares of
Common Stock with a par value of $.0001 per share."
<PAGE>
EXHIBIT K
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
TO EFFECT A 1 for 10 REVERSE STOCK SPLIT
The following sets forth the addition of a second paragraph to Article
"FOURTH" of the Company's Certificate of Incorporation if the proposed Amendment
is approved:
"Any and all previously issued shares (including shares issuable upon
exercise of outstanding options or warrants) of Common Stock of the par
value of $.0001 per share as of _______________ (date to be inserted) shall
be combined and reclassified on a ratio of one share for ten shares of
Common Stock with a par value of $.0001 per share."
<PAGE>
EXHIBIT L
COMPUTER CONCEPTS CORP.
1997 STOCK INCENTIVE PLAN
SECTION 1. GENERAL PROVISIONS
1.1. Name and General Purpose
------------------------
The name of this plan is the Computer Concepts Corp. 1997 Stock Incentive
Plan (hereinafter called the "Plan"). The purpose of the Plan is to enable
Computer Concepts Corp. (the "Company") and its subsidiaries and affiliates to
foster and promote the interests of the Company by attracting and retaining
officers and employees of the Company who contribute to the Company's success by
their ability, ingenuity and industry, to enable such officers and employees of
the Company to participate in the long-term success and growth of the Company by
giving them a proprietary interest in the Company and to provide incentive
compensation opportunities competitive with those of competing corporations.
1.2 Definitions
-----------
a. "Affiliate" means any person or entity controlled by or under
common control with the Company, by virtue of the ownership of
voting securities, by contract or otherwise.
b. "Board" means the Board of Directors of the Company.
c. "Change in Control" means a change of control of the Company, or
in any person directly or indirectly controlling the Company,
which shall mean:
(a) a change in control as such term is presently defined in
Regulation 240.12b-(f) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"); or
(b) if any "person" (as such term is used in Section 13(d) and
14(d) of the Exchange Act) other than the Company or any "person"
who on the date of this Agreement is a director or officer of the
Company, becomes the "beneficial owner" (as defined in Rule
13(d)-3 under the Exchange Act) directly or indirectly, of
securities of the Company representing twenty percent (20%) or
more of the voting power of the Company's then outstanding
securities; or
(c) if during any period of two (2) consecutive years during the
term of this Plan, individuals who at the beginning of such
period constitute the Board of Directors, cease for any reason to
constitute at least a majority thereof.
d. "Code" means the Internal Revenue Code of 1986, as amended.
e. "Committee" means the Committee referred to in Section 1.3 of
the Plan.
f. "Common Stock" means shares of the Common Stock, par value $.0001
per share, of the Company.
g. "Company" means Computer Concepts. Corp., a corporation organized
under the laws of the State of Delaware (or any successor
corporation).
<PAGE>
h. "Disinterested Person" shall have the meaning set forth in Rule
16b-3(c)(2) as promulgated by the Securities and Exchange
Commission (the "Commission"); provided, that such person is also
an "outside director" as set forth in Section 162(m) of the Code
and the regulations promulgated thereunder.
i. "Fair Market Value" means the market price of the Common Stock on
the National Association of Securities Dealers Automated
Quotation ("NASDAQ") system on the date of the grant or on any
other date on which the Common Stock is to be valued hereunder.
If no sale shall have been reported on NASDAQ on such date, Fair
Market Value shall be determined by the Committee in accordance
with the Treasury Regulations applicable to incentive stock
options under Section 422 of the Code.
j. "Incentive Stock Option" means an Incentive Stock Option as
described in Section 2.1 of the Plan.
k. "Non-Qualified Stock Option" means a Non-Qualified Stock Option
as described in Section 2.1 of the Plan.
l. "Option" means any option to purchase Common Stock under Section
2 of the plan.
m. Participant" means any officer or employee of the Company,
a Subsidiary or an Affiliate who is selected by the Committee
to participate in the Plan.
n. "Subsidiary" means any corporation in which the Company
possesses directly or indirectly 50% or more of the combined
voting power of all classes of stock of such corporation.
o. "Total Disability" means accidental bodily injury or sickness
which wholly and continuously disabled an optionee.The Committee,
whose decisions shall be final, shall make a determination
of Total Disability.
1.3 Administration of the Plan
--------------------------
The Plan shall be administered by the Committee appointed by the Board
consisting of two or more members of the Board all of whom shall be
Disinterested Persons. The Committee shall serve at the pleasure of the Board
and shall have such powers as the Board may, from time to time, confer upon it.
Subject to this Section 1.3, the Committee shall have sole and complete
authority to adopt, alter, amend or revoke such administrative rules, guidelines
and practices governing the operation of the Plan as it shall, from time to
time, deem advisable, and to interpret the terms and provisions of the Plan.
The Committee shall keep minutes of its meetings and of action taken by it
without a meeting. A majority of the Committee shall constitute a quorum, and
the acts of a majority of the members present at any meeting at which a quorum
is present, or acts approved in writing by all of the members of the Committee
without a meeting, shall constitute the acts of the Committee.
1.4 Eligibility
-----------
Stock and/or stock options may be granted only to regular full-time and
part-time employees or consultants of the Company or a Subsidiary or Affiliate.
Subject to Section 2.3, any person who has been granted any Option may, if he is
otherwise eligible, be granted an additional Option or Options. Those directors
who are not regular employees are not eligible.
<PAGE>
1.5 Shares
------
The aggregate number of shares reserved for issuance pursuant to the Plan
shall be 10,000,000 shares of Common Stock, or the number and kind of shares of
stock or other securities which shall be substituted for such shares or to which
such shares shall be adjusted as provided in Section 1.6.
Each number of shares may be set aside out of the authorized but unissued
shares of Common Stock or out of issued shares of Common Stock acquired for and
held in the Treasury of the Company, not reserved for any other purpose. Shares
subject to, but not sold or issued under, any Option terminating or expiring for
any reason prior to its exercise in full will again be available for Options
thereafter granted during the balance of the term of the Plan.
1.6 Adjustments Due to Stock Splits,
Mergers, Consolidation, Etc.
-------------------------------
If, at any time, the Company shall take any action, whether by stock
dividend, stock split, combination of shares or otherwise, which results in a
proportionate increase or decrease in the number of shares of Common Stock
theretofore issued and outstanding, the number of shares which are reserved for
issuance under the Plan and the number of shares which, at such time, are
subject to Options shall, to the extent deemed appropriate by the Committee, be
increased or decreased in the same proportion, provided, however, that the
Company shall not be obligated to issue fractional shares.
Likewise, in the event of any change in the outstanding shares of Common
Stock by reason of any recapitalization, merger, consolidation, reorganization,
combination or exchange of shares or other corporate change, the Committee shall
make such substitution or adjustments, if any, as it deems to be appropriate, as
to the number or kind of shares of Common Stock or other securities which are
reserved for issuance under the Plan and the number of shares or other
securities which, at such time are subject to Options.
In the event of a Change in Control, (a) all options outstanding on the
date of such Change in Control shall, for a period of sixty (60) days following
such Change in Control, become immediately and fully exercisable.
1.7 Non-Alienation of Benefits
--------------------------
Except as herein specifically provided, no right or unpaid benefit under
the Plan shall be subject to alienation, assignment, pledge or charge and any
attempt to alienate, assign, pledge or charge the same shall be void. If any
Participant or other person entitled to benefits hereunder should attempt to
alienate, assign, pledge or charge any benefit hereunder, then such benefit
shall, in the discretion of the Committee, cease.
1.8 Withholding or Deduction for Taxes
----------------------------------
If, at any time, the Company or any Subsidiary or Affiliate is required,
under applicable laws and regulations, to withhold, or to make any deduction for
any taxes, or take any other action in connection with any Option exercise, the
Participant shall be required to pay to the Company or such Subsidiary or
Affiliate, the amount of any taxes required to be withheld, or, in lieu thereof,
at the option of the Company, the Company or such Subsidiary or Affiliate may
accept a sufficient number of shares of Common Stock to cover the amount
required to be withheld.
1.9 Administrative Expenses
-----------------------
The entire expense of administering the Plan shall be borne by the Company.
<PAGE>
1.10 General Conditions
------------------
(a) The Board or the Committee may, from time to time, amend, suspend or
terminate any or all of the provisions of the Plan, provided that,
without the Participant's approval, no change may be made which would
prevent an Incentive Stock Option granted under the Plan from
qualifying as an Incentive Stock Option under Section 422 of the Code
or result in a "modification" of the Incentive Stock Option under
Section 424(h) of the Code or otherwise alter or impair any right
theretofore granted to any Participant ; and further provided that,
without the consent and approval of the holders of a majority of the
outstanding shares of Common Stock of the Company present at a meeting
at which a quorum exists, neither the Board nor the Committee may make
any amendment which (i) changes the class of persons eligible for
options; (ii) increases (except as provided under Section 1.6 above)
the total number of shares or other securities reserved for issuance
under the Plan; (iii) decreases the minimum option prices stated in
Section 2.2 hereof (other than to change the manner of determining Fair
Market Value to conform to any then applicable provision of the Code or
any regulation thereunder); (iv) extends the expiration date of the
Plan, or the limit on the maximum term of Options; or (v) withdraws the
administration of the Plan from a committee consisting of two or more
members, each of whom is a Disinterested Person.
b. With the consent of the Participant affected thereby, the Committee may
amend or modify any outstanding Option in any manner not inconsistent
with the terms of the Plan, including, without limitation, and
irrespective of the provisions of Sections 2.3(c) and 2.4(b) below, to
accelerate the date or dates as of which an installment of an Option
becomes exercisable.
c. Nothing contained in the Plan shall prohibit the Company or any
Subsidiary or Affiliate from establishing other additional incentive
compensation arrangements for employees of the Company or such
Subsidiary or Affiliate.
d. Nothing in the Plan shall be deemed to limit, in any way, the right of
the Company or any Subsidiary or Affiliate to terminate a Participant's
employment with the Company (or such Subsidiary or Affiliate) at any
time.
e. Any decision or action taken by the Board or the Committee arising out
of or in connection with the construction, administration,
interpretation and effect of the Plan shall be conclusive and binding
upon all Participants and any person claiming under or through any
Participant .
f. No member of the Board or of the Committee shall be liable for any act
or action, whether of commission or omission, (i) by such member except
in circumstances involving actual bad faith, nor (ii) by any other
member or by any officer, agent or employee.
1.11 Compliance with Applicable Law
------------------------------
Notwithstanding any other provision of the Plan, the Company shall not be
obligated to issue any shares of Common Stock, or grant any Option with respect
thereto, unless it is advised by counsel of its selection that it may do so
without violation of the applicable Federal and State laws pertaining to the
issuance of securities and the Company may require any stock certificate so
issued to bear a legend, may give its transfer agent instructions limiting the
transfer thereof, and may take such other steps, as in its judgment are
reasonably required to prevent any such violation.
1.12 Effective Dates
---------------
The Plan was adopted by the Board on September 25, 1997, subject to
approval by the stockholders of the Company. The Plan shall terminate on
September 25, 2007.
<PAGE>
Section 2. STOCK AND OPTION GRANTS
2.1 Authority of Committee
----------------------
Subject to the provisions of the Plan, the Committee shall have the sole
and complete authority to determine (i) the Participants to whom Options, stock,
appreciation rights or other awards shall be granted; (ii) the number of shares
to be covered by each Option or other grant; and (iii) the conditions and
limitations, if any, in addition to those set forth in Sections 2 and 3 hereof,
applicable to the exercise of an Option, including without limitation, the
nature and duration of the restrictions, if any, to be imposed upon the sale or
other disposition of shares acquired upon exercise of an Option, and/or the
vesting of Options, stock, appreciation rights or other awards granted..
Stock options granted under the Plan may be of two types: an incentive
stock option ("Incentive Stock Option"); and a non-qualified stock option
("Non-Qualified Stock Option"). Unless otherwise registered, Options, stock,
appreciation rights or other awards granted under the Plan will be restricted
pursuant to applicable securities laws.
It is intended that the Incentive Stock Options granted hereunder shall
constitute incentive stock options within the meaning of Section 422 of the Code
and shall be subject to the tax treatment described in Section 422 of the Code.
Anything in the Plan to the contrary notwithstanding, no provision of the
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or, without the consent of the
optionee, any Incentive Stock Option under Section 422 of the Code.
The Committee shall have the authority to grant Incentive Stock Options, or
to grant Non-Qualified Stock Options, or to grant both types of Options, to
grant restricted stock, to grant appreciation rights or other forms or
combinations of awards. To the extent that any Option does not qualify as an
Incentive Stock Option, in whole or in part, it shall constitute a separate
Non-Qualified Stock Option to the extent of such disqualification.
2.2 Option Exercise Price
---------------------
The exercise price of the Options granted pursuant to the Plan shall be
priced as adopted by the Board of Directors.
If an employee owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of the stock of the Company or any parent
corporation of the Company or Subsidiary and an Option granted to such employee
is intended to qualify as an Incentive Stock Option within the meaning of
Section 422 of the Code, the exercise price shall be no less than 110% of the
Fair Market Value of the Common Stock on the date the Option is granted. The
purchase price is to be paid in full in cash, certified or bank cashier's check
or, at the option of the Company, Common Stock valued at its Fair Market Value
on the date of exercise, or a combination thereof, when the Option is exercised
and stock certificates will be delivered only against such payment.
2.3 Incentive Stock Option Grants
-----------------------------
Each Incentive Stock Option will be subject to the following provisions:
a. Term of Option
--------------
<PAGE>
An Incentive Stock Option will be for a term of not more than ten years
from the date of grant, except in the case of an employee described in
the second paragraph of Section 2.2 above in which case an Incentive
Stock Option will be for a term of not more than five years from the
date of the grant.
b. Annual Limit
------------
To the extent the aggregate Fair Market Value of the Common Stock
(determined as of the date of grant) with respect to which any options
granted hereunder are intended to be designated as Incentive Stock
Options under the Plan (or any other incentive stock option plan of the
Company or any Subsidiary) which may be exercisable for the first time
by the optionee in any calendar year exceeds $100,000, such options
shall not be considered incentive stock options.
c. Exercise
--------
Subject to the power of the Committee under Section 1.10(b) above and
except in the manner described below upon the death of the optionee, an
Incentive Stock Option may be exercised for all of the subject shares
on and after the first such anniversary of the date of the grant of
such Option but in no event later than the expiration of the term of
the Option.
An Incentive Stock Option shall be exercisable during the optionee's
lifetime only by the optionee and shall not be exercisable by the
optionee unless, at all times since the date of grant and at the time
of exercise, such optionee is an employee of the Company, any parent
corporation of the Company or any Subsidiary, except that, upon
termination of all employment (other than by death or by Total
Disability followed by death in the circumstances provided below) with
the Company, any parent corporation of the Company and any Subsidiary
or Affiliate, the optionee may exercise an Incentive Stock Option at
any time within three months thereafter but only to the extent such
Option is exercisable on the date of such termination.
If termination of employment is the result of the optionee having
reached normal retirement age, option grants continue to be exercisable
for five years after retirement but in no event later than the
expiration of the term of the Option.
In the event of the death of an optionee (i) while an employee of the
Company, any parent corporation of the Company or any Subsidiary or
Affiliate, or (ii) within three months after termination of all
employment with the Company, any parent corporation of the Company and
any Subsidiary or Affiliate (other than for Total Disability) or (iii)
within three months after termination on account of Total Disability of
all employment with the Company, any parent corporation of the Company
and any Subsidiary, such optionee's estate or any person who acquires
the right to exercise such option by bequest or inheritance or by
reason of the death of the optionee may exercise such optionee's Option
at any time within the period of one year from the date of death. In
the case of clauses (i) and (iii) above, such Option shall be
exercisable in full for all the remaining shares covered thereby, but
in the case of clause (ii) such Option shall be exercisable only to the
extent it was exercisable on the date of such termination.
If an optionee's employment is terminated for deliberate, willful or
gross misconduct, all rights under an Option expire upon receipt by the
optionee of the notice of such termination.
<PAGE>
Notwithstanding the foregoing provisions regarding the exercise of an
Option in the event of death, Total Disability or other termination of
employment, in no event shall an Option be exercisable in whole or in
part after the termination date provided in the Option.
d. Transferability
---------------
An Incentive Stock Option granted under the Plan shall not be
transferable otherwise than by will or by the laws of descent and
distribution.
2.4 Non-Qualified Stock Option Grants
---------------------------------
Each Non-Qualified Stock Option will be subject to the following
provisions:
a. Term of Option
--------------
A Non-Qualified Stock Option will be for a term designated by the Board
of Directors or the Compensation Committee of not more than ten years
from the date of grant.
b. Exercise
--------
The exercise of a Non-Qualified Stock Option shall be subject to such
terms and conditions as determined by the Board of Directors or the
Compensation Committee.
c. Transferability
---------------
A Non-Qualified Stock Option granted under the Plan shall not be
transferable otherwise than by will or by the laws of descent and
distribution unless expressly authorized within the applicable option
agreement. During the lifetime of the person to whom an Option is
granted, such Option may be exercised only by such person.
Notwithstanding the foregoing, a Non-Qualified Stock Option may be
transferred pursuant to the terms of a "qualified domestic relations
order," within the meaning of Sections 401(a)(13) and 414(p) of the
Code or within the meaning of Title I of the Employee Retirement Income
Security Act of 1974, as amended.
2.5 Agreements
----------
In consideration of any Options granted to a Participant under the Plan,
each such Participant shall enter into an Option Agreement with the Company
providing, consistent with the Plan, such terms as the Committee may deem
advisable.
2.6 Grants of Restricted Stock, Appreciation Rights or Other Awards
---------------------------------------------------------------
The grant of restricted stock, appreciation rights or other awards shall be
subject to such terms and conditions as determined by the Board of Directors or
the Compensation Committee. All such stock, rights or awards shall be deemed
restricted unless otherwise registered under the Securities Act of 1933, as
amended.
3. Change in Control.
-----------------
In the event of a Change in Control, the Committee may take whatever action
it deems necessary or desirable with respect to any Options outstanding,
including, without limitation, accelerating the expiration or termination date
<PAGE>
in the respective Option Documents to a date no earlier than thirty (30) days
after notice of such acceleration is given to the optionees. In addition to the
foregoing, in the event of a Change in Control, Options granted pursuant to the
Plan shall become immediately exercisable in full.
A "Change in Control" shall be deemed to have occurred upon the earliest to
occur of the following events: (i) the date the stockholders of the Company (or
the Board of Directors, if stockholder action is not required) approve a plan or
other arrangement pursuant to which the Company will be dissolved or liquidated,
or (ii) the date the stockholders of the Company (or the Board of Directors, if
stockholder action is not required) and the stockholders of the other
constituent corporation (or its board of directors, if stockholder action is not
required) have approved a definitive agreement to merge or consolidate the
Company with or into such other corporation, other than, in either case, a
merger or consolidation of the Company in which holders of shares of the
Company's Common Stock immediately prior to the merger or consolidation will
hold at least a majority of the ownership of common stock of the surviving
corporation (and, if one class of common stock is not the only class of voting
securities entitled to vote on the election of directors of the surviving
corporation, a majority of the voting power of the surviving corporation's
voting securities) immediately after the merger or consolidation, which common
stock (and if applicable voting securities) is to be held in the same proportion
as such holders' ownership of Common Stock of the Company immediately before the
merger or consolidation, or (iii) the date any entity, person or group (within
the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange
Act of 1934, as amended) other than (A) the Company or any of its subsidiaries
or any employee benefit plan (or related trust) sponsored or maintained by the
Company or any of its subsidiaries, or (B) any person who, on the date the Plan
is effective, shall have been the beneficial owner of or have voting control
over shares of Common Stock of the Company, possessing more than ten percent
(10%) of the aggregate voting power of the Company's Common Stock shall have
become the beneficial owner of, or shall have obtained voting control over, more
than ten percent (10%) of the outstanding shares of the Company's Common Stock,
or (iv) the first day after the date this Plan is effective when directors are
elected such that a majority of the Board of Directors shall have been members
of the Board of Directors for less than two (2) years, unless the nomination for
election of each new director who was not a director at the beginning of such
two (2) year period was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of such
period.
4. No Commitment to Retain.
-----------------------
The grant of an Option pursuant to the Plan shall not be construed to imply
or to constitute evidence of any agreement, express or implied, on the part of
the Company or any Affiliate to retain the optionee as an employee or consultant
of the Company in any other capacity.
5. Withholding of Taxes.
--------------------
Whenever the Company proposes or is required to deliver or transfer Shares
in connection with the exercise of an Option, the Company shall have the right
to (a) require the recipient to remit or otherwise make available to the Company
an amount sufficient to satisfy any federal, state and/or local withholding tax
requirements prior to the delivery or transfer of any certificate or
certificates for such Shares or (b) take whatever other action it deems
necessary to protect its interests with respect to tax liabilities. The
Company's obligation to make any delivery or transfer of Shares shall be
conditioned on the optionee's compliance, to the Company's satisfaction, with
any withholding requirement.
6. Miscellaneous
-------------
(a) Other Provisions. Subject to the provisions of the Plan, the Option
Documents shall contain such other provisions including, without limitation,
additional restrictions upon the exercise of the Option or additional
limitations upon the term of the Option, as the Committee shall deem advisable.
<PAGE>
(b) Amendment. Subject to the provisions of the Plan, the Committee
shall have the right to amend Option Documents issued to an optionee, subject to
the optionee's consent if such amendment is not favorable to the optionee.
(c). Adjustments on Changes in Capitalization. The aggregate number of
Shares and class of Shares as to which Options may be granted hereunder, the
number and class or classes of Shares covered by each outstanding Option and the
Option Price thereof shall be appropriately adjusted in the event of a stock
dividend, stock split, recapitalization or other change in the number or class
of issued and outstanding equity securities of the Company resulting from a
subdivision or consolidation of the Common Stock and/or, if appropriate, other
outstanding equity securities or a recapitalization or other capital adjustment
(not including the issuance of Common Stock on the conversion of other
securities of the Company which are convertible into Common Stock) affecting the
Common Stock which is effected without receipt of consideration by the Company.
The Committee shall have authority to determine the adjustments to be made under
this Section, and any such determination by the Committee shall be final,
binding and conclusive.
***
<PAGE>
EXHIBIT M
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
If Proposal 14 is approved, the following will be included in an amendment
to the Certificate of Incorporation of the Company, in Article Fourth, thereof:
Fourth: (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is THREE HUNDRED ONE MILLION
(301,000,000) shares. [If Proposal 3 is not approved, to read: "The total number
of shares of all classes of stock which the Corporation shall have authority to
issue is THREE HUNDRED MILLION (300,000,000) shares.] Of these (i) THREE HUNDRED
MILLION (300,000,000) shares shall be shares of Common Stock of the par value of
$.0001 per share; and (ii) ONE MILLION (1,000,000) shares shall be shares of
Serial Preferred Stock of the par value of $.0001 per share. [If Proposal 3 is
not approved, delete this "(ii)" clause.] [ If Proposals 3 and 14 are not
approved, to read: "The amount of the total authorized capital stock of this
Corporation is 150,000,000 shares of $.0001 Par Value.] ...
(c) The statement of the relative rights, preferences and limitations of
the shares of each class is as follows [If Proposal 3 is not approved, to be
denominated "(b)"]:
A. Serial Preferred Stock. The Serial Preferred Stock may be issued from
time to time in classes or series and shall have such voting powers, full or
limited, or no voting powers, and such designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, as shall be stated and expressed in the resolution or
resolutions of the Board of Directors providing for the issuance of such stock.
B. Common Stock. Subject to the rights, privileges, preferences and
priorities of any holders of Serial Preferred Stock, the Common Stock shall be
entitled to dividends out of funds legally available therefor, when, as and if
declared and paid to the holders of Common Stock, and upon liquidation,
dissolution or winding up of the Corporation, to share ratably in the assets of
the Corporation available for distribution to the holders of Common Stock.
Except as otherwise provided herein or by law, the holders of the Common Stock
shall have full voting rights and powers, and each share of Common Stock shall
be entitled to one vote. All shares of Common Stock shall be identical with each
other in every respect. [If Proposal 3 is not approved, to read: The Common
Stock shall be entitled to dividends out of funds legally available therefor,
when, as and if declared and paid to the holders of Common Stock, and upon
liquidation, dissolution or winding up of the Corporation, to share ratably in
the assets of the Corporation available for distribution to the holders of
Common Stock. Except as otherwise provided herein or by law, the holders of the
Common Stock shall have full voting rights and powers, and each share of Common
Stock shall be entitled to one vote. All shares of Common Stock shall be
identical with each other in every respect.]
