[TREEV Letterhead}
500 Huntmar Park Drive
Herndon, VA 20170
September 30, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
ATTN: Filing Desk
RE: TREEV, Inc.
Preliminary Proxy Filing
Ladies and Gentlemen:
On behalf of TREEV, Inc. (the "Company), enclosed for filing is the
Company's preliminary proxy statement.
If you have any questions regarding this filing, please contact me at
(703) 904-3109 or the Company's outside counsel, Meredith Cross of Wilmer,
Cutler & Pickering, who can be reached at (202) 663-6644.
Sincerely,
/s/ Julia A. Bowen
Julia A. Bowen
Vice President and General Counsel
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TREEV, Inc.
500 Huntmar Park Drive
Herndon, Virginia 20170
October ___, 1998
Dear Stockholders:
It is my pleasure to invite you to a Special Meeting of Stockholders of
TREEV, Inc. to be held on _______, November ___, 1998 at 9:00 a.m., at the
Company's headquarters at 500 Huntmar Park Drive, Herndon, Virginia 20170.
Whether or not you plan to attend, and regardless of the number of
shares you own, it is important that your shares be represented at the Special
Meeting. You are accordingly urged to complete, sign, date and return your proxy
promptly in the enclosed envelope. Your return of a proxy in advance will not
affect your right to vote in person at the Special Meeting.
I hope that you will attend the Special Meeting. The officers and
directors of the Company look forward to seeing you at that time.
Very truly yours,
JAMES J. LETO
Chairman and Chief Executive Officer
<PAGE>
TREEV, Inc.
500 Huntmar Park Drive
Herndon, Virginia 20170
-------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
__________, November ___, 1998
--------------------------------------------
To our Stockholders:
A Special Meeting of Stockholders (the "Meeting") of TREEV, Inc. (the
"Company") will be held on _______, November ___, 1998 at 9:00 a.m. at TREEV's
headquarters, 500 Huntmar Park Drive, Herndon, Virginia for the following
purposes:
1. To approve, in accordance with the Nasdaq rules, the issuance of shares
of the Company's common stock, $.0001 par value per share, issuable in
connection with the Company's Series N Convertible Preferred Stock and
on exercise of warrants to purchase shares of Common Stock at an
exercise price of $.6250 per share;
2. To approve an amendment to the Restated Certificate of Incorporation of
the Company to effect a one-for-three reverse stock split of the
Company's outstanding Common Stock; in the event the reverse stock
split is not necessary for the Company to meet the Nasdaq listing
requirements, the Board of Directors has reserved the ability to
abandon implementation of the amendment; and
3. To transact such other business as may properly come before the Meeting
or any adjournment or postponement thereof.
Holders of record of Common Stock at the close of business on October
___, 1998 are entitled to receive notice of and to vote at the Meeting.
You are invited to attend the Meeting. Please carefully read the
attached Proxy Statement for information regarding the matters to be considered
and acted upon at the Meeting.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING IN PERSON, YOU
ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED RETURN POSTAGE-PAID ENVELOPE. No postage need to be affixed to the
return envelope if mailed in the United States. If you attend the Meeting, you
may withdraw your proxy and vote in person.
By Order of the Board of Directors
JULIA A. BOWEN
Vice President, General Counsel
and Assistant Secretary
Herndon, Virginia
October ___, 1998
<PAGE>
TREEV, Inc.
500 Huntmar Park Drive
Herndon, Virginia 20170
-------------------------
PROXY STATEMENT
The Proxy Statement and the accompanying Notice of Special Meeting of
Stockholders and Proxy Card are being furnished in connection with the
solicitation by the Board of Directors ("Board") of TREEV, Inc. (the "Company")
of proxies to be voted at a Special Meeting of Stockholders scheduled to be held
on ______, November ___, 1998 at 9:00 a.m. at the Company's headquarters, 500
Huntmar Park Drive, Herndon, Virginia, and any adjournment or postponement
thereof (the "Meeting"). This Proxy Statement and the enclosed Proxy Card are
being furnished on or about October ___, 1998, to all holders of record of the
Company's common stock, $.0001 par value per share (the "Common Stock"), as of
the close of business on October ___, 1998.
At the Meeting, stockholders will vote on proposals to (1) approve, in
accordance with Nasdaq rules, the issuance of shares of Common Stock issuable in
connection with the Company's Series N Convertible Preferred Stock ("Series N
Stock") and on exercise of warrants to purchase shares of Common Stock at an
exercise price of $.6250 per share ("Investor Warrants") and (2) amend the
Restated Certificate of Incorporation of the Company to effect a one-for-three
reverse stock split (the "Reverse Stock Split"); in the event the reverse stock
split is not necessary for the Company to meet the Nasdaq listing requirements,
the Board of Directors has reserved the ability to abandon implementation of the
amendment.
VOTING SECURITIES AND RECORD DATE
The Board has fixed the close of business on October ___, 1998 as the
record date (the "Record Date") for determination of holders of Common Stock
entitled to notice of and to vote at the Meeting. As of the Record Date, there
were ________ shares of Common Stock issued and outstanding and there were no
other voting securities of the Company outstanding. Each outstanding share of
Common Stock entitles the record holder thereof to one vote. Under Delaware law,
shares represented at the Meeting (either by properly executed proxy or in
person) that reflect abstentions or "broker non-votes" (i.e., shares held by a
broker or nominee that are represented at the Meeting, but with respect to which
such broker or nominee is not empowered to vote on a particular proposal) will
be counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Abstentions as to either Proposal 1 or 2
will have the same effect as votes against the proposals. Under the New York
Stock Exchange Rules, brokers will not have discretionary voting authority to
vote on Proposals 1 or 2, and may not vote for Proposals 1or 2 without receiving
instructions from the beneficial owners of shares. Broker non-votes will be
treated as unvoted for purposes of determining approval of Proposal 1 (and
therefore will reduce the absolute number - although not the percentage - of
votes needed for approval) but will be counted as votes against Proposal 2.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Holders of Common Stock of record on the Record Date may vote at the
Meeting in person or by means of the enclosed Proxy Card. You may specify your
voting choices by marking the appropriate boxes on the Proxy Card. The proxy
solicited hereby, if properly signed and returned to the Company and not revoked
prior to or at the Meeting, will be voted in accordance with the instructions
specified thereon. If you properly sign and return your Proxy Card, but do not
specify your choices, your shares will be voted by the proxy holders FOR
Proposals 1 and 2.
The Board encourages you to complete and return the Proxy Card even if
you expect to attend the Meeting. You may revoke your proxy at any time before
it is voted at the Meeting by giving written notice of revocation to the
Secretary of the Company, by submission of a proxy bearing a later date or by
attending the Meeting and voting in person.
<PAGE>
The proxy holders, James J. Leto and Jorge R. Forgues, will vote all
shares of Common Stock represented by Proxy Cards that are properly signed and
returned by stockholders. The Proxy Card also authorizes the proxy holders to
vote the shares represented with respect to any matters not known at the time
this Proxy Statement was printed that may properly be presented for
consideration at the Meeting. You must return a signed Proxy Card if you want
the proxy holders to vote your shares of Common Stock.
Dissenters' rights of appraisal do not apply to the matters to be
considered at the Meeting.
The cost of preparing, assembling and mailing this proxy soliciting
material and Notice of Special Meeting of Stockholders will be paid by the
Company. Following the mailing of proxy solicitation materials, proxies may be
solicited by directors, officers and regular employees of the Company and its
subsidiaries personally, by mail, telephone, telecopier or by personal
solicitation, for which they will receive no additional compensation. In
addition, the Company will reimburse brokers, custodians, nominees and other
persons holding shares of Common Stock for others for their reasonable expenses
in sending proxy materials to the beneficial owners of such shares and in
obtaining their proxies. Brokerage houses and other nominees, fiduciaries, and
custodians nominally holding shares of Common Stock as of the Record Date will
be requested to forward proxy soliciting material to the beneficial owners of
such shares, and will be reimbursed by the Company for their reasonable
expenses. All expenses for soliciting proxies will be paid by the Company.
Proxies may be solicited by personal interview, mail, and telephone.
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OWNERSHIP OF TREEV STOCK
The following table sets forth certain information, as of September 25,
1998, with respect to the beneficial ownership of shares of Common Stock by (i)
each stockholder known by the Company to be the beneficial owner of more than
five percent (5%) of the outstanding shares of Common Stock; (ii) each director
of the Company; (iii) the Chief Executive Officer and the four other most highly
compensated executive officers of the Company; and (iv) all executive officers
and directors as a group. Except as indicated in the footnotes to the table,
persons named in the table have sole voting and investment power with respect to
all shares of Common Stock which they respectively own beneficially.
The address of each person listed below, other than Mr. Kassner and Mr. Ar-
dinger, is 500 Huntmar Park Drive, Herndon, Virginia 20170.
Number of Shares Percent of
Name and Address of Beneficial Owner Beneficially Owned (1) Class
- ------------------------------------ ---------------------- -----
Horace T. Ardinger, Jr. (2)......... 6,494,960 19.9%
Fred E. Kassner (3)................. 8,544,097 26.0
Robert P. Bernardi (4).............. 1,226,247 3.8
James J. Leto (5)................... 577,939 1.8
Jorge R. Forgues (6)................ 157,216 0.4
John F. Burton (7).................. 145,000 0.4
C. Alan Peyser (8).................. 79,000 0.1
David E. MacWhorter (9)............. 119,466 0.4
Brian H. Hajost (10)................ 121,400 0.4
Richard McMahon (11)................ 105,573 0.3
Directors and executive officers as
a group (8) persons................ 2,331,841 7.1
- --------------------
(1) Under applicable rules of the SEC, a person is deemed to be the beneficial
owner of shares of Common Stock if, among other things, he or she directly or
indirectly has or shares voting power or investment power with respect to such
shares. A person is also considered to beneficially own shares of Common Stock
that he or she does not actually own but has the right to acquire presently or
within the next sixty (60) days, by exercise of stock options or otherwise.
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<PAGE>
(2) The address of Mr. Ardinger is 3000 Thanksgiving Tower, Dallas, TX 75201.
The shares of Common Stock listed in the table as beneficially owned by Mr.
Ardinger consist of 2,906,015 shares of Common Stock currently owned by Mr.
Ardinger and 3,588,945 shares of Common Stock currently issuable upon conversion
or exercise of a portion of the Series N Stock and/or the Investor Warrants.
Under Nasdaq rules, a portion of the shares underlying the Series N Stock and/or
the Investor Warrants cannot be issued absent stockholder approval. Such shares
are thus not currently beneficially owned by Mr. Ardinger. However, upon
approval of Proposal 1 by the stockholders in accordance with such Nasdaq Rules,
the Series N Stock will be convertible and automatically converted into
15,595,570 shares of Common Stock and the Investor Warrants will be exercisable
for 500,000 shares of Common Stock. Combined with the Common Stock owned
directly by Mr. Ardinger, 19,001,585 shares of Common Stock will be beneficially
owned by Mr. Ardinger upon approval of Proposal 1.
(3) The address of Mr. Kassner is 69 Spring Street, Ramsey, New Jersey 07446. Of
the total shares shown, Mr. Kassner has shared voting and dispositive power with
respect to 1,972,857 shares, including 80,000 shares underlying a warrant, held
by Liberty Travel, Inc. of which Mr. Kassner is an officer, director, and
stockholder. Of the shares reported as being held directly by Mr. Kassner,
354,000 are issuable upon the exercise of warrants, 4,000,000 shares are
issuable upon the conversion of the Series M Convertible Preferred Stock and
1,000,000 shares are issuable upon the conversion of the Series M1 Convertible
Preferred Stock.
(4) Includes 778,747 shares issuable upon exercise of options.
(5) Includes 537,195 shares issuable upon exercise of options.
(6) Includes 149,695 shares issuable upon exercise of options.
(7) All shares are issuable upon exercise of options.
(8) Includes 55,000 shares issuable upon exercise of options.
(9) Includes 113,659 shares issuable upon exercise of options.
(10) Includes 103,049 shares issuable upon exercise of options.
(11) Includes 99,000 shares issuable upon exercise of options.
PROPOSAL NUMBER 1 - APPROVAL TO ELIMINATE
THE RESTRICTION ON THE NUMBER OF COMMON SHARES
ISSUABLE IN CONNECTION WITH THE SERIES N STOCK
AND ON EXERCISE OF THE INVESTOR WARRANTS
On September 22, 1998, pursuant to the Securities Purchase Agreement
dated as of September 22, 1998 (the "Securities Purchase Agreement") between the
Company and Horace T. Ardinger, Jr. (the "Purchaser"), the Company issued
1,559,576 shares of Series N Stock and Investor Warrants to purchase 500,000
shares of Common Stock to Purchaser. The Investor Warrants expire on September
21, 2001. The rights, preferences and privileges of the Series N Stock are set
forth in a Certificate of Designations, Preferences and Rights of Series N
Convertible Preferred Stock (the "Series N Certificate"), as filed with the
Secretary of State of the State of Delaware. The Series N Certificate is annexed
as Appendix A to this Proxy Statement and the following summary of the terms of
the Series N Stock is qualified in its entirety by reference to the Series N
Certificate. The terms of the Series N Stock and the Investor Warrants were
approved by the Board.
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Approximately $7,100,000 of the $10 million in net proceeds from the
sale of the Series N Stock and the Investor Warrants has been used to redeem the
Series K Convertible Preferred Stock and the Series L Convertible Preferred
Stock and the remainder will be used for working capital purposes.
Under the Securities Purchase Agreement, the Company has granted the
Purchaser registration rights whereby the Company is obligated to file a
registration statement under the Securities Act of 1933 (the "Securities Act")
with the Securities and Exchange Commission ("SEC") upon such time as it
registers shares for any other third party. Until such time as a registration
statement has been filed and is declared effective by the SEC, the holder of the
Series N Stock and the holder of the Investor Warrants (which, as of the date
hereof, are the Purchaser, who shall be referred to hereafter in this Proxy
Statement as the "Holder") may not transfer such securities or the Common Stock
issuable in connection therewith unless the sale is made in compliance with an
exemption from the registration requirements of the Securities Act.
Conversion and Exercise Rights
Subject to the Nasdaq limits described below, each share of Series N
Stock is convertible at the option of the Holder into 10 shares of Common Stock.
Upon the stockholders' approval of Proposal 1 at the Meeting, the Series N Stock
shall immediately convert into 15,595,760 shares of the Company's Common Stock.
The conversion price of the Series N Stock is $.6412 per share, which was the
market price of the Common Stock on the date the Series N Stock was sold to the
Holder by the Company. The conversion price of the Series N Stock shall be
adjusted in the event of a stock split, stock dividend, combination,
reclassification or other similar event with respect to the Common Stock. The
number of shares of Common Stock to be issued to the Holder upon conversion of
the Series N Stock shall be adjusted if certain distributions with respect to
shares of Common Stock are made, if certain reclassifications or changes of the
outstanding shares of Common Stock are made, and in the event of certain mergers
or consolidations, a sale or transfer of all or substantially all of the
Company's assets and certain share exchanges. In addition, the Holder shall be
entitled to acquire certain purchase rights to the Common Stock in the event the
Company issues any convertible securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock
Upon the stockholders' approval of Proposal 1 at the Meeting, the
Investor Warrants shall be exercisable, until September 21, 2001, into an
aggregate of 500,000 shares of Common Stock at an exercise price of $.6250 per
share, which was the market price of the Common Stock on the date the Investor
Warrants were sold by the Company to the Holder. In the event of a stock split,
stock dividend, recapitalization, reorganization, reclassification or other
subdivision or combination of the Common Stock, the exercise price of the
Investor Warrants and the number of shares of Common Stock issuable on exercise
of the Investor Warrants shall be proportionately adjusted. The number of shares
issuable on exercise is also adjusted in the event of certain mergers and
consolidations and in the event of a sale or conveyance of all or substantially
all of the Company's assets.
If Proposal 2 concerning the Reverse Stock Split is approved by the
stockholders and implemented, the number of shares to be issued upon conversion
of the Series N Stock and on exercise of the Investor Warrants will be adjusted
proportionately. See "Proposal 2" below.
Ranking
Shares of Series N Stock rank prior to the Common Stock and any class
or series of capital stock created after the creation of the Series N Stock
(unless consent of the holders of the Series N Stock is obtained as described
below under "Voting Rights") and ranks pari passu with any class or series
created after the creation of the Series N Stock that specifically states that
it ranks pari passu with the Series N Stock and where the holders of the Series
N Stock have approved the issuance of such securities as described below under
"Voting Rights." The Series N Stock ranks junior to the Company's Series A
Cumulative Convertible Preferred Stock ("Series A Stock") and the Series M and
M1 Convertible Preferred Stocks (the "Series M Stock" and the "Series M1
Stock").
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Voting Rights
The Series N Stock generally has no voting rights except as otherwise
provided by the Delaware General Corporation Law. However, the approval of the
holders of a majority of the then outstanding shares of Series N Stock is
required to: (1) alter or change the rights, preferences or privileges of the
Series N Stock, (2) alter or change the rights, preferences or privileges of any
capital stock of the Company so as to adversely affect the Series N Stock, (3)
create any new class or series of capital stock ranking prior to or pari passu
with the Series N Stock as to distribution of assets upon liquidation,
dissolution or winding up of the Company, (4) increase the authorized number of
shares of Series N Stock, (5) issue any shares of Series N Stock other than
pursuant to the Securities Purchase Agreement, (6) issue any additional shares
of any securities ranking senior to the Series N Stock or (7) redeem, or declare
or pay a cash dividend or distribution on, any securities junior to the Series N
Stock.
In the event the holders of the Series N Stock approve a change
described in clause (1) above, a dissenting holder has the right for a period of
30 days to convert its shares of Series N Stock pursuant to the terms of the
Series N Certificate as they existed prior to the change.
Redemption
A holder of the Series N Stock is entitled to require the Company to
purchase for cash any or all of such holder's shares of Series N Stock in the
event that the Company (i) fails to timely remove legends from any holder's
securities as and when required by the Securities Purchase Agreement; (ii)
provides notice to any holder of its intention not to issue shares of Common
Stock upon conversion in accordance with the terms of the Series N Certificate;
(iii) sells, conveys or disposes of all or substantially all of the Company's
assets; (iv) merges, consolidates or engages in certain other business
combinations; or (v) approves, recommends or otherwise consents to any
transaction or series of related transactions which results in fifty percent or
more of the voting power of its capital stock being owned beneficially by one
person, entity or "group" (as such term is used under Section 13(d) of the
Securities Exchange Act of 1934, as amended). The Company does not have the
right to redeem shares of the Series N Stock.
Nasdaq Rule
Rule 4460 of Nasdaq, which is applicable to the Company because the
Company's shares of Common Stock are presently included for quotation on the
Nasdaq National Market, sets forth the corporate governance standards for such
securities. Section (i) of Rule 4460 requires shareholder approval for certain
transactions in such securities. Section (i) provides:
(1) Each NNM [Nasdaq National Market] issuer shall require
shareholder approval of a plan or arrangement under
subparagraph (A) below, or prior to the issuance of designated
securities under subparagraph (B), (C), or (D) below:
. . .
(B) when the issuance will result in a change of
control of the issuer;
. . .
(D) in connection with a transaction other than a
public offering involving:
(i) the sale or issuance by the issuer of
common stock (or securities convertible into or exercisable
for common stock) at a price less than the greater of book or
market value which together with sales by officers, directors
or substantial shareholders of the company equals 20% or more
of common stock or 20% or more of the voting power outstanding
before the issuance; or
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(ii) the sale or issuance by the company of
common stock (or securities convertible into or exercisable
for common stock) equal to 20% or more of the common stock or
20% or more of the voting power outstanding before the
issuance for less than the greater of book or market value of
the stock.
(2) Exceptions may be made upon application to Nasdaq when:
(A) the delay in securing stockholder approval would
seriously jeopardize the financial viability of the
enterprise; and
(B) reliance by the company on this exception is
expressly approved by the Audit Committee or a comparable body
of the Board of Directors.
A company relying on this exception must mail to all
shareholders not later than ten days before issuance of the
securities a letter alerting them to its omission to seek the
shareholder approval that would otherwise be required and
indicating that the Audit Committee of the Board or a
comparable body has expressly approved the exception.
Nasdaq Rule 4460(i)(1) provides that the limits set forth in
subparagraphs (B) and (D) do not apply if a company's stockholders approve the
issuance of the securities subject to the Rule.
Stockholder Approval
The Board desires to be able to issue shares of Common Stock in
connection with the Series N Stock and on exercise of the Investor Warrants
without regard to the limits of Nasdaq Rule 4460. The Board believes it would be
in the best interests of the Company if the Company could issue such shares of
Common Stock to the Holder.
If stockholder approval is not obtained for Proposal 1 at the Meeting,
the Company is obligated to continue seeking stockholder approval. At any time
prior to obtaining stockholder approval, the Series N Stock and the Investor
Warrants will remain outstanding but the amount of shares of Series N Stock and
the amount of Investor Warrants that may be converted or exercised will be
limited. In general, unless stockholder approval is obtained, the Series N Stock
and the Investor Warrants will not be convertible or exercisable, as applicable,
into shares of Common Stock which, when combined with Common Stock already owned
by the Holder, exceeds 20% of the voting power or outstanding Common Stock of
the Company at the time of conversion or exercise.
Vote Required
The affirmative vote of the holders of a majority of the Common Stock
present or represented and entitled to vote at the Meeting is required to
approve the proposal to eliminate the restriction on the number of shares of
Common Stock issuable in connection with the Series N Stock and on exercise of
the Investor Warrants.
The Board recommends a vote "FOR" the approval to eliminate the
restriction on the number of shares of Common Stock issuable in connection with
the Series N Stock and on exercise of the Investor Warrants.
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PROPOSAL NUMBER TWO - AMEND THE RESTATED CERTIFICATE OF
INCORPORATION OF THE COMPANY TO EFFECT A ONE-FOR-THREE REVERSE
STOCK SPLIT OF THE COMPANY'S OUTSTANDING COMMON STOCK.
General
As of September 22, 1998, the Board of Directors adopted a resolution,
subject to stockholder approval, authorizing an amendment to the Company's
Restated Certificate of Incorporation to effect a one-for-three reverse stock
split (the "Reverse Stock Split") of the Company's outstanding Common Stock. The
intent of the Reverse Stock Split is to prevent the delisting of the Company's
shares of Common Stock from the Nasdaq National Market.
If the Reverse Stock Split is approved by the stockholders at the
Meeting, it will be effected only upon a determination by the Board that it is
required to effect the Reverse Stock Split in order for the Common Stock to
remain listed on the Nasdaq National Market. If the Board makes such a
determination, the Board will cause an amendment to the Restated Certificate of
Incorporation of the Company to effect the Reverse Stock Split to be filed. The
Reverse Stock Split would become effective on any date (the "Effective Date")
selected by the Board of Directors on or prior to the Company's next Annual
Meeting of Stockholders. The Company expects that if the Reverse Stock Split is
effected, it will be effected substantially before the next Annual Meeting, as
described below. However, if no Reverse Stock Split is effected by the date of
the next Annual Meeting, the Board will take action to abandon the Reverse Stock
Split. The procedures for the consummation of the Reverse Stock Split of the
Company's capital stock are attached hereto as Appendix B.
Reasons for the Reverse Stock Split
The primary reasons for the Reverse Stock Split are to maintain listing
of the Company's shares of Common Stock on the Nasdaq National Market and to
facilitate trading activity of the Common Stock.
The Company's shares of Common Stock have been listed, and have traded
on the Nasdaq National Market under the symbol "TREV" (prior to May 9, 1998, as
"IMGX"), since its initial public offering in December 1992. The Nasdaq Stock
Market, the National Association of Securities Dealers, Inc., and the SEC have
approved substantial changes in Nasdaq National Market initial listing and
maintenance requirements which became effective on February 23, 1998. These
rules require that in order to remain listed on the Nasdaq National Market,
companies must, among other requirements, maintain a minimum bid price of $1.00
per share. According to the maintenance requirements, a listed company will have
regained compliance if its security trades at or above the minimum requirement
for at least ten consecutive trade days.
On numerous occasions, and for protracted periods, the bid price of the
Company's shares of Common Stock has fallen and remained below $1.00. On the
Record Date, the reported closing price of the Common Stock on the Nasdaq
National Market was $___ per share. Nasdaq has indicated that because the
Company's stock has traded below the Nasdaq minimum bid price of $1.00, the
Company is not currently in compliance with the minimum bid price requirement to
maintain listing on the Nasdaq National Market System. Nasdaq indicated further
that if, on or before October 7, 1998, the Company's Common Stock is not in
compliance for at least ten consecutive trading days, the Company's Common Stock
will be delisted at the opening of business on October 9. In an effort to
maintain its listing, the Company intends to request a hearing before October 7,
1998. The Company understands that, under Nasdaq procedures, the Company's
Common Stock will continue to trade on Nasdaq pending the outcome of the
hearing. The Board believes that if the Reverse Stock Split is approved by the
stockholders at the Meeting, and the Reverse Stock Split is implemented, the
Company's Common Stock will trade at a price above the minimum required bid
price for continued listing on the Nasdaq National Market System. However, no
assurance can be given that the market price of the Common Stock will rise in
proportion to the reduction in the number of outstanding shares resulting from
the Reverse Stock Split, or will remain at levels necessary for such continued
listing, or that the Company would meet the other eligibility standards for the
Nasdaq National Market. In the event that the Company's Common Stock trades at a
minimum price of more than $1.00 for a period of ten consecutive trading days
prior to the hearing, and the Company is thereby able to maintain its Nasdaq
National Market System listing, the Board will reassess whether to proceed with
the Reverse Stock Split.
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The Board believes that the current per share price of the Common Stock
may limit the effective marketability of the Common Stock because of the
reluctance of many brokerage firms and institutional investors to recommend
lower-priced stocks to their clients or to hold them in their own portfolios.
Certain policies and practices of the securities industry may tend to discourage
individual brokers within those firms from dealing in lower-priced stocks. Some
of those policies and practices involve time-consuming procedures that make the
handling of lower-priced stocks economically unattractive. The brokerage
commission on a sale of lower-priced stock may also represent a higher
percentage of the sale price than the brokerage commission on a higher-priced
issue. Any reduction in brokerage commissions resulting from the Reverse Stock
Split may be offset, however, in whole or in part, by increased brokerage
commissions required to be paid by stockholders selling "odd lots" created by
such Reverse Stock Split. The Reverse Stock Split may result in some
stockholders owning "odd-lots" of less than 100 shares of Common Stock.
Brokerage commissions and other costs of transactions in odd-lots are generally
somewhat higher than the costs of transactions in "round-lots" of even multiples
of 100 shares.
If the Reverse Split is not approved by the stockholders at the
Meeting, it is highly likely that the Company's shares of Common Stock will
cease to be listed and traded on the Nasdaq National Market. In such an event,
the shares of Common Stock will likely be quoted in the "pink sheets" maintained
by the National Quotation Bureau, Inc. or on the "Electronic Bulletin Board," as
a result of which, among other things, the spread between the bid and ask price
of the shares of Common Stock is likely to be greater than at present and
stockholders likely would experience a greater degree of difficulty in engaging
in trades of shares of Common Stock.
Implementation of the Reverse Stock Split
If the stockholders approve this proposal and the Board believes it is
in the best interest of the Company to give effect to the Reverse Stock Split,
the Reverse Stock Split would be formally implemented by amending Article Fourth
of the Company's present Restated Certificate of Incorporation to add language
in or substantially in the form annexed hereto as Appendix B, and then by filing
such an amendment with the Secretary of State of the State of Delaware.
Principal Effects of the Reverse Stock Split
Assuming the Reverse Stock Split is approved by the Company's
stockholders at the Meeting and implemented by the Board, the number of whole
shares of Common Stock held by stockholders of record as of the close of
business on the Effective Date will be equal to the number of shares of Common
Stock held immediately prior to the close of business on the Effective Date
divided by three. The Company will pay cash in lieu of any fractional shares.
The percentage ownership interest in the Company and proportional voting power
of each holder of Common Stock will remain unchanged, except for minor
differences resulting from the payment of cash in lieu of fractional shares. The
rights and privileges of the holders of shares of Common Stock and the Series A
Stock, Series M Stock, the Series M1 Stock and the Series N Stock (the
"Preferred Stock") will be substantially unaffected by the Reverse Stock Split.
However, the conversion prices or the number of shares of Common Stock issuable
upon conversion of the Preferred Stock, as applicable, shall be proportionately
adjusted to reflect the Reverse Stock Split. In addition, the exercise prices at
which and the number of shares of Common Stock into which any outstanding
warrants of the Company are or shall be exercisable shall be proportionately
adjusted to reflect the Reverse Stock Split.
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After the Reverse Stock Split, the Company expects to have
approximately _____________ shares of Common Stock outstanding. The par value of
the Common Stock will remain at $.0001 per share. The number of authorized
shares of Common Stock will not be reduced and consequently will be greater as
compared to the number of shares of Common Stock outstanding than prior to the
Reverse Stock Split. Future issuances of Common Stock therefore may have the
effect of diluting the earnings per share and book value per share, as well as
the stock ownership and voting rights, of outstanding Common Stock. As the
Reverse Stock Split will increase proportionately the number of authorized but
unissued shares of Common Stock, it may be construed as having an anti-takeover
effect by permitting the issuance of shares to purchasers who might oppose a
hostile takeover bid or oppose any efforts to amend or repeal certain provisions
of the Company's Restated Certificate of Incorporation or By-Laws.
Exchange of Stock Certificates
Assuming the Reverse Stock Split is approved by the stockholders and
effectuated, stockholders will be required to exchange their stock certificates
for new certificates representing the post-split number of shares of Common
Stock. 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 changed into the appropriate fraction of a share of the
Company's Common Stock (the "New Common Stock"), subject to the treatment of
fractional share interests as described below. No certificates or scrip
representing fractional share interests in the New Common Stock will be issued
and the Company will instead pay cash in lieu of fractional shares resulting
from the Reverse Stock Split. Shortly after the Effective Date, the Corporation
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 surrender and exchange for certificates representing whole shares of New
Common Stock and cash in lieu of any fractional shares.
Stockholders will be furnished with the necessary materials and
instructions for the surrender and exchange of stock certificates at the
appropriate time by the Company's transfer agent. Stockholders will not be
required to pay a transfer or other fee in connection with the exchange of
certificates. STOCKHOLDERS SHOULD NOT SUBMIT ANY CERTIFICATES IF AND UNTIL
REQUESTED TO DO SO.
U.S. Federal Income Tax Consequences
The following summary of the material U. S. federal income tax
consequences of the Reverse Stock Split is based on the Internal Revenue Code of
1986, as amended (the "Code"), and regulations, rulings, and judicial decisions
as of the date hereof, all of which may be repealed, revoked, or modified so as
to result in U.S. federal income tax consequences different from those described
below. Such changes could be applied retroactively in a manner that could
adversely affect a holder of Common Stock. This summary applies only to holders
who hold Common Stock as a capital asset, and does not deal with special
situations, such as those of dealers in securities or currencies, financial
institutions, insurance companies, tax-exempt organizations, persons holding
Common Stock as part of a hedging or conversion transaction or a straddle,
persons whose "functional currency" is not the U.S. dollar, and certain U.S.
expatriates.
This summary is for general information only. It does not address all
aspects of U.S. federal income taxation that may be relevant to holders of
Common Stock in light of their particular circumstances, nor does it address any
tax consequences arising under the laws of any state, local, or foreign taxing
jurisdiction. ACCORDINGLY, HOLDERS OF COMMON STOCK SHOULD CONSULT THEIR TAX
ADVISORS ABOUT THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES TO THEM OF
THE REVERSE STOCK SPLIT, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS
OF ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION.
1. The Company will not recognize any gain or loss as a result of the
Reverse Stock Split.
2. Except with respect to cash received in lieu of fractional shares
(discussed below), no gain or loss will be recognized by a holder of Common
Stock as a result of the Reverse Stock Split.
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3. A holder's tax basis in Common Stock immediately before the Reverse
Stock Split generally will be allocated among the Common Stock (including
fractional shares) received in the Reverse Stock Split on a pro rata basis.
4. The holding period of the Common Stock received in the Reverse Stock
Split (including fractional shares) will include the holder's holding period of
the Common Stock prior to the Reverse Stock Split.
5. The receipt of cash in lieu of a fractional share of Common Stock
will be taxable as if the fractional share had been issued and then redeemed for
cash. Accordingly, the tax consequences of this assumed redemption will be
determined in accordance with Section 302 of the Code and such deemed redemption
should give rise to capital gain or loss in an amount equal to the difference
between the amount of cash received in lieu of a fractional share and the
holder's adjusted tax basis in such fractional share. Such capital gain or loss
will be long-term capital gain or loss if on the Effective Date the shares of
Common Stock have been held for more than one year. Holders of Common Stock
should consult their tax advisers with respect to the tax treatment of cash
received in lieu of a fractional share.
Required Affirmative Vote
The affirmative vote of the holders of a majority of all the issued and
outstanding shares of Common Stock is required to approve the Reverse Stock
Split.
Recommendation
The Company's Board of Directors unanimously recommends a vote
"FOR" the proposal to approve the Reverse Stock Split.
Stockholder Proposals
The Company anticipates that its 1999 Annual Meeting of stockholders
will be held in June, 1999. In order for a stockholder proposal to be included
in the Company's proxy statement or form of proxy for the 1999 Annual Meeting,
such proposal must be submitted in accordance with SEC Rule 14a-8 and must be
received by the Company no later than December 24, 1998. Stockholders should
send their proposals to the Company's corporate headquarters. Under SEC Rule
14a-4, the Company will be able to use proxies given to it for the 1999 Annual
Meeting to vote for or against any stockholder proposal submitted other than
pursuant to Rule 14a-8 at the Company's discretion unless the proposal is
submitted to the Company on or before March 6, 1999.
Other Business
The Board does not intend to bring any other matter before the Meeting
and does not know of any other business that others will present for
consideration at the Meeting. Except as the Board may otherwise permit, only the
business set forth and discussed in the Notice of Special Meeting of
Stockholders and this Proxy Statement may be acted on at the Meeting. If any
other business does properly come before the Meeting, the proxy holders will
vote on such matters according to their discretion.
By Order of the Board of Directors
JULIA A. BOWEN
Vice President, General Counsel and Assistant Secretary
All stockholders are urged to complete, sign, date, and return the
accompanying proxy card in the enclosed postage-paid envelope. Thank you for
your prompt attention to this matter.
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Appendix A
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
of
SERIES N CONVERTIBLE PREFERRED STOCK
of
TREEV, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
TREEV, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Corporation"), hereby certifies that the following
resolutions were adopted by the Board of Directors of the Corporation pursuant
to authority of the Board of Directors as required by Section 151 of the
Delaware General Corporation Law.
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (the "Board of Directors" or the "Board")
in accordance with the provisions of its Certificate of Incorporation and
Bylaws, each as amended and restated through the date hereof, the Board of
Directors hereby authorizes a series of the Corporation's previously authorized
Preferred Stock, par value $.0001 per share (the "Preferred Stock"), and hereby
states the designation and number of shares, and fixes the relative rights,
preferences, privileges, powers and restrictions thereof as follows:
Series N Convertible Preferred Stock:
I. DESIGNATION AND AMOUNT
The designation of this series, which consists of 1,559,576 shares of
Preferred Stock, is the Series N Convertible Preferred Stock (the "Series N
Preferred Stock") and the face amount shall be $6.4120 per share (the "Face
Amount"). The Holder will be issued shares of the Series N Preferred Stock in
denominations of 100,000 shares. No other Series N Preferred Stock shall be
issued without the consent of the purchaser.
II. CERTAIN DEFINITIONS
For purposes of this Certificate of Designation, the following terms
shall have the following meanings:
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A. "Conversion Date" means, for any Optional Conversion, the date
specified in the notice of conversion in the form attached hereto (the "Notice
of Conversion"), so long as the copy of the Notice of Conversion is faxed (or
delivered by other means resulting in notice) to the Corporation before
Midnight, New York City time, on the Conversion Date indicated in the Notice of
Conversion. If the Notice of Conversion is not so faxed or otherwise delivered
before such time, then the Conversion Date shall be the date the holder faxes or
otherwise delivers the Notice of Conversion to the Corporation. The Conversion
Date for the Required Conversion shall be the date the Corporation's
shareholders approve the transaction (as discussed in Paragraph D of Article
III).
B. "Conversion Price" means a price equal to $.6412 per share of
Common Stock.
III. CONVERSION
A. Conversion at the Option of the Holder. (i) Subject to the
limitations on conversions contained in Paragraph C of this Article IV, each
holder of shares of Series N Preferred Stock may, at any time and from time to
time, convert (an "Optional Conversion") each of its shares of Series N
Preferred Stock into a number of fully paid and nonassessable shares of Common
Stock at $.6412 per share.
B. Mechanics of Conversion. In order to effect an Optional Conversion,
a holder shall: (x) fax (or otherwise deliver) a copy of the fully executed
Notice of Conversion to the Corporation for the Common Stock and (y) surrender
or cause to be surrendered the original certificates representing the Series N
Preferred Stock being converted (the "Preferred Stock Certificates"), duly
endorsed, along with a copy of the Notice of Conversion as soon as practicable
thereafter to the Corporation or the transfer agent. The Corporation shall not
be obligated to issue shares of Common Stock upon a conversion unless either the
Preferred Stock Certificates are delivered to the Corporation or the transfer
agent as provided above, or the holder notifies the Corporation or the transfer
agent that such certificates have been lost, stolen or destroyed (subject to the
requirements of Article XI.B).
(i) Delivery of Common Stock Upon Conversion. Upon the
surrender of Preferred Stock Certificates from a holder of Series N Preferred
Stock accompanied by a Notice of Conversion, the Corporation shall, no later
than the second business day following the later of (a) the Conversion Date and
(b) the date of such surrender (or, in the case of lost, stolen or destroyed
certificates, after provision of indemnity pursuant to Article XI.B) (the
"Delivery Period"), issue and deliver to the holder (x) that number of shares of
Common Stock issuable upon conversion of such shares of Series N Preferred Stock
being converted and (y) a certificate representing the number of shares of
Series N Preferred Stock not being converted, if any. In lieu of delivering
physical certificates representing the Common Stock issuable upon conversion,
provided the Borrower's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program, upon request of the
holder and its compliance with the provisions contained in this paragraph, so
long as the certificates therefor do not bear a legend and the holder thereof is
not obligated to return such certificate for the placement of a legend thereon,
the Corporation shall use its best efforts to cause its transfer agent to
electronically transmit the Common Stock issuable upon conversion to the holder
by crediting the account of holder's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission system.
(ii) Taxes. The Corporation shall pay any and all taxes and
all other reasonable expenses which may be imposed upon it with respect to the
issuance and delivery of the shares of Common Stock upon the conversion of the
Series N Preferred Stock.
(iii) No Fractional Shares. If any conversion of Series N
Preferred Stock would result in the issuance of a fractional share of Common
Stock, such fractional share shall be disregarded and the number of shares of
Common Stock issuable upon conversion of the Series N Preferred Stock shall be
the next higher whole number of shares.
(iv) Conversion Disputes. In the case of any dispute with
respect to a conversion, the Corporation shall promptly issue such number of
shares of Common Stock as are not disputed in accordance with subparagraph (i)
above. If such dispute involves the calculation of the Conversion Price, the
Corporation shall submit the disputed calculations to its outside accountant via
facsimile within two (2) business days of receipt of the Notice of Conversion.
The accountant shall audit the calculations and notify the Corporation and the
holder of the results no later than two (2) business days from the date it
receives the disputed calculations. The accountant's calculation shall be deemed
conclusive, absent manifest error. The Corporation shall then issue the
appropriate number of shares of Common Stock in accordance with subparagraph (i)
above.
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C. Required Conversion Upon Shareholders' Approval of the Transaction.
Provided all shares of Common Stock issuable upon conversion of all outstanding
shares of Series N Preferred Stock are then authorized and reserved for
issuance, each share of Series N Preferred Stock issued and outstanding on the
date the Corporation's shareholders approve the issuance of the Common Stock
issuable under the Series N Preferred Stock to the Holder, automatically shall
be converted into shares of Common Stock on such date in accordance with the
conversion rate set forth in Paragraph A of this Article III (the "Required
Conversion"). When the Required Conversion occurs, the Corporation and the
holders of Series N Preferred Stock shall follow the applicable conversion
procedures set forth in Paragraph B of this Article III; provided, however, that
the holders of Series N Preferred Stock are not required to deliver a Notice of
Conversion to the Corporation or its transfer agent
In the event that shareholders' approval is not obtained, the
Corporation shall endeavor to again pursue shareholders' approval. After the
first attempt at obtaining shareholders' approval of the issuance of the shares
whereby the shareholders do not approve the issuance of the shares and until
such time as the shareholders do approve of the issuance of the shares to
Holder, the Holder may convert a number of shares of the Series N Stock;
provided however, that with Holder's current stock ownership in the Corporation,
that ownership does not exceed 19.99% of the outstanding shares of Common Stock
of the Corporation.
IV. RESERVATION OF SHARES OF COMMON STOCK
Upon the initial issuance of the shares of Series N Preferred Stock,
the Corporation shall reserve 15,595,760 shares of the authorized but unissued
shares of Common Stock for issuance upon conversion of the Series N Preferred
Stock and thereafter the number of authorized but unissued shares of Common
Stock so reserved (the "Reserved Amount") shall not be decreased and shall at
all times be sufficient to provide for the conversion of the Series N Preferred
Stock outstanding at the Conversion Price.
V. REDEMPTION DUE TO CERTAIN EVENTS
A. Redemption by Holder. In the event (each of the events described in
clauses (i)-(v) below after expiration of the applicable cure period (if any)
being a "Redemption Event"):
(i) the Corporation fails, and any such failure continues
uncured for five (5) business days after the Corporation has been notified
thereof in writing by the holder, to remove any restrictive legend on any
certificate or any shares of Common Stock issued to the holders of Series N
Preferred Stock upon conversion of the Series N Preferred Stock as and when
required by the Securities Purchase Agreement;
(ii) the Corporation provides notice to any holder of Series N
Preferred Stock, including by way of public announcement, at any time, of its
intention not to issue shares of Common Stock to any holder of Series N
Preferred Stock upon conversion in accordance with the terms of this Certificate
of Designation (other than due to the circumstances contemplated by Articles V
or VII for which the holders shall have the remedies set forth in such
Articles);
(iii) the Corporation shall:
(a) sell, convey or dispose of all or substantially
all of its assets;
(b) merge, consolidate or engage in any other busi-
ness combination with any other entity (other than pursuant to a migratory
merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Corporation); or
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(c) have approved, recommended or otherwise consented
to any transaction or series of related transactions which result in fifty
percent (50%) or more of the voting power of its capital stock owned
beneficially by one person, entity or "group" (as such term is used under
Section 13(d) of the Securities Exchange Act of 1934, as amended);
then, upon the occurrence of any such Redemption Event, each holder of shares of
Series N Preferred Stock shall thereafter have the option, exercisable in whole
or in part at any time and from time to time by delivery of a Redemption Notice
(as defined in Paragraph C below) to the Corporation while such Redemption Event
continues, to require the Corporation to purchase for cash any or all of the
then outstanding shares of Series N Preferred Stock held by such holder for an
amount per share equal to $6.4120.
VI. RANK
All shares of the Series N Preferred Stock shall rank (i) prior to the
Corporation's Common Stock; (ii) prior to any class or series of capital stock
of the Corporation hereafter created (unless, with the consent of the holder(s)
of Series N Preferred Stock); and (iii) junior to the Corporation's Series A
Cumulative Convertible Preferred Stock, par value $.0001 per share, and the
Corporation's Series M and Series M1 Convertible Preferred Stock (the "Senior
Securities"), in each case as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary.
VII. LIQUIDATION PREFERENCE
A. If the Corporation shall commence a voluntary case under the U.S.
Federal bankruptcy laws or any other applicable bankruptcy, insolvency or
similar law, or consent to the entry of an order for relief in an involuntary
case under any law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the U.S. Federal bankruptcy laws or any other
applicable bankruptcy, insolvency or similar law resulting in the appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of sixty (60) consecutive
days and, on account of any such event, the Corporation shall liquidate,
dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve
or wind up (a "Liquidation Event"), no distribution shall be made to the holders
of any shares of capital stock of the Corporation (other than Senior Securities)
upon liquidation, dissolution or winding up unless prior thereto the holders of
shares of Series N Preferred Stock shall have received the Liquidation
Preference with respect to each share.
B. The purchase or redemption by the Corporation of stock of any class,
in any manner permitted by law, shall not, for the purposes hereof, be regarded
as a liquidation, dissolution or winding up of the Corporation. Neither the
consolidation or merger of the Corporation with or into any other entity nor the
sale or transfer by the Corporation of less than substantially all of its assets
shall, for the purposes hereof, be deemed to be a liquidation, dissolution or
winding up of the Corporation.
C. The "Liquidation Preference" with respect to a share of Series N
Preferred Stock means an amount equal to the Face Amount thereof. The
Liquidation Preference with respect to any other security shall be as set forth
in the Certificate of Designation filed in respect thereof.
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VIII. ADJUSTMENTS TO THE CONVERSION PRICE
The Conversion Price shall be subject to adjustment from time to time
as follows:
A. Stock Splits, Stock Dividends, Etc. If at any time on or after the
date of execution, the number of outstanding shares of Common Stock is increased
by a stock split, stock dividend, combination, reclassification or other similar
event, the Conversion Price shall be proportionately reduced, or if the number
of outstanding shares of Common Stock is decreased by a reverse stock split,
combination or reclassification of shares, or other similar event, the
Conversion Price shall be proportionately increased. In such event, the
Corporation shall notify the Corporation's transfer agent of such change on or
before the effective date thereof.
B. Adjustment Due to Merger, Consolidation, Etc. If, at any time after
the date of execution, there shall be (i) any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination), (ii) any consolidation or merger of the
Corporation with any other entity (other than a merger in which the Corporation
is the surviving or continuing entity and its capital stock is unchanged), (iii)
any sale or transfer of all or substantially all of the assets of the
Corporation or (iv) any share exchange pursuant to which all of the outstanding
shares of Common Stock are converted into other securities or property (each of
(i) - (iv) above being a "Fundamental Change"), then the holders of Series N
Preferred Stock shall thereafter have the right to receive upon conversion, in
lieu of the shares of Common Stock otherwise issuable, such shares of stock,
securities and/or other property as would have been issued or payable in such
Fundamental Change with respect to or in exchange for the number of shares of
Common Stock which would have been issuable upon conversion had such Fundamental
Change not taken place, and in any such case, appropriate provisions shall be
made with respect to the rights and interests of the holders of the Series N
Preferred Stock to the end that the provisions hereof (including, without
limitation, provisions for adjustment of the Conversion Price and of the number
of shares of Common Stock issuable upon conversion of the Series N Preferred
Stock) shall thereafter be applicable, as nearly as may be practicable in
relation to any shares of stock or securities thereafter deliverable upon the
conversion thereof. The Corporation shall not effect any transaction described
in this Paragraph B unless (i) each holder of Series N Preferred Stock has
received written notice of such transaction at least thirty (30) days prior
thereto, but in no event later than ten (10) days prior to the record date for
the determination of shareholders entitled to vote with respect thereto, and
(ii) the resulting successor or acquiring entity (if not the Corporation)
assumes by written instrument the obligations of this Paragraph B. The above
provisions shall apply regardless of whether or not there would have been a
sufficient number of shares of Common Stock authorized and available for
issuance upon conversion of the shares of Series N Preferred Stock outstanding
as of the date of such transaction, and shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share exchanges.
C. Adjustment Due to Distribution. If at any time after the date of
execution the Corporation shall declare or make any distribution of its assets
(or rights to acquire its assets) to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise (including any
dividend or distribution to the Corporation's shareholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e. a spin-off) (a
"Distribution"), then the holders of Series N Preferred Stock shall be entitled,
upon any conversion of shares of Series N Preferred Stock after the date of
record for determining shareholders entitled to such Distribution, to receive
the amount of such assets which would have been payable to the holder with
respect to the shares of Common Stock issuable upon such conversion had such
holder been the holder of such shares of Common Stock on the record date for the
determination of shareholders entitled to such Distribution.
D. Purchase Rights. If at any time after the date of execution, the
Corporation issues any Convertible Securities or rights to purchase stock,
warrants, securities or other property (the "Purchase Rights") pro rata to the
record holders of any class of Common Stock, then the holders of Series N
Preferred Stock will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock acquirable
upon complete conversion of the Series N Preferred Stock immediately before the
date on which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
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E. Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article VIII, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to each holder of Series N Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
N Preferred Stock, furnish to such holder a like certificate setting forth (i)
such adjustment or readjustment, (ii) the Conversion Price at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon conversion of a
share of Series N Preferred Stock.
IX. VOTING RIGHTS
The holders of the Series N Preferred Stock have no voting power
whatsoever, except as otherwise provided by the Delaware General Corporation Law
(the "Business Corporation Law"), in this Article IX and in Article X below.
To the extent that under the Business Corporation Law the vote of the
holders of the Series N Preferred Stock, voting separately as a class or
series, as applicable, is required to authorize a given action of the
Corporation, the affirmative vote or consent of the holders of at least a
majority of the shares of the Series N Preferred Stock represented at a duly
held meeting at which a quorum is present or by written consent of a
majority of the shares of Series N Preferred Stock (except as otherwise may
be required under the Business
Corporation Law) shall constitute the approval of such action by the class.
To the extent that under the Business Corporation Law holders of the Series N
Preferred Stock are entitled to vote on a matter with holders of Common Stock,
voting together as one class, each share of Series N Preferred Stock shall be
entitled to a number of votes equal to the number of shares of Common Stock
into which it is convertible.
X. PROTECTION PROVISIONS
So long as any shares of Series N Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by the Business Corporation Law) of the holders of at least
a majority of the then outstanding shares of Series N Preferred Stock:
(a) alter or change the rights, preferences or privileges of
the Series N Preferred Stock;
(b) alter or change the rights, preferences or privileges of
any capital stock of the Corporation so as to affect adversely
the Series N Preferred Stock;
(c) create any new class or series of capital stock having a
preference over the Series N Preferred Stock as to
distribution of assets upon liquidation, dissolution or
winding up of the Corporation (as previously defined, "Senior
Securities");
(d) create any new class or series of capital stock ranking
pari passu with the Series N Preferred Stock as to
distribution of assets upon liquidation, dissolution or
winding up of the Corporation (as previously defined, "Pari
Passu Securities");
(e) increase the authorized number of shares of Series N Pre-
ferred Stock;
(f) issue any shares of Series N Preferred Stock other than
pursuant to the Securities Purchase Agreement with Horace T.
Ardinger, Jr.;
(g) issue any additional shares of Senior Securities; or
(h) redeem, or declare or pay any cash dividend or distribu-
tion on, any Junior Securities.
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If holders of at least a majority of the then outstanding shares of Series N
Preferred Stock agree to allow the Corporation to alter or change the rights,
preferences or privileges of the shares of Series N Preferred Stock pursuant to
subsection (a) above, then the Corporation shall deliver notice of such approved
change to the holders of the Series N Preferred Stock that did not agree to such
alteration or change (the "Dissenting Holders") and the Dissenting Holders shall
have the right, for a period of thirty (30) days, to convert pursuant to the
terms of this Certificate of Designation as they existed prior to such
alteration or change or to continue to hold their shares of Series N Preferred
Stock.
XI. MISCELLANEOUS
A. Cancellation of Series N Preferred Stock. If any shares of Series N
Preferred Stock are converted pursuant to Article IV, the shares so converted
shall be canceled, shall return to the status of authorized, but unissued
preferred stock of no designated series, and shall not be issuable by the
Corporation as Series N Preferred Stock.
B. Lost or Stolen Certificates. Upon receipt by the Corporation of (i)
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificate(s) and (ii) (y) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to the Corporation, or (z) in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Corporation shall execute and deliver new Preferred Stock
Certificate(s) of like tenor and date. However, the Corporation shall not be
obligated to reissue such lost or stolen Preferred Stock Certificate(s) if the
holder contemporaneously requests the Corporation to convert such Series N
Preferred Stock.
C. Status as Stockholder. Upon submission of a Notice of Conversion by
a holder of Series N Preferred Stock, the shares covered thereby shall be deemed
converted into shares of Common Stock and the holder's rights as a holder of
such converted shares of Series N Preferred Stock shall cease and terminate,
excepting only the right to receive certificates for such shares of Common Stock
and to any remedies provided herein or otherwise available at law or in equity
to such holder because of a failure by the Corporation to comply with the terms
of this Certificate of Designation. Notwithstanding the foregoing, if a holder
has not received certificates for all shares of Common Stock prior to the tenth
(10th) business day after the expiration of the Delivery Period with respect to
a conversion of Series N Preferred Stock for any reason, then (unless the holder
otherwise elects to retain its status as a holder of Common Stock) the holder
shall regain the rights of a holder of Series N Preferred Stock with respect to
such unconverted shares of Series N Preferred Stock and the Corporation shall,
as soon as practicable, return such unconverted shares to the holder.
IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Corporation this 22nd day of September, 1998.
TREEV, INC.
By:
---------------------------
19
<PAGE>
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series N Preferred Stock)
The undersigned hereby irrevocably elects to convert ____________ shares of
Series N Preferred Stock (the "Conversion"), represented by stock certificate
No.(s). ___________ (the "Preferred Stock Certificates") into shares of common
stock ("Common Stock") of TREEV, Inc. (the "Corporation") according to the
conditions of the Certificate of Designations, Preferences and Rights of Series
N Convertible Preferred Stock (the "Certificate of Designation"), as of the date
written below. If securities are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto. No fee will be charged to the holder for any conversion, except
for transfer taxes, if any. A copy of each Preferred Stock Certificate is
attached hereto (or evidence of loss, theft or destruction thereof).
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
Series N Preferred Stock shall be made pursuant to registration of the Common
Stock under the Securities Act of 1933, as amended (the "Act"), or pursuant to
an exemption from registration under the Act.
The undersigned hereby requests that the Corporation electronically
transmit the Common Stock issuable pursuant to this Notice of
Conversion to the account of the undersigned's Prime Broker (which is
__________) with DTC through its Deposit Withdrawal Agent Commission
System.
Date of Conversion:___________________________
Applicable Conversion Price: $.6412
Number of Shares of
Common Stock to be Issued:____________________
Signature:____________________________________
Name:_________________________________________
Address:______________________________________
* The Corporation is not required to issue shares of Common Stock until the
original Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Corporation or its
transfer agent. The Corporation shall issue and deliver shares of Common Stock
to an overnight courier not later than the later of (a) two (2) business days
following receipt of this Notice of Conversion and (b) delivery of the original
Preferred Stock Certificates (or evidence of loss, theft or destruction thereof)
and shall make payments pursuant to the Certificate of Designation for the
failure to make timely delivery.
<PAGE>
Appendix B
PROPOSED AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
RESOLVED, that, prior to the next Annual Meeting of the
stockholders of the Company, Article Fourth of the Company's Certificate of
Incorporation shall be amended by the addition of the following provision:
Simultaneously with the effective date of this amendment (the
"Effective Date"), each three shares of the Company's Common Stock, par value
$.0001 per share, issued and outstanding immediately prior to the Effective Date
(the "Old Common Stock") shall, automatically and without any action on the part
of the holder thereof, be reclassified as and changed, pursuant to a reverse
stock split (the "Reverse Stock Split"), into one share of the Company's
outstanding Common Stock (the "New Common Stock"), subject to the treatment of
fractional share interests as described below. Each holder of a certificate or
certificates which immediately prior to the Effective Date represented
outstanding shares of Old Common Stock (the "Old Certificates," whether one or
more) shall be entitled to receive upon surrender of such Old Certificates to
the Company's Transfer Agent for cancellation, a certificate or certificates
(the "New Certificates," whether one or more) representing the number of whole
shares of the New Common Stock into and for which the shares of the Old Common
Stock formerly represented by such Old Certificates so surrendered, are
reclassified under the terms hereof. From and after the Effective Date, Old
Certificates shall thereupon be deemed for all corporate purposes to evidence
ownership of New Common Stock in the appropriately reduced whole number of
shares. No certificates or scrip representing fractional share interests in New
Common Stock will be issued, and no such fractional share interest will entitle
the holder thereof to vote, or to any rights of a stockholder of the Company.
Any fraction of a share of New Common Stock to which the holder would otherwise
be entitled will be adjusted downward to the nearest whole share and the holder
will receive cash in lieu of such fractional share. If more than one Old
Certificate shall be surrendered at one time for the account of the same
stockholder, the number of full shares of New Common Stock for which New
Certificates shall be issued shall be computed on the basis of the aggregate
number of shares represented by the Old Certificates so surrendered. In the
event that the Company's Transfer Agent determines that a holder of Old
Certificates has not surrendered all his certificates for exchange, the Transfer
Agent shall carry forward any fractional share until all certificates of that
holder have been presented for exchange such that payment for fractional shares
to any one person shall not exceed the value of one share. If any new
Certificate is to be issued in a name other than that in which it was issued,
the Old Certificates so surrendered shall be properly endorsed and otherwise in
proper form for transfer, and the stock transfer tax stamps to the Old
Certificates so surrendered shall be properly endorsed and otherwise in proper
form for transfer, and the person or persons requesting such exchange shall
affix any requisite stock transfer tax stamps to the Old Certificates
surrendered, or provide funds for their purchase, or establish to the
satisfaction of the Transfer Agent that such taxes are not payable. From and
after the Effective Date, the amount of capital shall be represented by the
shares of the New Common Stock into which and for which the shares of the Old
Common Stock are reclassified, until thereafter reduced or increased in
accordance with applicable law. All references elsewhere in the Restated
Certificate of Incorporation to the "Common Stock" shall, after the Effective
Date, refer to the New Common Stock.
FURTHER RESOLVED, that at any time prior to the filing of the foregoing
amendment to the Company's Restated Certificate of Incorporation effecting the
Reverse Stock Split, notwithstanding authorization of the proposed amendment by
the stockholders of the Company, the Board may abandon such proposed amendment
without further action by the stockholders.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate of
Amendment to be signed and attested by its duly authorized officers as of this
__ day of ____________, 1998.
TREEV, INC.
By: _______________________________
James J. Leto
Chairman and Chief Executive Officer
ATTEST:
- ------------------
Julia A. Bowen
Assistant Secretary
<PAGE>
REVOCABLE PROXY
TREEV, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James J. Leto and Jorge R. Forgues, and
each of them individually, each with full power of substitution, as the lawful
proxies of the undersigned and hereby authorizes them to represent and to vote
as designated below all shares of common stock, $.0001 par value per share
("Common Stock"), of TREEV, Inc. (the "Company") that the undersigned would be
entitled to vote if personally present at the Special Meeting of Stockholders of
the Company (the "Meeting") to be held on ________, November ___, 1998, at 9:00
a.m. at the Company's headquarters at 500 Huntmar Park Drive, Herndon, Virginia
20170, and at any adjournment or postponement thereof.
The undersigned acknowledges the receipt of the Notice of Special
Meeting of Stockholders and Proxy Statement for the Special Meeting. All other
proxies heretofore given by the undersigned to vote shares of Common Stock are
expressly revoked.
TREEV, INC.
500 HUNTMAR PARK DRIVE
HERNDON, VIRGINIA 20170
1. To approve, in accordance with the Nasdaq rules, the issuance of shares of
Common Stock issuable in connection with the Company's Series N Convertible
Preferred Stock and on exercise of warrants to purchase shares of Common Stock
at an exercise price of $.6250 per share.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. To amend the Restated Certificate of Incorporation to effect a one-for-three
reverse stock split of the Company's outstanding Common Stock.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To transact such other business as may properly come before the Meeting or
any adjournment or postponement thereof.
Signature_____________________________________ Date ________________________
