<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Voice Powered Technology International, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE> 2
VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
15260 VENTURA BOULEVARD, SUITE 2200
SHERMAN OAKS, CA 91403
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 25, 1997
To the Stockholders of Voice Powered Technology International, Inc.:
A Special Meeting of Stockholders of Voice Powered Technology
International, Inc., a California corporation (the "Company"), will be held on
April 25, 1997, at 9:30 a.m., local time, at the Radisson Valley Center, 15433
Ventura Boulevard, Sherman Oaks, California 91403, to consider and take action
with respect to the following matters:
1. To approve an amendment to the Company's Restated
Articles of Incorporation to effect a reverse stock split of the
Company's Common Stock such that every seven (7) shares of Common
Stock outstanding would be converted into one (1) share of Common
Stock.
2. To transact such other business as may properly come
before the meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 4,
1997 as the record date for determination of stockholders entitled to notice of
and to vote at the meeting or any adjournments or postponements thereof, either
in person or by proxy.
You are cordially invited to attend the meeting and, if you do so, you
may personally vote your shares regardless of whether you have signed and
returned a completed proxy. YOU ARE URGED TO DATE, MARK, AND SIGN THE ENCLOSED
PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE, WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING.
By Order of the Board of Directors,
Edward M. Krakauer,
Chairman of the Board,
President and Chief Executive Officer
Sherman Oaks, California
March 19, 1997
<PAGE> 3
VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
15260 VENTURA BOULEVARD, SUITE 2200
SHERMAN OAKS, CA 91403
_______________
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 25, 1997
_______________
INTRODUCTION
GENERAL INFORMATION
This Proxy Statement and the enclosed Proxy are furnished in
connection with the solicitation of proxies by the Board of Directors of Voice
Powered Technology International, Inc., a California corporation (the
"Company"), for use at the Special Meeting of Stockholders to be held on April
25, 1997, at 9:30 a.m., local time, at the Radisson Valley Center, 15433
Ventura Boulevard, Sherman Oaks, California 91403, (together with any and all
adjournments and postponements, the "Special Meeting").
If Proxies in the accompanying form are properly executed and
returned, unless contrary instructions are indicated thereon, the shares of
Common Stock represented thereby will be voted for the adoption of an amendment
to the Restated Articles of Incorporation of the Company effecting a reverse
split of the Common Stock on the basis of one (1) new share of Common Stock for
each seven (7) shares of Common Stock issued as of the effective date of such
amendment (the "Reverse Split"). The approval of the Amendment to the
Company's Restated Articles of Incorporation effecting the Reverse Split
requires the affirmative vote of a majority of the outstanding shares of the
Common Stock entitled to vote thereon at the Special Meeting.
RECORD DATE, QUORUM, MAILING
All holders of record of the Company's common stock, $.001 par value
per share ("Common Stock"), at the close of business on March 4, 1997, are
entitled to notice of and to vote at the Special Meeting. At the close of
business on such date, the Company had 13,949,072 shares of Common Stock
outstanding. A majority of the outstanding shares of Common Stock represented
in person or by Proxy will constitute a quorum for the transaction of business
at the Special Meeting.
The Company anticipates that the mailing to stockholders of this Proxy
Statement and the enclosed Proxy will commence on or about March 19, 1997.
VOTE BY AND REVOCATION OF PROXIES
At the Special Meeting, the designated Proxy holder will vote the
shares of Common Stock represented by Proxies which have been received and not
revoked. Where the Stockholder specifies a choice on the Proxy Card with
respect to the matter to be acted upon, the shares of Common Stock will be
voted in accordance with the choice specified. Where no choice is specified,
the shares represented by a signed Proxy Card will be voted in favor of the
proposal for the adoption of an amendment to the Restated Articles of
Incorporation of the Company effecting the Reverse Split.
Any Proxy may be revoked at any time prior to its exercise by
notifying the Secretary of the Company in writing, by delivering a duly
executed Proxy bearing a later date or by attending the Special Meeting and
voting in person. Attendance in person at the Special Meeting does not itself
revoke an otherwise valid Proxy; however, any stockholder who attends the
Special Meeting may orally revoke his or her Proxy at the Special Meeting and
vote in person. If your shares are held of record by a broker, bank, or other
nominee and you wish to attend and vote your
<PAGE> 4
shares at the Special Meeting, you must obtain a letter from the broker, bank,
or nominee confirming your beneficial ownership of the shares and a written
Proxy from the holder issued in your name, and bring it to the Special Meeting.
VOTING RIGHTS AND SOLICITATION
Each holder of Common Stock is entitled to one vote for each share
held. There are no cumulative voting rights with respect to the matters to be
voted upon. Abstentions and broker non-votes are counted as shares of Common
Stock represented at the Special Meeting for purposes of determining a quorum.
Abstentions will have the same effect as negative votes with respect to all
matters to come before the Special Meeting. Broker non-votes will have the
same effect as negative votes with respect to all matters to come before the
Meeting. With respect to Proxies that are executed by the record holders but
are not marked to indicate how the holder is voting, such Proxies will be voted
in favor of the item being considered at the Special Meeting.
The expenses of this solicitation of proxies for the Special Meeting
will be paid by the Company. In addition to the mailing of the proxy
materials, such solicitation may be made in person or by telephone or other
means of communication by directors, officers or regular employees of the
Company, but such persons will not be specifically compensated for such
services. The Company may also reimburse brokers, banks, custodians, nominees
and other fiduciaries for their reasonable charges and expenses in forwarding
the proxy materials to beneficial owners.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table contains information with respect to each person
known to the Company to be the beneficial owner of more than five percent of
the Company's outstanding Common Stock as of December 31, 1996. To the
Company's knowledge, unless otherwise indicated in the notes below, each
beneficial owner has sole voting and investment power with respect to the
Common Stock set forth opposite his or her name in the following table:
<TABLE>
<CAPTION>
PERCENT OF TOTAL
NAME AND ADDRESS OF NUMBER OF SHARES
BENEFICIAL OWNER SHARES OUTSTANDING
---------------- ------ -----------
<S> <C> <C>
Flextronics (Malaysia) SDN.BHD 1,356,966 9.7%
</TABLE>
2
<PAGE> 5
The following table sets forth existing stock ownership by the
directors and executive officers of the Company, as well as all directors and
executive officers of the Company as a group. To the Company's knowledge, all
of the shares shown in the following table are owned both of record and
beneficially, and the persons named possess sole voting and investment power,
except as otherwise indicated in the notes to the table. No person is known to
the Company to beneficially own 5% or more of the Company's outstanding Common
Stock as of December 31, 1996.
<TABLE>
<CAPTION>
Shares Beneficially Owned
As of December 31, 1996
-----------------------
Positions and Offices Director Percent of
Name (1) Held with Company Since Amount (2) Class
- ---- ----------------- ----- ------ -----
<S> <C> <C> <C> <C>
Edward M. Krakauer President, CEO, Director,
Chairman of the Board 1992 648,825 (3) 4.7%
Mitchell B. Rubin Vice President, CFO,
Director 1994 150,000 1.1%
Myron H. Hitchcock Director 1990 56,688 (4) *
Ernest W. Townsend Director 1994 23,355 (4) *
George H. Fischer Vice President n/a 141,046 1.0%
Kenneth I. DeWitt Vice President n/a 90,000 *
Larry Kloman Vice President n/a 25,000 (5) *
All directors and
executive officers of the
Company as a group 1,134,914 8.1%
- -----------------------
</TABLE>
* Less than 1%.
(1) The address of each individual, unless otherwise indicated, is c/o
Voice Powered Technology International, Inc., 15260 Ventura Blvd.,
Suite 2200, Sherman Oaks, California 91403.
(2) The amounts shown include shares subject to stock options currently
exercisable or exercisable within 60 days from the date hereof.
(3) The amount shown does not include 6,000 shares of Common Stock owned
by relatives of Mr. Krakauer. Mr. Krakauer disclaims beneficial
ownership of such shares.
(4) The amounts shown include stock options granted to these directors in
1994, 1995 and 1996 for serving as directors of the Company, except
for options for 9,346 shares as to each of Messrs. Hitchcock and
Townsend, as such options are not currently exercisable or exercisable
within 60 days of the date of this table.
(5) The amount shown does not include options held by Mr. Kloman to
purchase 25,000 shares which are not currently exercisable or
exercisable within sixty days of the table.
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<PAGE> 6
EXECUTIVE OFFICERS OF THE COMPANY
The following are the names and respective ages as of January 31, 1996
of the executive officers of the Company. The Company's executive officers are
elected by, and serve at, the discretion of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Edward M. Krakauer 64 Chairman of the Board, President
and Chief Executive Officer
Mitchell B. Rubin 42 Executive Vice President and
Chief Financial Officer
</TABLE>
Edward M. Krakauer, became a director of the Company upon joining it
in November 1991, was appointed chairman of the board in July 1994, and has
been the Company's president and chief executive officer since August 1993.
From November 1991 to August 1993, Mr. Krakauer served as the Company's chief
operating officer. From 1985 to November 1991, Mr. Krakauer was a managing
director of The Oxford Group, a full service management consulting firm. Mr.
Krakauer's areas of concentration with The Oxford Group were management,
marketing, and new product development. From 1985 to 1991, Mr. Krakauer was
actively involved with, and was founder, chairman of the board, and chief
executive officer, of Rabbit Systems, Inc., a developer, marketer, and
manufacturer of innovative consumer electronic products, which transformed its
business from that of an operating entity to a licensor of its technologies.
From 1980 to 1985, Mr. Krakauer founded and served as chairman of the board and
chief executive officer of General Consumer Electronics ("GCE"), a marketer of
video games, which was acquired by the Milton Bradley Company in 1982. Before
starting GCE, from 1975 to 1980, Mr. Krakauer served as president and chief
executive officer of Mattel Electronics, where he was responsible for founding,
developing, and managing Mattel's consumer electronics business. Earlier, he
was group vice president of Hunt Wesson Foods with responsibility for all
marketing, sales, new product and corporate development. Mr. Krakauer holds a
Bachelors Degree in marketing and economics from New York University, 1953. In
addition, he has been a lecturer in marketing at Johns Hopkins University.
Mitchell B. Rubin, joined the Company as vice president and general
manager in January 1994, and was elected a director in July 1994. In December
1994, Mr. Rubin assumed the newly created position of vice president, finance
and operations, which includes the responsibilities of chief financial officer;
and in January 1995 Mr. Rubin was also appointed secretary of the Company.
Previously, from July 1991 through 1993, Mr. Rubin held various positions
(including executive vice president and chief operating officer from April 1992
through 1993) with Regal Group, Inc., a television direct-response company with
which the Company did business. In late 1994, when Mr. Rubin was no longer
associated with Regal, Regal filed a petition for protection under Chapter 11
of the U.S. Bankruptcy Code. From 1990 to 1991, Mr. Rubin was senior vice
president and chief financial officer of Quantum Marketing International, where
he was responsible for operations, systems, and finance. From 1984 to 1990,
Mr. Rubin was treasurer and chief financial officer at Chase Financial
Management Corporation, a holding company, where he had responsibility for
negotiation of all business and real estate acquisitions and sales, finance and
operations. Prior to 1984, Mr. Rubin was a partner in Margolis & Company,
Certified Public Accountants, in Pennsylvania. Mr. Rubin holds a B.S. degree
in Business Administration/Accounting from Drexel University, 1977, and became
licensed as a certified public accountant in the State of Pennsylvania in 1978.
4
<PAGE> 7
APPROVAL OF AMENDMENT OF RESTATED ARTICLES OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT OF THE COMMON STOCK
GENERAL
The Board of Directors of the Company has unanimously approved, and is
hereby soliciting stockholder approval of, an amendment to the Company's
Restated Articles of Incorporation, in the form of Exhibit "A" attached to this
Proxy Statement (the "Amendment"), effecting the Reverse Split with respect to
all issued shares of Common Stock. As a result of the Reverse Split, every
seven (7) shares of existing Common Stock outstanding ("Old Common Stock") as
of the time of filing of the Amendment with the California Secretary of State
(the "Effective Date") would be automatically converted into one (1) new share
of Common Stock ("New Common Stock").
The Restated Articles of Incorporation of the Company, as amended to
date, provide for 50,000,000 authorized shares of Common Stock, par value $.001
per share, 13,949,072 of which were issued and outstanding as of the Record
Date, and 5,000,000 shares of Preferred Stock, par value $0.001, 2,000,000
shares of Series B 14% convertible Cumulative Preferred Stock, par value
$0.001, 2,500,000 shares of Series C 12% convertible Cumulative Preferred
Stock, par value $0.001, and 10,000,000 shares of Special Preferred Stock, par
value $0.001 (all such preferred stock collectively referred to as the
"Preferred Stock") of which no shares of the Preferred Stock were issued and
outstanding as of the Record Date.
In order to effect the Reverse Split, the stockholders are being asked
to approve the Amendment. The Board of Directors of the Company believes that
the Reverse Split is in the best interests of both the Company and its
stockholders and has approved the Reverse Split. The Board of Directors of the
Company reserves the right, notwithstanding stockholder approval and without
further action by the stockholders, to decide not to proceed with the Reverse
Split if at any time prior to its effectiveness it determines, in its sole
discretion, that the Reverse Split is no longer in the best interests of the
Company and its stockholders.
EFFECTS OF THE REVERSE SPLIT
If effected, the Reverse Split would reduce the number of outstanding
shares of Old Common Stock from 13,949,072 as of the Record Date of the Special
Meeting (March 4, 1997) to approximately 1,992,724 shares of New Common Stock
as of the Effective Date. (The foregoing assumes no issuances of Common Stock
between said Record Date and the Effective Date.) The Reverse Split would have
no effect on the number of authorized shares of Common Stock or Preferred Stock
or the par value of the stock.
All outstanding options, warrants, rights and convertible securities
that include provisions for adjustments in the number of shares covered
thereby, and the exercise or conversion price thereof, would be appropriately
adjusted for the Reverse Split automatically on the Effective Date. The
Reverse Split would not affect any stockholder's proportionate equity interest
in the Company except for those stockholders who would receive an additional
share of Common Stock, or cash if the Company so elects, in lieu of fractional
shares. None of the rights currently accruing to holders of the Company's
Common Stock, or options or warrants to purchase Common Stock, will be affected
by the Reverse Split.
The Reverse Split will result in some stockholders holding odd lots of
the Company's Common Stock (blocks of less than 100 shares). Because
broker/dealers typically charge a higher commission to complete trades in odd
lots of securities, the transaction costs may increase for those stockholders
who will hold odd lots after the Reverse Split.
Although the Board of Directors believes as of the date of this Proxy
Statement that the Reverse Split is advisable, the Reverse Split may be
abandoned by the Board of Directors at any time before, during or after the
Special Meeting and prior to the Effective Date. In addition, depending upon
prevailing market conditions, the
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<PAGE> 8
Board of Directors may deem it advisable to implement the Reverse Split and
concurrently or sometime thereafter declare a Common Stock dividend in an
amount to be determined, which Common Stock dividend would not require
stockholder approval. Any such Common Stock dividend would partially offset
the decrease in the number of issued shares of New Common Stock resulting from
the Reverse Split. No such Common Stock dividend is presently contemplated.
Dissenting stockholders have no appraisal rights under California law
or under the Company's Restated Articles of Incorporation or Bylaws in
connection with the Reverse Split.
The Board of Directors may make any and all changes to the Amendment
that it deems necessary in order to file the Amendment with the California
Secretary of State and give effect to the Reverse Split.
The Reverse Split could result in a significant increase in possible
dilution to present stockholders' percentage of ownership of the New Common
Stock. Assuming the issuance of all authorized shares of Common Stock, the
current stockholders, in the aggregate, would own approximately 28% under the
Company's present capital structure prior to the Reverse Split, but only
approximately 4% of the outstanding New Common Stock under the capital
structure assuming adoption of the Reverse Split. The Board of Directors has
determined that having 50,000,000 authorized shares of Common Stock may be more
attractive for future possible merger or acquisition candidates, as well as
future issuances of stock to raise capital in private or public transactions,
should opportunities arise and be recommended by the Board of Directors with
regard to such matters and thus has determined not to reduce the authorized
number of shares.
REASONS FOR THE REVERSE SPLIT
The Board of Directors believes that the Reverse Split is beneficial
to the Company and the stockholders. The principal reason for the Reverse
Split is the desire to remain eligible for listing on the NASDAQ SmallCap
Market. Failure to maintain a bid price in excess of $1.00 per share could
result in the future delisting of the Common Stock on the NASDAQ SmallCap
Market, which might adversely affect the trading in and liquidity of the Common
Stock.
NASDAQ has required that, as a condition to the Company continuing its
listing in the NASDAQ SmallCap Market, the Company must effect a reverse stock
split in sufficient amount so as to result in an increase in the trading price
of the Common Stock to $1.00 per share or higher. The quoted high and low
closing prices of the Common Stock have been as follows:
<TABLE>
<CAPTION>
Quarter Ended High Low
-------------------------------------------------------------------------------------
<S> <C> <C>
March 31, 1995 2 15/16 1 13/16
_ _ _ _ _ _ _ _ _ _ _
June 30, 1995 4 2 1/4
- - - - - - - - - - -
September 30, 1995 4 1/16 3
- - - - - - - -
December 31, 1995 3 1/2 1 1/2
- - - - - - - - -
March 31, 1996 3 1/16 1 3/16
- - - - - - - - - -
June 30, 1996 1 5/8 1 1/8
- - - - - - - - - - -
September 30, 1996 1 1/2 9/16
- - - - - - - -
December 31, 1996 13/16 5/32
- - - - - - - - -
Month Ended January 31, 1997 17/32 1/4
- - - -
</TABLE>
By reason of the Reverse Split, the market value of a share of Common
Stock may increase to a level above the current market trading price. Failure
to maintain a closing bid price in excess of $1.00 per share following the
Reverse Split could result in the future delisting of the Company's Common
Stock from the NASDAQ SmallCap Market, which might adversely affect the trading
in and liquidity of such shares. While the Board of Directors believes that
the shares of Common Stock will trade at higher prices than those which have
6
<PAGE> 9
prevailed in recent months, there can be no assurance that such increase in the
trading price will occur or, if it does occur, that it will equal or exceed the
direct arithmetical result of the Reverse Split since there are numerous
factors and contingencies which could affect such price. No assurance can be
given that the Company will continue to meet the listing requirements for the
NASDAQ SmallCap Market following the Reverse Split.
MECHANICS OF REVERSE SPLIT
If the Reverse Split is approved by the requisite vote of the
Company's stockholders, the Amendment will be filed no later than April 25,
1997, and the Reverse Split will thus be effected, unless abandoned by the
Board of Directors as described above. Upon filing of the Amendment, every
seven (7) issued and outstanding shares of Old Common Stock will, immediately
following filing of the Amendment, be automatically and without any action on
the part of the stockholders converted into and reconstituted as one (1) share
of New Common Stock.
As soon as practical after the Effective Date, the Company will
forward a letter of transmittal to each holder of record of shares of Old
Common Stock outstanding as of the Effective Date. The letter of transmittal
will set forth instructions for the surrender of certificates representing
shares of Old Common Stock to the Company's transfer agent in exchange for
certificates representing the number of whole shares of New Common Stock into
which the shares of Old Common Stock have been converted as a result of the
Reverse Split. CERTIFICATES SHOULD NOT BE SENT TO THE COMPANY OR THE TRANSFER
AGENT PRIOR TO RECEIPT OF SUCH LETTER OF TRANSMITTAL FROM THE COMPANY.
Until a stockholder forwards a completed letter of transmittal
together with certificates representing his shares of Old Common Stock to the
transfer agent and receives a certificate representing shares of New Common
Stock, such stockholder's Old Common Stock shall be deemed equal to the number
of whole shares of New Common Stock to which each stockholder is entitled as a
result of the Reverse Split.
No scrip or fractional certificates will be issued in the Reverse
Split. [Instead, the Company will issue one additional share of New Common
Stock, or cash if it so elects, in lieu of fractional shares.] If the Company
elects to make a cash payment in lieu of fractional shares, such payment will
be based on the average closing price of the New Common Stock on the NASDAQ
SmallCap Market for the five trading days preceding the Effective Date. Such
cash payment, if elected by the Company, would be made upon surrender to the
Company's transfer agent of stock certificates representing a fractional share
interest. The ownership of a fractional interest will not give the holder
thereof any voting, dividend or other rights except the right to receive
payment therefor as described herein.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT
The following is a summary of the material anticipated federal income
tax consequences of the Reverse Split to stockholders of the Company. This
summary is based on the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), the Treasury Department Regulations (the "Regulations")
issued pursuant thereto, and published rulings and court decisions in effect as
of the date hereof, all of which are subject to change. This summary does not
take into account possible changes in such laws or interpretations, including
amendments to the Code, applicable statutes, Regulations and proposed
Regulations or changes in judicial or administrative rulings, some of which may
have retroactive effect. No assurance can be given that any such changes will
not adversely affect the discussion of this summary.
This summary is provided for general information only and does not
purport to address all aspects of the possible federal income tax consequences
of the Reverse Split and IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. In
particular, and without limiting the foregoing, this summary does not consider
the federal income tax consequences to stockholders of the Company in light of
their individual investment circumstances or to holders subject to special
treatment under the federal income tax laws (for example, life insurance
companies, regulated investment companies and foreign taxpayers). In addition,
this summary does not address any
7
<PAGE> 10
consequence of the Reverse Split under any state, local or foreign tax laws.
As a result, it is the responsibility of each stockholder to obtain and rely on
advice from his or her personal tax advisor as to: (i) the effect on his or
her personal tax situation of the Reverse Split, including the application and
effect of state, local and foreign income and other tax laws; (ii) the effect
of possible future legislation and Regulations; and (iii) the reporting of
information required in connection with the Reverse Split on his or her own tax
returns. It will be the responsibility of each stockholder to prepare and file
all appropriate federal, state and local tax returns.
No ruling from the Internal Revenue Service ("Service") or opinion of
counsel will be obtained regarding the federal income tax consequences to the
stockholders of the Company as a result of the Reverse Split. ACCORDINGLY,
EACH STOCKHOLDER IS ENCOURAGED TO CONSULT HIS OR HER TAX ADVISOR REGARDING THE
SPECIFIC TAX CONSEQUENCES OF THE PROPOSED TRANSACTION TO SUCH STOCKHOLDER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND
OTHER TAX LAWS.
The Company believes that the Reverse Split will qualify as a
"recapitalization" under Section 368(a)(1)(E) of the Code. As a result, no
gain or loss will be recognized by the Company or its stockholders in
connection with the Reverse Split, except with respect to any cash received in
lieu of fractional shares. A stockholder of the Company who exchanges his or
her Old Common Stock solely for New Common Stock will recognize no gain or loss
for federal income tax purposes. A stockholder's aggregate tax basis in his or
her shares of New Common Stock received from the Company will be the same as
his or her aggregate tax basis in the Old Common Stock exchanged therefor. The
holding period of the New Common Stock received by such stockholder will
include the period during which the Old Common Stock surrendered in exchange
therefor was held, provided all such Common Stock was held as a capital asset
on the date of the exchange. Each stockholder who will receive cash, if any,
in lieu of fractional shares of New Common Stock will recognize capital gain or
loss equal to the difference between the amount of cash received and the
stockholder's tax basis allocable to such fractional shares.
VOTE REQUIRED
The approval of the Amendment to the Company's Restated Articles of
Incorporation effecting the Reverse Split requires the affirmative vote of a
majority of the outstanding shares of the Common Stock entitled to vote thereon
at the Special Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE PROPOSAL.
OTHER MATTERS WHICH MAY COME BEFORE THE MEETING
The Company knows of no matters other than as stated above which are
to be brought before the Special Meeting. It is intended that the persons
named in the Proxy will vote their Common Stock represented by duly executed
and delivered Proxies according to their best judgment if any other matters do
properly come before the Special Meeting.
INTEREST OF CERTAIN PERSONS
In 1996, the Company entered into a new agreement with Mr. Hitchcock,
a director of the Company, concerning the VoiceLogic(TM) technology. The new
agreement, which replaced all previous licensing agreements with Mr. Hitchcock,
resulted in the Company acquiring unrestricted exclusive ownership to the
technology. As a result of the new agreement, the Company agreed to pay Mr.
Hitchcock $100,000 in two installments during 1996, which have been paid.
Further, as a part of the new agreement, in 1996 the Company granted to Mr.
Hitchcock
8
<PAGE> 11
options to purchase 33,333 shares at an exercise price of $0.375 per share.
The exercise price was a fraction of the then market price of the shares, it
being the intent of the Company that had the options been exercised at
issuance, a $50,000 gain would have been realized. The Company believes that
terms of the foregoing transaction were as favorable to the Company as would be
available from unrelated third parties. For the year ended December 31, 1995,
the Company paid to Mr. Hitchcock $131,000 in royalties under the prior
agreements. For the year ended December 31, 1996, the Company paid $97,500 in
royalties to Mr. Hitchcock under the new agreement.
SUMMARY OF LETTER OF INTENT WITH
FRANKLIN ELECTRONIC PUBLISHERS, INC.
The Company has executed a nonbinding letter of intent ("LOI") to
merge with Franklin Electronic Publishing, Inc. ("Franklin"), a Pennsylvania
corporation whose stock is traded on the New York Stock Exchange.
The LOI provides that Franklin will pay consideration of $0.25 per
share for all issued and outstanding shares of the Company's common stock in
connection with the merger, which will be paid in either cash or shares of
Franklin stock. The LOI is subject to satisfactory conclusion of due diligence
and the execution of a definitive agreement and plan of merger on or before
April 30,1997 as well as the approval of the Company's shareholders.
The LOI also provides for Franklin to loan to the Company $500,000 on or
before March 12,1997. The loan will be in the form of a promissory note and
shall accrue interest at the rate of 9.0% per annum. The note will be secured
by all of the Company's tangible and intangible assets subordinate only to the
Company's present agreement with KBK Financial Inc. related to financing of the
Company's accounts receivable. Principal and interest will be due and payable
on or before December 31,1997.
The LOI prohibits the Company from pursuing transactions with other
parties (such as a merger or sale of assets) unless the Company's Board of
Directors is legally required to do so in order to fulfill its fiduciary duties
to the Company and its shareholders. Further, the LOI requires that failure of
the Company to abide by the foregoing restrictions would result in acceleration
of the due date of the $500,000 loan as well as the payment by the Company to
Franklin of a $100,000 break-up fee. Notwithstanding the foregoing, the LOI
provides that the Company may continue to have discussions with third parties
regarding the raising of additional capital, however, the Company has agreed
not to complete any such transaction without Franklin's concurrence prior to
the termination of the LOI.
The LOI provides that the definitive agreement will include standard
representations and warranties of the parties and customary closing conditions
including the negotiation of payment terms of the Company's accounts payable
and other commitments owed by the Company to third parties on terms acceptable
to Franklin. The Company has also made covenants that (i) it will operate the
business in the ordinary course, (ii) it will not declare any dividends, grant
new stock options or accelerate the exercise dates of any existing options
(except that the Company may issue new stock options to its employees after
conferring with Franklin), or issue any new shares of stock or other
securities, and (iii) it will not borrow more than $3,000,000 (including
existing borrowings) under its line of credit with KBK Financial, Inc.
Franklin will have until April 30, 1997 to conduct its due diligence
of the Company and its records. At any time during the due diligence period,
Franklin can terminate the LOI (or the definitive agreement if one has been
executed) without liability to the Company. If not terminated by Franklin, the
LOI shall expire upon the earlier of i) March 12,1997 if Franklin does not make
the loan to the Company; ii) the date of execution of a definitive agreement;
or iii) April 30,1997. The LOI can also be terminated by the mutual agreement
of the parties.
9
<PAGE> 12
It is important that your shares be represented at the Special
Meeting, whether or not you plan to attend in person, and regardless of the
number of shares which you hold. YOU ARE, THEREFORE, URGED TO EXECUTE PROMPTLY
AND RETURN THE ACCOMPANYING PROXY IN THE ENVELOPE WHICH HAS BEEN ENCLOSED FOR
YOUR CONVENIENCE. Stockholders who are present at the Special Meeting may
revoke their proxies and vote in person or, if they prefer, may abstain from
voting in person and allow their proxies to be voted.
By Order of the Board of Directors
Edward M. Krakauer
Chairman of the Board, President
and Chief Executive Officer
March ___, 1997
Sherman Oaks, California
10
<PAGE> 13
EXHIBIT A
CERTIFICATE OF AMENDMENT
TO
RESTATED ARTICLES OF INCORPORATION
OF
VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
Edward M. Krakauer and Mitchell B. Rubin certify that:
1. They are the President and the Secretary, respectively, of
Voice Powered Technologies International, Inc., a California corporation.
2. Paragraph (a) of Article III of the Restated Articles of
Incorporation of this corporation is amended to read in its entirety as
follows:
"(a) Preferred Stock, Series B 14% Convertible Cumulative
Preferred Stock, Series C 12% Convertible Preferred Stock,
Special Preferred Stock and Common Stock. The corporation is
authorized to issue five classes of shares designated
"Preferred Stock," "Series B 14% Convertible Cumulative
Preferred Stock," "Series C 12% Convertible Preferred Stock,"
"Special Preferred Stock" and "Common Stock," respectively.
The number of shares of Preferred Stock authorized to be
issued is 5,000,000 shares, $0.001 par value, the number of
shares of Series B 14% Convertible Cumulative Preferred Stock
authorized to be issued is 2,000,000 shares, $0.001 par value,
the number of shares of Series C 12% Convertible Cumulative
Preferred Stock authorized to be issued is 2,500,000 shares,
$0.001 par value, the number of shares of Special Preferred
Stock authorized to be issued is 10,000,000 shares, $0.001 par
value, and the number of shares of Common Stock authorized to
be issued is 50,000,000 shares, $0.001 par value. The rights,
preferences, provisions and restrictions imposed upon the five
classes of shares are set forth in the succeeding Sections of
Article III.
Upon the amendment of this Article III, paragraph (a), every
seven (7) issued and outstanding shares of Common Stock,
$0.001 par value ('Old Common Stock'), shall be automatically
and without any action on the part of the shareholders
converted into and reconstituted as one (1) share of Common
Stock, $0.001 par value ('New Common Stock'), subject to the
treatment of fractional interests as described below. Each
holder of a certificate or certificates which immediately
prior to the Amendment of the Restated Articles of
Incorporation becoming effective pursuant to the General
Corporation Law of the State of California (the 'Effective
Date'), represented outstanding shares of the Old Common Stock
shall be entitled to receive a certificate for the number of
shares of New Common Stock they own by presenting their old
certificate(s) to the Corporation's transfer agent for
cancellation and exchange.
No scrip or fractional certificates will be issued. In lieu
of fractional shares, the Corporation will issue one
additional share of New Common Stock, or cash if it so elects.
If the Corporation elects to make a cash payment in lieu of
fractional shares, such payment will be based on the average
closing price of the New Common Stock on the NASDAQ SmallCap
Market for the five trading days preceding the Effective Date.
Such cash payment, if elected by the Corporation, would be
made upon surrender to the Corporation's transfer
<PAGE> 14
agent of stock certificates representing a fractional share
interest. The ownership of a fractional interest will not
give the holder thereof any voting, dividend or other rights
except the right to receive payment therefor as described
herein."
3. The foregoing amendment of the Restated Articles of
Incorporation has been duly approved by the Board of Directors.
4. The foregoing amendment of the Restated Articles of
Incorporation has been duly approved by the required vote of shareholders in
accordance with Section 902 of the California Corporations Code. The total
number of outstanding shares of this corporation is 13,949,072 shares of Common
Stock and no shares of Preferred Stock. The number of shares voting in favor
of the amendment equaled or exceeded the vote required. The percentage vote
required was more than 50%.
We further declare under penalty of perjury under the laws of
the State of California that the matters set forth in this certificate are true
and correct of our own knowledge.
Date: April ___, 1997
______________________________
Edward M. Krakauer, President
______________________________
Mitchell B. Rubin, Secretary
A-2
<PAGE> 15
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
_______________
SPECIAL MEETING OF STOCKHOLDERS
APRIL 25, 1997
_______________
The undersigned stockholder of Voice Powered Technology International,
Inc., a California corporation, hereby acknowledges receipt of the Notice of
Special Meeting of Stockholders and Proxy Statement, each dated March ___,
1997, and hereby appoints each of Edward M. Krakauer and Mitchell B. Rubin, and
each of them, proxy and attorney-in-fact, each with full power of substitution
and resubstitution, on behalf and in the name of the undersigned, to represent
the undersigned at the Special Meeting of Stockholders of Voice Powered
Technology International, Inc. to be held on April 25, 1997, at 9:30 a.m.,
local time, at the Radisson Valley Center, 15433 Ventura Boulevard, Sherman
Oaks, California 91403 and at any postponements or adjournments thereof, and to
vote all shares of Common Stock which the undersigned would be entitled to vote
if then and there personally present, on the matters set forth below:
1. APPROVAL OF AN AMENDMENT TO THE RESTATED ARTICLES OF
INCORPORATION TO EFFECT A ONE (1) FOR SEVEN (7) REVERSE STOCK SPLIT OF THE
COMPANY'S COMMON STOCK, PAR VALUE $0.001 PER SHARE.
___ FOR ___ AGAINST ___ ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
2. IN THEIR DISCRETION, THE PROXY IS AUTHORIZED TO VOTE UPON SUCH
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.
___ FOR ___ AGAINST ___ ABSTAIN
<PAGE> 16
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO
CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR PROPOSAL 1 AND
PROPOSAL 2 AND AS THE NAMED PROXIES CONSIDER ADVISABLE IN THEIR JUDGMENT WITH
REGARD TO ANY OTHER MATTERS PROPERLY BROUGHT TO A VOTE AT THE MEETING.
Dated:__________________________, 1997
______________________________________
(Signature)
______________________________________
(Signature)
(This Proxy must be signed exactly as your name
appears hereon. Executors, administrators,
trustees, etc., should give full title as such. If
the stockholder is a corporation, a duly
authorized officer should sign on behalf of the
corporation and should indicate his or her title.)
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
