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SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Information Statement
[X] Definitive Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2))
</TABLE>
MOBINETIX SYSTEMS, INC.
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(Name of Registrant As Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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MOBINETIX SYSTEMS, INC.
500 Oakmead Parkway
Sunnyvale, CA 94806
INFORMATION STATEMENT
INTRODUCTION
GENERAL INFORMATION FOR STOCKHOLDERS
This information statement is furnished in connection with the prior
receipt by the Board of Directors of MobiNetix Systems, Inc., a Delaware
corporation (the "COMPANY"), of approval by written consent of the holders of a
majority of the Company's Common and Preferred Stock (the "VOTING CAPITAL
STOCK") of a proposal (the "PROPOSAL") to approve an amendment (the "AMENDMENT")
to the Company's Restated Certificate of Incorporation to increase the total
authorized shares of Preferred Stock of the Company and create a new series of
Preferred Stock which shall be designated "Series D Preferred" and fix the
rights, preferences and privileges of such Series D Preferred (the "SERIES D
AUTHORIZATION"). This information statement is being first sent to stockholders
on or about April 23, 1998. The Company anticipates that the Amendment will be
filed with the Delaware Secretary of State on or about May 26, 1998.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
VOTE REQUIRED
The vote required to approve the Proposal is the affirmative vote of the
holders of (i) a majority of the Company's Voting Capital Stock, voting together
on an as-converted basis, (ii) two-thirds of the Series B Preferred Stock (the
"Series B Preferred") and (iii) two-thirds of the Series C Preferred Stock (the
"Series C Preferred"). Each holder of Common Stock is entitled to one vote for
each share held. Each holder of Series B Preferred is entitled to two votes for
each share held. Each holder of Series C Preferred is entitled to forty votes
for each share held. The record date for purposes of determining the number of
outstanding shares of Common Stock and Preferred Stock of the Company, and for
determining stockholders entitled to vote, is the close of business on April 13,
1998 (the "RECORD DATE"), the day on which the Board of Directors of the Company
adopted the resolution setting forth and recommending the Amendment. As of the
Record Date, the Company had outstanding 1,597,580 shares of Common Stock, no
shares of Series A Preferred, 850,589 shares of Series B Preferred and 28,125
shares of Series C Preferred.
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VOTE OBTAINED - SECTION 228 OF THE DELAWARE GENERAL CORPORATION LAW
Section 228 of the Delaware General Corporation Law (the "DELAWARE LAW")
provides that the written consent of the holders of outstanding shares of Voting
Capital Stock, having not less than the minimum number of votes which would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted, may be substituted for such a
special meeting. Pursuant to Section 242 of the Delaware Law, a majority of the
outstanding shares of Voting Capital Stock entitled to vote thereon is required
in order to amend the Certificate. Furthermore, as required by the Company's
Restated Certificate of Incorporation, the vote of the holders of two-thirds of
both the outstanding Series B Preferred and Series C Preferred is required to
approve the Amendment. In order to eliminate the costs and management time
involved in holding a special meeting and in order to effect the Series D
Authorization as early as possible in order to accomplish the purposes of the
Company as hereafter described, the Board of Directors of the Company voted to
utilize, and did in fact obtain, the written consent of the holders of a
majority in interest of the Voting Capital Stock of the Company and the written
consent of the holders of two-thirds of both the Series B Preferred and the
Series C Preferred.
Pursuant to Section 228 of the Delaware Law, the Company is required to
provide prompt notice of the taking of the corporate action without a meeting to
the stockholders of record who have not consented in writing to such action.
This Information Statement is intended to provide such notice. No dissenters' or
appraisal rights under the Delaware Law are afforded to the Company's
stockholders as a result of the approval of the Proposal.
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PROPOSAL TO AUTHORIZE THE CREATION OF SERIES D PREFERRED STOCK
GENERAL
On April 20, 1998, the Company's Board of Directors took action without
meeting, subject to stockholder approval, to amend Article FOURTH of the
Company's Restated Certificate of Incorporation to (i) increase the total
authorized shares of Preferred Stock of the Company to 3,071,274 shares, 70,000
shares of which shall be designated "Series A Preferred", 1,700,000 of which
shall be designated "Series B Preferred", and 28,125 shares of which shall be
designated "Series C Preferred"; (ii) create a new series of Preferred Stock
which shall be designated "Series D Preferred", consisting of 1,273,149 shares;
and (iii) fix the rights, preferences and privileges of such Series D Preferred.
On April 20, 1998 this proposal to amend Article FOURTH of the Company's
Restated Certificate of Incorporation was approved by written consent of the
holders of a majority of the Company's Voting Capital Stock, voting together as
a single class, and by the holders of two-thirds of both the Series B Preferred
and Series C Preferred.
REASONS FOR SERIES D AUTHORIZATION
The Company's Restated Certificate of Incorporation will be amended, as
described above, in connection with the proposed sale of 1,273,149 shares of
Series D Preferred (the "Series D Financing") to Welch Allyn, Inc., a New York
corporation ("Welch Allyn") for an aggregate price of $6,875,000.00 in cash. The
Series D Financing is expected to close on or about June 2, 1998. The Board of
Directors of the Company has determined that the Series D Financing is the most
favorable means of obtaining necessary capital. The Company intends to use the
proceeds primarily for procurement of production materials and supplies and
retirement of existing debt.
DESCRIPTION OF SERIES D PREFERRED STOCK
Each share of Series D Preferred shall be entitled to receive dividends
to the same extent as the Common Stock. In the event of any liquidation,
dissolution or winding up of the Company, the holders of Series D Preferred are
entitled to receive, along with any distributions required to be made to the
holders of the Series B Preferred and Series C Preferred, the amount of $5.40
per share, plus declared but unpaid dividends on the Series D Preferred. After
such distributions are made to the holders of the Series B Preferred, Series C
Preferred, and Series D Preferred, the holders of the Series A Preferred shall
be entitled to receive a certain distribution amount as set forth in the
Certificate of Incorporation. Thereafter, the holders of the Series D Preferred
are entitled to receive any additional distributions, along with the holders of
the Series B Preferred, Series C Preferred, and Common Stock, in proportion to
the number of shares of Common Stock (assuming full conversion of such shares of
Series B Preferred, Series C Preferred, and Series D Preferred) held by them.
Each share of Series D Preferred is convertible at any time into Common
Stock on a one-for-one basis, subject to adjustment with respect to certain
dilutive issuances by the Company. In addition, all of the Series D Preferred
will be automatically converted into Common Stock upon the
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occurrence of (i) the closing of the sale of the Company's Common Stock in a
firm commitment, underwritten public offering with aggregate proceeds to the
Company of at least $25 million, or (ii) the written election of holders of a
majority of the Series D Preferred then outstanding.
The holders of Series D Preferred are entitled to vote with the holders
of Common Stock on an as-converted basis as a single class on all matters
presented for stockholder vote. With respect to the election of the directors of
the Company, the holders of the Series D Preferred have the exclusive right to
elect one director of the Company, provided that person is reasonably acceptable
to the Board of Directors, with remaining directors elected by all classes of
stock entitled to vote, including the Series D Preferred. In addition, the
Series D Preferred contains customary antidilution rights in the event of
certain dilutive issuances by the Company of shares or rights to acquire shares
of its capital stock and protective voting provisions that, among other things,
limit the Company's ability to, without the affirmative vote of the holders of
at least a two-thirds of the outstanding shares of Series D Preferred (i) effect
any sale or other conveyance of all or a substantial portion of the assets of
the Company or any of its subsidiaries (other than in the ordinary course of
business); (ii) amend, repeal, or waive any provision of, or add any provision
to, the Company's Certificate of Incorporation or Bylaws; (iii) authorize or
issue any class or series of equity securities having any right, including but
not limited to, any preference or priority as to voting, dividends, redemptions
or distribution of assets upon liquidation, merger or otherwise, which is
superior to or on a parity with any such preference or priority of the Series D
Preferred, Series C Preferred or Series B Preferred; (iv) declare or pay a
dividend on any shares of Common Stock or other shares of capital stock of the
Company; (v) effect a liquidation, dissolution, merger, consolidation,
recapitalization, reorganization or winding up of the Company or any other
transaction or related series of transactions pursuant to which the stockholders
of the Company immediately prior to such transaction shall own less than 50% of
the voting securities of the surviving corporation or entity or effect the sale,
transfer or lease of all or substantially all of the assets of the Company; (vi)
apply any of its assets to the redemption, retirement, purchase or acquisition,
directly or indirectly, of any shares of any class or series of Common Stock,
except at cost from employees, advisors, officers, directors and consultants of,
and persons performing services for, this Company or its subsidiaries on terms
approved by the Board of Directors upon termination of employment or
association; or (vii) issue any shares of Series A Preferred or Series B
Preferred.
EFFECTS OF SERIES D AUTHORIZATION AND PROPOSED SERIES D FINANCING
Stockholders should be aware that the issuance of additional shares
could have a dilutive effect on earnings per share and on the equity ownership
of the present holders of Common Stock and Preferred Stock of the Company.
Additionally, as currently contemplated, the holders of Series D Preferred would
have the right to elect one member of the Company's Board of Directors (the
"Series D Director"). Such an arrangement would reduce the proportionate Board
representation of the holders of the Common Stock, Series B Preferred and Series
C Preferred.
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CERTAIN MATTERS RELATED TO THE PROPOSAL
Approximately 20 days after this Information Statement has been
distributed to the Company's stockholders, the Company will file the necessary
documents with the Secretary of State of Delaware to amend Article FOURTH of the
Certificate as described above.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding the beneficial ownership of each class of the Company's voting
securities as of April 13, 1998, by (a) each beneficial owner of more than 5% of
the Company's Common Stock, (b) the Named Officers, (c) each director of the
Company and (d) all directors and executive officers of the Company as a group.
Except as otherwise indicated, each person has sole voting and investment power
with respect to all shares shown as beneficially owned, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial
Title of Class Beneficial Owner Ownership(2) Percent of Class(3)
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<S> <C> <C> <C>
Series B Life Investors Company 352,942 shares 41.5%
Preferred of America directly owned
Stock(1) 4333 Edgewood Rd NE
Cedar Rapids, IA 52499
Series B Storie Partners L.P. 92,371 10.9%
Preferred 1 Bush St., Suite 1350
Stock(1) San Francisco, CA 94104
Series B Rainbow Technologies, Inc. 90,993 10.7%
Preferred 50 Technology Drive
Stock(1) Irvine, CA 92618
Series B Associated Capital, L.P. 88,235 10.4%
Preferred 477 Madison Ave.
Stock(1) 14th Floor
New York, NY 10022
</TABLE>
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<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial
Title of Class Beneficial Owner Ownership(2) Percent of Class(3)
-------------- ------------------- -------------------- -------------------
<S> <C> <C> <C>
Series B JDN Partners L.P. 58,824 6.9%
Preferred 2420 Camino Ramon
Stock(1) Suite 222
San Ramon, CA 94583
Common Stock Aziz Valliani(4) 448,933 25.0%
MobiNetix Systems, Inc.
500 Oakmead Parkway
Sunnyvale, CA 94086
Common Stock Nazim Kareemi(5) 302,933 18.4%
MobiNetix Systems, Inc.
500 Oakmead Parkway
Sunnyvale, CA 94086
Common Stock Abbas Rafii(6) 222,938 13.5%
MobiNetix Systems, Inc.
500 Oakmead Parkway
Sunnyvale, CA 94086
Common Stock Llavan Fernando(7) 229,938 13.9%
MobiNetix Systems, Inc.
500 Oakmead Parkway
Sunnyvale, CA 94086
Common Stock David M. Licurse, Sr.(8) 232,928 14.0%
MobiNetix Systems, Inc.
500 Oakmead Parkway
Sunnyvale, CA 94086
Common Stock Wilmont Living Trust 175,000 10.9%
13333 La Cresta Drive
Los Altos, CA 94022
Common Stock All Directors and Officers 1,437,670 70.9%
as a group(4)-(8)
Series C Nazem & Company 28,125 100%
Preferred 3000 Sand Hill Road
Stock(1) Building 2, Suite 205
Menlo Park, CA 94025
</TABLE>
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(1) The Company effected a reverse stock split in October 1996, converting
each share of Series B Preferred into one-half share and increasing the
conversion ratio of Series B Preferred into Common Stock from 1:1 to 1:2
and converting each share of Series C Preferred into one-fourth share
and increasing the conversion ratio of Series C Preferred into Common
Stock from 1:10 to 1:40.
(2) Includes outstanding options to purchase Common Stock, which may be
exercised immediately upon grant and prior to full vesting, subject to
the optionee's entering into a restricted stock purchase agreement with
the Company with respect to any unvested shares.
(3) Applicable percentage ownership is based on 1,597,580 shares of Common
Stock outstanding as of April 13, 1998, 850,589 shares of Series B
Preferred Stock outstanding as of April 13, 1998 and 27,125 shares of
Series C Preferred Stock outstanding as of April 13, 1998. The
percentage ownership of the Common Stock also treats as outstanding all
shares of Common Stock issuable upon exercise of options held by the
particular beneficial owner that are included in the first column.
(4) Includes 195,000 shares issuable upon exercise of outstanding stock
options.
(5) Includes 49,000 shares issuable upon exercise of outstanding stock
options.
(6) Includes 55,000 shares issuable upon exercise of outstanding stock
options.
(7) Includes 167,938 shares held by the Llavanya X. Fernando Trust as to
which Mr. Fernando claims voting and investment control and 62,000
shares issuable upon exercise of outstanding stock options.
(8) Includes 162,428 shares held by the D and P Licurse Trust, for the
benefit of Mr. Licurse's wife, and 70,500 shares issuable upon exercise
of outstanding stock options. Mr. Licurse disclaims beneficial ownership
of the shares held by the trust for the benefit of his wife.
BY ORDER OF THE BOARD OF DIRECTORS
May 4, 1998
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