<PAGE>
Schedule 14A
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(1-2000) COLLECTION OF INFORMATION CONTAINED IN THIS FORM ARE
NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY
VALID OMB CONTROL NUMBER.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO.)
Filed by the Registrant / / Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
(AS PERMITTED BY RULE 14A-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to ss.240.14a-12
On-Point Technology Systems, Inc.
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(Name of Registrant as Specified In Its Charter)
Merrill Corporation
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(Name of Persons 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:
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<PAGE>
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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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
ON-POINT TECHNOLOGY SYSTEMS, INC.
1370 WEST SAN MARCOS BOULEVARD, SUITE 100
SAN MARCOS, CA. 92069
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Our Shareholders:
The Annual Shareholders' Meeting (the "Meeting") of On-Point Technology
Systems, Inc. will be held at the Corporate Office of On-Point Technology
Systems, Inc. located at 1370 West San Marcos Boulevard, Suite 100, San Marcos,
California 92069, on November 13, 2000, at 10:30 a.m. local time, for the
purpose of considering and acting upon:
(1) The election of four directors to serve as the Board of
Directors until the next annual meeting of Shareholders and
their successors are elected and qualified;
(2) A proposal to ratify and adopt an amendment to the 1994 Stock
Option Plan that will increase the number of shares of common
stock authorized for issuance from 1.5 Million to 3 Million
shares.
(3) A proposal to ratify and adopt an amendment to the Articles of
Incorporation of the Company to increase the number of
authorized common shares from twenty million to forty million.
(4) A proposal to ratify the appointment of Rothstein, Kass & Co.,
P.C. as On-Point Technology Systems, Inc.'s independent
auditors for the current fiscal year;
(5) Such other business as may properly come before the meeting or
any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on October 2,
2000 as the record date for determining shareholders entitled to notice of and
to vote at the Meeting. Only shareholders of record at the close of business on
that date are entitled to vote at the Annual Meeting and any adjournment
thereof.
By order of the Board of Directors,
San Marcos, California
October 13, 2000 Chairman
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<PAGE>
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
AND YOU ARE URGED TO SIGN, DATE AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
IF YOU ATTEND THE ANNUAL MEETING, YOU
MAY REVOKE THE PROXY AND VOTE IN PERSON
IF YOU SO DESIRE.
2
<PAGE>
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of On-Point Technology Systems, Inc. (the "Company")
of proxies to be voted at its Annual Meeting of Shareholders (the "Meeting") to
be held on November 13, 2000 and at any adjournment thereof.
The Board requests that all shareholders complete the enclosed proxy
card and sign, date and return it as promptly as possible. Since many
shareholders cannot personally attend, it is necessary that a large number be
represented by proxy. The holders of record of a majority of the outstanding
shares must be represented in person or represented by proxy at the Annual
Meeting in order to hold the Meeting.
Any shareholder returning a proxy may revoke it by casting a ballot at
the Meeting. Any proxy not revoked will be voted as specified by the
shareholder. If no choice is indicated, a proxy will be voted in accordance with
the Board of Directors' recommendations.
The Company's Bylaws require an affirmative vote of the holders of a
majority of the shares of Common Stock present in person or by proxy and
entitled to vote for approval of each item listed on the proxy card and
described herein, unless otherwise indicated.
At October 2, 2000, the record date, there were 10,716,401 shares of
the Company's Common Stock outstanding and entitled to one vote each at the
Annual Meeting. These shares were registered in the names of 300 shareholders
and were owned beneficially by approximately 2,800 shareholders. As of June 30,
2000 Frederick Sandvick was the beneficial owner of 2,850,000 shares. The
Company knows of no other person or group who is beneficial owner of more than
5% of its issued and outstanding common stock.
This proxy statement is being mailed on or about October 13, 2000.
PROXY ITEM NO. 1
ELECTION OF DIRECTORS
Four (4) directors are to be elected at the Annual Meeting to hold
office from their election until the next Annual Meeting of Shareholders or
until their successors are duly elected and qualified. The following nominees
have been proposed by the Board of Directors.
The Board of Directors recommends a vote FOR the election of these
nominees.
FREDERICK SANDVICK has been Chairman of the Board and Chief Executive
Officer of the Company since January 1996. Mr. Sandvick is President and
principal stockholder of Vanguard Strategies, Inc., a privately held strategic
planning company he founded. From 1990 to 1995, Mr. Sandvick was Executive Vice
President and Chief Financial Officer of Jackpot Enterprises, Inc., a New York
Stock Exchange listed company in the gaming/entertainment industry. Mr. Sandvick
is a licensed attorney and certified public accountant. Mr. Sandvick is the half
brother of John H. Olbrich. Mr. Sandvick is 42 years old.
JOHN H. OLBRICH has been the owner and President of U.S. Mortgage
Bankers Corporation, a residential mortgage brokerage firm, since 1991. Mr.
Olbrich has been in the real estate mortgage business for approximately 12
years. Mr. Olbrich was appointed to the Board in July 1996. Mr. Olbrich is Mr.
Sandvick's half brother. Mr. Olbrich is 38 years old. See "Certain Relationships
and Related Transactions," herein.
3
<PAGE>
KEITH CANNON has been a securities branch manager at Wilson-Davis and
Co. since 1993 where he has supervised trading with a variety of domestic and
international clients. Mr. Cannon has served as a financial and corporate
financial consultant for various publicly-held companies for over 25 years. Mr.
Cannon was appointed to the Board in August 2000. Mr. Cannon is 60 years old.
GORDON T. GRAVES has been Chairman of the Board and director of
Multimedia Games, Inc. since 1991, and has been Chief Executive Officer since
September 1994. Since December 1993 and from 1989 to 1990, Mr. Grave has been
the President of Graves Management, Inc., a management consultant and investment
company. From 1992 through December 1993, Mr. Graves was president and Chief
Executive Officer of Arrowsmith Technologies, Inc. ("Arrowsmith"), a computer
systems company. From 1991 to 1993, Mr. Graves was employed by KDT
Industries,Inc., a high-tech manufacturing and services company and an affiliate
of Arrowsmith, as, successively, Vice President of Corporate Development and
President. From 1987 to 1989, Mr. Graves was the Chairman of the Board of
Directors of Gamma International Ltd. (currently American Gaming and
Entertainment, Ltd., a company co-founded by him). Mr. Graves is 62.
BOARD MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held five meetings and five actions by consent
during 1999. Each director who served during 1999 attended at 100% of the
meetings of the Board of Directors and any committee of which he was a member
held during his term in office.
An Audit Committee was formed in 1993 and currently consists of Mr.
Cannon, Mr. Lipper and Mr. Olbrich. The Audit Committee reviews external and
internal audit plans and activities, reviews the Company's annual financial
statements, reviews the Company's system of internal financial controls and
recommends to the Board the annual selection of independent auditors. A
Compensation Committee was also formed in 1993 and currently consists of Mr.
Cannon, Mr. Lipper and Mr. Olbrich. The Compensation Committee is responsible
for reviewing and establishing policy regarding salary and other forms of
compensation for the Company's executive officers. During 1999, the Audit
Committee held two meetings and the Compensation Committee held two meetings. If
elected, Mr. Graves will replace Mr. Lipper on both the Audit Committee and the
Compensation Committee.
DIRECTORS' COMPENSATION
Outside directors are automatically granted 10,000 shares of the
Company's common stock pursuant to the July 26, 1996 Amendment to the 1994 Stock
Option Plan for Directors which provided a formula for granting options to
outside directors. In addition, on July 30, 1999, August 28, 1998 and August 27,
1997, the Board amended the Directors' Plan by modifying the formula for
granting options to outside directors by providing for the annual grant of stock
options for 10,000 shares in lieu of regular cash compensation for serving as a
director. These options become exercisable on the date of the next annual
meeting of shareholders and have a three year life.
1994 STOCK OPTION PLAN FOR DIRECTORS
On April 21, 1994, the Company adopted the 1994 Stock Option Plan for
Directors (the "Directors' Plan") under which 525,000 shares of common stock may
be issued to Directors of the Company. Options issued under the Directors' Plan
are non-qualified stock options. Prior to the Amendments to the Directors' Plan
described below, the Board of Directors, excluding outside Directors who are
eligible for the Directors' Plan, subject to the provisions of the Directors'
Plan, has authority to determine the outside Directors to whom options would be
granted, the time or times at which options would issue, the exercise price of
granted options and any conditions for their exercise. The Directors' Plan
requires that the exercise price of stock options be not less than the fair
market value on the date of grant and that stock options expire not later than
ten years from the date of the grant. The Directors' Plan contains an
anti-dilution provision whereby the shares of common stock that underlie
outstanding options are increased proportionately in the event of a stock split
or dividend.
4
<PAGE>
On July 26, 1996, the Board amended the Directors' Plan to provide for
the automatic issuance of options in order to satisfy the requirements of
Securities and Exchange Commission Rule 16b-3. The Amendment provided for the
automatic issuance of stock options for 10,000 shares to each outside director
on July 26, 1996 and as of each June 30 thereafter. Also, each new outside
director is automatically granted stock options for 10,000 shares as of the date
of becoming a member of the Board, unless that date falls between April 1 and
June 30 of any year. These options become exercisable six months after grant and
expire three years after date of grant. The exercise price is equal to the fair
market value at date of grant, but not less than one dollar.
On July 29, 1999, August 28, 1998 and August 27, 1997, the Board
amended the Directors' Plan by modifying the formula for granting options to
outside directors by providing for the annual grant of stock options for 10,000
shares in lieu of regular cash compensation for serving as a director. These
options become exercisable on the date of the next annual meeting of
shareholders and have a three year life.
As of December 31, 1999, 100,000 options have been granted under this
plan.
OWNERSHIP OF CAPITAL STOCK BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of June 30, 2000, the shares of the
Company's Capital Stock beneficially owned by each 5% beneficial owner, by each
director or nominee, by each named executive officer individually, and by all
directors and executive officers as a group:
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS OF SHARES BENEFICIALLY
BENEFICIAL OWNER OWNED (1) PERCENTAGE OF CLASS
------------------- ------------------- -------------------
<S> <C> <C>
Frederick Sandvick(2) 2,850,000 21.3%
108 Ivy Street
San Diego, CA. 92101
John H. Olbrich(3) 271,667 2.53%
3256 Loma Vista Dr.
Jamul, CA 91935
Keith Cannon 55,000 .51%
2300 Shawn Court
Carlsbad, CA 92008
Gordon Graves - -
1604 Crested Butte
Austin, TX 78746
Arthur Lipper - -
14911 Caminito Ladera
Del Mar, CA 92024
All directors and executive officers as a 2,734,843 24.34%
Group (5 persons)
</TABLE>
--------------
(1) Unless otherwise indicated, all shares are owned beneficially and of
record.
5
<PAGE>
(2) Of the shares of common stock reflected in the table above, 490,000 are
registered in Mr. Sandvick's name. The number includes 870,000 options
which vested pursuant to Mr. Sandvick's employment agreement, warrants
to purchase 500,000 shares of common stock in connection with a
guarantee of a performance bond and warrants to purchase 500,000 shares
of common stock granted to Vanguard Strategies, Inc. (see "Certain
Relationships and Related Transactions" herein). The table also
includes options to purchase 240,000 and 250,000 shares of common stock
granted to Mr. Sandvick in 1998 and 1999, respectively.
(3) Of the shares of common stock reflected in the table above, 201,667 are
registered in Mr. Olbrich's name. The table includes options to
purchase 70,000 shares of common stock.
EXECUTIVE COMPENSATION
The following information relates to compensation of the Company's
Chief Executive Officer for the Company's fiscal years ended December 31, 1999,
1998 and 1997. No other executive officer of the Company received total annual
salary and bonuses in excess of $100,000 during those fiscal years.
The Compensation Committee did not have a substantial role in setting
compensation in 1999, 1998 & 1997 because the Chief Executive Officer was
engaged pursuant to an employment agreement that fixed compensation. The role of
the Compensation Committee and its policies are expected to increase as
employment agreements expire and compensation packages are negotiated with key
executives.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
--------------------- ------------------------------------------------------------------
SECURITIES
UNDERLYING LONG -TERM
OTHER ANNUAL RESTRICTED OPTIONS/ INCENTIVE ALL OTHER
NAME AND YEAR SALARY BONUS COMPENSATION STOCK SARS PLAN COMPENSATION
PRINCIPAL POSITION ($) ($) ($)(1)(2) AWARDS($) (#) PAYOUTS($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999 138,461(4) 0 59,000 0 250,000 0 0
Frederick Sandvick 1998 176,909 0 70,006 0 290,000(3) 0 0
1997 141,000 0 168,012 0 750,000(2) 0 0
</TABLE>
--------------------
(1) Includes a $7,243 car allowance in 1997 to cover automobile expenses.
(2) Includes options to purchase 870,000 shares of common stock which
vested pursuant to Mr. Sandvick's employment agreement, warrants to
purchase 500,000 shares of common stock in connection with a guarantee
of a performance bond in 1997 and warrants to purchase 700,000 shares
of common stock in 1996 and 250,000 shares in 1997 granted to Vanguard
Strategies, Inc. (see "Certain Relationships and Related Transactions"
herein). The calculated fair value of the options and warrants
described above included in "Other Annual Compensation" was $59,000 in
1999, $70,006 in 1998 and $160,769 in 1997. In 1999 the fair value of
options granted is estimated as approximately $0.97 per share on the
date of the grant using the Black-Scholes option-pricing model with the
following weighted average assumptions used for the grants; dividend
yield of 0%; expected volatility of 72%; risk free interest rate of
5.80% and expected lives of 4.84 years. In 1998 the fair value of
options granted is estimated as approximately $.0.71 per share on the
date of grant using Black-Scholes option-pricing model with the
following weighted average assumptions used for the grants; dividend
yield of 0%; expected volatility of 51%; risk free interest rate of
4.68%; and expected lives of 4.65 years. In 1997 the fair value of
options granted is estimated as approximately $0.51 per share on the
date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions used for the grants; dividend
yield of 0%; expected volatility of 70%; risk free interest of 5.71%;
and expected lives of 3.02 years.
(3) Includes options to purchase 240,000 shares of common stock granted to
Mr. Sandvick and options to purchase 50,000 shares of common stock
granted to Vanguard Strategies, Inc. (see "Certain Relationships and
Related Compensation" herein); the options to purchase 50,000 shares of
common stock to Vanguard Strategies, Inc. have been terminated.
(4) While the terms of the employment contract called for an annual salary
of $300,000 and $255,000 in 1999 and 1998, respectively, only $138,451
and $176,909 were paid to Mr. Sandvick in 1999 and 1998, respectively.
Mr. Sandvick waived all accrued pay and bonuses otherwise due to him as
of December 31, 1999.
6
<PAGE>
EMPLOYMENT AGREEMENTS
Mr. Sandvick serves as Chairman of the Board and Chief Executive
Officer of the Company pursuant to a three year employment agreement commencing
on January 9, 1996. The agreement has been extended for four additional years
and will terminate unless further extended or sooner terminated, on December 31,
2002. The term of the agreement is automatically extended annually for an
additional year unless notice is given by either party that such party does not
wish to extend the agreement term. The agreement provides for an annual base
salary of $180,000 through June 30, 1996 with $30,000 annual increases
thereafter. The agreement provides for an increase in the annual base salary, to
at least $300,000 per year if the Company's pre tax income as defined, for any
calendar year equals or exceeds $2 million. Mr. Sandvick is entitled to an
annual bonus equal to 5% of the first $10 million of the Company's pre tax
income and 7% of the Company's pre tax income in excess of $10 million. Pursuant
to the agreement, on the commencement of employment Mr. Sandvick was granted a
ten-year option to acquire 870,000 shares of the Company's common stock at a
price of $.80 per share, such price representing the greater of (1) the closing
price on the date of stockholder approval of the First Amendment to the
Company's 1994 Stock Option Plan or (2) the average of the closing sales price
for the 20 trading days preceding the effective date of the agreement. One-third
of the shares subject to the option award became exercisable on January 9, 1996
and one-third of the shares became exercisable over the next two years in equal
annual increments. Mr. Sandvick is also entitled to participate in other
employee benefit plans and the Company is obligated to reimburse Mr. Sandvick
for, or pay directly, the costs of a personal plan of disability providing for
$15,000 per month disability benefits.
The employment agreement with Mr. Sandvick also provides for severance
upon termination by the Company without cause or termination by Mr. Sandvick for
"good reason" in the amount equal to the base salary Mr. Sandvick would have
earned during the 36 month period commencing on the date of termination plus
three times Mr. Sandvick's average annual bonus received over the prior three
fiscal years. Mr. Sandvick would also have the right to receive all other
benefits that would have been received under his employment arrangement for that
36 month period. Further, all shares underlying outstanding stock options
granted to Mr. Sandvick could become fully exercisable for a period of 18 months
after termination. Mr. Sandvick shall have "good reason" to terminate his
employment if, among other events, (i) the Company fails to comply with any
material provision of the employment agreement; (ii) the Company gives Mr.
Sandvick notice of nonrenewal; or (iii) for any reason within one year following
the occurrence of a change in control, as defined. Change in control occurs if
(i) any person, excluding existing relationships, becomes the beneficial owner
of securities representing 20% or more of the combined voting power of the
Company's then outstanding voting securities; (ii) a change occurs in the
majority of the Board of Directors; (iii) the stockholders approve a merger in
which at least 51% of the Company's combined voting power is given to a new
entity not in the Company's control or the effect of such merger is that any
person acquires 20% or more of the combined voting power of the Company. On
January 27, 1997, the Company hired Michael Wright to serve as the Company's
President. Mr. Wright served as President from January 27 to December 25, 1997,
during which time Mr. Sandvick's annual salary was reduced by $84,000.
While the terms of the employment contract called for an annual salary
of $300,000 and $255,000 in 1999 and 1998, respectively, only $138,451 and
$176,909 were paid to Mr. Sandvick in 1999 and 1998, respectively. Mr. Sandvick
voluntarily waived all accrued pay and bonuses otherwise due to him as of
December 31, 1999.
OPTIONS GRANTS IN FISCAL 1999
The following table represents certain information regarding stock
option grants to each of the Named Executive Officers:
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF SECURITIES PERCENT OF TOTAL OPTIONS GRANTED EXERCISE OF BASE
UNDERLYING OPTIONS TO EMPLOYEES PRICE
NAME GRANTED IN FISCAL YEAR (%) ($)/SHARE EXPIRATION DATE
----------------------- -------------------- -------------------------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Frederick Sandvick 250,000 53 1.63 9/08/04
</TABLE>
7
<PAGE>
OPTION EXERCISES IN FISCAL 1999 AND FISCAL YEAR-END OPTION VALUES
The following table presents certain information regarding stock option
exercises during fiscal 1999 and fiscal year end option values.
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED IN-THE-MONEY
NAME EXERCISE (#) REALIZED($) OPTIONS/SARS AT FY-END (#) OPTIONS/SARS AT FY-END($)
---- ------------ ----------- -------------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISED
-------------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Frederick Sandvick 0 0 2,810,000(1) 0 $4,645,000 0
</TABLE>
---------------
(1) Includes options to purchase 870,000 shares of common stock which
vested pursuant to Mr. Sandvick's employment agreement, warrants to
purchase 500,000 shares of common stock in connection with a guarantee
of a performance bond and options to purchase 490,000 shares of common
stock pursuant to annual employee grants, and warrants to purchase
950,000 shares of common stock granted to Vanguard Strategies, Inc.
(see "Certain Relationships and Related Transactions" herein).
Subsequent to December 31, 1999, VSI exercised warrants to purchase
450,000 shares of common stock at $.60 per share.
BONUS POLICY
While the Company has no established policy to award cash or stock
bonuses to its officers, it may elect to pay bonuses in the future to reward the
performance of its employees and management. The company awarded $16 thousand
and $108 thousand in bonuses in 1999 and 1998 respectively. No cash bonuses were
awarded to the chief executive officer.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 8, 1996, the Company entered into an agreement with Vanguard
Strategies, Inc. ("VSI"), a private strategic planning company, in which VSI
would assist the Company as its exclusive consultant for at least 120 days in
negotiating debt and equity financing and in developing the Company's strategic
plans. Mr. Sandvick is the president and principal stockholder of VSI. In
January 1996 VSI assisted the Company in obtaining a $450,000 loan from U.S.
Mortgage Bankers Corp. ("USMBC"). The president of USMBC is Mr. Sandvick's half
brother. As compensation for these services, VSI was granted warrants, subject
to the Company receiving financing of at least $1.5 million, to purchase up to
450,000 shares of common stock of the Company at a price of $.60 per share
exercisable for five years. In July 1996, VSI was granted an additional warrant
to purchase 250,000 shares of the Company's common stock at a price of $.69 per
share pursuant to the extension of the USMBC promissory note under this
agreement. In January 1997, VSI was granted an additional warrant to purchase
250,000 shares of the Company's common stock at a price of $.72 per share
pursuant to the extension of the USMBC promissory note under this agreement. In
May 2000, Mr. Sandvick, on behalf of VSI, exercised the warrants to purchase
450,000 shares of common stock at $.60 per share, totaling $270,000.
In connection with the engagement of VSI (an unaffiliated third party
prior to entering into the agreement) to raise capital for the Company and
pursue other business restructuring alternatives and the continuing arrangements
with Mr. Burr, VSI and Mr. Burr were provided an option to purchase 80% (40%
each) of a subsidiary to be formed to carry on the Company's international
operations. The option was provided to VSI and Mr. Burr as an incentive for them
to aggressively pursue international sales. However, the subsidiary was never
formed and on March 19, 1998 the Company and VSI entered into an agreement
whereby the original agreement with VSI referred to above was terminated.
Pursuant to the termination agreement, VSI and Mr. Burr were each granted
options to purchase 50,000 shares of the Company's common stock at $2.88 per
share, the closing market price of the Company's common stock on such date.
These options were subsequently terminated.
8
<PAGE>
In July 1999, James Bouskos and Miles Scully received options to
purchase 20,000 shares and 10,000 shares, respectively, of On-Point's common
stock at $1.97 per share pursuant to their arrangements as Advisory Directors.
The Options vest in one year and expire in three years from the date of grant.
PROXY ITEM NO. 2
PROPOSAL TO RATIFY AND ADOPT AN
AMENDMENT TO THE 1994 STOCK OPTION PLAN
The 1994 Stock Option Plan (the "Plan") is intended to assist in
encouraging and enabling members of management, including officers and other key
employees of the Company, to acquire a propriety interest in the Company through
ownership of the common stock. Such members of management will be offered the
opportunity to acquire common stock through the grant of incentive and
nonqualified stock options ("options"). On April 21, 1994, the Board of
Directors adopted the 1994 Plan. The 1994 Plan was approved by the Company's
stockholders on June 7, 1994.
The Company was originally authorized under the 1994 Plan to issue
shares of common stock pursuant to the exercise of options with respect to a
maximum of 500,000 shares. As a result of the 5% stock divided on July 1, 1994,
the authorized number of shares under the plan increased by 25,000 shares to
525,000 shares. On January 8, 1996 the plan was amended to increase the shares
available for issuance to 1,500,000. Such amendment was approved by the
stockholders on July 26, 1996. As of December 31, 1999, 1,500,000 options have
been granted under this Plan.
The Company also has a 1993 Stock Option Plan under which 472,500
shares of common stock may be issued to officers and key employees of the
Company. As of December 31, 1999, 312,635 options have been granted under the
1993 Stock Option Plan. As of June 30, 2000, under the 1994 Plan and the 1993
Stock Option Plan only 504,120 shares remain available for issuance.
PROPOSED CHANGE
The company is seeking shareholder approval to ratify and adopt an
amendment to the Plan to increase the number of shares available under the Plan
to 3,000,000. The Board of Directors believes that the increase in available
shares is in the best interest of the shareholders because the increase is
necessary for the Company to attract and retain the type of high-qualified
officers and employees required for the Company's future growth. The Company
faces intense competition to secure and retain the services of highly qualified
personnel. The Board of Directors believe the grant of options to acquire shares
of the Company's stock is a necessary element of a compensation package to deal
with this competition. The Board of Directors believes that stock options are an
excellent compensatory element because officers and employees granted stock
options only benefit if all the shareholders benefit through stock price
increases. If the amendment to the plan is not approved, the Company will be
required to pay other forms of compensation to attract and retain officers and
employees which the Board of Directors believes would not be as beneficial to
the shareholders.
GENERAL DESCRIPTION OF THE PLAN
Options issued under the Plan are either incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended (the"Code"), or
non-qualified stock options, as determined in the discretion of the Compensation
Committee of the Board of Directors of the Company at the time the options are
granted. In addition, the Compensation Committee, subject to the provisions of
the Plan, has authority to determine the employees to whom options will be
granted, the time or times at which options will issue, the exercise price of
granted options and any condition of their exercise. The Plan requires that the
exercise price of stock options be not less than the fair market value on the
date of grant and that stock options expire no later than ten years from the
date of grant. In addition, the Plan provides that no incentive stock options
may be granted to any employee who owns more than 10% of the Company's voting
securities unless the exercise price is at least 110% of the fair market value
9
<PAGE>
of the underlying common stock and the option expires on or before five years
from the date of grant. The Plan contains an anti-dilution provision whereby the
shares of common stock which underlie outstanding options are increased
proportionately in the event of a stock split or dividend.
Approval of the amendment to the 1994 Stock Option Plan requires the
affirmative vote of a majority of all shares entitled to be cast on the matter.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT
TO THE 1994 STOCK OPTION PLAN.
PROXY ITEM NO. 3
INCREASE NUMBER OF
AUTHORIZED SHARES
In order to improve the Company's ability to continue its growth, the
Board of Directors is seeking shareholder approval to ratify and adopt an
amendment to the Fourth Article of the Articles of Incorporation to increase the
amount of authorized common stock from 20 million shares to 40 million shares.
The Board believes that this increase in shares is essential to the future of
the Company. The increase in the number of authorized shares will allow the
Company to pursue financing, acquisitions, mergers and other business
opportunities. Without the ability to raise additional capital through stock
issuance the Company's growth will be impaired. This increase in shares is also
a critical element for the increase necessary for the 1994 Stock Option Plan,
which is essential in attracting and retaining qualified key personnel. Apart
from possible private placements of its common stock the Company has no other
plans for the issuance of the increased authorized stock. As of July 28, 2000,
there were 9,283,599 authorized and unissued shares of common stock remaining.
However, only 5,780,319 shares were available for issuance. The Board of
Directors believes that the limited availability of shares for issuance will
significantly impact the Company's plans to finance its future growth plans. The
Board of Directors believes that an increase in the number of authorized shares
is essential for the future success of the Company.
Approval of the amendment to the Articles of Incorporation requires the
affirmative vote of a majority of all shares entitled to be cast on the matter.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED COMMON SHARES TO 40 MILLION.
PROXY ITEM NO. 4
APPROVAL OF AUDITORS
The Audit Committee has recommended that Rothstein, Kass and Company,
P.C. be appointed as the Company's independent auditors for the current fiscal
year. Representatives of the firm are expected to be present at the Annual
Meeting and will be available to answer questions. If the shareholders do not
ratify the appointment of Rothstein, Kass and Company, P.C. the Board of
Directors will reconsider the appointment.
The Board of Directors recommends a vote FOR approval of Rothstein,
Kass and Company, P.C. as independent auditors for the current fiscal year.
The Board of Directors knows of no other matters to be brought before
the meeting. If matters other than the foregoing should arise at the meeting, it
is intended that the shares represented by proxies will be voted in accordance
with the judgment of the person named in the proxy.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
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Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's executive officers and directors, and persons who own more than ten
percent of the Company's common stock, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission. Based solely on
reports and other information submitted by executive officers, directors and ten
percent shareholders, the Company believes that during the year ended December
31, 1999, each of those persons filed all reports required by section 16(a).
SHAREHOLDERS' PROPOSALS
The Company welcomes comments or suggestions from its shareholders. In
the event a shareholder desires to have a proposal formally considered at the
2001 Annual Shareholders' Meeting, and included in the Proxy Statement for that
meeting, the proposal must be received in writing by the Company on or before
December 31, 2000.
11
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GENERAL
The costs relating to this Proxy Statement, the Proxy and the Annual
Meeting are being borne by the Company. In addition to solicitation by mail,
employees of the Company may request the return of the proxies personally, by
telephone or telecopier. The Company will, on request, reimburse brokers and
their persons holding shares for the benefit of others for their expenses in
forwarding proxies and accompanying materials and in obtaining authorization
from beneficial owners of the Company's stock to execute proxies.
The 1999 Annual Report on Form 10-KSB and the Form 10-QSB for the
second quarter that ended on June 30, 2000 have been mailed with this Proxy
Statement or previously delivered to shareholders and do not form a part of the
material for the solicitation of proxies.
Please complete, sign, and date the enclosed proxy card, which is
revocable as described herein, and mail it in the enclosed postage-paid
envelope.
By order of the Board of Directors
Frederick Sandvick
Chairman
12
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2000 ANNUAL MEETING OF SHAREHOLDERS
OF ON-POINT TECHNOLOGY SYSTEMS, INC.
PROXY CARD
THIS PROXY IS SOLICITED ON BEHALF OF ON-POINT TECHNOLOGY SYSTEMS, INC. BOARD OF
DIRECTORS.
THE UNDERSIGNED HEREBY APPOINTS FREDERICK SANDVICK AND JOHN OLBRICH,
AND EACH OF THEM, AS PROXIES FOR THE UNDERSIGNED, WITH FULL POWER OF
SUBSTITUTION, TO VOTE ALL SHARES OF ON-POINT TECHNOLOGY SYS INC., WHICH THE
UNDERSIGNED MAY BE ENTITLED TO VOTE AT THE ANNUAL MEETING OF SHAREHOLDERS IN SAN
MARCOS, CALIFORNIA ON NOVEMBER 13, 2000 AT 10:30 A.M., OR AT ANY ADJOURNMENTS
THEREOF, UPON THE MATTERS SET FORTH BELOW AND DESCRIBED IN THE ACCOMPANYING
PROXY STATEMENT AND UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENTS THEREOF.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" THE BOARD OF DIRECTORS' RECOMMENDATIONS.
PROXY ITEM NO. 1 - ELECTION OF DIRECTORS
IF YOU WISH TO WITHHOLD YOUR VOTE FOR ANY NOMINEE PLEASE PLACE A LINE THROUGH
THE NOMINEE'S NAME OR OTHERWISE STRIKE OUT THE NAME OF THE NOMINEE YOU DO NOT
WISH TO VOTE FOR.
FREDERICK SANDVICK, JOHN OLBRICH, KEITH CANNON, ARTHUR LIPPER
PLEASE MARK THE APPROPRIATE BOX WITH AN X TO CAST YOUR VOTE ON THE FOLLOWING
FOUR PROXY ITEMS
APPROVAL DISAPPROVAL ABSTENTION PROXY ITEM
===============================================================================
/ / / / / / PROXY ITEM NO. 2
RATIFY AND ADOPT AN AMENDMENT TO THE
1994 STOCK OPTION PLAN
/ / / / / / PROXY ITEM NO. 3
RATIFY AND ADOPT AN AMENDMENT TO THE
ARTICLES OF INCORPORATION OF THE COMPANY
TO INCREASE THE NUMBER OF AUTHORIZED
SHARES
/ / / / / / PROXY ITEM NO. 4
APPROVAL OF AUDITORS
<PAGE>
I PLAN TO ATTEND THE MEETING. / /
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW. / /
SIGNATURES MUST BE THAT OF THE SHAREHOLDER. IF SHARES ARE HELD JOINTLY, EACH
SHAREHOLDER NAMED SHOULD SIGN. IF THE SIGNER IS A CORPORATION, PLEASE SIGN FILL
CORPORATE NAME BY DULY AUTHORIZED OFFICER. IF THE SIGNER IS A PARTNERSHIP,
PLEASE SIGN PARTNERSHIP NAME BY AUTHORIZED PERSON. EXECUTORS, ADMINISTRATORS,
TRUSTEES, GUARDIANS, ATTORNEYS IN FACT, ETC., SHOULD SO INDICATE WHEN SIGNING.
DATED: ____________________, 2000
__________________________________
__________________________________
SIGNATURE OF SHAREHOLDER (S)
