<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 Section 240.14a-11(c) or
Section 240.14a-12
Osage Systems Group, 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
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(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:
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<PAGE> 2
OSAGE SYSTEMS GROUP, INC.
1661 EAST CAMELBACK ROAD, SUITE 245
PHOENIX, ARIZONA 85016
PRELIMINARY PROXY STATEMENT
May __, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Meeting") of Osage Systems Group, Inc. (the "Company") which will be held
at 1661 East Camelback Road, Suite 245, Phoenix, Arizona on Friday, June 12,
1998 at 10:00 A.M. mountain time. Your Board of Directors and management look
forward to personally greeting those stockholders able to attend.
At the Meeting, stockholders will be asked:
(1) to approve an amendment to the Company's Certificate of
Incorporation (the "Certificate") to provide for the
classification of the Board of Directors into three different
classes and to establish procedures for filling vacancies on
the Board of Directors;
(2) to approve and amendment to the Certificate to provide that
directors shall only be removed for cause and by a
supermajority vote of stockholders and to require consent of
the Board of Directors to amend the Certificate;
(3) to elect five (5) directors to serve until the end of their
respective terms or until their successors are elected and
qualified;
(4) to approve an amendment to the Certificate to increase the
number of shares of Common Stock the Company is authorized to
issue from 10,000,000 to 50,000,000;
(5) to approve an amendment to the Certificate to increase the
number of shares of Preferred Stock the Company is authorized
to issue from 1,000 to 10,000,000;
(6) to approve an amendment to the 1993 Stock Option Plan to
increase the number of shares available for issuance pursuant
to grants thereunder from 100,000 to 2,000,000;
(7) to ratify the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the year ending December
31, 1998; and
(8) to consider such other matters as may be properly brought
before the Meeting and at any adjournment(s) or
postponement(s) thereof.
These matters are discussed in greater detail in the accompanying Proxy
Statement.
Your Board of Directors recommends a vote FOR the election of directors
nominated, FOR all of the amendments to the Certificate, FOR the amendment to
the 1993 Stock Option
<PAGE> 3
Plan increasing the number of shares available for issuance pursuant to grants
thereunder and FOR the ratification of Deloitte & Touche LLP as the Company's
independent auditors.
Regardless of the number of shares you own or whether you plan to
attend, it is important that your shares be represented and voted at the
Meeting. You are requested to sign, date and mail the enclosed proxy promptly.
A copy of the Annual Report for the year ended December 31, 1997 is
enclosed for your information. No material contained in the Annual Report is to
be considered a part of the proxy solicitation material.
We wish to thank our stockholders for their loyal support of the
Company and their participation in this process.
Sincerely,
----------------------
Jack R. Leadbeater
Chairman of the Board
and Chief Executive Officer
2
<PAGE> 4
OSAGE SYSTEMS GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 12, 1998
PRELIMINARY PROXY STATEMENT
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Osage Systems Group, Inc. (the "Company") will be held 1661 East
Camelback Road, Suite 245, Phoenix, Arizona on Friday, June 12, 1998, at 10:00
A.M. mountain time, for the following purposes:
(1) to approve an amendment to the Company's Certificate of
Incorporation (the "Certificate") to provide for the classification of the Board
of Directors into three different classes (a "Classified Board") and to
establish procedures for filling vacancies on the Board of Directors;
(2) to approve an amendment to the Certificate to provide that
directors shall only be removed for cause and by a supermajority vote of
stockholders and to require the consent of the Board of Directors to amend the
Certificate;
(3) to elect five (5) directors to serve until the end of their
respective terms or until their successors are elected and qualified;
(4) to approve an amendment to the Certificate to increase the number
of shares of Common Stock available for issuance from ten million (10,000,000)
shares to fifty million (50,000,000) shares;
(5) to approve an amendment to the Certificate to increase the number
of shares of Preferred Stock available for issuance from one thousand (1,000)
shares to ten million (10,000,000) shares;
(6) to approve an amendment to the 1993 Stock Option Plan to increase
the number of shares of the Company's Common Stock available for issuance
pursuant to grants thereunder from one hundred thousand (100,000) shares to two
million (2,000,000) shares;
(7) to ratify the appointment of Deloitte & Touche LLP as independent
auditors for the Company for the year ending December 31, 1998; and
(8) to transact such other business as may properly be brought before
the Meeting and at any adjournment(s) or postponement(s) thereof.
A copy of the Annual Report for the year ended December 31, 1997 is
enclosed for your information. No material contained in the Annual Report is to
be considered a part of the proxy solicitation material.
Only stockholders of record as of the close of business on May 12, 1998
will be entitled to vote at the Meeting and any adjournment(s) or
postponement(s) thereof.
<PAGE> 5
All stockholders are cordially invited to attend the Meeting. However,
to assure your representation at the Meeting, you are urged to complete, sign,
date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the Meeting may vote in person even if he or she has returned a proxy.
By Order of the Board of Directors,
----------------------
Jack R. Leadbeater
Chairman of the Board and
Chief Executive Officer
Phoenix, Arizona
May __, 1998
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO SIGN, DATE AND PROMPTLY
RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
2
<PAGE> 6
OSAGE SYSTEMS GROUP, INC.
1661 EAST CAMELBACK ROAD, SUITE 245
PHOENIX, ARIZONA 85016
PRELIMINARY PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of
Osage Systems Group, Inc. (the "Company") to be voted at the Annual Meeting of
Stockholders (the "Meeting") of the Company to be held at 1661 East Camelback
Road, Suite 245, Phoenix, Arizona on Friday, June 12, 1998 at 10:00 A.M.
mountain time, and at any adjournment(s) or postponement(s) thereof for the
purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.
The proxy solicitation materials were mailed on or about May __, 1998 to all
stockholders entitled to vote at the Meeting.
RECORD DATE AND SHARE OWNERSHIP
Stockholders of record at the close of business on May 12, 1998 (the
"Record Date") are entitled to notice of and to vote at the Meeting, and at any
adjournment(s) or postponement(s) thereof. At the Record Date, [6,270,000]
shares of the Company's common stock, $0.01 par value per share ("Common Stock")
and 50 shares of Series B $3.00 Convertible Preferred Stock ("Series B Shares")
were issued, outstanding and entitled to notice of and to vote at the Meeting
and at any adjournment(s) or postponement(s) thereof. In addition, the Company
has outstanding 122 shares of Series A $3.00 Convertible Preferred Stock, $0.01
par value per share ("Series A Shares") and 105.3 shares of Series C Convertible
Preferred Stock ("Series C Shares"). The Series A Shares and the Series C Shares
are nonvoting securities of the Company. The Series A Shares, Series B Shares
and Series C Shares are collectively referred to herein as the "Preferred
Stock."
REVOCABILITY OF PROXIES
The execution of a proxy will not affect a stockholder's right to
attend the Meeting and vote in person. Any proxy given pursuant to this
solicitation may be revoked by the person giving it at any time before it is
used at the Meeting by filing with the Secretary of the Company either (i) a
written notice of revocation; (ii) a proxy bearing a later date than the most
recently submitted proxy; or (iii) by attendance at the Meeting and voting in
person. Attendance at the Meeting will not, by itself, revoke a proxy.
ANNUAL REPORT
A copy of the Company's Annual Report for the year ended December 31,
1997 accompanies this Proxy Statement. No material contained in the Annual
Report is to be considered a part of the proxy solicitation material.
The mailing address of the Company's executive office is 1661 East
Camelback Road, Suite 245, Phoenix, Arizona 85016.
<PAGE> 7
VOTING AND SOLICITATION
On all matters, each share of Common Stock is entitled to one vote. Of
the Preferred Stock, only the Series B Shares have voting rights. Nominees
receiving a majority of the votes cast will be elected as directors. On all
other matters, the Series B Shares vote as a class. The affirmative vote of a
majority of the outstanding shares of Common Stock and the affirmative vote of a
majority of the outstanding Series B Shares is required to approve all
amendments to the Company's Certificate of Incorporation (the "Certificate"), to
approve the amendment to the 1993 Stock Option Plan and to ratify the
appointment of Deloitte & Touche LLP as independent auditors for the Company.
Proxies which are validly executed by stockholders and which are
received by the Company no later than the business day preceding the Meeting
will be voted in accordance with the instructions contained thereon. If no
instructions are given, the proxy will be voted in accordance with the
recommendations of the Board of Directors and in the discretion of the proxy on
all other matters presented to the Meeting. For the reasons set forth in more
detail in the Proxy Statement, the Board of Directors recommends a vote FOR all
amendments to the Certificate, FOR the election of directors nominated herein,
FOR the amendment to the 1993 Stock Option Plan increasing the number of Common
Stock issuable pursuant to grants thereunder and FOR the ratification of
Deloitte & Touche LLP as the Company's independent auditors.
The cost of this proxy solicitation will be borne by the Company. In
addition to the use of mail, proxies may be solicited in person or by telephone
by employees of the Company without additional compensation. The Company will
reimburse brokers and other persons holding stock in their names or in the names
of nominees for their expenses incurred in sending proxy material to principals
and obtaining their proxies.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The Company's bylaws (the "Bylaws") provide that the stockholders
holding a majority of the shares issued, outstanding and entitled to vote on the
Record Date must be present in person or represented by proxy at the Meeting in
order to constitute a quorum for the transaction of business. Abstentions and
broker non-votes will be counted for the purpose of determining a quorum but
will not be counted toward the approval of the amendments to the Certificate,
the election of directors, the approval of the amendment to the 1993 Stock
Option Plan increasing the number of Common Stock issuable pursuant to grants
thereunder or the ratification of the Company's independent auditors.
2
<PAGE> 8
PROPOSAL 1
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO CLASSIFY THE BOARD OF DIRECTORS
The Board of Directors has approved a resolution amending the
Certificate to provide for a classified Board of Directors (the "Classified
Board") and to establish procedures for filling vacancies on the Board. At the
Meeting, stockholders will consider and vote on this proposed amendment. The
text of the proposed amendment is attached to this Proxy Statement as Exhibit A.
The statements made in this Proxy Statement with respect to this amendment to
the Certificate should be read in conjunction with and are qualified in their
entirety by reference to Exhibit A. In the event that this proposal is approved,
the Board of Directors will consider conforming amendments to the Bylaws at the
meeting of the Board of Directors which is expected to follow shortly after the
Meeting.
This amendment may have the effect of making it more difficult for
stockholders to remove the existing management of the Company; and therefore,
the amendment may discourage potentially unfriendly bids for the Company's
stock. See "POSSIBLE ANTI-TAKEOVER EFFECTS OF PROPOSAL."
DESCRIPTION OF PROPOSED AMENDMENT
Article Seventh of the Certificate would be amended to provide for a
classified Board of Directors. The Proposal would operate to divide the Board of
Directors into three separate classes of directors, as nearly equal in number as
possible, to serve a three year term and until their successors are duly elected
and qualified with each class being elected at different annual stockholder
meetings. Following the effectiveness of the Proposal, Class I will consist of
two (2) directors who will serve for an initial term of three (3) years, Class
II will consist of one (1) director who will serve for an initial term of two
(2) years, and Class III will consist of two (2) directors who will serve for an
initial term of one (1) year. See "PROPOSAL 3-ELECTION OF DIRECTORS." At each
annual meeting after 1998, directors will be elected to succeed those whose
terms then expire and each newly elected director will serve for a three year
term. The proposed amendment would replace the prior system of electing all of
the directors annually for one year terms.
If the number of directors constituting the Board of Directors is
increased or decreased, the resulting number of directors will be apportioned
among the three classes so as to make all classes as nearly equal in number as
possible, except that the term of any incumbent director may not be shortened.
Under the Delaware General Corporation Law ("DGCL"), if a Board is classified by
action of the stockholders, unless the Certificate specifies otherwise, members
of the Board of Directors may be removed by the stockholders before the
expiration of their respective terms only for cause. Accordingly, in the event
that stockholders approve this proposal, none of the directors elected to the
Classified Board may be removed without cause prior to the expiration of their
respective terms.
The effect of a Classified Board of Directors may be circumvented by
increasing or decreasing the size of the Board of Directors. At present,
vacancies in the Board of Directors, including vacancies resulting from an
increase in the number of directors, are required to be filled by a vote of the
majority of the remaining members of the Board of Directors, although less than
a quorum, and each person so elected serves as a director until a successor is
elected by the
3
<PAGE> 9
stockholders. Additionally, any director or the entire Board of Directors may be
removed with or without cause by majority vote of the stockholders. The Proposal
provides that the size of the Board of Directors may be fixed solely by action
of the Board of Directors itself; and any vacancies in the Board of Directors
may be filled by a majority vote of the remaining directors then in office, even
though less than a quorum and each person so elected would serve for the
remainder of the full term of the class in which the new directorship was
created or the vacancy occurred. The Proposal would also provide that directors
may be removed only for cause and only by the affirmative vote of two-thirds of
the stockholders entitled to vote thereon. See "PROPOSAL 2-SUPERMAJORITY VOTING
PROVISIONS." The DGCL provides that the Certificate, including these provisions,
may be amended by the stockholders only with the consent of the Board.
REASONS FOR PROPOSAL
Since directors will be serving for longer terms which expire at
different times and directors may only be removed for cause by a supermajority
vote of stockholders, the Board of Directors believes that a Classified Board
will promote continuity of management; and thereby, enhance the ability of the
Company to carry out long-range plans and goals for its benefit and the benefit
of its stockholders. Although the Company has not experienced difficulties in
the past in maintaining continuity of the Board and management, the Board of
Directors believes that a Classified Board will assist the Company in
maintaining this continuity of management into the future. Additionally, the
Proposal has certain anti-takeover effects that the Board believes will deter
unsolicited takeover attempts and protect the value of each stockholder's
investment in the Company. See "POSSIBLE ANTI-TAKEOVER EFFECTS OF THE PROPOSAL."
A Classified Board would also extend the time it would take for a
majority stockholder to obtain control of the Company's Board of Directors; and
thereby, limit abusive takeover tactics. Assuming each class of directors is
equal in size, a majority stockholder could not obtain control of the Board of
Directors until the second annual stockholders' meeting after it acquired a
majority of the voting stock. During this time, the Board of Directors would
have a better opportunity to defend the Company against abusive takeover tactics
and to negotiate with any majority stockholder to obtain more favorable price
and terms in any merger or tender offer.
POSSIBLE ANTI-TAKEOVER EFFECTS OF THE PROPOSAL
The Board of Directors believes that this Proposal may have
anti-takeover effects as described below. Also described below are the general
anti-takeover provisions of the DGCL.
ANTI-TAKEOVER PROVISIONS OF THE DGCL
As set forth above, the DGCL prohibits stockholders from removing
members of a Classified Board without cause before the expiration of their
respective terms unless the Certificate specifies otherwise. The DGCL contains a
number of other provisions which are designed to strengthen the position of
incumbent management in connection with a takeover attempt. For example,
Delaware law provides that a company has the general power, exercisable by its
board of directors, to accept, reject, respond to or take no action in respect
of an actual or proposed acquisition, divestiture, tender offer, takeover or
other fundamental change. The case law of Delaware has developed special
standards for deciding whether to uphold or advocate the actions of incumbent
management in the context of takeover proposals.
4
<PAGE> 10
The Company is also subject to Section 203 of the DGCL, which provides
that a person who acquires fifteen percent (15%) or more of the outstanding
voting stock of a Delaware corporation becomes an "interested stockholder."
Section 203 prohibits a corporation from engaging in mergers or certain other
"business combinations" with an interested stockholder for a period of three (3)
years, unless (i) prior to the date the stockholder becomes an interested
stockholder, the board of directors approves either the business combination or
the transaction which results in the stockholder becoming an interested
stockholder, or (ii) the interested stockholder is able to acquire ownership of
at least eight-five percent (85%) of the outstanding voting stock of the
corporation (excluding shares owned by directors of the corporation who are also
officers and shares owned by certain employee stock plans) in the same
transaction by which the stockholder became an interested stockholder, or (iii)
the interested stockholder obtains control of the board of directors, which then
approves a business combination which is authorized by a vote of the holders of
two-thirds of the outstanding voting stock not held by the interested
stockholder.
The definition of interested stockholder does not include persons whose
ownership of voting stock exceeds the fifteen percent (15%) threshold as a
result of action taken by the corporation unless that person thereafter acquires
additional stock.
A "business combination" is defined broadly in the DGCL to include any
merger or consolidation with the interested stockholder, any merger or
consolidation caused by the interested stockholder in which the surviving
corporation will not be subject to Delaware law, or the sale, lease, exchange,
mortgage, pledge, transfer or other disposition to the interested stockholder of
any assets of the corporation having a market value equal to or greater than ten
percent (10%) of the aggregate market value of the assets of the corporation.
"Business combination" is also defined to include transfers of stock of the
corporation or a subsidiary to the interested stockholder (except for transfers
in conversion, exchange or pro rata distribution which do not increase the
interested stockholder's proportionate ownership of a class or series), or any
receipt by the interested stockholder (except proportionately as a stockholder)
of any loans, advances, guaranties, pledges or financial benefits.
POSSIBLE CONSEQUENCES OF THE ANTI-TAKEOVER EFFECTS OF THE PROPOSAL
The Board of Directors believes that this Proposal 1, to the extent
that it deters unsolicited takeover attempts, will promote conditions of
stability in the business, management and control of the Company, discourage in
advance certain takeover offers or other attempts to accumulate the Company's
stock and encourage anyone contemplating such actions to negotiate with the
Company and will assist the Company in defending against any such action if the
Board of Directors does not believe it to be in the best interests of the
Company and all of its stockholders. Although the Board of Directors is not
aware of any overt threat of such a takeover attempt at this time, the Board of
Directors believes that this Proposal 1 is in the best interest of the Company.
A takeover offer often places the target corporation in the position of
making a forced sale. Hostile acquirers sometimes make takeover offers when the
market price of a potential target's stock may be temporarily depressed. The
Board of Directors believes that the consideration offered in such a situation,
even though it may be in excess of the then market price, may be less than the
consideration which could be obtained in a freely negotiated transaction. In a
freely negotiated transaction, the Board of Directors would have the opportunity
5
<PAGE> 11
to seek a suitable partner at a time of its choosing and to negotiate the most
favorable price and terms which reflect not only the current, but also the
future value of the Company. The Board of Directors may also believe that the
takeover offer is not in the best interests of the Company and its stockholders
for additional reasons, such as those exhibited in the large number of business
failures which result from overleveraged transactions. In the context of an
unsolicited offer, the Board may not have adequate time to consider fully the
takeover offer and to determine what actions are in the best interests of the
Company and its stockholders despite the provisions of applicable federal law
regarding the minimum duration of certain takeover offers. This Proposal 1
attempts to ameliorate the problems inherent in these situations.
Takeover offers or other non-market acquisitions of stock are usually
made at prices above the prevailing market price of the corporation's stock and
often have a corresponding effect on such market price. Accumulation of stock
through market purchases, whether or not for the purpose of acquiring control,
may also support the price of a corporation's stock at levels higher than
otherwise would be the case. This Proposal 1 may discourage such takeover offers
and purchases, even if holders of a majority of the Company's shares desire to
sell such shares.
This Proposal 1 may also make it more difficult to accomplish a
transaction requiring stockholder approval or to displace management quickly,
even if a majority of the stockholders of the Company desire to do so. Under
certain circumstances, this Proposal 1 may permit management of the Company to
perpetuate itself in control of the Company. In addition, the Proposal could
encourage a potential purchaser of the Company to negotiate with the Board of
Directors and offer terms acceptable to it. Such terms might include
continuation of the existing management of the Company or a commitment by the
purchaser to provide benefits (such as employment contracts) not available to
stockholders generally.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of at least the majority of the shares of Common
Stock and Series B Shares, voting as separate classes, is required in order to
approve this Proposal 1. An abstention or failure to vote on this proposal is
not an affirmative vote; and therefore, will have the same effect as a negative
vote on this proposal at the Meeting. If approved, this Proposal 1 will become
effective upon the filing of a Certificate of Amendment to the Certificate with
the Secretary of State of Delaware which is expected to follow shortly after the
approval of this Proposal 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
CLASSIFICATION OF THE BOARD OF DIRECTORS
6
<PAGE> 12
PROPOSAL 2
SUPERMAJORITY VOTING PROVISION
The Board of Directors has approved a resolution amending the
Certificate to require the affirmative vote of two-thirds of the outstanding
voting stock to approve amendments to the Certificate unless the proposed
amendment has been approved by the affirmative vote of at least eighty percent
(80%) of the Board of Directors. At the Meeting, stockholders will consider and
vote on this proposed amendment. The text of the proposed amendment to the
Certificate is attached to this Proxy Statement as Exhibit A. The statements
made in this Proxy Statement with respect to this amendment to the Certificate
should be read in conjunction with and are qualified in their entirety by
reference to Exhibit A.
This Proposal may have the effect of making it more difficult for
stockholders to change the number of directors of the Company and to remove the
existing management of the Company; consequently, it may discourage potentially
unfriendly bids for stock of the Company. This Proposal 2 will also make it more
difficult for a stockholder to defuse the Company's takeover defenses that
require amending the Certificate. For example, if this Proposal 2 is adopted,
and Proposal 1 is also adopted a stockholder seeking to eliminate the Classified
Board would have to obtain a supermajority vote of the stockholders in order to
amend the Certificate. For these reasons, the Board of Directors believes that
this Proposal may have an anti-takeover effect. In considering Proposal 2,
stockholders should consider and review the "PROPOSAL 1-AMENDMENT TO THE
COMPANY'S CERTIFICATE OF INCORPORATION TO CLASSIFY THE BOARD OF
DIRECTORS-Possible Anti-Takeover Effects of this Proposal."
VOTE REQUIRED FOR APPROVAL
The affirmative vote of holders of at least the majority of the shares
of Common Stock and the Series B Shares, voting as separate classes, is required
in order to approve this Proposal 2. An abstention or failure to vote on this
proposal is not an affirmative vote; and therefore, will have the same effect as
a negative vote on this proposal at the Meeting. If approved, this Proposal 2
will be effective upon the filing of a Certificate of Amendment to the
Certificate with the Secretary of State of Delaware which is expected to follow
shortly after the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
SUPERMAJORITY VOTING PROVISION.
7
<PAGE> 13
PROPOSAL 3
ELECTION OF DIRECTORS
NOMINEES FOR CONSIDERATION AT THE MEETING
The Bylaws provide that the Board of Directors shall consist of at
least three (3), but not more than eight (8) directors. The Board of Directors,
in its discretion by majority vote, may increase and decrease the number of
directors on the Board of Directors. Currently, the Board of Directors consists
of five (5) directors.
The five persons listed below have been nominated by the Board of
Directors to serve as directors of the Company.
If the amendment to the Certificate to provide for a Classified Board
of Directors is adopted, the Board of Directors will be divided into three
classes. See "PROPOSAL 1-AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO
CLASSIFY THE BOARD OF DIRECTORS." This Meeting will be the first election of
directors after the amendment which created the Classified Board. Accordingly,
at the Meeting, two directors will be elected for a term expiring at the
Company's 1999 Annual Meeting, one director for a term expiring at the 2000
Annual Meeting, and two directors for a term expiring at the 2001 Annual Meeting
and, in each case, until their successors are duly elected and qualified. At
each Annual Meeting after 1998, directors will be elected to succeed those
directors whose terms then expire and each person so elected will serve for a
three year term.
If the Amendment to the Certificate is not approved, directors elected
at the Meeting will serve one year terms until the 1999 Annual Meeting and until
their successors are duly elected and qualified.
Unless otherwise specified, each properly executed proxy received will
be voted for the election of the nominees named below to serve as directors
until the end of their respective terms or until his successor is elected and
qualified. The Company is not aware of any reason that any nominee will be
unable to serve or will decline to serve as a director. In the event that any
nominee is unable to serve or will not serve as a director, it is intended that
the proxies solicited hereby will be voted for such other person or persons as
shall be nominated by management.
The following table sets forth certain information with respect to each
of the nominees for director and their current positions with the Company.
CLASS I
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Director Whose Term Year in Which
Expires at the 2001 Service as a
Annual Meeting Principal Occupation Director Began
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Jack R. Leadbeater, 43 Chairman of the Board and Chief 1997
Executive Officer
David S. Olson, 40 Chief Operating Officer and President 1997
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 14
JACK R. LEADBEATER
Mr. Leadbeater became Chairman and Chief Executive Officer of the
Company on December 22, 1997, the effective date of the merger by and between
the Company and Osage Computer Group, Inc. (the "Merger"). Mr. Leadbeater
remains President and a director of Osage Computer Group, Inc. ("Osage"),
positions he has held since 1993. From 1987 to 1993, Mr. Leadbeater served as
President of a privately-held computer systems integration company. Prior to
1987, Mr. Leadbeater was employed as a regional sales manager by MAI Canada
Ltd., an international manufacturer of mini-computers. Mr. Leadbeater is a
graduate of the University of Manitoba, Canada with a Business/Commerce degree
in Marketing.
DAVID S. OLSON
Mr. Olson became director, President and Chief Operating Officer of the
Company on the effective date of the Merger on December 22, 1997. Mr. Olson
remains a director and Executive Vice-President/General Manager of Osage,
positions he has held since 1993. From 1989 to 1993, Mr. Olson served as an
Executive Vice-President of a privately held computer systems integration
company. Prior to 1989, he was employed by Sun Microsystems Canada Ltd. where
his responsibilities included sales as well as market development in the
petroleum exploration market. Prior to joining Sun Microsystems, Mr. Olson was
an Account Manager at Digital Equipment, Canada where he sold information
processing technology to major national accounts in the petroleum exploration
market. Mr. Olson is a graduate of the University of Calgary, Canada with a
Bachelor of Science degree in Computer Science.
CLASS II
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Director Whose Term Year in Which
Expires at the 2000 Service as a
Annual Meeting Principal Occupation Director Began
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
John Iorillo, 31 Chief Financial Officer of the 1997
Company
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
JOHN IORILLO
Mr. Iorillo became Chief Financial Officer of the Company on February
16, 1998 and a director on March 27, 1998. From 1990 to 1998, Mr. Iorillo was
employed as a certified public accountant by Deloitte & Touche LLP where his
responsibilities included the oversight of audit engagements, participation in
various merger and acquisition projects and other related activities. Mr.
Iorillo is a graduate of Cleveland State University with a Bachelor of Business
Administration degree in Accounting with a minor in Economics.
9
<PAGE> 15
CLASS III
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Director Whose Term Year in Which
Expires at the 1999 Service as a
Annual Meeting Principal Occupation Director Began
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Andrew P. Panzo, 33 President, American Maple Leaf 1997
Financial Corporation
Michael G. Glynn, 41 Executive Vice President of the 1997
Company
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
ANDREW P. PANZO
Mr. Panzo became a director of the Company during December 1997. Mr. Panzo is
President of American Maple Leaf Financial Corporation in Philadelphia,
Pennsylvania, an investment banking firm which specializes in emerging growth
companies. He is also a director of The Eastwind Group, Inc., a public company.
Mr. Panzo is a graduate of the University of Connecticut and has a Masters
degree in International Business and Finance from Temple University.
MICHAEL G. GLYNN
Mr. Glynn became a director of the Company on March 10, 1998. Mr. Glynn
became an Executive Vice-President of the Company on the effective date of the
Merger on December 22, 1997. During 1997, Mr. Glynn served as Director of Sales
for the Southwest region of the United States at Compuware, a publicly-traded
software manufacturer. From 1996 to 1997, Mr. Glynn served as Senior
Vice-President and Chief Operating Officer of Prologic Management Systems, a
publicly-traded software development company. From 1993 to 1996, he was Director
of Sales and International Business Development at Access Technologies (formerly
Access Graphics, a division of Lockheed Martin), an aggregator of computer
software and hardware. From 1991 to 1993, Mr. Glynn served on the football staff
at the University of Colorado. Mr. Glynn is a graduate from the University of
Notre Dame with a Bachelor of Arts degree in Liberal Studies and Languages and a
Master of Divinity degree. He is also continuing his graduate work at
Northwestern University's JL Kellogg Graduate School of Management.
BOARD AND COMMITTEE MEETINGS
During the year ended December 31, 1997, the Board of Directors met one
(1) time and all the directors were present at that meeting. Additionally, the
Board of Directors took action by unanimous written consent eighteen (18) times.
During the year ended December 31, 1997, the Company had no committees
of the Board of Directors. However, in May of 1998, a Compensation Committee of
the Board of Directors was formed. The Compensation Committee has primary
responsibility for reviewing the Company's general compensation strategy;
establishing salaries and reviewing benefit programs (including pensions) for
the Chief Executive Officer and those persons who report directly to him;
reviewing, approving, recommending and administering the Company's incentive
compensation and stock option plans and certain other compensation plans; and
approving
10
<PAGE> 16
certain employment contracts. The members of the Compensation Committee are Jack
R. Leadbeater, David S. Olson, and John Iorillo.
DIRECTOR'S COMPENSATION
Currently, the Company has no policy with respect to the granting of
fees to directors in connection with their service to the Company. However, the
Company may reimburse directors for their cost of travel and lodging to attend
meetings of the Board of Directors or committees thereof. In connection with
their service as directors of the Company, each of Messrs. Steven B. Rosner,
Bernard Buchwalter, Ike Suri and Richard Someck received 1,000 shares of Common
Stock of the Company during the year ended December 31, 1997. Prior to or in
connection with the effective date of the Merger, Messrs. Buchwalter, Suri and
Someck resigned as directors of the Company. Mr. Rosner resigned as a director
on March 27, 1998.
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid or
accrued for the fiscal years ended December 31, 1997, 1996 and 1995 by the
Company to or for the benefit of the named executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS PAYOUTS
-------------------------- ---------------
RESTRICTED
ANNUAL COMPENSATION STOCK OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY AWARD(S)($) SARS(#) COMPENSATION($)
- --------------------------- ---- ------ ----------- ------- ---------------
<S> <C> <C> <C> <C> <C>
JACK R. LEADBEATER 1997 $89,967(1) -0- 351,057(2) $261,463
Chairman of the Board and 1996 $49,417 N/A N/A $236,335
Chief Executive Officer 1995 -- N/A N/A $ 55,000
DAVID S. OLSON 1997 $89,967(3) -0- 351,057(2) $261,463
Director, Chief Operating 1996 $64,417 N/A N/A $236,335
Officer and President 1995 $25,000 N/A N/A $ 55,000
MICHAEL G. GLYNN 1997 -(4)- -0-(5) 100,000(6) -0-
Director and Executive Vice 1996 N/A N/A N/A N/A
President 1995 N/A N/A N/A N/A
STEVEN B. ROSNER 1997 -0- $100(7) -0- $100,000(8)
Former President, Secretary 1996 -0- -0- -0- -0-
and Director 1995 -0- -0- -0- -0-
</TABLE>
- ----------------------------
(1) Reflects Mr. Leadbeater's compensation during 1997, 1996 and 1995 as an
officer and director of Osage. As of December 22, 1997, Mr. Leadbeater
entered into an employment agreement with the Company pursuant to which
his scheduled base compensation for 1998 is $200,000. See "EMPLOYMENT
ARRANGEMENTS."
(2) Includes options to purchase 332,000 shares of Common Stock granted as
part of the Merger. Also includes options to purchase 19,057 shares of
Common Stock granted immediately following the Merger.
(3) Reflects Mr. Olson's compensation as an officer and director of Osage
during 1997, 1996 and 1995. As of December 22, 1997, Mr. Olson entered
into an employment agreement with the Company pursuant to which his
scheduled base compensation for 1998 is $200,000. See "EMPLOYMENT
ARRANGEMENTS."
11
<PAGE> 17
(4) Mr. Glynn became an officer of the Company on December 22, 1997. Mr.
Glynn's scheduled compensation for 1998 is $200,000. Mr. Glynn entered
into an employment agreement with the Company as of December 22, 1997.
See "EMPLOYMENT ARRANGEMENTS."
(5) Does not include 200,000 shares of Common Stock being held by the
Company which are subject to release at the rate of 100,000 shares on
each of December 22, 1998 and December 22, 1999, provided that Mr.
Glynn remains employed by the Company on those dates.
(6) Pursuant to the terms of his employment agreement, Mr. Glynn was
granted options to purchase 100,000 shares of Common Stock.
(7) Represents the fair market value of 1,000 shares of Common Stock
granted to Mr. Rosner during the year ended December 31, 1997 in
connection with his service as a director of the Company. Mr. Rosner
resigned as a directors of the Company on March 27, 1998.
(8) Mr. Rosner had been the President and a director of the Company since
January 1997. He resigned his position as an officer of the Company
effective upon the Merger, and resigned as a director on March 27,
1998. While the directors and executive officers of the Company
received no annual compensation during the fiscal years ended December
31, 1997, 1996 and 1995, Mr. Rosner received $100,000 during the fiscal
year ended December 31, 1997 in consideration for the provision of the
Company's executive offices, reimbursement of certain expenses on
behalf of the Company and for consulting services by Mr. Rosner in
connection with the financial and administrative reorganization of the
Company. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
EMPLOYMENT ARRANGEMENTS
The Company has employment agreements with each of Messrs. Leadbeater,
Olson, Glynn and Iorillo. Each of Messrs. Leadbeater, Olson and Glynn are
provided with an annual salary of $200,000. The agreement with Mr. Iorillo
provides for an annual salary of $100,000. Each of Messrs. Leadbeater and Olson
are employed for an initial term of three years, commencing December 1997 with
successive year-to-year renewals in the event that neither they nor the Company
elect to terminate the agreement after the initial term. Each of Messrs. Glynn
and Iorillo are employed for an initial term of one year commencing December
1997 and February 1998, respectively, with successive year-to-year renewals in
the event that the agreement is not earlier terminated. The employment
agreements of Messrs. Leadbeater, Olson, Glynn and Iorillo contain
non-competition and non-solicitation provisions which survive their actual
employment for a term of one year. Mr. Glynn has been granted 200,000 shares
under his employment arrangement; 100,000 of which vest at the end of his first
year of employment and the remainder of which vest at the end of his second year
of employment. Each of Messrs. Glynn and Iorillo were also granted options to
purchase 100,000 shares of Common Stock of the Company. See "SUMMARY
COMPENSATION TABLE."
STOCK OPTIONS
The Company's 1993 Stock Option Plan provides for the issuance of both
"Incentive Stock Options" as well as "Nonqualified Options" to be issued to
employees, consultants and others. An aggregate of 100,000 shares of Common
Stock were reserved for issuance under this plan. No options have been granted
under this plan since inception.
The Company also adopted the "Outside Directors Stock Option Plan"
pursuant to which options to purchase an aggregate of 2,500 shares of Common
Stock have been authorized on an annual basis to each outside director who has
served during the immediately preceding year. No options have been granted under
this plan since inception.
In connection with the Merger, the Company granted the former
stockholders of Osage options to purchase 800,000 shares of Common Stock. Such
options have a term of six years and
12
<PAGE> 18
an exercise price of $3.00 per share. The options vest: (i) 50% once the
Company's audited financial statements reflect annual earnings for the preceding
year of no less than $.20 per share and (ii) 100% once the Company's audited
financial statements reflect annual earnings for the preceding year of no less
than $.30 per share.
Under the terms of their respective employment agreements, each of
Messrs. Glynn and Iorillo were granted options to purchase 100,000 shares of
Common Stock. Mr. Glynn's options are subject to the same exercise price and
vesting criteria as the options granted pursuant to the Merger. Mr. Iorillo's
options are subject to an exercise price of $5.00 per share, are scheduled to
expire on January 1, 2002 and vest upon the earlier of: (i) January 1, 2001,
provided Mr. Iorillo remains continuously employed by the Company; (ii) fifty
percent (50%) of the options, however, shall vest earlier than January 1, 2001,
provided that at such earlier date the Company's annual earnings equal or exceed
$.20 per share; and (iii) one hundred percent (100%) of the options, however,
shall vest earlier than January 1, 2001, provided that at such earlier date the
Company's annual earnings equal or exceed $.30 per share.
Immediately following the Merger, the Company issued to various
employees and agents, including Messrs. Leadbeater and Olson, options to
purchase in the aggregate 100,000 shares of Common Stock at an exercise price of
$3.00 per share. Such options have a term of two years and vest at various rates
during such period in accordance with the terms of the respective option
agreements. These options were not issued pursuant to the Company's stock option
plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
-------------------------------------
Individual Grants
-------------------------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or
Option/SARs Employees in Base Price Expiration
Name Granted(#)(1) Fiscal Year ($/Sh) Date
- ---- ------------- ----------- ------ ----
<S> <C> <C> <C> <C>
Jack R. Leadbeater 19,057 1.9% $3.00 December 19, 2000
Jack R. Leadbeater 332,000 33.2% $3.00 December 19, 2003
David S. Olson 332,000 33.2% $3.00 December 19, 2003
David S. Olson 19,057 1.9% $3.00 December 19, 2000
Michael G. Glynn 100,000 10% $3.00 December 19, 2003
Steven B. Rosner -0- N/A N/A N/A
</TABLE>
- ------------------------
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number
of Securities
Underlying
Unexercised Value of Unexercised
Options/SARs In-the-Money Options/SARs
at FY-End (#) at
Shares Shares FY-End ($)
Acquired on Exercisable/ Exercisable/
Name Exercise(#) Value Realized ($) Unexercisable Unexercisable (2)
- ---- ----------- ------------------ ------------- -----------------
<S> <C> <C> <C> <C>
Jack R. Leadbeater -0- -0- (E)0/(U)351,057 (E)$0/(U)$351,057
David S. Olson -0- -0- (E)0/(U)351,057 (E)$0/(U)$351,057
</TABLE>
13
<PAGE> 19
<TABLE>
<S> <C> <C> <C> <C>
Michael G. Glynn -0- -0- (E)0/(U)100,000 (E)$0/(U)$100,000(3)
Steven B. Rosner -0- -0- (E)0/(U)0 (E)$0/(U)$0
</TABLE>
- ------------------------
(1) As part of the purchase price in the Merger, each of Messrs. Leadbeater
and Olson were granted options to purchase 332,000 shares of Common
Stock. Such options have a term of six years commencing in December
1997 and an exercise price of $3.00 per share. Provided Messrs.
Leadbeater and Olson remained employed by the Company, the options
vest: (i) 50% once the Company's audited financial statements reflect
annual earnings for the preceding year of no less than $.20 per share
and (ii) 100% once the Company's audited financial statements reflect
annual earnings for the preceding year of no less than $.30 per share.
Messrs. Leadbeater and Olson were also each granted options to purchase
19,057 shares of the Company's Common Stock immediately following the
Merger. These options vested upon grant.
(2) Based upon the high bid price ($4.00 per share) of the Company's Common
Stock on the last reported trading date during the year ended December
31, 1997 as reported on the OTC Bulletin Board.
(3) Pursuant to the terms of his employment agreement, Mr. Glynn was
granted options to purchase 100,000 shares of Common Stock. Such
options have a term of six years commencing in December 1997 and an
exercise price of $3.00 per share. Provided that Mr. Glynn remains
employed by the Company, the options vest: (i) 50% once the Company's
audited financial statements reflect annual earnings for the preceding
year of no less than $.20 per share and (ii) 100%, once the Company's
audited financial statements reflect annual earnings for the preceding
year of no less than $.30 per share.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of MAY 12, 1998,
information with respect to the securities holdings of all persons which the
Company, pursuant to filings with the Securities and Exchange Commission, has
reason to believe may be deemed the beneficial owners of more than five percent
(5%) of the Company's outstanding Common Stock. Also set forth in the table is
the beneficial ownership of all shares of the Company's outstanding stock, as of
such date, of all officers and directors, individually and as a group.
14
<PAGE> 20
<TABLE>
<CAPTION>
Shares Owned Percentage of
Beneficially Outstanding
Name and Address and of Record (1) Shares
- ---------------- ----------------- ------
<S> <C> <C>
Jack R. Leadbeater.......................................................... 683,057(2) 11.8%
1661 East Camelback Road, Suite 245
Phoenix, AZ 85016
David S. Olson.............................................................. 683,057(2) 11.8%
1661 East Camelback Road, Suite 245
Phoenix, AZ 85016
Michael G. Glynn............................................................ -(3) 0%
1661 East Camelback Road, Suite 245
Phoenix, AZ 85016
John Iorillo................................................................ -(4) 0%
1661 East Camelback Road, Suite 245
Phoenix, AZ 85016
Andrew P. Panzo............................................................. 11,000(5) (*)
2 Penn Center Plaza, Suite 605
Philadelphia, PA 19102
Godwin Finance Ltd.......................................................... 350,000 6.3%
Whitehill House
Newby Road Industrial Estate
Newby Road
Hazel Grove, Stockport SK7 5DA, England
Steven B. Rosner............................................................ 617,850(6) 11.1%
1220 Mirabeau Lane
Gladwynne, PA 19035
Michael Lauer............................................................... 800,000(7) 14.36%
375 Park Avenue, Suite 2006
New York, NY 10152
All Directors and Officers as a group (5 persons)........................... 1,377,114 22.86%
</TABLE>
- ---------------------
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in
the regulations promulgated under the Securities Exchange Act of 1934,
and, accordingly, may include securities owned by or for, among others,
the spouse and/or minor children of an individual and any other
relative who has the same home as such individual, as well as, other
securities as to which the individual has or shares voting or
investment power or which each person has the right to acquire within
60 days through the exercise of options or otherwise. Beneficial
ownership may be disclaimed as to certain of the securities. This table
has been prepared based on [6,270,000] shares of Common Stock
outstanding as of May 12, 1998.
(2) Includes 456,500 shares of Common Stock, 207,500 shares issuable upon
conversion of the Series B Shares and 19,057 shares issuable upon the
exercise of vested options. Does not include options to purchase
332,000 shares of Common Stock which have not vested. Also, does not
include 1.5 million shares of Common Stock held in a voting trust over
which the holders of the Series B Shares, including Messrs. Leadbeater
and Olson, have voting rights. See "MATERIAL VOTING ARRANGEMENTS
-VOTING TRUST."
(3) Does not include 200,000 shares of Common Stock being held by the
Company in escrow which are subject to release at the rate of 100,000
shares on each of the first and second anniversaries of the
commencement of Mr. Glynn's employment with the Company, provided Mr.
Glynn is an employee of the Company at the time such shares are
released. Does not include options to purchase 100,000 shares of Common
Stock which have not vested.
15
<PAGE> 21
(4) Does not include options to purchase 100,000 shares of Common Stock
granted to Mr. Iorillo pursuant to his employment agreement which have
not vested. Mr. Iorillo is a director and the Chief Financial Officer
of the Company.
(5) Includes the indirect ownership of the shares owned by American Maple
Leaf Financial Corporation. Mr. Panzo is an officer and director of
American Maple Leaf Financial Corporation.
(6) Includes the direct ownership of 192,850 shares and the indirect
ownership of 414,025 shares through Mr. Rosner's role as the sole
general partner of two Delaware limited partnerships, Diversified
Investment Fund, L.P. (50,000 shares) and PRE Investors, L.P. (375,000
shares).
(7) Includes direct ownership of 40,000 shares and investment control of
760,000 shares through Mr. Lauer's role as Managing Member of Lancer
Management Group LLC which is the Manager of Lancer Offshore, Inc.
(420,000 shares), Lancer Voyager Fund (70,000 shares) and Lancer
Management Group, II which is the Manager of Lancer Partners, L.P.
(270,000 shares). Mr. Lauer acts as Investment Manager of each of these
funds.
(*) Less than 1%.
- -----------------------
MATERIAL VOTING ARRANGEMENTS
- Voting Rights of Series B Shares
The holders of the Series B Shares shall be entitled to vote as a class
on all matters brought to a vote of stockholders.
- Voting Trust
In conjunction with the Merger, certain historic stockholders of the
Company agreed to place in a voting trust (the "Voting Trust") 1.5 million
shares of Common Stock with voting rights as to such shares vested in the
holders of the Series B Shares, including Messrs. Leadbeater and Olson. The
Voting Trust shall remain in effect until the earlier of: (i) the end of the
18th month following the Merger; or (ii) such earlier date when all of its
shares have either been released to its beneficial owners or allocated in
satisfaction of the purchase price in the Merger. For every three month period
during the term of the Voting Trust in which no shares are issued in
satisfaction of the purchase price, 250,000 shares may be released to such
historic stockholders of the Company from the Voting Trust.
16
<PAGE> 22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EMPLOYMENT ARRANGEMENTS
The Company has employment agreements with Messrs. Leadbeater, Olson,
Glynn and Iorillo. The terms of Mr. Glynn's agreement include the grant of
options to purchase 100,000 shares of Common Stock which have not vested and the
grant of 200,000 shares of Common Stock which have not vested. The terms of Mr.
Iorillo's agreement include the grant of options to purchase 100,000 shares of
Common Stock which have not vested. See "EXECUTIVE COMPENSATION-EMPLOYMENT
ARRANGEMENTS."
CONSULTING SERVICES
Mr. Rosner received $100,000 during the fiscal year ended December 31,
1997 in consideration for providing the Company with executive offices prior to
the Merger, reimbursement of certain expenses on behalf of the Company and for
consulting services by Mr. Rosner in connection with the financial and
administrative reorganization of the Company. Mr. Rosner resigned as a directors
of the Company in March 27, 1998.
SALE OF COMMON STOCK
During November 1997, the Company sold shares of Common Stock in a
private placement transaction at a purchase price of $.10 per share which
generated net proceeds in excess of $300,000. In such private placement
transaction, Mr. Rosner purchased 190,000 shares at a purchase price of $19,000.
In addition, two Delaware limited partnerships, of which Mr. Rosner is the sole
general partner, purchased in the aggregate 691,692 shares of Common Stock at a
purchase price of $69,169. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT."
VOTE REQUIRED FOR APPROVAL
VOTING PROCEDURES
A plurality of the votes cast by the shares present in person or by
proxy is required to elect a nominee as a director.
17
<PAGE> 23
VOTING RIGHTS OF SERIES B SHARES
As adopted, the Certificate of Designation of the Series B Shares
provided that the holders of the Series B Shares would be entitled to vote in
the election of directors by casting as many votes in total as equates to the
total number of shares that may be cast in the election of directors by the
holders of Common Stock, plus one. The holders of the Series B Shares retained
this voting right so long as certain performance criteria were maintained. These
rights would permit the holders of the Series B Shares to elect a majority of
the Board of Directors, notwithstanding the vote of the holders of the Company's
Common Stock. Subject to the adoption of a Classified Board set forth in
Proposal 1, the holders of the Series B Shares have agreed to relinquish these
rights.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF
THE FIVE NOMINEES TO THE BOARD OF DIRECTORS
18
<PAGE> 24
PROPOSAL 4
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
FROM 10,000,000 TO 50,000,000
The Board of Directors has unanimously adopted a resolution setting
forth a proposed amendment to the Certificate to increase the number of shares
of Common Stock which the Company is authorized to issue from 10,000,000 shares
to 50,000,000 shares. A true and correct copy of the proposed amendment is
attached hereto as Exhibit "A." The statements made in this Proxy Statement
regarding the amendment to the Certificate to increase the number of authorized
shares of Common Stock should be read in conjunction with and are qualified in
their entirety by reference to Exhibit "A."
DESCRIPTION OF COMMON STOCK
Currently, the Certificate authorizes the issuance of 10,000,000 shares
of Common Stock, par value $.01 per share. As of May 12, 1998, the Company had
[6,270,000] shares of Common Stock issued and outstanding. The issued and
outstanding shares of Common Stock are fully paid and nonassessable and held by
approximately 192 stockholders of record. Except as otherwise required by law,
each share of Common Stock held of record entitles the stockholder to one vote
on each matter which stockholders may vote on at all meetings of the
stockholders of the Company. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERSHIP AND MANAGEMENT-MATERIAL VOTING ARRANGEMENTS." The holders of the
Company's Common Stock are not entitled to cumulative voting rights nor are they
entitled to preemptive, subscription or conversion rights. In addition, there
are no redemption or sinking fund provisions applicable thereto. However, upon
liquidation or dissolution of the Company, the holders of the Common Stock are
entitled to share ratably in the residual assets of the Company.
The holders of the Company's Common Stock are entitled to share equally
and ratably in dividends paid, when, as and if declared by the Board of
Directors out of funds legally available for the payment thereof. Under the
Certificate and consistent with Delaware law, the declaration of dividends is
subject to the discretion of the Board of Directors. The Company has no present
intention of paying cash dividends on the Common Stock; rather, the Company
intends to retain earnings to finance the development and expansion of
operations. Nonetheless, the payment of cash dividends may be restricted by a
number of other factors, including future earnings, capital requirements and the
Company's overall financial condition.
REASON FOR THE INCREASE IN THE NUMBER OF SHARES OF COMMON STOCK
In its Annual Report, the Company has stated that one of its principal
business strategies is to achieve growth through implementation of an aggressive
acquisition strategy. Toward this end, the Company has recently completed three
(3) acquisitions that have more than doubled the revenue base of the Company.
Since issuance of the Company's Common Stock is an important element in the
acquisition of target companies, the Board of Directors considers the proposed
increased in the number of authorized shares desirable so that adequate Common
Stock is available in order to facilitate the acquisition of target companies.
The issuance of Common Stock is also essential in connection with financing the
Company's working capital needs through the offering of shares on a private
placement or public offering basis. In addition, the Common Stock authorized as
a result of the approval of this proposal shall provide the Board of Directors
the necessary
19
<PAGE> 25
flexibility to issue Common Stock in connection with and in furtherance of
general corporate purposes, whether in the nature of stock dividends and splits,
employee benefits, stock options or any other appropriate corporate purpose.
POTENTIAL ANTI-TAKEOVER EFFECT
Although neither the Board of Directors nor the management of the
Company views this proposal as an anti-takeover measure, the Company could use
authorized but unissued Common Stock to frustrate persons seeking to effect a
takeover or otherwise gain control of the Company. For example, the Company
could privately place shares of the Common Stock with purchasers who might side
with the Board of Directors in opposing a hostile takeover bid or issue shares
to a holder which would, thereafter, have sufficient voting power to assure that
any proposal to amend or repeal the Bylaws or certain provisions of the
Certificate would receive the requisite vote. Notwithstanding the potential
anti-takeover effect of the authorization of additional Common Stock, the Board
of Directors believes it is in the best interest of the Company to increase the
number of authorized shares of Common Stock to further general corporate
purposes, including but not limited to, the Company's aggressive acquisition
program.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of at least a majority of the outstanding shares
of Common Stock and Series B Shares, voting as separate classes, is required to
approve this proposal to amend the Certificate to authorize an increase in the
number of shares of Common Stock available for issuance. An abstention or
failure to vote on this proposal is not an affirmative vote; and therefore, will
have the same effect as a negative vote on this proposal at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL TO THIS PROPOSAL
TO AMEND THE CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK FROM 10,000,000 TO 50,000,000
20
<PAGE> 26
PROPOSAL 5
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF PREFERRED STOCK
FROM 1,000 TO 10,000,000
The Board of Directors has unanimously adopted a resolution setting
forth a proposed amendment to the Company's Certificate of Incorporation to
increase the number of shares of Preferred Stock which the Company is authorized
to issue from 1,000 to 10,000,000 shares. A true and correct copy of the
proposed amendment is attached hereto as Exhibit "A." The statements made in
this Proxy Statement regarding the amendment to the Company's Certificate to
increase the number of authorized shares of Preferred Stock should be read in
conjunction with and are qualified in their entirety by reference to Exhibits
"A."
DESCRIPTION OF THE PREFERRED STOCK
Within the limits and restrictions contained in the Certificate, the
Board of Directors has the authority, without further action by the
stockholders, to issue up to 1,000 shares of Preferred Stock, $.01 par value per
share, in one or more series, and to fix, as to any such series, the dividend
rate, redemption prices, preferences on liquidation or dissolution, sinking fund
terms, if any, conversion rights, voting rights, and any other preference or
special rights and qualifications.
The Company has issued three series of Preferred Stock: the Series A
Shares, Series B Shares and the Series C Shares. The Certificate of Designation
for each series of Preferred Stock sets forth the general rights and preferences
of each series.
SERIES A $ 3.00 CONVERTIBLE PREFERRED STOCK
The Board of Directors has authorized the designation of a series of
Preferred Stock as Series A $3.00 Convertible Preferred Stock ("Series A
Shares"). The Company currently has 122 Series A Shares outstanding which have
such rights and preferences as described below.
The Series A Shares have a liquidation preference of $30,000 per Series
A Share in addition to any accrued dividends thereon. The holders of the Series
A Shares share ratably in all liquidation preferences with the holders of the
Series B Shares. The holders of the Series A Shares are not entitled to receive
dividends. The holders of the Series A Shares are entitled, at any time, to
convert the principal amount of the purchase price of the Series A Shares into
shares of Common Stock at a conversion rate of $3.00 per share of Common Stock.
The number of shares of Common Stock into which each Series A Share shall be
convertible shall be subject to adjustment to protect against dilution in the
event the Company shall declare a stock dividend, make a distribution on the
Common Stock or divide or reclassify the outstanding shares of Common Stock.
Prior to the conversion of the Series A Shares, the holders thereof have no
voting rights.
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SERIES B $3.00 CONVERTIBLE PREFERRED STOCK
The Board of Directors has authorized the designation of a series of
Preferred Stock as Series B $3.00 Convertible Preferred Stock ("Series B
Shares"). Currently, the Company has 50 Series B Shares outstanding with such
rights and preferences as are described below.
The Series B Shares have a liquidation preference of $30,000 per share.
The holders of the Series B Shares and the Series A Shares shall share ratably
in all liquidation preferences. Accordingly, if the Company shall liquidate or
dissolve, no distribution shall be made to the holders of the Common Stock
unless prior thereto holders of the Series B Shares shall have received a
liquidation preference of $30,000 per Series B Share which shall be paid after
the payment to all creditors and payment of the liquidation preference to the
holders of the Series A Shares but before the liquidation preference paid to the
holders of the Series C Shares.
Unlike the holders of the Series A Shares who are not entitled to
dividends, the holders of the Series B Shares are entitled to dividends when, as
and if declared by the Board of Directors. The holders of the Series B Shares
share any dividends declared by the Board of Directors with the holders of the
Common Stock on an as converted basis. Any dividend declared may be paid by the
Company in its sole discretion either in cash or in shares of Common Stock based
upon the Series B Conversion Rate of $3.00 per share.
At any time, the holders of the Series B Shares have the right to
convert the $1,500,000 principal amount of the shares in addition to any and all
accrued dividends thereon into shares of the Company's Common Stock at the
Series B Conversion Rate of $3.00 per share (the "Series B Conversion Rate").
The Series B Conversion Rate is subject to adjustment provided that at the time
of the conversion the Company remains in compliance with the conversion
performance criteria (the "Conversion Performance Criteria"). The Company shall
remain in compliance with the Conversion Performance Criteria so long as during
each of the fiscal quarters in the first, second and third years after the
Merger, the Company achieves earnings per share of $.0125, $.025 and $.0375,
respectively. As so adjusted, the Series B Conversion Rate shall be the lower
of: (i) $3.00 per share of Common Stock; or (ii) the average of the closing bid
and ask prices of the Common Stock on the principal exchange, automated
quotation system or over-the counter market for the 15 trading days prior to the
date of conversion. The failure to meet the Conversion Performance Criteria for
any particular quarter will not adversely effect the computation of the Series B
Conversion Rate for any subsequent quarter.
The number of shares of Common Stock into which each Series B Share is
convertible shall be subject to adjustment to protect against dilution in the
event the Company shall declare a stock dividend, make a distribution of the
Common Stock, divide or reclassify the outstanding shares of Common Stock.
The holders of Series B Shares are entitled to vote in the election of
directors by casting as many votes in total as equates to the total number of
shares that may be cast in the election of directors by the holders of Common
Stock, plus one; provided that the holders of the Series B Shares may only elect
a majority of the Board of Directors by voting for their own nominees. The
holders of the Series B Shares will also be entitled to vote as a class on all
matters brought to a vote of stockholders. The foregoing rights of the holders
of the Series B Shares shall terminate upon the earlier of: (i) the first date
upon which the Company no longer complies with the Voting Rights Performance
Criteria; or (ii) the third anniversary of the closing of the Merger. The
Company shall remain in compliance with the Voting Rights Performance Criteria
so long
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as for the first three years following the closing of the Merger, its annual
audited financial statements reflect earnings per share of $.05, $.10 and $.15,
respectively. Failure to meet the Voting Rights Performance Criteria in any of
the first three years after the closing of the Merger results in the termination
of such rights of holders of the Series B Shares. Upon termination of such
rights, the holders of the Series B Shares shall have no voting rights and their
consent shall not be required for the taking of any action except as required by
law. See "PROPOSAL 3-ELECTION OF DIRECTORS-VOTE REQUIRED FOR APPROVAL."
In connection with the adoption of the Classified Board, the holders of
the Series B Shares have agreed to relinquish their right to vote for the
election of directors.
SERIES C CONVERTIBLE PREFERRED STOCK
The Board of Directors has authorized the designation of a series of
Preferred Stock as Series C Convertible Preferred Stock ("Series C Shares").
Currently, the Company has 105.3 Series C Shares outstanding with such rights
and preferences as are described below. The Series C Shares do not have voting
rights.
The Series C Shares have a liquidation preference of $15,000 per Series
C Share. The holders of the Series A Shares, Series B Shares and Series C Shares
share ratably in all liquidation preferences. Accordingly, if the Company shall
liquidate or dissolve, no distribution shall be made to the holders of the
Common Stock unless prior thereto holders of the Series C Shares shall have
received a liquidation preference of $15,000 per share which shall be paid after
the payment to all creditors and payment of the liquidation preference to the
holders of the Series A Shares and the holders of the Series B Shares.
The holder of the Series C Shares shall be entitled to dividends only
when, as and if declared by the Board of Directors. The holder of the Series C
Shares will share dividends declared by the Board of Directors with the holders
of the Common Stock on an as if converted basis. In addition, the Series C
Shares shall automatically convert into shares of the Company's Common Stock on
the last day of each of the three month periods following the issuance of the
Series C Shares (March 18, 1998). $455,000 of the Series C Shares shall convert
on June 18, 1998. Thereafter, on each of the next three month periods following
issuance, $375,000 of the Series C Shares shall convert into Common Stock. The
Series C Shares shall convert into shares of Common Stock at a conversion rate
equal to the lower of: (i) $6.87 per share; or (ii) a 33% premium over the
average of the closing prices of the Company's Common Stock on the principal
exchange, automated quotation system or over-the-counter market upon which the
Company's Common Stock trades for the ten trading days prior to the date of each
conversion. Prior to conversion of the Series C Shares, the holders thereof have
no voting rights.
REASON FOR THE INCREASE IN THE NUMBER OF SHARES OF PREFERRED STOCK
The Board of Directors considers the proposed increase in the number of
authorized shares of Preferred Stock desirable because it would give the Board
of Directors the necessary flexibility to issue Preferred Stock in connection
with and in furtherance of general corporate purposes, including but not limited
to, the pursuit of the Company's acquisition program. See "PROPOSAL 4-AMENDMENT
TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF
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COMMON STOCK FROM 10,000,000 TO 50,000,000-REASON FOR THE INCREASE IN THE NUMBER
OF SHARES OF COMMON STOCK."
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POTENTIAL ANTI-TAKEOVER EFFECT
The Company is governed by the provisions of Section 203 of the DGCL,
an anti-takeover law. Generally, the DGCL prohibits a public corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. "Business combination" includes mergers, asset sales and
other transactions resulting in a financial benefit to the stockholder. An
"interested stockholder" is a person who, together with its affiliates and
associates, owns (or within three years, did own) 15% or more of the
corporation's stock.
The provisions regarding certain business combinations under the DGCL
could have the effect of delaying, deferring or preventing a change in control
of the Company or the removal of existing management. Frequently, a takeover
transaction affords stockholders the opportunity to sell their shares at a
premium over the current market prices.
The provisions described above, together with the voting rights of the
Series B Shares and the ability of the Board of Directors to issue Preferred
Stock may have the effect of delaying or deterring a change in control or
management of the Company.
In addition, one of the effects of undesignated Preferred Stock may be
to enable the Board of Directors to render more difficult or to discourage an
attempt to obtain control of the Company by means of a tender offer, proxy
contest, merger or otherwise, and thereby protect the continuity of the
Company's management. The issuance of shares of Preferred Stock pursuant to the
Board of Directors' authority described above may adversely affect the rights of
the holders of Common Stock. For example, Preferred Stock issued by the Company
may rank prior to the Common Stock as to dividend rights, liquidation
preferences or both, may have full or limited voting rights and may be
convertible into shares of Common Stock. Accordingly, the issuance of shares of
Preferred Stock may discourage bids for the Common Stock or may otherwise
adversely affect the market price of the Common Stock.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of at least a majority of the outstanding shares
of Common Stock and Series B Shares, voting as separate classes, is required to
approve this proposal to amend the Certificate to authorize an increase in the
number of shares of Preferred Stock available for issuance. An abstention or
failure to vote on this proposal is not an affirmative vote; and therefore, will
have the same effect as a negative vote on this proposal at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSAL TO AMEND
THE CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED PREFERRED
STOCK FROM 1,000 TO 10,000,000
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PROPOSAL 6
AMENDMENT TO THE 1993 STOCK OPTION PLAN TO INCREASE THE NUMBER
OF SHARES AVAILABLE FOR ISSUANCE PURSUANT TO GRANTS FROM 100,000
TO 2,000,000
The stockholders of the Company are being asked to vote on a proposal
to amend the 1993 Stock Option Plan (the "1993 Option Plan") to increase the
number of shares of the Common Stock issuable thereunder by 1,900,000 shares to
2,000,000 shares. The Board of Directors believes that the share increase is
necessary in order to ensure that the Company will continue to have the ability
in the future to attract and retain the services of highly qualified officers
and other employees by providing them with adequate equity incentives in the
form of stock option grants. As of May 12, 1998, 100,000 shares were available
for future issuance under the 1993 Option Plan.
The terms and provisions of the 1993 Option Plan, as proposed to be
amended, are described more fully below. The description, however, is not
intended to be a complete summary of all the terms of the 1993 Option Plan.
Because executive officers (who may also be members of the Board) are
eligible to receive awards under the 1993 Option Plan, each of them has a
personal interest in the approval of these amendments.
PURPOSE OF THE 1993 OPTION PLAN
The Board believes that it is in the best interests of the Company to
maintain an equity incentive program which will provide a meaningful opportunity
for officers, employees and directors who are also full-time employees to
acquire a substantial proprietary interest in the enterprise and thereby
encourage such individuals to remain in the Company's service and more closely
align their interests with those of the shareholders.
ADMINISTRATION OF THE 1993 OPTION PLAN
The 1993 Option Plan is administered by a committee of the Board of
Directors or the full Board of Directors (in either case, the "Plan
Administrator"). The Plan Administrator shall construe and interpret the 1993
Option Plan and establish such rules as it deems necessary for the proper
administration of the 1993 Option Plan. The Plan Administrator has authority
(subject to full Board review) to determine which eligible individuals are to
receive option grants, the number of shares to be covered by each granted
option, the date or dates on which the option is to become exercisable, and the
price of the option.
ELIGIBILITY
Under the 1993 Option Plan, all full-time employees of the Company or
its subsidiaries, including those who are officers and directors, non-employee
directors and consultants are eligible to receive options pursuant to the 1993
Option Plan, if selected.
TYPE OF OPTIONS, PRICE AND EXERCISABILITY
Nonqualified and incentive stock options may be granted under the 1993
Option Plan. The term of options granted under the 1993 Option Plan will be
fixed by the Plan Administrator
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provided, however, that the maximum option term may not exceed ten (10) years
from the grant date and the exercise price per share may not be less than the
fair market value per share of the Common Stock on the grant date. The exercise
price may be paid in cash or in shares of Common Stock; provided however that
shares of Common Stock used to pay the exercise price must have been owned by
the participant for a six-month period prior to the exercise date or such longer
period as determined by the Plan Administrator. No optionee is to have any
shareholder rights with respect to the option shares until such optionee has
exercised the option and paid the exercise price for the purchased shares.
Options are not assignable or transferable other than by will or the laws of
inheritance; and during the optionee's lifetime, the option may be exercised
only by such optionee.
TERMINATION OF EMPLOYMENT
If the employee to whom an option is granted shall cease to be employed
by the Company or its subsidiaries for any reason, other than death, then within
30 days next succeeding such termination of employment, but in any event not
later than the expiration date of the option, the option holder may exercise the
option rights granted to the option holder under the option, but only to the
extent that the option holder was entitled to exercise the same on the date of
such termination of employment. Notwithstanding the foregoing, the Plan
Administrator may, in its discretion, extend the post-termination exercise
period to a date not later than the original expiration date of such option.
If the employee to whom an option is granted shall cease to be employed
by the Company or its subsidiaries by reason of death, then within the six (6)
months next succeeding such option holder's death, but in any event not later
than the expiration date of the option, the option holder's executor,
administrator, or any person or persons to whom the option holder's rights under
the option shall pass by testamentary transfer, bequest or by the operation of
the laws of descent and distribution, may exercise the option rights granted to
the option holder under the option, but only to the extent that the option
holder was entitled to exercise the same on the date of such option holder's
death. Notwithstanding the foregoing, the Plan Administrator may, in its
discretion, extend the post-death exercise period to a date not later than the
original expiration date of such option.
AMENDMENT AND TERMINATION
The Board of Directors may modify, amend, or terminate the 1993 Option
Plan at any time except that, to the extent then required by applicable law,
rule, or regulation, approval of the holders of a majority of the Common Stock
represented in person or by proxy at a meeting of the shareholders will be
required to increase the maximum number of shares of Common Stock available for
grant under the 1993 Option Plan (other than increases due to adjustments in
accordance with the 1993 Option Plan). No modification, amendment, or
termination of the 1993 Option Plan shall adversely affect the rights of a
participant under a grant previously made to him without the consent of such
participant.
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<PAGE> 33
ADJUSTMENTS
In the event of a stock dividend, stock split or other change affecting
the shares or share price of Common Stock, such proportionate adjustments, if
any, as the Board of Directors deems appropriate, will be made with respect to:
(i) the aggregate number of shares of Common Stock that may be issued under the
1993 Option Plan, (ii) each outstanding award made under the 1993 Option Plan
and (iii) the exercise price per share for any outstanding stock option awards
under the 1993 Option Plan.
NEW PLAN BENEFITS AND CLOSING QUOTATION
Because the grant of awards under the 1993 Option Plan are at the
discretion of the Plan Administrator, it is not possible to indicate what awards
will be made to eligible participants.
As of May 12, 1998, the closing price of the Company's Common Stock as
quoted on the OTC Bulletin Board was $___ per share.
FEDERAL INCOME TAX CONSEQUENCES
(a) Nonqualified Options. Under the current applicable provisions of
the Internal Revenue Code, no tax will be payable by the recipient of an option
at the time of grant. Upon exercise of a nonqualified option, the excess, if
any, of the fair market value of the shares with respect to which the option is
exercised over the total option exercise price of such shares will be treated
for Federal tax purposes as ordinary income. Any profit or loss realized on the
sale or exchange of any shares actually received will be treated as capital gain
or loss. The Company will be entitled to deduct the amount, if any, by which the
fair market value on the date of exercise of the shares with respect to which
the option was exercised exceeds the exercise price.
(b) Incentive Stock Options. With respect to an incentive stock option,
generally, no taxable gain or loss will be recognized when the option is granted
or exercised. Incentive stock options exercised more than three months after
termination of employment will be taxed in the same manner as nonqualified
options described above. Generally, upon exercise of an incentive stock option,
the spread between the fair market value and the exercise price will be an item
of tax preference for the purposes of the alternative minimum tax.
If the shares acquired upon the exercise of an incentive stock option
are held for at least one year, any gain or loss realized upon their sale will
be treated as long-term capital gain or loss. The Company will not be entitled
to a deduction. If the shares are not held for the one-year period, ordinary
income will be recognized in an amount equal to the difference between the
exercise price and the fair market value of the common stock on the date the
option is exercised. The Company will be entitled to a deduction equal to the
amount of ordinary income so recognized. If the shares are not held for the one
year-period and the amount realized upon sale is less than the exercise price,
such difference will be a capital loss.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the holders of the Common Stock
and Series B Shares, voting separately in classes present, in person or by
proxy, at the Meeting is required for the approval of the amendment to the 1993
Option Plan. If the stockholders do not approve the
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proposal, then the 1993 Option Plan will continue in effect in accordance with
its existing provisions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL TO
AMEND THE 1993 OPTION PLAN
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PROPOSAL 7
RATIFICATION OF THE COMPANY'S INDEPENDENT AUDITORS
Deloitte & Touche LLP has audited the Company's financial statements
for the year ended December 31, 1997. The Board of Directors has selected
Deloitte & Touche LLP to serve as the independent auditors for the Company for
the fiscal year ending December 31, 1998. Representatives of Deloitte & Touche
LLP are expected to be present at the Meeting to make a statement, if they so
desire, and to be available to respond to appropriate questions.
The Board of Directors shall consider the selection of another
accounting firm to serve as the Company's independent auditors in the event that
the stockholders do not approve the selection of Deloitte & Touche LLP as the
Company's independent auditors.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the shares of Common Stock and
Series B Shares, voting in separate classes, present, in person or by proxy, at
the Meeting is required for ratification of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending December 31, 1998.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
THE 1998 FISCAL YEAR
OTHER MATTERS
The Board of Directors does not know of any other matter which is
intended to be brought before the Meeting, but if such matter is presented, the
persons named in the enclosed proxy intend to vote the same according to their
best judgment.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act") requires the Company's officers and directors, and persons
who own more than ten percent (10%) of a class of the Company's equity
securities registered under the Exchange Act to file reports of ownership on
Form 3 and changes in ownership on Form 4 or 5 with the Securities and Exchange
Commission (the "SEC"). Such officers, directors and ten percent (10%)
stockholders are also required by SEC rules to furnish the Company with copies
of all forms that they file pursuant to Section 16(a). Based solely on its
review of the copies of such forms received by it, or written representations
from such persons that no other reports were required for such persons, the
Company believes that all Section 16(a) filing requirements applicable to the
Company's officers, directors and ten percent (10%) stockholders were complied
with in a timely fashion during the fiscal year ended December 31, 1997, except
for certain reports, which include a Form 3, and Forms 4 and 5 for Steven
Rosner; and (ii) a Form 3 and Forms 4 and 5 for each of Messrs. Bernard
Buchwalter, Ike Suri and Richard Someck. Messrs. Buchwalter, Suri and Someck
resigned as directors prior to or in connection with the Merger.
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DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
The Company currently intends to hold its 1999 Annual Meeting of
Stockholders in June 1999 and to mail proxy statements relating to such meeting
in April 1999. In order for proposals of stockholders to be considered for
inclusion in the proxy statement and form of proxy relating to the Company's
1999 Annual Meeting of Stockholders, such proposals must be received by the
Company no later than January __, 1999 and must otherwise be in compliance with
all applicable laws and regulations.
By Order of the Board of Directors
------------------------------------
Jack R. Leadbeater
Chairman of the Board and
Chief Executive Officer
Dated: May __, 1998
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Exhibit A
FORM OF CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
OSAGE SYSTEMS GROUP, INC.
The undersigned, desiring to amend the Certificate of
Incorporation of Osage Systems Group, Inc., a Delaware corporation (the
"Corporation"), pursuant to Section 242 of the Delaware General Corporation law,
DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation, by unanimous
approval at a meeting of the directors, evidenced by board
resolutions and approval of the requisite vote of each class
of stockholders, has duly adopted the following resolutions
proposing and declaring advisable the following amendment to
the Certificate of Incorporation:
RESOLVED,that Article Fourth of the Certificate of
Incorporation of the Corporation, as amended to date,
be restated in its entirety to read:
"Capital Stock." The total number of shares of stock
which the Corporation shall have authority to issue
is Sixty Million (60,000,000) shares, of which Fifty
Million (50,000,000) shares shall be Common Stock of
the par value of One Cent ($.01) per share
(hereinafter called "Common Stock") and of which Ten
Million (10,000,000) shares shall be Preferred Stock
of the par value of One Cent ($.01) per share
(hereinafter called "Preferred Stock").
RESOLVED,that Article Seventh of the Certificate of
Incorporation of the Corporation, as amended to date,
be restated in its entirety to read:
"Board of Directors and Bylaws." All corporate powers
shall be exercised by the Board of Directors, except
as otherwise provided by statute or by this
Certificate or Incorporation, or any amendment
thereof, or by the Bylaws. Directors need not be
elected by written ballot, unless in the Bylaws of
the corporation. The Bylaws, may be adopted, amended
or repealed by the Board of Directors of the
Corporation, except as otherwise provided by law, but
any bylaw made by the Board of Directors is subject
to amendment and repeal by the stockholders of the
Corporation.
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(a) Numbers, Elections And Terms. Except as otherwise
fixed by or pursuant to provisions hereof relating to
the rights of the holders of any class or series of
stock having a preference over common stock as to
dividends or upon liquidation to elect additional
Directors under specified circumstances, the number
of Directors of the Corporation shall be fixed from
time to time by affirmative vote of a majority of the
Directors then in office. The Directors, other than
those who may be elected by the holders of any
classes or series of stock having a preference over
the common stock as to dividends or upon liquidation,
shall be classified, with respect to the time for
which they severally hold office, into three class,
as nearly equal in number as possible, as shall be
provided in the manner specified in the Bylaws of the
corporation, one class to be originally elected for a
term expiring at the annual meeting of stockholders
to be held in 1999, another class to be originally
elected for a term expiring as the annual meeting of
stockholders to be held in 2000, and another class to
be originally elected for a term expiring at the
annual meeting of stockholders to be held in 2001,
with each class to hold office until its successor is
elected and qualified. At each annual meeting of the
stockholders of the Corporation after fiscal year
1998, the successors of the class of Directors whose
term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of
stockholders held in the third year following the
year of their election.
(b) Newly Created Directorships And Vacancies. Except
as otherwise fixed by or pursuant to provisions
hereof relating to the rights of the holders of any
class or series of stock having a preference over
common stock as to dividends or upon liquidation to
elect additional Directors under specified
circumstances, newly created directorships resulting
from any increase in the number of directors and any
vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal or
other cause shall be filled by the affirmative vote
of a majority of the remaining Directors than in
office, even though less then a quorum of the Board
of Directors. Any Director elected in accordance with
the preceding sentence shall hold office for the
remainder of the full term of the class of Directors
in which the new directorship was created or the
vacancy occurred and until such Director's successor
shall have been elected and qualified. No decrease in
the number of Directors constituting the Board of
Directors shall shorten the term of any incumbent
director.
(c) Removal. Except as otherwise fixed by or pursuant
to provisions hereof relating to the rights of the
holders of any class or series of stock having a
preference over common stock as to dividends or upon
liquidation to elect additional Directors under
specified circumstances, any Director may be removed
from office only for cause and only by the
affirmative vote of the holders of two-thirds of the
combined voting power of the then outstanding shares
of stock entitled to vote generally in the election
of Directors, voting together as a single class.
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<PAGE> 39
(d) Amendment, Repeal, Etc. Notwithstanding anything
contained in this Certificate of Incorporation to the
contrary, the consent of the Board of Directors shall
be required to alter, amend, adopt any provisions
inconsistent with or repeal this Section Seventh.
RESOLVED,that Article Tenth to the Certificate of
Incorporation be included in its entirety to read as
follows:
"Amendments To Certificate Of Incorporation."
Amendments to the Certificate of Incorporation of the
Corporation shall require the affirmative vote of
two-thirds of the holders of a majority of the
combined voting power of the then outstanding shares
of stock entitled to vote on any proposed amendment
to the Certificate of Incorporation. Notwithstanding
the foregoing, in the event that a resolution to
amend the Certificate of Incorporation of the
Corporation is adopted by the affirmative vote of at
least eighty percent (80%) of the Board of Directors
approval of the amendment shall only require the
affirmative vote of the holders of a majority of the
combined voting power of the then outstanding shares
of stock entitled to vote generally on such
amendment, voting together as a single class.
SECOND: That the aforesaid amendments has been duly adopted in
accordance with Section 242 of the Delaware General
Corporation Law.
THIRD: That this amendment shall become effective on _________, 1998.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by, Jack R. Leadbeater, its Chief Executive Officer, and
David S. Olson, its Chief Operating Officer this __ day of _________, 1998.
OSAGE SYSTEMS GROUP, INC.
By:_________________________________
Jack R. Leadbeater
Chief Executive Officer
By:_________________________________
David S. Olson
Chief Operating Officer
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PRELIMINARY COPY
OSAGE SYSTEMS GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jack R. Leadbeater and David Olson and
each of them proxies with power to appoint a substitute and hereby authorizes
either of them to represent and to vote all shares of Common Stock of Osage
Systems Group, Inc. held of record by the undersigned on May 12, 1998 at the
Annual Meeting of Stockholders of Osage Systems Group, Inc. to be held on June
12, 1998 and at any adjournment(s) or postponement(s) thereof, and to vote as
directed on the reverse side of this form and, in their discretion, upon such
other matters not specified as may come before said meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX (SEE
REVERSE SIDE), BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD
SEE REVERSE SIDE
<PAGE> 41
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES FOR DIRECTOR, FOR ALL AMENDMENTS TO THE CERTIFICATE OF INCORPORATION,
FOR THE AMENDMENT TO THE 1993 STOCK OPTION PLAN AND FOR THE RATIFICATION OF
DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR OSAGE SYSTEMS GROUP, INC. FOR
THE 1998 FISCAL YEAR.
- -------------------------------------------------------------------------------
1. Proposal 1
Amendment to the Certificate of FOR AGAINST ABSTAIN
Incorporation to provide for [ ] [ ] [ ]
the classification of the Board
of Directors.
2. Proposal 2
Amendment to the Certificate of FOR AGAINST ABSTAIN
Incorporation to provide that [ ] [ ] [ ]
directors shall only be removed
for cause and by a
supermajority vote of
stockholders and to require the
consent of the Board of
Directors to amend the
Certificate of Incorporation.
3. Proposal 3
Election of Directors FOR WITHHELD
Jack R. Leadbeater [ ] [ ]
David S. Olson
John Iorillo
Andrew P. Panzo
Michael G. Glynn
Vote withheld from the
following nominee(s):
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4. Proposal 4
Amendment to the Company's FOR AGAINST ABSTAIN
Certificate of Incorporation to [ ] [ ] [ ]
Increase the Number of
Authorized Shares of Common
Stock from 10,000,000 to
50,000,000.
<PAGE> 42
5. Proposal 5
Amendment to the Company's FOR AGAINST ABSTAIN
Certificate of Incorporation [ ] [ ] [ ]
to Increase the Number of Authorized
Shares of Preferred Stock from
1,000 to 10,000,000.
6.
Proposal 6
Amendment to the 1993 Stock FOR AGAINST ABSTAIN
Option Plan to Increase the [ ] [ ] [ ]
Number of Shares Available for
Issuance Pursuant to Grants
from 100,000 to 2,000,000.
7.
Proposal 7
Ratification of the appointment FOR AGAINST ABSTAIN
of Deloitte & Touche LLP as [ ] [ ] [ ]
Independent Auditors for the
Company.
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE REQUIRED IF MAILED IN THE UNITED STATES.
NOTE: Please sign name(s) exactly as printed hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as
such.
SIGNATURE(S)_____________________________________________________
____________________________________________________________,1998
DATE
