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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
Renaissance Golf Products, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER _________, 1997
RENAISSANCE GOLF PRODUCTS, INC.
You are cordially invited to attend the Annual Meeting of Stockholders of
Renaissance Golf Products, Inc. (the "Company"), which will be held Wednesday,
October _______, 1997, at 11:00 a.m. local time, at the Willow Creek Country
Club, located at 8300 South, 2700 East, Sandy, Utah 84093-1198, telephone number
(801) 942-1954, for the following purposes:
1. To elect Company directors for the upcoming year;
2. To approve a 4:1 reverse stock split of the currently outstanding
shares without changing the number of authorized shares or the par value of the
shares which if approved will result in the current shareholders current
aggregate stock ownership interest in the Company being diluted from 59.5% to
26.8%, assuming full dilution of the shares through the conversion of
outstanding convertible debentures into 2,500,000 shares, and the exercise of
outstanding stock options into 5,477,000 shares;
3. To approve an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares from 20,150,000 to 40,150,000;
4. To consider and ratify the appointment of Corbin & Wertz as
independent auditor of the Company for the year ending December 31, 1997;
5. To adjourn the meeting for a period of two months, if necessary to
permit management with an opportunity to obtain the requisite number of votes to
approve Proposal 2 and/or 3; and
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on ________, 1997 will
be entitled to vote at the Annual Meeting or adjournment thereof.
By Order of the Board of Directors
John B. Hewlett
Chairman of the Board
________, 1997
IMPORTANT
PLEASE COMPLETE, DATE, SIGN, AND MAIL PROMPTLY THE ENCLOSED PROXY CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH TO DO SO
EVEN THOUGH YOU HAVE RETURNED YOUR PROXY.
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RENAISSANCE GOLF PRODUCTS, INC.
5812 Machine Drive
Huntington Beach, California 92649
PRELIMINARY PROXY STATEMENT
September 22, 1997
-------------------
SOLICITATION OF PROXIES
DATE, TIME, AND PLACE
This Proxy Statement and the accompanying proxy/voting instruction card
("Proxy Card") are being mailed beginning on or about the date shown above, to
holders of common shares (the "Stockholders") in connection with the
solicitation of proxies by the Board of Directors (the "Board of Directors" or
"Board") of RENAISSANCE GOLF PRODUCTS, INC., a Delaware corporation (the
"Company"), to be used at the Annual Meeting of Stockholders (the "Meeting"), to
be held Friday, _________, 1997 at the Willow Creek Country Club, located at
8300 South, 2700 East, Sandy, Utah 84093-1198, telephone number (801) 942-1954
at 11:00 a.m. local time, or any adjournment thereof.
QUORUM AND VOTING
Proxies are solicited to give all Stockholders of record at the close of
business on __________, 1997, an opportunity to vote on matters that come before
the Meeting. This procedure is necessary because Stockholders live in various
states and many may not be able to attend the Meeting. Shares of Common Stock
(the "Shares") can be voted only if the Stockholder is present in person or is
represented by proxy. The presence in person or by proxy of the holders of a
majority of the total outstanding voting Shares is necessary to constitute a
quorum at the Meeting.
When your Proxy Card is returned properly signed, the Shares represented
will be voted in accordance with your directions. You can specify your choices
by marking the appropriate boxes on the enclosed Proxy Card. If your Proxy Card
is signed and returned without specifying choices, the Shares will be voted as
recommended by the Board of Directors. Abstentions marked on the Proxy Card and
broker non-votes are voted neither "for" nor "against" items being voted upon,
but are counted in the determination of a quorum.
As of the record date, there were 10,961,250 Shares outstanding. Each
outstanding Share is entitled to one vote on each matter properly brought before
the Meeting other than the election of Directors which is by cumulative voting.
SOLICITATION AND COST
The Company will bear all costs and expenses related to this solicitation
of proxies by the Board of Directors, including the costs of preparing,
printing, and mailing to the Stockholders this Proxy Statement and accompanying
materials. In addition to the solicitation of proxies by use of the mails, the
Directors, officers, and employees of the Company, without receiving additional
compensation, may solicit proxies personally, by telephone, or by any other
means of communication.
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REVOCABILITY OF PROXY
If you wish to give your proxy to someone other than the persons designated
by the Board of Directors, all names appearing on the enclosed Proxy Card must
be crossed out and the name of another person or persons inserted. The signed
card must be presented at the Meeting by the person or persons representing you.
You may revoke your proxy at any time before it is voted at the Meeting by
executing a later-dated proxy, by voting by ballot at the Meeting, or by filing
a written revocation of your proxy with the Company before the Meeting.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO SIGN AND RETURN THE
ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. If you
do attend, you may vote by ballot at the Meeting, thereby canceling any proxy
previously given.
As a matter of policy, proxies, ballots, and voting tabulations that
identify individual Stockholders are kept private by the Company. Such
documents are available for examination only by the inspectors of election and
certain personnel associated with processing Proxy Cards and tabulating the
vote. The vote of any Stockholder is not disclosed except as may be necessary
to meet legal requirements.
DOCUMENTS INCORPORATED BY REFERENCE
The Company specifically incorporates the Financial Statements for the year
ended March 31, 1996, filed as part of the 1996 Annual Report on Form 10-KSB in
response to Item 13 of the 10-KSB, and the Form 10-QSB for the period ended June
30, 1997. The Annual Report and attached Financial Statements should have been
enclosed in the mailing containing this Proxy Statement. If you did not receive
a copy of the Annual Report and attached Financial Statement, please contact the
Company and request that the information be sent to you. A copy of the June 30,
1997 10-QSB may be obtained from the Company without cost to the requesting
stockholder by contacting the Company.
INTERESTS OF PERSONS IN MATTERS TO BE ACTED UPON
In October 1996, at which time the Company was insolvent and its license to
use the Fila trademark on golf equipment and accessories was suspended pending
payment of past due royalties of approximately $835,000 (the "Past Due
Royalties"), the Company offered for sale in a private placement (the
"Financing") up to a maximum of 100 units at an issue price of $25,000 per unit
(the "Units"), for an aggregate of $2,500,000, each Unit consisting of (i) a
Convertible Subordinated Debenture due November 1, 2001 in the principal amount
of $12,500 bearing interest, payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year commencing on June 30, 1997, at the
rate of 10% per annum for the first 24 months and bearing interest thereafter at
the prime rate charged by the Company's bank plus four points (the "Debenture");
and (ii) 62,500 Shares, par value $.001 (the "Unit Shares"), at a price of $.20
per Share for a total of $12,500 for the Unit Shares. The Debenture is
convertible at any time from issuance prior to maturity at the rate of $0.50 per
Share and is redeemable by the Company at any time after the closing price of
the Company's Shares equals or exceeds $1.50 per Share for 20 consecutive
trading days.
In conjunction with the Financing, the Company experienced a change of
control which included the Company appointing a new Chairman of the Board, and
the Board of Directors acting to fill two vacancies created by the resignations
of Michael B. Orr and J. Arthur Wright, and two other existing vacancies, by
electing John B. Hewlett, Kenneth W. Craig, Dennis L. Crockett, and Wade M.
Mitchell as Directors to serve until the 1997 annual meeting of stockholders.
John B. Hewlett, who was primarily responsible for bringing the new capital into
the Company through the Financing, provided a $400,000 line of credit to secure
future minimum royalties to Fila Sport, and personally guaranteed a
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$1,000,000 revolving loan agreement obtained to provide working capital for the
Company was appointed as the Chairman of the Board of Directors.
Mr. Hewlett, who maintains his principal place of business at 2919 East
Granite Hollow Street, Sandy, Utah 84092, is President of Hewlett Financial
Corporation which engages primarily in strategic asset, insurance and tax
planning for individuals and businesses.
All 100 Units offered through the Financing have been subscribed, which
will result in a capital investment to the Company of nearly $2,500,000. In
conjunction with the Financing, the Company experienced a change of control to
facilitate attracting the new investors and to secure new lines of credit
totaling an additional $1,900,000. The $3,900,000 increase in capital available
to the Company through the sale of the Company's securities and the lines of
credit guaranteed by Mr. Hewlett, enabled the Company to continue operations and
remain a viable entity. At the time of the Financing, the Company was
insolvent, struggling to remain viable, and had severely decreasing sales due to
a lack of working capital. All of the new capital invested in the Company
resulted directly and indirectly from the personal efforts of Mr. Hewlett and
the new members of the Board of Directors and through the contacts of Mr.
Hewlett's affiliated companies. If capital had not been raised from the outside
investors assembled by Mr. Hewlett, the Company would likely have been forced to
discontinue operations and liquidate its remaining assets.
Before pursuing the Financing, the Board considered various options to keep
the Company operating, including the possibility of private and public
financings; however, the previous Board was unsuccessful in its attempts to
raise capital due to the poor financial condition of the Company. The Company
received limited financing from Mr. Doody, the Chief Executive Officer at the
time, but was able to obtain only small amounts of capital for short-term
purposes.
Recognizing the limitations on the Company's ability to raise capital
through a public or private financing because of the Company insolvency and the
termination of the Company's license agreement with Fila Sport, S.p.A. ("Fila
Sport") for the use of the Fila trademark because of the Past Due Royalties, the
Company's Board of Directors determined it would explore financing alternatives
to restore the Company to viability before winding down its operations. After
nearly one year of unsuccessful searching for new funding for the Company, the
Board was introduced to John B. Hewlett by the Secretary of the Company, Bruce
H. Haglund. After the introduction, Mr. Hewlett evaluated the Company's
financial condition and requirements, including the conditions to reinstate the
license agreement with Fila Sport, and proposed the structure of the Financing
for Board approval. The percentage of ownership required by Mr. Hewlett for an
offering to new investors, post-Financing and post-split, were determined
through negotiations with Mr. Hewlett and the Board. In the negotiations, the
parties agreed on the percentages for existing stockholders, post-Financing,
while providing sufficient ownership for potential investors to attract their
investment in an insolvent Company which needed to immediately repay the Past
Due Royalties to continue its business.
In order to provide potential investors, introduced to the Company by Mr.
Hewlett, with a degree of confidence in management necessary to secure new
investment proceeds, a change of control of the Company was effectuated by the
Board of Directors pursuant to negotiations with Mr. Hewlett in conjunction with
the Financing. Although existing executive management, all of whom had existing
employee agreements, was maintained, management was reinforced with the addition
of Kenneth W. Craig as the new President of the Company. The Board of Directors
was reconstituted with the resignation of the two former directors and the
addition of Messrs. Hewlett, Crockett, Craig and Mitchell pursuant to
nominations by and a vote of the remaining Board member, Miles T. Doody. Each
of the new Board members was nominated based upon his individual skills,
abilities, and anticipated role in completing the Financing and effectuating a
return of the Company to profitability. Additionally, management, the Board and
the new investors desired to increase the Company's stock price as part of a
long-term plan to qualify the Company's stock for trading on the Nasdaq Small
Cap Market, one criterion of which requires a minimum bid price of $4.00 per
share. In order to increase the
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bid price, the Board resolved prior to the Financing to propose a 4:1 reverse
stock split after the additional investment brought in through the Financing was
in place.
A bid price of $4.00 per share is only one of the entry standards the
Company must meet in order to regain the right to have its stock traded on the
Nasdaq Small Cap Market. The Company will also need to meet other entry
standards to have its stock listed on the Small Cap Market, including having (i)
300 stockholders, (ii) three market makers, (iii) $4,000,000 in net tangible
assets, or a $50,000,000 market capitalization, or $750,000 in net income, (iv)
a publicfloat of at least 1,000,000 shares having a market value of at least
$5,000,000, and (v) at least a one-year operating history or a $50,000,000
market capitalization. Currently, the per share bid price standard represents
the most challenging standard facing the Company. The proposed 4:1 reverse
stock split is expected to increase the bid stock price. Although existing
stockholders prior to the Financing have had their interests diluted as a result
of the Financing and will experience additional dilution as a result of the
reverse stock split, the Board of Directors believe all the stockholders will
benefit from the success of the Company as a result of the new capital available
and the prospects of an increased stock price.
After the completion of the Financing, the new investors obtained a total
of approximately 53.4% of the total outstanding stock of the Company, leaving
prior stockholders an aggregate interest in the Company of 46.6%. However, as
part of the plan to attract the new investors to the Company, convertible
debentures were issued to the new investors as part of the Financing and stock
options were granted to those persons and entities facilitating the financial
viability and a change in the focus of the Company. Assuming the conversion of
all debentures and full exercise of stock options, the new investors will hold
approximately 72.3% of the total outstanding stock and the prior stock holders
approximately 27.7%. However, the convertible debentures and stock options
granted in conjunction with the Financing are not subject to price adjustment
under any circumstances including a reverse stock split; accordingly, if the
proposal before the stockholders to approve a 4:1 reverse split is passed, the
new investors in the Financing and stock option holders will hold approximately
87.5% of the outstanding stock of the Company and the existing stockholders
prior to the Financing will hold approximately 12.5%, on a fully diluted basis.
In connection with the Financing, the Company by vote of the Board of
Directors, which did not require a vote of the stockholders, agreed to grant a
total of 5,477,000 non-qualified stock options in October 1996 (the "1996
Options"), all of which are exercisable at a price of $.50 or $1.00 per Share
and expire on December 31, 2006. The shares issuable upon exercise of the 1996
Options are not subject to adjustment in the event of a reverse stock split.
Certain of the options granted vested upon the sale of all 100 Units offered
through the Financing including the following: (i) Pine Valley, Ltd., an
affiliate of Mr. Hewlett, and Culley W. Davis, a consultant to the Company, were
each granted options to purchase 400,000 shares at a price of $.50 per Share;
(ii) Granite Hollow Insurance Agency, LLC, an affiliate of Mr. Hewlett, was
granted options to purchase 1,000,000 shares at a price of $.50 per Share; (iii)
Dennis L. Crockett was granted options to purchase 100,000 shares at a price of
$.50 per Share; (iv) Michael B. Orr and J. Arthur Wright, former directors of
the Company who have never been compensated for their service as directors, were
each granted options to purchase 50,000 shares at a price of $.50 per Share; (v)
Miles T. Doody was granted options to purchase 360,000 shares at a price of $.50
per Share in consideration for his waiver of rights to purchase 160,000 options
previously granted and his agreement to reduce his salary to $75,000 per year;
(vi) Bruce H. Haglund, Secretary and general counsel to the Company, received
750,000 options at a price of $.50 per Share in consideration for his agreement
to convert $150,000 of legal fees for a long-term promissory note due June 30,
1999, and he agreed to waive his rights to 50,000 options previously granted.
The Company agreed to grant Mr. Craig 1996 Options to purchase 600,000
shares at a price of $.50 per share. A total of 300,000 of the options vested
and the balance of his options vest upon the earlier of achieving certain
performance goals or after ten years. The remaining options granted are to vest
upon the earlier of achieving certain performance goals, or, ten years. The
performance goals are that the Company achieves sales of Fila-Registered
Trademark--trademarked products in the amount of $5,000,000 in 1997,
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$8,000,000 in 1998, and $10,000,000 in 1999. Current employees of the Company
were granted an aggregate of 417,000 1996 Options. James T. Doody received
225,000 of the 417,000 options. Mont E. Warren received 150,000 of the options,
and Janet Gardner received 9,000 of the options.
The Board also granted Mr. Hewlett 1,000,000 1996 Options exercisable at
the price of $1.00 per Share at any time until their expiration 10 years from
the date of grant in connection with his services in 1996 as a Director of the
Company, for providing marketing contacts and expertise to help effectuate the
Company's plan to re-focus its business strategy and marketing efforts, and in
consideration for the $400,000 royalty line of credit and his personal guarantee
of the Company's credit arrangements.
The Board granted Wade B. Mitchell 200,000 of the 1996 Options exercisable
at the price of $.50 per Share at any time until their expiration 10 years from
the date of grant and 150,000 of the 1996 Options exercisable at the price of
$1.00 per Share at any time until their expiration 10 years from the date of
grant. The options were granted to Mr. Mitchell for his services in 1996 as a
Director of the Company and for providing services to implement the Company's
re-focused business strategy and marketing efforts.
The 1996 Options granted were granted by the Board of Directors and such
grants did not require a vote of the stockholders. The shares issuable upon
exercise of the 1996 Options including those specifically discussed in this
section are not subject to adjustment in the event of a reverse stock split. A
summary of the options granted in conjunction with the Financing follows:
OPTIONS GRANTED PURSUANT TO THE FINANCING
<TABLE>
<CAPTION>
NAME OF RECIPIENT RELATIONSHIP NUMBER VESTING EXERCISE CONSIDERATION
----------------- ------------ OF SHARES DATE PRICE -------------
--------- ---- -----
<S> <C> <C> <C> <C> <C>
John B. Hewlett Chairman 1,000,000 12/31/96 $1.00 (4)
Granite Hollow Consultant (1) 1,000,000 12/31/96 $0.50 (4)
Pine Valley, Ltd. Consultant (1) 400,000 12/31/96 $0.50 (4)
Dennis L. Crockett Director 100,000 12/31/96 $0.50 (5)
Culley W. Davis Consultant 400,000 12/31/96 $0.50 (6)
Michael B. Orr Director (2) 50,000 12/31/96 $0.50 (7)
J. Arthur Wright Director (2) 50,000 12/31/96 $0.50 (7)
Miles T. Doody Director 360,000 12/31/96 $0.50 (8)
Kenneth W. Craig Director 300,000 12/31/96 $0.50 (9)
300,000 (3) $0.50 (9)
Bruce H. Haglund Officer 750,000 12/31/96 $0.50 (10)
Wade B. Mitchell Director 200,000 12/31/96 $0.50 (11)
150,000 12/31/96 $1.00 (11)
Other Employees 417,000 (3) $0.50 (12)
Total Options Granted 5,477,000
Value of Options Granted (13)
</TABLE>
(1) An affiliate of John B. Hewlett.
(2) Resigned in conjunction with the Financing in October 1996.
(3) Options are to vest upon the earlier of achieving certain performance goals
or ratably over 10 years. The performance goals are that the Company
achieves sales of $5,000,000 in 1997, $8,000,000 in 1998, and $10,000,000
in 1999.
(4) Mr. Hewlett was granted options for serving as a Director of the Company,
for providing marketing contacts and expertise to help effectuate the
Company's plan to re-focus its business strategy and marketing efforts
through his affiliated companies, and in consideration for the $400,000
royalty line of credit and his personal guarantee of the Company's credit
arrangements
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including a $1,000,000 line of credit and additional short-term lines of
credit in amounts exceeding $1,000,000.
(5) Mr. Crockett was granted options for serving as a Director of the Company
and for providing consulting services to help effectuate the Company's re-
focused business strategy.
(6) Mr. Davis was granted options for providing consulting services related to
organizing and effectuating the Financing plan.
(7) Messrs. Orr and Wright, who have never been compensated for their years of
service as Directors, were each granted options as compensation for their
past services to the Company.
(8) Mr. Doody agreed to waive his rights to purchase 160,000 options previously
granted and to reduce his salary to $75,000 per year.
(9) Mr. Craig was granted options for providing consulting services related to
organizing and effectuating the Financing plan, for providing services as
the Company's President and as a Director, and for guiding the Company to
the achievement of certain performance goals.
(10) Mr. Haglund agreed to convert $150,000 of legal fees for a long-term
promissory note due June 30, 1999, and he agreed to waive his rights to
50,000 options previously granted.
(11) Mr. Mitchell was granted options for his services in 1996 as a Director of
the Company and for providing services to implement the Company's re-
focused business strategy and marketing efforts.
(12) Current employees of the Company were granted an aggregate of 417,000 1996
Options. Current management including James T. Doody received 225,000 of
the 417,000 options, Mont E. Warren received 150,000 of the options, and
Janet Gardner received 9,000 of the options.
(13) Upon the Share price reaching $1.50 per Share, any 1996 Options which are
currently subject to the Optionholder Agreement will be eligible for
release in accordance with the provisions of the Optionholder Agreement.
(See "Optionholder Agreement" discussion below.) Approval of a reverse
stock split will likely result in the Share price of $1.50 per Share being
reached more quickly than if a reverse stock split is not approved. At
$1.50 per Share, options granted at $.50 per Share will have a value of
$1.00 per Share and options granted at $1.00 per Share will have a value of
$.50 per Share.
In conjunction with 1996 Stock Option grants to the new Directors,
executives, and consultants including John B. Hewlett and his affiliates, Bruce
H. Haglund, Culley W. Davis, Dennis L. Crockett and his affiliates, Kenneth W.
Craig, Miles T. Doody, and Wade L. Mitchell the specifically named individuals
and their affiliates are hereinafter collectively referred to as the
("Optionholders"), entered into an agreement effective in the event of approval
of the Reverse Split ("Optionholder Agreement."). Pursuant to the Optionholder
Agreement, each Optionholder will place his 1996 Options granted in conjunction
with the Financing, but excluding performance based options (the "Escrowed
Options") into an escrow (the "Escrow") with Bruce H. Haglund, the Secretary of
the Company, to hold the Escrowed Options during the terms of the Optionholder
Agreement, subject to the following restrictions:
- All Escrowed Options and Shares issued upon the exercise of the
Escrowed Options held by any of the Optionholders participating in the
Optionholder Agreement will be placed in the Escrow;
- Shares issued upon the exercise of the Escrowed Options shall be
released from the Escrow only after the post-reverse-stock split
closing price exceeds $1.50 per Share for 60 consecutive trading days
(the "Initial Release Date");
- After the initial Release Date, the aggregate number of Shares issued
upon the exercise of the Escrowed Options released from the Escrow in
any month shall not exceed the greater of 5% of the total Escrowed
Options and Shares issued upon the exercise of Escrowed Options, or
25% of the previous month's total trading volume of the Company's
Shares;
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- All Shares issued upon the exercise of the Escrowed Options shall be
subject to release from the Escrow after the earlier of the 60th
consecutive trading day that the post-stock split closing price
exceeds $5.00 per share or December 31, 2000 (the "Final Release
Date"); and
- In the event the Initial Release Date has not occurred within two
years of establishment of the Escrow, the Company by a majority vote
of the directors may permit modification of the Optionholder
Agreement.
In the event the proposed reverse stock split is not approved, no 1996
Options will be placed into Escrow. In the event the proposed reverse stock
split is approved the stock price will need to rise approximately $.31 from its
anticipated average level (assuming the price of the Shares increases four times
the current price) after giving effect to the 4:1 reverse stock split before any
shares will begin being released from Escrow.
The Financing and grant of 1996 Options are relevant to the matters to be
acted upon because the Company's Board of Directors is recommending a 4:1
reverse stock split (the "Reverse Split") for approval by the Stockholders
whereby each four Shares would be combined into one Share. If approved, all of
the issued and outstanding Shares would be subject to the Reverse Split,
including the Unit Shares issued through the 1996 Financing. Debenture
conversion right prices, 1996 Option prices, and Shares issuable upon conversion
of the Debentures and 1996 Options (the "Conversion Shares") are not subject to
adjustment in the event of the Reverse Split. If all of the Financing Unit
Shares offered are issued, as a consequence of the Reverse Split, the 6,250,000
Unit Shares would be combined into 1,562,500 Shares and the remaining 5,461,163
Shares outstanding as of March 31, 1997 would be combined into 1,365,291 Shares.
Because the Conversion Shares are not subject to adjustment, assuming total
conversion of the Conversion Shares, the percentage of the outstanding Shares
represented by the Unit Shares, Conversion Shares and Shares outstanding before
the Financing to the total Shares outstanding would be as follows: Unit Shares
14.3%, Conversion Shares 73.2%, and Shares outstanding before the Financing
12.5%.
Because each of the current Directors has rights to Conversion Shares not
subject to the Reverse Split, each Director will substantially benefit if the
Reverse Split is approved by effectively increasing his beneficial ownership of
the total issued and outstanding Shares of the Company. Additionally, if the
Reverse Split is approved, Directors holding Conversion Shares will be able to
purchase Shares for $0.50 and $1.00 per share; whereas, Stockholders investing
in the Company through the offering will have effectively paid $0.80 per Share
after the Reverse Split. (See the ownership chart in the section entitled
"PRINCIPAL STOCKHOLDERS" below for a breakdown of the potential beneficial
ownership change for each Director.)
In addition to the 1996 Options granted, certain officers, directors and
related parties purchased Units for investment purposes including Mr. Hewlett
or his affiliates who purchased two Units and Dennis L. Crockett or his
affiliates who purchased six Units. See "PRINCIPAL STOCKHOLDERS."
PRICE RANGE OF COMMON STOCK
The following table sets forth, for the period from January 1995 to
December 1996, the high and low bid quotations for the Common Stock during the
two most recent fiscal years as reported by the National Quotation Bureau
Incorporated from November 4, 1995 to December 31, 1996 and the NASDAQ Small Cap
Market prior to November 4, 1995. The prices represent quotations between
dealers, without adjustment for retail markup, mark down or commission, and do
not necessarily represent actual transactions. The table also sets forth the
Common Stock price for the same period with an adjustment to reflect what the
price may have effectively been after giving effect to the proposed 4:1 Reverse
Split to reflect the potential value of the Common Stock after the Reverse
Split to
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the exercise price of the debenture conversion shares and the stock options
granted pursuant to the Financing.
COMMON STOCK PRICE ACTUAL AND ADJUSTED
BEFORE SPLIT AFTER SPLIT(1)
HIGH LOW HIGH LOW
1997 ---- --- ---- ---
----
1st Quarter .6562 .2813 2.625 1.125
2nd Quarter .5313 .2813 2.125 1.125
1996
----
1st Quarter .25 .1875 1.00 .75
2nd Quarter .5385 .1250 2.15 .50
3rd Quarter .5625 .1250 2.25 .50
4th Quarter .3750 .2187 1.50 .875
1995
----
1st Quarter 1.437 .875 5.75 3.50
2nd Quarter 1.25 .435 5.00 1.75
3rd Quarter .75 .50 3.00 2.00
4th Quarter .50 .25 2.00 1.00
- ---------------
(1) Represents the price quote multiplied by four. Does not take any other
factors into account in determining the stock price.
PRINCIPAL STOCKHOLDERS
The following table sets forth information concerning the beneficial
ownership of the Company's Shares as of July 31, 1997 for (i) each current
Director and each nominee for Director (ii) each officer of the Company, (iii)
all persons known by the Company to beneficially own more than 5% of the
outstanding Shares of the Company's Shares, and (iv) all officers and Directors
of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIALLY OWNED(2) PERCENT OF TOTAL BENEFICIALLY OWNED(2) PERCENT OF TOTAL
BENEFICIAL OWNER(1) BEFORE SPLIT BEFORE SPLIT (3) AFTER SPLIT AFTER SPLIT (4)
- ------------------- ------------ ---------------- ----------- ---------------
<S> <C> <C> <C> <C>
John B. Hewlett 2,575,000 (5) 19.2% 2,481,250 47.8%
Bruce H. Haglund 757,000 (6) 6.5% 751,750 21.7%
Kenneth W. Craig 300,000 (7) 2.7% 300,000 9.9%
Dennis L. Crockett 625,000 (8) 5.6% 343,750 11.5%
Miles T. Doody 449,375 (9) 4.0% 382,343 12.3%
James T. Doody 165,250 (10) 1.5% 131,313 4.6%
Mont E. Warren 97,250 (11) 0.9% 69,313 2.5%
Janet R. Gardner 96,375 (12) 0.9% 69,094 2.5%
Wade M. Mitchell 350,000 (13) 3.1% 350,000 11.3%
8
<PAGE>
All officers and Directors 5,415,250 (14) 34.6% 4,878,813 65.6%
as a group (nine persons)
Unaffiliated 12,345,913 (15) 93.0% 4,661,478 92.2%
Shareholders
</TABLE>
(1) Unless otherwise noted, the Company believes that all Shares are
beneficially owned and that all persons named in the table or family
members have sole voting and investment power with respect to all Shares
owned by them. Unless otherwise indicated, the address of each Stockholder
is 5812 Machine Drive, Huntington Beach, California 92649.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date hereof upon the
exercise of warrants or options. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that are held
by such person (but not those held by any other person) and which are
exercisable within 60 days from the date hereof have been exercised.
(3) Assumes 10,961,250 Shares outstanding plus, for each individual, any
securities that specific person has the right to acquire upon exercise of
presently exercisable stock options and conversion of debenture shares
before giving effect to the proposed 4 to 1 Reverse Split. Options,
warrants, or conversion rights held by persons other than the specific
individual for whom an ownership interest percentage is being calculated
are not considered in calculating that specific individual's ownership
interest percentage.
(4) Assumes 2,740,312 Shares outstanding that will be outstanding upon approval
and completion of the proposed 4 to 1 Reverse Split, plus, for each
individual, any securities that specific person has the right to acquire
upon exercise of presently exercisable stock options and conversion of
debenture shares. Options held by each beneficial owner or group listed
are not subject to adjustment upon approval of the Reverse Split;
accordingly, each beneficial owner or group will hold a greater ownership
interest relative to the total Shares outstanding. Options, warrants, or
conversion rights held by persons other than the specific individual for
whom an ownership interest percentage is being calculated are not
considered in calculating that specific individual's ownership interest
percentage.
(5) Represents 1,400,000 Shares issuable to Mr. Hewlett, and affiliates which
he controls, upon the exercise of stock options to be issued upon
completion of the Financing at a price of $0.50 per Share, 1,000,000 Shares
issuable upon the exercise of presently exercisable stock options at a
price of $1.00 per Share and 50,000 Debenture Conversion Shares issued as a
result of his investment in the Financing. Mr. Hewlett's address is 2919
East Granite Hollow Street, Sandy, Utah 84092.
(6) Includes 750,000 Shares issuable upon the exercise of presently exercisable
stock options and stock options to be issued upon completion of the
Financing at a price of $0.50 per Share. Mr. Haglund's address is 2010
Main Street, Suite 400, Irvine, California 92660.
(7) Includes 300,000 Shares issuable upon the exercise of presently exercisable
stock options and stock options to be issued upon completion of the
Financing at a price of $0.50 per Share.
(8) Includes 100,000 Shares issuable upon the exercise of presently exercisable
stock options and stock options to be issued upon completion of the
Financing at a price of $0.50 per Share and 150,000 Debenture Conversion
Shares issued as a result of his investment in the Financing. Mr.
Crockett's address is 7050 Union Park Center, Suite 600, Midvale, Utah
84047.
(9) Includes 360,000 Shares issuable upon the exercise of presently exercisable
stock options at a price of $0.50 per Share.
(10) Includes 120,000 Shares issuable upon the exercise of presently exercisable
incentive stock options at a price of $4.00 per Share.
(11) Includes 60,000 Shares issuable upon the exercise of presently exercisable
incentive stock options at a price of $4.00 per Share.
(12) Includes 60,000 Shares issuable upon the exercise of presently exercisable
incentive stock options at a price of $4.00 per Share.
(13) Represents 200,000 Shares issuable to Mr. Mitchell upon the exercise of
stock options to be issued upon completion of the Financing at a price of
$0.50 per Share and 150,000 Shares issuable upon the
9
<PAGE>
exercise of presently exercisable stock options at a price of $1.00 per
Share. Mr. Mitchell's address is 2919 East Granite Hollow Street, Sandy,
Utah 84092.
(14) Includes 4,500,000 Shares issuable upon the exercise of stock options and
200,000 Debenture Conversion Shares.
(15) Unaffiliated Stockholders includes all stockholders not otherwise listed in
the chart. Total shares include 100,000 options held by former directors
who are no longer affiliated with the Company and 2,000,000 Debenture
Conversion Shares. The percentage assumes no conversion of shares or
exercise of options held by any person or entity other than the 100,000
option shares and 2,000,000 Debenture Conversion Shares referenced in this
footnote 15.
BOARD OF DIRECTORS
The Board of Directors has the responsibility for establishing broad
corporate policies and for overseeing the overall performance of the Company.
However, in accordance with corporate governance principles, the Board is not
involved in day-to-day operating details. Members of the Board of Directors are
kept informed of the Company's business through discussions with the Chairman
and other officers, by reviewing analyses and reports sent to them, and by
participating in Board and committee meetings.
In October 1996, Michael B. Orr and J. Arthur Wright resigned as Directors
of the Company to permit new Directors to be appointed in conjunction with the
Financing and a restructuring of the Board. The Board acted to fill these two
vacancies and two other vacancies on the Board by electing John B. Hewlett,
Kenneth W. Craig, Dennis L. Crockett, and Wade M. Mitchell as Directors to serve
until the next Annual Meeting of the Company.
The Board held five Meetings in 1996. All Directors attended more than 75%
of the Meetings held during their tenures as Directors. Board members are not
presently compensated, other than being reimbursed for expenses and receiving
1996 Options, for their attendance at Board Meetings.
COMMITTEES OF THE BOARD
In November 1996, the Board of Directors established a number of
committees, including a Finance Committee, an Audit Committee, and a
Compensation Committee, each of which is briefly described below. The
Committees did not meet in 1996.
The Finance Committee has been established to oversee Company expenditures
and approve contracts entered into by the Company. The committee must, by
majority vote, approve all contracts and negotiated debt obligations on behalf
of the Company whereby the obligation of the Company will exceed $2,500. The
committee consists of two outside Directors, John B. Hewlett and Wade M.
Mitchell, one employee Director, Kenneth W. Craig, and Mont Warren, the
Company's Chief Financial Officer as an EX OFFICIO member.
The Audit Committee has been established to meet with management to
consider the adequacy of the internal controls and the objectivity of financial
reporting; the committee meets with the independent auditors and with
appropriate Company financial personnel about these matters. The committee
recommends to the Board of Directors the appointment of the independent
auditors, subject to ratification by the Stockholders at the annual Meeting.
Both the internal auditors and the independent auditors periodically meet alone
with the committee and always have unrestricted access to the committee. The
committee consists of two non-employee, Directors Dennis L. Crockett and Wade B.
Mitchell, one employee Director, Kenneth W. Craig, and Mont Warren, the
Company's Chief Financial Officer as an EX OFFICIO member.
10
<PAGE>
The Compensation Committee negotiates employment contracts, recommends to
the Board of Directors compensation for officers, Directors, and employees, and
administers management incentive compensation plans, including stock option
plans. The committee consists of two non-employee Directors, John B. Hewlett and
Dennis L. Crockett, one employee Director Miles T. Doody, and Bruce H. Haglund,
Secretary and General Counsel to the Company, as an EX OFFICIO member, having no
vote.
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
The Bylaws of the Company provide for the Directors to number at least five
and no more than seven. Five members of the Board of Directors are to be
elected at the Meeting. The five nominees selected by the Board of Directors
are listed on the following pages. Stockholders have cumulative voting rights
when voting for Directors; accordingly, any Stockholder may multiply the number
of Shares he or she is entitled to vote by the number of Directors to be elected
and allocate votes among the candidates in any manner. There are no conditions
precedent to the exercise of the right to cumulate votes in the election of
Directors of the Company: Stockholders may exercise such cumulative voting
rights, either in person or by proxy, with or without advance notice to the
Company. The five Director nominees receiving the highest number of votes will
be elected. Any Shares not voted, whether by abstention, broker non-vote, or
otherwise, have no impact on the vote.
The Board of Directors intends to vote proxies equally for the five
nominees unless otherwise instructed on the Proxy Card. If you do not wish your
Shares to be voted for particular nominees, please identify the exceptions in
the designated space provided on the Proxy Card.
If at the time of the Meeting one or more of the nominees have become
unavailable to serve, Shares represented by proxies will be voted for the
remaining nominees and for any substitute nominee or nominees designated by the
Board of Directors.
Directors elected at the Meeting will hold office until the next annual
Meeting or until their successors have been elected and qualified. For each
nominee there follows a brief listing of principal occupation for at least the
past five years, other major affiliations, and age as of January 1, 1997.
NOMINEES FOR ELECTION AS DIRECTORS
The following sets forth certain information for each person who is
nominated for election to the Board of Directors:
DIRECTOR
OR OFFICER
NAME AGE CURRENT POSITION WITH THE COMPANY SINCE
John B. Hewlett 45 Chairman of the Board, Director 1996
Miles T. Doody 69 Vice Chairman of the Board, Director 1993
Kenneth W. Craig 42 President, Chief Executive
Officer, Director 1996
Dennis L. Crockett 45 Director 1996
Wade M. Mitchell 32 Director 1996
JOHN B. HEWLETT has served as Chairman of the Board of Directors of the
Company since October 1996. Mr. Hewlett is President of Hewlett Financial
Corporation. He has 22 years of experience in the insurance industry,
specializing in sales and long and short-term planning. From 1985 to the
present, Mr. Hewlett has been a nationally-recognized consultant and seminar
leader on closely held business succession and financial planning. He is a
member of the Million Dollar Round Table, Court of the Table, and one of three
Top of the Table members in the Intermountain West with career insurance sales
approaching $640,000,000. Mr. Hewlett is a member of the National Basketball
Association Utah Jazz 100 Club and Advisory Board.
11
<PAGE>
MILES T. DOODY served as Chief Executive Officer of the Company from
January 1993 through December 1996, as President from 1990 to 1996, and
currently serves as Vice Chairman of the Board and as a Director. From 1986 to
1990, Mr. Doody operated a golf industry consulting service, advising such
companies as Callaway Golf and Bullet/Cougar Golf Company. From 1971 through
1986, Mr. Doody was employed with Lynx Precision Golf Company where he was
involved in specific club designs, various manufacturing procedures set-up, and
where he served eventually as General Manager and Executive Vice President. Mr.
Doody negotiated the acquisition by Lynx of Lilly Dache, a leading leisure
sportswear company, whereupon he became the General Manager of Lilly Dache,
working with overseas and domestic soft goods suppliers. From 1967 to 1971, Mr.
Doody was employed by P.G.A. Golf Co., serving as National Accounts Executive
and National Sales Manager. Miles T. Doody is the father of James T. Doody.
KENNETH W. CRAIG has served as President and as a Director of the Company
since October 1996, and as Chief Executive Officer since January 1997. Mr.
Craig has been a private investor since June 1993. He began his career as an
attorney in Houston, Texas and practiced law from 1980 to 1989, specializing in
contracts, tax, and mergers and acquisitions. In the early 1980's, he
participated in the growth of Telecommunications Specialist Inc. ("TSI"), a
telephone system rental company which became the largest distributor for TIE
Communications ("TIE"). In 1987, he founded TIE National Rental Company, Inc.
("TNR") to prove a pilot program for TIE. In 1991, he sold his interest in TNR
to TIE to pursue the acquisition of Centel Business Systems ("Centel") by the
Williams Companies. Upon the acquisition, Centel became Wiltel Communications
Systems, Inc. where he was President of the Finance/Marketing Divisions until
May 1993. Mr. Craig has also been actively involved in golf in various
capacities including coach of the University of Mississippi golf team and as a
buyer, director, and president of numerous golf and country clubs. He is a
graduate of Stetson University and the University of Mississippi School of Law.
DENNIS L. CROCKETT has served as a Director of the Company since October
1996. He is a co-founder and since 1985 has been the Chief Operations Officer
of Broadcast International, Inc., a communications firm specializing in the
delivery of business information via satellite, FM wireless, and cable
television technologies, which recently merged with Data Broadcasting
Corporation. Further, Mr. Crockett co-founded the Instore Satellite Network,
one of the nation's largest private satellite communications networks providing
private audio, video, voice, and data broadcasts to retail clients including
Safeway Stores, Osco/Savon Drug, Lucky Stores, and RE/MAX Reality. Mr. Crockett
is also a nationally published composer, arranger, vocalist, and keyboardist as
well as a respected musical producer of both record, radio, and television
entertainment. He is a graduate of Brigham Young University in Provo, Utah.
WADE M. MITCHELL has served as a Director since October 1996. He has been
employed as a business consultant through Mitchell & Associates, a professional
corporation specializing in mergers, acquisitions, and corporate turn-arounds
since 1989. Mitchell & Associates is owned and controlled by Mr. Mitchell.
From 1993 to 1995, he was a special consultant and member of the Board of
Directors of Environmental Safeguards, Inc., of Springville, Utah, and a member
of the Board of Directors of National Fuel & Energy, Inc., a wholly-owned
subsidiary of Environmental Safeguards, Inc. From 1991 to 1993, he was the
Chief Operating Officer for Enpak Surgical Products, Inc., Salt Lake City, Utah.
During 1989, he was a marketing consultant for Novations Group, Inc., Provo,
Utah, and from 1985 to 1988, he was the Director of Marketing for Great Wave
Software, Inc., Scotts Valley, California. Mr. Mitchell also serves as a
director of Mitchell's Nursery & Gifts, Inc., a member of the advisory Board of
GT Travel, Inc., and, a director of Paradise Optical, Park City, Utah. Mr.
Mitchell graduated from Brigham Young University in April 1988, with a B.S.
degree in science, and received an MBA degree from Brigham Young University's
Marriott School of Management in April 1990.
Management intends to vote for the directors as nominated.
12
<PAGE>
REVERSE STOCK SPLIT
(ITEM 2 ON PROXY CARD)
The Board of Directors of the Company has adopted a resolution recommending
to the Stockholders a Reverse Split of one Share for every four Shares (1:4) of
outstanding common stock without amending the Company's Certificate of
Incorporation to reduce the number of authorized Shares or to modify the par
value of the Shares. A reverse stock split is the opposite of a conventional
stock split. Instead of a corporation splitting its outstanding shares to
provide for more shares outstanding, the corporation consolidates its
outstanding stock into a lesser number of shares. The proposed Reverse Split
reflects the Board's intent, first contemplated at the time discussions were
held with new potential investors regarding undertaking the Financing, to
increase the stock price in an effort to enable the Company to ultimately
qualify to meet one of the requirements necessary to have the stock listed on
the Nasdaq Small Cap Market.
The Board considers the proposed Reverse Split to be in the best interest
of all stockholders based upon its belief that if the Company will be able to
more quickly meet all necessary requirements to have the stock traded on the
Nasdaq Small Cap Market within the next several years, and upon the Boards
belief the valuation of the Company will increase and permit the Company to
attract additional new capital into the Company at a high stock price.
Additional capital as it comes available can then be used to increase working
capital to enable the Company to finance production and sales. The Board
believes the end result of the increase in capital available to the Company will
be an increased valuation of the Company. The Board also believes that the stock
held by the stockholders will increase in value upon the Reverse Stock Split
although, the Company cannot accurately predict if the stockholders will
experience any increase in the value of their stock holdings, merely as result
of the Reverse Split.
If the Reverse Split proposal is adopted, each stockholder's percentage
ownership interest in the Company and proportional voting power will not
immediately change upon effecting the stock split, but will change substantially
in the event rights for Conversion Shares are exercised. The Company
anticipates that the Reverse Split will result in fractional Shares aggregating
less than 500 of the approximately 2,740,312 Shares that would be outstanding
after the Reverse Split, and that less than five of its approximately 225
holders of record would no longer have any Shares by virtue of the payment of
cash in lieu of fractional Shares. The rights and privileges of the holders of
Shares would be substantially unaffected by the adoption of the Reverse Split
proposal other than by the dilution which could occur if the Conversion Shares
are exercised. The issuance of cash in lieu of fractional Shares will not
affect the Company's reporting requirements pursuant to the Securities Exchange
Act of 1934.
The Reverse Split proposal may be abandoned by the Board of Directors, at
any time before or after the Annual Meeting and prior to effecting the Reverse
Split by mailing notice to the Stockholders to return their certificates to
permit new certificates to be issued ("Effective Date"), if for any reason the
Board of Directors deems it advisable to abandon the proposal.
CASH PAYMENT IN LIEU OF FRACTIONAL SHARES; EXCHANGE OF STOCK CERTIFICATES
No fractional Shares will be issued as a result of the Reverse Split. In
lieu of receiving fractional Shares, any Stockholder who holds any number of
Shares not evenly divisible by four immediately prior to the Reverse Split will
be entitled to receive cash in the sum of such stockholder's fractional interest
multiplied by the fair value of the Shares (as determined by the Board of
Directors) on the Effective Date of the Reverse Split. For purposes of such
determination, fair value will be deemed to be an amount equal to the highest of
(a) the highest of the Average Price of the Shares for any of the ten trading
days immediately following the effective date of the Reverse Split, and (b) the
product of four multiplied by the highest of the Average Price of the Shares on
the last trading date prior to the effective date of the Reverse Split. As used
herein, "Average Price" means the arithmetic
13
<PAGE>
average of the "high/ask" and "low/bid" prices for the Shares as reported by the
National Quotation Bureau Incorporated.
As permitted by Delaware law, promptly following the Effective Date, the
Company will exchange certificates issued before the Effective Date for new
certificates on or before a date (the "Certificate Exchange Deadline") which is
45 days after the Effective Date. Each Stockholder will receive a letter of
transmittal from the transfer agent containing instructions on how to exchange
certificates. (Please do not return your certificate until you receive these
instructions.) The Company will not issue certificates for fractional Shares.
In the event that any holder fails to surrender presently held certificate(s) on
or before the Certificate Exchange Deadline, such holder shall not be entitled
thereafter to vote or to receive dividends or to exercise any of the other
rights of a Stockholder of the Shares represented by such certificate(s) until
such holder has surrendered the certificate(s).
REASONS FOR THE PROPOSED REVERSE SPLIT
The Company's Shares have traded with bid quotation in the range of $3.875
to $0.125 per Share since January 1994. During calendar year 1996, Shares
traded with bid quotations in the range of $0.563 to $0.125 per share. The
Board of Directors believes that the current low per share price of the Shares
has had a negative effect on the marketability of the existing Shares and the
potential ability of the Company to raise capital by issuing additional Shares.
Many brokerage firms are reluctant to recommend low-priced stocks to their
clients, and a variety of brokerage house practices and policies exist which
tend to discourage individual brokers within those firms from dealing in low-
priced stocks such as the Company's Shares. In addition, by virtue of the per
share price, the Shares are now subject to a Commission rule that imposes
various sales practice requirements on broker-dealers who sell the Shares to
persons other than established customers or accredited investors. For these
types of transactions, the broker-dealer must make a special suitability
determination for the purchase and have received the purchaser's written consent
to the transaction prior to sale.
In addition, since brokers' commissions on low-priced stocks generally
represent a higher percentage of the stock price than the commission on higher
priced stock, the current Share price can result in individual Stockholders
paying transaction costs which are a higher percentage of their total Share
value than would be the case if the Share price was substantially higher.
Effective November 3, 1995, the Company's was delisted from the Nasdaq
Small Cap Market, on which it had been traded since November 12, 1993, for
failure to meet the minimum bid price and capital and surplus requirements.
Although the Board of Directors has determined that it would be advantageous to
the Company and its Stockholders to again have the Shares listed on the Nasdaq
Small Cap Market, the Shares cannot be so listed unless the Company re-qualifies
for listing. Re-qualification will require the Company to meet all of the
current listing standards which include, in substantial part that the Company
have, (i) shares with a bid price of over $4.00 per share, (ii) 300
stockholders, (iii) three market makers, (iv) $4,000,000 in net tangible assets,
or a $50,000,000 market capitalization, or $750,000 in net income, (v) a public
float of at least 1,000,000 shares having a market value of at least $5,000,000,
and (vi) at least a one year operating history or a $50,000,000 market
capitalization. Although these requirements are not currently met by the
Company, the Company and the Board intend to use their best efforts to meet all
of the necessary requirements as quickly as possible to permit listing.
The Company's Shares are currently traded in the over-the-counter market on
the OTC Electronic Bulletin Board. Accordingly, an investor may find it more
difficult to dispose of, or to obtain accurate quotations as to the market value
of, the Shares than if the Shares were listed on a national securities exchange
or the Nasdaq Small Cap Market.
14
<PAGE>
There can be no assurance that the market price of the Shares after the
proposed Reverse Split will be four times the market price before the proposed
Reverse Split, that the resulting market prices will be maintained for any
period of time, or that the Shares will qualify for listing on the Nasdaq Small
Cap Market.
RELEASE OF ESCROWED SHARES
In the event the Reverse Split is approved, the Escrowed Options held
pursuant to the Optionholder Agreement are likely to begin being released more
quickly than if the Reverse Split is not approved because the stock price after
the Reverse Split will be closer to the price of $1.50 per Share required to
trigger the Initial Release Date than if the Reverse Split is not approved.
Upon the Initial Release Date, up to 5% of the total Escrowed Options and Shares
issued upon the exercise of Escrowed Options, or 25% of the previous month's
total trading volume of the Company's Shares are subject to release each month.
The release of Shares at $1.50 per share will occur before the Share price meets
the minimum share pricing for listing on Nasdaq.
DISSENTERS' RIGHTS
No dissenter's rights are available to dissenting Stockholders under
Delaware law with respect to the Reverse Split.
FEDERAL INCOME TAX CONSEQUENCES
The Reverse Split is intended to be a tax-free re-capitalization to the
Company and its Stockholders, except for those Stockholders who receive cash in
lieu of a fractional share. Stockholders will not recognize any gain or loss
for Federal income tax purposes as a result of the Reverse Split, except for
those Stockholders receiving cash in lieu of a fractional share (as described
below). The holding period for Shares after the Reverse Split will include the
holding period of Shares before the Reverse Split, provided that such Shares are
held as a capital asset on the Effective Date. The adjusted basis of the Shares
after the Reverse Split will be the same as the adjusted basis of the Shares
before the Reverse Split excluding the basis of fractional Shares.
A Stockholder who receives cash in lieu of fractional Shares will be
treated as if the Company has issued fractional Shares to such Stockholder and
then immediately redeemed such Shares for cash. Such Stockholder would
generally recognize gain or loss, as the case may be, measured by the difference
between the amount of cash received and the basis of such stockholder's Shares
(prior to the Reverse Split) allocable to such fractional share.
Although the Company believes that the foregoing summary describes the
material Federal income tax consequences of the Reverse Split, there can be no
assurance that the actual tax consequences will not be different. Stockholders
should be advised that the Company has not obtained, and does not intend to
request, either a ruling from the Internal Revenue Service or an opinion of
counsel regarding any tax consequences. Furthermore, the foregoing is only a
summary of the Federal income tax consequences of the Reverse Split and does not
deal with all of the tax consequence that may be relevant to particular
Stockholders, such as Stockholders who are dealers in securities, foreign
persons or Stockholders who acquired their Shares upon the exercise of stock
options or in other compensatory transactions. In view of the individual nature
of tax consequences, Stockholders are urged to consult their own tax advisers as
to the specific tax consequences to them of the proposed Reverse Split,
including the applicability of Federal, state, local, and foreign tax laws.
VOTE REQUIRED
The affirmative vote of a majority of the outstanding Shares is required to
approve this proposal. Management intends to vote "FOR" the proposal to effect
the Reverse Split.
15
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND THAT THE COMPANY'S
STOCKHOLDERS VOTE "FOR" THE PROPOSAL TO EFFECT A REVERSE SPLIT, AND YOUR PROXY
WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
AMENDMENT OF THE COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF
SHARES OF COMMON STOCK
(ITEM 3 ON PROXY CARD)
The Board of Directors recommends approving an increase in the authorized
number of Shares of the Company. If approved by the stockholders of the
Company, paragraph 4 of the Company's Certificate of Incorporation, as
previously amended, will be amended to read in full as follows:
4. The total number of shares of stock which the Corporation shall
have authority to issue is 40,150,000 of which stock 40,000,000 shares
of the par value of $.001 each, amounting in the aggregate to
$40,000.00 shall be common stock and of which 150,000 shares of the
par value of $.01 each, amounting in the aggregate to $1,500 shall be
Preferred Stock.
The Company's Certificate of Incorporation currently authorizes 20,150,000
Shares. As of July 31, 1997, there were 10,961,250 issued and outstanding
Shares. Of the unissued Shares, a total of approximately 9,000,000 are reserved
for issuance upon completion of the Financing, the conversion of the Debentures,
and the exercise of options for the purchase of Shares pursuant to the Company's
various stock option plans and other stock option agreements. Consequently, the
Company presently has few additional Shares available for issuance as currently
authorized under the Certificate of Incorporation, as amended. The Company
proposes to increase its authorized Shares to 40,150,000, which will then be
available for issuance from time to time, for such purposes and such
consideration, and on such terms, as the Board of Directors may approve, and no
further vote of the Stockholders of the Company will be required except in
certain transactions as provided under the Delaware General Corporation Law.
The Board of Directors believes that it is in the best interest of the
Company to increase the number of authorized Shares to 40,150,000 at this time
in light of the limited availability of Shares. An increase in the authorized
Shares will enable the Company to meet possible contingencies and opportunities
in which the issuance of Shares in amounts greater than would otherwise remain
available for issuance may be deemed advisable, such as in equity financings or
in acquisition transactions. By adopting the proposed amendment to the
Certificate of Incorporation at this time, consummation of issuances of any
additional Shares would be facilitated, because the delay and expense incident
to the calling of a special Meeting of the Company's Stockholders, in cases
where such a Meeting would not be otherwise be required, would be avoided. The
timing of the actual issuance of additional Shares, if any, will depend upon
market conditions, the specific purpose for which the stock is to be issued, and
other factors. Any additional issuance of Shares could have a dilutive effect
on existing holders of Shares. Any additional issuance of Shares would also
have the effect of making a takeover attempt more difficult because control over
a greater number of Shares would be required. The Company currently has no
plans for the issuance of any unreserved Shares for which authorization is
sought.
The terms of the additional Shares for which authorization is sought will
be identical to the terms of the Shares currently authorized and outstanding,
and approval of the proposed amendment will not affect the terms, or the rights
of the holders, of such Shares.
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<PAGE>
Approval of the amendment to increase the authorized Shares will require
the affirmative vote of the holders of at least a majority of the outstanding
Shares.
The amendment to the Certificate of Incorporation would be effective on the
date the amendment is filed with the Delaware Secretary of State.
WITHDRAWAL OF ITEM 3 FROM VOTE
The purpose for voting to Amend the Certificate of Incorporation is to
ensure that Shares are available for future grant or sale. Upon a majority vote
"FOR" Item 2, Reverse Stock Split, the Board intends to withdrawal Item 3 from
vote because additional common stock shares would not be needed for grant or
sale. Upon the approval of the Reverse Split, the outstanding shares will be
reduced into 2,250,000 Shares, and the Shares reserved for issuance of
outstanding stock options will be reduced into 5,477,000 Shares; accordingly,
approval of the Reverse Split will result in approximately 12,000,000 Shares
being available for future issuance.
VOTE REQUIRED
The affirmative vote of a majority of the outstanding Shares is required to
approve this proposal. Management intends to vote "FOR" the proposal to amend
the Certificate of Incorporation in the event the proposal to effect the Reverse
Split does not pass.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND THAT THE COMPANY'S
STOCKHOLDERS VOTE "FOR" THE PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION,
AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
RATIFICATION OF APPOINTMENT OF AUDITORS
(ITEM 4 ON PROXY CARD)
The Board of Directors has selected Corbin & Wertz as independent public
accountants for the Company for the fiscal year ending December 31, 1997,
subject to the approval of the Stockholders. Corbin & Wertz acted as the
Company's independent public accountants for the years ending December 31, 1995
and 1996. To the knowledge of the Company, at no time has Corbin & Wertz had
any direct or indirect financial interest in or any connection with the Company
other than as independent public accountants. A representative of Corbin &
Wertz will be available at the Meeting to respond to appropriate questions.
Ratification of the appointment of auditors requires a majority of the
votes cast thereon. Any Shares not voted, whether by abstention, broker non-
vote, or otherwise, have no impact on the vote. If the Stockholders do not
ratify this appointment, other independent auditors will be considered by the
Board or Directors upon recommendation of the Audit Committee.
VOTE REQUIRED
The affirmative vote of a majority of the outstanding Shares is required to
approve this proposal. Management intends to vote "FOR" the proposal to ratify
the auditors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND THAT THE COMPANY'S
STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF THE AUDITORS, AND YOUR PROXY WILL BE
SO VOTED UNLESS YOU SPECIFY OTHERWISE.
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MEETING ADJOURNMENT
(ITEM 5 ON PROXY CARD)
The Board of Directors proposes to the stockholders that in the event
either proposal 2 or 3 is not approved at the Meeting on the date first held,
the Meeting be adjourned for two months to permit management to continue to
solicit votes sufficient to approve either or both of the proposals. The Board
makes this proposal because management does not have discretionary authority to
use proxies held by the Board and voted against the proposals to vote for
adjournment of the meeting.
VOTE REQUIRED
Adjournment requires a majority of the votes represented at the Meeting to
be in favor of the proposal. Any Shares not voted, whether by abstention,
broker non-vote, or otherwise, have no impact on the vote. Management intends
to vote "FOR" the proposal to adjourn the Meeting in the event the proposal to
effect the Reverse Split or the proposal to amend the Certificate of
Incorporation does not pass.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND THAT THE COMPANY'S
STOCKHOLDERS VOTE "FOR" ADJOURNMENT FOR TWO MONTHS IF EITHER PROPOSAL 2 OR 3
DOES NOT PASS, AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
REPORT ON EXECUTIVE COMPENSATION
The Company's compensation programs are designed to link executives'
compensation to the performance of the Company. The annual salary paid to
executives over the past three years reflect fixed amounts that are deemed
competitive for executives with comparable ability and experience in the
industry. Additionally, because of cash flow issues for the Company, executives
have not received increases in salary for three years, and in some instances,
executives have taken a salary cut.
The Company believes that providing stock options to executives helps
reinforce their alignment of interests with the Stockholders. Accordingly, as a
part of the recent Financing, executive officers were awarded stock options
based upon performance over the next three years.
The compensation paid to Mr. M. Doody, the highest paid executive during
the past four years, is summarized in the compensation table below.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
- ------------------------------------------------------------------------------------------------------------------------
NAME AND OTHER AWARDS PAYOUTS ALL
PRINCIPAL YEAR SALARY BONUS ANNUAL ------------------------------------------
POSITION ($) ($) COMPEN- RESTRICTED OPTIONS/ LTIP OTHER (1)
SATION STOCK ($) SARS (#) PAYOUTS ($)
($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 75,000 -0- -0- -0- 360,000(2) -0- -0-
1995 121,000 -0- -0- -0- -0- -0- -0-
Miles T. Doody, 1994 150,000 19,800 -0- -0- -0- -0- -0-
CEO 1993 150,000 1,100 30,300 36,000 -0- 160,000 -0-
</TABLE>
(1) The remuneration described in the table does not include the cost to the
Company of benefits furnished to the named executive officers, including
premiums for health insurance and other personal benefits provided to such
individual that are extended to all employees of the Company in connection
with their employment. The value of such benefits cannot be precisely
determined; however, the executive officer named above did not receive
other compensation in excess of the lesser of $50,000 or 10% of such
officers' cash compensation. Salary for Mr. M. Doody for 1991 and 1992 in
the aggregate amount of $30,300 was deferred to 1993.
(2) In conjunction with the Financing, Mr. M. Doody agreed to forfeit a stock
option for 160,000 Shares at $4.00 per Share granted in 1993 and to convert
a short-term $50,000 note of the Company to a promissory note in exchange
for a stock option for 360,000 Shares at $0.50 per share.
The Company entered into three-year employment agreements in January 1993
with Miles T. Doody, James T. Doody, Janet R. Gardner, and Mont E. Warren, its
executive officers. The agreements provide for minimum base salaries of
$150,000 for Miles T. Doody, $85,000 for James T. Doody, $39,500 for Ms.
Gardner, and $55,000 for Mr. Warren. In connection with their employment
agreements, each of the executive officers also received Shares of the Company
as part of their compensation. In January 1994, the Company agreed to extend
these contracts through December 31, 1997. Miles T. Doody agreed to reduce his
compensation to $75,000 per year commencing in July 31, 1996. See " - Certain
Transactions" below.
In October 1996, the Company entered into an oral agreement with Kenneth W.
Craig to serve as President of the Company for three years. It is anticipated
that the formal agreement will be executed in 1997. The employment agreement
will provide for a minimum base salary of $48,000 per annum plus a quarterly
incentive compensation bonus equal to 1% of the adjusted gross sales of the
Company for various product lines.
1993 STOCK OPTION PLAN
On July 13, 1993, the Board of Directors of the Company adopted the 1993
Stock Option Plan (the "Plan") which was approved by the Stockholders on the
same day. The Plan, which does not encompass the 1996 Options which have been
granted outside of the Plan, is intended to provide incentive to key employees
and Directors of, and key consultants, vendors, customers, and others expected
to provide significant services to, the Company, to encourage proprietary
interest in the Company, to encourage such key employees to remain in the employ
of the Company and its subsidiaries, to attract new employees with outstanding
qualifications, and to afford additional incentive to consultants, vendors,
customers, and others to increase their efforts in providing significant
services to the Company. The Company has reserved 600,000 Shares for issuance
under the Plan. The Plan provides that incentive stock options ("Incentive
Stock Options") may be granted to full-time
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<PAGE>
employees (who may also be Directors) and nonstatutory stock options
("Nonstatutory Stock Options") may be granted to non-employee Directors and
consultants from time to time on a discretionary basis by the Board of Directors
or the Committee. The Plan also provides for the grant of Nonstatutory Stock
Options to outside members of the Board of Directors on a "formula award" basis
as provided in Rule 16b-3 of the Securities Exchange Act of 1934 ("Rule 16b-3").
As of the date of this Memorandum, Incentive Stock Options are outstanding for
the purchase of 240,000 Shares at $4.00 per Share pursuant to the Plan, all of
which are vested, to the following executive officers: James T. Doody (120,000
options), Mont W. Warren (60,000 options), and Janet R. Gardner (60,000
options). These options expire in July 1998.
The Plan provides for administration by the Board of Directors in
compliance with Rule 16b-3, or by a Committee (the "Committee") appointed by the
Board of Directors, which Committee shall be constituted to permit the Plan to
comply with Rule 16b-3, and which shall consist of not less than two members,
each of whom has not participated in the Plan by way of receipt of any
discretionary grant of an option (Incentive Stock Options and Nonstatutory
Stock Options are together hereinafter referred to as "Option" or "Options",
unless the context otherwise requires), and who will not so participate while
serving as a member of the Committee, and each of whom has not participated
under any other plan or have received options of the Company during the year
preceding adoption of the Plan by the Stockholders (other than pursuant to a
formula award grant under the Plan). A member of the Board of Directors or a
Committee member shall in no event participate in any determination related to
Options held by or to be granted on a discretionary basis to such Board of
Directors or Committee member.
The aggregate number of Shares of the Company's authorized but unissued
Shares which may be issued upon exercise of Options under the Plan may not
exceed 600,000 Shares. If any unexercised option, or any portion thereof, for
any reason expires or are terminated, do not vest or are not delivered, the
unexercised or unvested Shares allocable to such Option may again be made
subject to any Award.
Options must be evidenced by written stock option agreements in such form
as the Committee may from time to time determine. Each Option must state the
number of Shares to which it pertains and must provide for the adjustment
thereof if the outstanding Shares are exchanged for cash or a different number
or kind of Shares or securities of the Company, or if the outstanding Shares of
the common stock are increased, decreased, exchanged for, or otherwise changed,
or if additional Shares or new or different Shares or securities are distributed
with respect to the outstanding Shares of the Shares, through a reorganization
or merger in which the Company is the surviving entity or through a combination,
consolidation, recapitalization, reclassification, stock split, stock dividend,
reverse stock split, stock consolidation or other capital change or adjustment.
In addition, the Board or the Committee may grant such additional rights in the
foregoing circumstances as the Board or the Committee deems to be in the best
interests of any participant and the Company in order to preserve for the
participant the benefits of the Award.
The exercise price in the case of any Incentive Stock Option must not be
less than the fair market value on the date of grant and, in the case of any
Option granted to an optionee who owns more than 10% of the total combined
voting power of all classes of outstanding stock of the Company, must not be
less than 110% of the fair market value on the date of grant. The exercise
price, in the case of any Nonstatutory Stock Option, must not be less than 85%
of the fair market value on the date of grant.
The purchase price is payable in full in United States dollars upon the
exercise of the Option; provided, however, that if the applicable Option
agreement so provides, the purchase price may be paid (i) by the surrender of
Shares in good form for transfer, owned by the participant and having a fair
market value on the date of exercise equal to the purchase price, or in any
combination of cash and Shares, as long as the sum of the cash so paid and the
fair market value of the Shares so surrendered equals the purchase price; (ii)
by cancellation of indebtedness owed by the Company to the participant; (iii)
with a full recourse promissory note executed by the participant; or (iv) any
combination of the foregoing. The interest rate and other terms and conditions
of such note must be determined by the
20
<PAGE>
Board or the Committee. The Board or Committee may require that the participant
pledge his Shares to the Company for the purpose of securing the payment of such
note, in which event the stock certificate(s) representing such Shares may not
be released to the participant until such note has been paid in full.
Each Option must state the time or times which all or part thereof becomes
exercisable. No Option may be exercised after the expiration of 10 years from
the date it was granted, and no Option granted to an optionee who owns more than
10% of the total combined voting power of all classes of outstanding stock of
the Company may be exercised after the expiration of five years from the date it
was granted. During the lifetime of a participant in the Plan, his Options may
be exercisable only by him and shall not be assignable or transferable. If a
participant dies while Options are exercisable, they may be exercised, subject
to the condition that no option shall be exercisable after the expiration of 10
years from the date granted and to the extent the right to exercise the Option
accrued at any time within three months after the death of the participant, by
the executors or administrators of the deceased participant or by persons who
acquired the option directly from the deceased optionholder by bequest or
inheritance.
Within the limitations of the Plan, the Board or Committee may modify,
extend or renew outstanding Options or accept the cancellation of outstanding
Options (to the extent not previously exercised) for the granting of new Options
in substitution therefor. No modification of an Option may, without the consent
of the participant, alter or impair any rights or obligations under any Option
previously granted.
In the case of Incentive Stock Options granted under the Plan, the
aggregate fair market value (determined as of the date of the grant thereof) of
the Shares with respect to which Incentive Stock Options become exercisable by
any participant for the first time during any calendar year (under the Plan and
all other plans maintained by the Company) may not exceed $100,000. The Board
or Committee may, however, with the participant's consent, authorize an
amendment to the Incentive Stock Option which renders it a Nonstatutory Stock
Option.
The stock option agreements authorized under the Plan may contain such
other provisions not inconsistent with the terms of the Plan (including, without
limitation, restrictions upon the exercise of the Options) as the Board or the
Committee deems advisable.
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
Section 16 (a) of the Securities Exchange Act requires the Company's
officers, Directors, and persons who own more than 10% of a registered class of
the Company's equity securities to file reports of ownership and changes in
ownership with the SEC, NASDAQ, and the Boston Stock Exchange. Officers,
Directors, and greater than 10% beneficial owners are required by SEC regulation
to furnish the Company with copies of all Section 16 (a) forms they file. The
Company believes that all filing requirements applicable to its officers,
Directors, and greater than 10% beneficial owners were complied with.
CERTAIN TRANSACTIONS
During the first quarter of 1997, John B. Hewlett, Chairman of the Board of
Directors, agreed to provide a letter of credit to Fila Sport S.p.A. in the
amount of $400,000 to insure compliance with the Company's revised license
agreement for the Fila trademark. Additionally, the Company and Mr. Hewlett
jointly entered into a loan and security agreement and promissory note with a
lender on March 31, 1997 which will provide the Company up to a maximum of
$1,000,000 to fund open customer purchase orders.
21
<PAGE>
During 1996, Miles T. Doody advanced a total of $50,000 to the Company to
enable the Company to pay various expenses during the year. In October 1996,
the Company agreed to convert the $50,000 advance into a promissory note bearing
interest at 10% and due on June 30, 1999.
In October 1996, the Company agreed with Bruce H. Haglund, Secretary and
general counsel to the Company, to convert up to $150,000 of accrued legal fees
into a promissory note bearing interest at 10% and due on June 30, 1999. The
Company also agreed to grant Mr. Haglund non-qualified stock options to purchase
750,000 Shares at a price of $0.50 per Share. The options vest upon the
completion of the Financing and are exercisable until December 31, 2006. Mr.
Haglund's billings for legal fees to the Company for the fiscal year ended
December 31, 1996 totaled approximately $63,000 and accrued legal fees at
December 31, 1996 approximately $150,000.
In October 1996, the Company agreed to pay an affiliate of John B. Hewlett
a consulting fee for services to the Company of $250,000 payable as follows:
$50,000 on January 1, 1997, $100,000 on January 1, 1988, and $100,000 on January
1, 1999. Further, the Company agreed to grant an affiliate of Mr. Hewlett non-
qualified stock options to purchase 400,000 Shares at a price of $0.50 per
Share. The options vest upon the completion of the Financing and are exercisable
until December 31, 2006. The consulting services performed by the affiliate of
Mr. Hewlett involved providing marketing contacts and expertise to help
effectuate the Company's plan to re-focus its business strategy and marketing
efforts to place greater emphasis on market niches which have not been
productive in the past and could likely be expanded.
The Company granted Wade B. Mitchell 200,000 1996 Options exercisable at
the price of $.50 per share any time until their expiration 10 years from the
date of grant and 150,000 1996 Options exercisable at the price of $1.00 per
share anytime until their expiration 10 years from the date of grant. The
options were granted to Mr. Mitchell for his services in 1996 as a Director of
the Company and for providing services to implement the Company's re-focused
business strategy and marketing efforts. The shares issuable upon exercise of
these 1996 Options are not subject to adjustment in the event of a reverse stock
split.
In October 1996, the Company entered into an oral agreement with Kenneth W.
Craig to serve as President of the Company for three years. It is anticipated
that the formal agreement will be executed in 1997. The employment agreement
will provide for a minimum base salary of $48,000 per annum plus a quarterly
incentive compensation bonus equal to 1% of the adjusted gross sales of the
Company for various product lines. Further, the Company agreed to grant Mr.
Craig non-qualified stock options to purchase 600,000 Shares at a price of $0.50
per Share. A total of 300,000 of the options vest upon the completion of the
Financing and 300,000 vest upon the earlier of achieving certain performance
goals or ratably over ten years. The performance goals are that the Company
achieves sales of $5,000,000 in 1997, $8,000,000 in 1998, and $10,000,000 in
1999. The options are exercisable until December 31, 2006.
In addition to the transactions outlined in this section, Directors and
officers received 1996 Options as outlined in "INTERESTS OF PERSONS IN MATTERS
TO BE ACTED UPON."
SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholders proposals intended for inclusion in next years proxy statement
should be sent via certified mail-return receipt requested to Bruce H. Haglund,
Secretary, 2010 Main Street, Suite 400, Irvine, California 92614, and must be
received by March 1, 1998.
22
<PAGE>
MISCELLANEOUS AND OTHER MATTERS
Management knows of no matters to come before the Meeting other than those
specified herein. If any other matter should come before the Meeting, then the
persons named in the enclosed form of proxy will have discretionary authority to
vote all proxies with respect thereto in accordance with their judgment.
DOCUMENTS INCORPORATED BY REFERENCE
The Company specifically incorporates the Financial Statements for the year
ended March 31, 1996, filed as part of the 1996 Annual Report on Form 10-KSB in
response to Item 13 of the 10-KSB, and the Form 10-QSB for the period ended June
30, 1997. The Annual Report and attached Financial Statements should have been
enclosed in the mailing containing this Proxy Statement. If you did not receive
a copy of the Annual Report and attached Financial Statement, please contact the
Company and request that the information be sent to you. A copy of the June 30,
1997 10-QSB may be obtained from the Company without cost to the requesting
stockholder by contacting the Company.
A COPY OF THE COMPANY'S CURRENT ANNUAL REPORT ON FORM 10-KSB AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES THERETO, IS BEING MAILED TO EACH STOCKHOLDER TOGETHER WITH THIS PROXY
STATEMENT. ADDITIONAL COPIES MAY BE OBTAINED BY STOCKHOLDERS WITHOUT CHARGE BY
WRITING TO: RENAISSANCE GOLF PRODUCTS, INC., 5812 MACHINE DRIVE, HUNTINGTON
BEACH, CALIFORNIA 92649.
23
<PAGE>
[SIDE ONE OF CARD]
RENAISSANCE GOLF PRODUCTS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER ________, 1997
The undersigned hereby constitutes and appoints John B. Hewlett and Bruce
H. Haglund, and each of them, the true and lawful attorneys, agents and proxies
of the undersigned, with full power of substitution, to vote with respect to all
the shares of Common Stock, par value $.001, of RENAISSANCE GOLF PRODUCTS, INC.,
standing in the name of the undersigned at the close of business on _____ , 1997
at the Annual Meeting of Stockholders to be held October _______, 1997, and at
any and all adjournments and postponements thereof, to vote:
1. Election of Directors: FOR all nominees listed below
----- (Except as marked to the contrary
below)
WITHHOLD AUTHORITY
-----
JOHN B. HEWLETT, KENNETH W. CRAIG, MILES T. DOODY, DENNIS L. CROCKETT,
and WADE M. MITCHELL
2. To approve a 4:1 reverse stock split of the currently outstanding shares
without changing the number of authorized shares or the par value of the
shares which if approved will result in the current shareholders current
aggregate stock ownership interest in the Company being diluted from 59.5%
to 26.8%, assuming full dilution of the shares through the conversion of
outstanding convertible debentures into 2,250,000 shares, and the exercise
of outstanding stock options into 5,477,000 shares:
FOR AGAINST ABSTAIN
----- ----- -----
3. To approve an amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares from 20,150,000 to 40,150,000:
FOR AGAINST ABSTAIN
----- ----- -----
4. To consider and ratify the appointment of CORBIN & WERTZ as independent
auditor of the Company for the fiscal year ending December 31, 1997:
FOR AGAINST ABSTAIN
----- ----- -----
5. To adjourn the meeting for a period of two months, if necessary, to permit
management with an opportunity to obtain the requisite number of votes to
approve Proposal 2 and/or 3 if not approved.
FOR AGAINST ABSTAIN
----- ----- -----
6. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment or
postponement thereof.
<PAGE>
[SIDE TWO OF CARD]
The shares represented by this Proxy will be voted in the manner directed
herein by the undersigned stockholder. If no directions to the contrary are
made, this Proxy will be voted FOR the election of all of the director nominees
named above and FOR approval of Proposals 2, 3, 4 and 5 if necessary.
DATED: , 1997
--------------------
-------------------------------
(Signature)
-------------------------------
(Signature if held jointly)
IMPORTANT: Please sign exactly as your name
appears at the left. Each joint owner should
sign. Executors, administrators, trustees,
should give full title. If a corporation,
please sign in full corporate name by an
authorized officer. If a partnership, please
sign in partnership name by an authorized
person.
Please mark, sign, date and return promptly.
THIS PROXY IS BEING SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS
OF RENAISSANCE GOLF PRODUCTS, INC.
