<PAGE>
SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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 Rule 14a-11(c) or Rule 14a-12
VIDEOLAN TECHNOLOGIES, INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
(2) Aggregate number of securities to which transaction applies:
N/A
(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):
N/A
(4) Proposed maximum aggregate value of transaction:
N/A
(5) Total fee paid:
$125.00
[ ] Fee paid previously with preliminary materials.
N/A
[ ] 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 date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
VIDEOLAN TECHNOLOGIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 24, 1997
TO THE STOCKHOLDERS OF
VIDEOLAN TECHNOLOGIES, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of VideoLan Technologies, Inc., a Delaware corporation (the
"Company"), will be held on Tuesday, July 24, 1997, at 10:00 a.m. (EDT), at the
Boston Harbor Rowes Wharf Hotel, Boston, Massachusetts, for the purposes of
considering and acting upon the following:
(1) the election of five directors;
(2) the adoption of an amendment to the Company's Certificate of
Incorporation to cause a one-for-ten reverse stock split of the Company's
common stock;
(3) the adoption of the 1997 Employee Stock Option Plan;
(4) the ratification of the appointment of Grant Thornton LLP as the
Company's independent accountants for the fiscal year ending December 31, 1997;
and
(5) the transaction of such other business as may properly come before
the Annual Meeting or any adjournment thereof.
The Board of Directors recommends that stockholders vote, according to
their voting rights, "FOR" the nominees for the directorships and further
recommends that stockholders vote "FOR" agenda items above.
Abstentions and "broker non-votes" are counted for purposes of
determining the presence or absence of a quorum for the transaction of
business.
Only stockholders of record at the close of business on May 27, 1997
will be entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof. The Annual Meeting may be adjourned from time to time
without notice other than by announcement. A list of stockholders entitled to
vote at the Annual Meeting will be available for inspection by any stockholder
for any purpose germane to the Meeting, during ordinary business hours, during
the ten days prior to the Meeting, at the Company's
<PAGE>
headquarters located at 100 Mallard Creek Road, Suite 250, Louisville, Kentucky
40207.
By Order of the Board of Directors
STEVEN B. ROTHENBERG
Secretary
Louisville, Kentucky
_________, 1997
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING,
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD, IN ORDER THAT A QUORUM MAY BE
ASSURED. WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING IN PERSON,
PLEASE COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING
RETURN ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED BY THE SENDER IF MAILED
WITHIN THE UNITED STATES. IF YOU RECEIVE MORE THAN ONE PROXY BECAUSE YOUR
SHARES ARE REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH SUCH PROXY SHOULD
BE SIGNED AND RETURNED TO ASSURE THAT ALL OF YOUR SHARES WILL BE VOTED. THE
PROXY SHOULD BE SIGNED BY ALL REGISTERED HOLDERS EXACTLY AS THE STOCK IS
REGISTERED.
<PAGE>
VIDEOLAN TECHNOLOGIES, INC.
100 Mallard Creek Road, Suite 250
Louisville, Kentucky 40207
--------------------
PROXY STATEMENT
--------------------
1997 ANNUAL MEETING OF STOCKHOLDERS
General Information
This Proxy Statement is furnished to stockholders of VideoLan
Technologies, Inc., a Delaware corporation (the "Company"), in connection with
the solicitation of proxies by the Board of Directors of the Company (the
"Board of Directors") for use at the Annual Meeting of Stockholders of the
Company to be held at 10:00 a.m. (EDT) on July 24, 1997, at the Boston Harbor
Rowes Wharf Hotel, Boston, Massachusetts, and any adjournment or adjournments
thereof (the "Annual Meeting"), for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders. This Proxy Statement, the attached
Notice of Annual Meeting of Stockholders, the accompanying form of proxy and
the Annual Report to Stockholders of the Company for the fiscal year ended
December 31, 1996 are first being sent to stockholders of the Company on or
about June 17, 1997.
The record date for stockholders of the Company entitled to notice of,
and to vote at, the Annual Meeting is the close of business on May 27, 1997
(the "Record Date"). On the Record Date, there were issued and outstanding
14,050,398 shares of the Company's common stock, $.001 par value (the "Common
Stock"). All of such shares are of one class with equal voting rights. Presence
in person or by proxy of holders of 7,025,199 shares of Common Stock will
constitute a quorum at the Annual Meeting.
A proxy, in the accompanying form, which is properly executed, duly
returned to the Company and not revoked will be voted in accordance with the
instructions contained thereon. If no specific instructions are indicated on
the proxy, the shares represented will be voted FOR the election of five
persons nominated herein as directors, for Item 2 described herein, for Item 3
described herein, for Item 4 described herein, and at the discretion of the
persons who are named in the accompanying form of proxy with respect to such
other matters as may properly come before the Annual Meeting.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the inspectors of election appointed for the meeting, who also
will determine whether or not a quorum is present. The inspectors of election
will treat abstentions as shares that are present and entitled to vote for
purposes of determining the presence of a quorum, but as unvoted for purposes
of determining the approval of any matter submitted to the stockholders for a
vote. Thus, an abstention from voting on a matter has the same legal effect as
a vote "against" the matter, even though the
<PAGE>
stockholder may interpret such action differently. If a broker indicates on the
proxy that it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
Each proxy granted may be revoked by the person granting it at any
time (i) by giving written notice to such effect to the Secretary of the
Company, (ii) by execution and delivery of a proxy bearing a later date, or
(iii) by attendance and voting in person at the Annual Meeting, except as to
any matter upon which, prior to such revocation, a vote has been cast at the
Annual Meeting pursuant to the authority conferred by such proxy. The mere
presence at the Annual Meeting of a person appointing a proxy does not revoke
the appointment.
Ownership of Equity Securities
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of the Record Date by (i) each
person who is known by the Company to be the beneficial owner of more than 5%
of the outstanding shares of Common Stock of the Company, (ii) each of the
Company's current directors, (iii) each of the Company's executive officers,
and (iv) all directors and executive officers of the Company as a group. Unless
indicated otherwise, the Company believes that each person named below has the
sole power to vote and dispose of the shares of Common Stock beneficially owned
by such person.
2
<PAGE>
Number of Shares
Name and Address Beneficially Owned(8) Percent of Total
- ---------------- ------------------ ----------------
Ted Ralston(1) 1,389,308 9.9%
Jack Shirman (2) * *
Steven B. Rothenberg 40,000(3) *
Peter Beck 50,000(4) *
John R. Glankler 45,000(5) *
John Ruggiero 10,000(6) *
Norman Barkeley 10,000(7) *
Executive Officers and Directors
as a Group (6 persons) 1,544,308 11%
- -------------
* Less than 1%
(1) The address of Mr. Ted Ralston is 1941 S. Kemp, Lima, Ohio 45806.
(2) The address for Mr. Shirman is 100 Mallard Creek Road, Suite 250,
Louisville, Kentucky 40207.
(3) Represents 40,000 shares of Common Stock subject to options
exercisable within 60 days of July 24, 1997 at an exercise price of
$1.56. These options were received on January 23, 1997 in exchange for
50,000 previously granted options. The address for Mr. Rothenberg is
100 Mallard Creek Road, Suite 250, Louisville, Kentucky 40207.
(4) Represents 50,000 shares of Common Stock subject to options
exercisable within 60 days of July 24, 1997. These options were
received on January 23, 1997 in exchange for 61,000 previously granted
options. The address for Mr. Beck is 100 Mallard Creek Road, Suite
250, Louisville, Kentucky 40207.
(5) Represents 25,000 shares of Common Stock owned by record and 20,000
other shares of Common Stock subject to options exercisable within 60
days of July 24, 1997. The address of Mr. Glankler is 1300 Courthouse
Plaza NE, Dayton, Ohio 45402.
(6) Represent 10,000 shares of Common Stock subject to options exercisable
within 60 days of July 24, 1997. The address of Mr. Ruggiero One Post
Office Square, Suite 3360 Boston, MA 02109.
3
<PAGE>
(7) Represents 10,000 shares of Common Stock subject to options
exercisable within 60 days of July 24, 1997. The address of Mr.
Barkeley is 23301 S. Wilmington Avenue Carson, California 90745
(8) Does not include shares subject to options which are not exercisable
and will not become exercisable within 60 days of July 24, 1997.
ELECTION OF DIRECTORS
(Item 1 on the Proxy Card)
Nominees
In accordance with the Company's By-Laws, the Board of Directors has
fixed the number of directors at five. Accordingly, five persons will be
elected to the Board of Directors at the Annual Meeting. Directors are elected
by a plurality of the votes cast by the holders of the shares present in person
or represented by proxy at a meeting at which a quorum is present. "Plurality"
means that the individuals who receive the largest number of votes cast are
elected as directors up to the maximum number of directors to be chosen at the
meeting. Consequently, any shares not voted (whether by withholding authority
or broker non-vote) have no impact in the election of directors, except to the
extent the failure to vote for the individual results in another individual
receiving a larger number of votes.
The persons named in the accompanying form of proxy, unless otherwise
instructed, intend to vote the shares of Common Stock covered by valid proxies
FOR the election of the five persons named below to the Board of Directors. In
the event that any of such persons is unable to continue to be available for
election, the persons named in the accompanying form of proxy will have
discretionary power to vote for a substitute and will have discretionary power
to vote or withhold their vote for any additional nominees named by
stockholders. There are no circumstances presently known to the Board of
Directors which would render any of the following persons unavailable to
continue to serve as a director, if elected.
The business experience of each of the foregoing director nominees,
during the past five years, is as follows:
John Ruggiero, age 61, has been Chairman of the Board of Directors
since January 1997. Mr. Ruggiero is currently the Vice Chairman of Telco
Systems, Inc. ("Telco"). Mr. Ruggiero has held various positions with Telco
including Chief Executive Officer, President, and Chief Financial Officer.
Prior to that time, Mr. Ruggiero was Corporate Vice President and Chief
Financial Officer of Sanders Associates, Inc., a manufacturer of fiber optic
and customer premise transmission equipment. Mr. Ruggiero received his BS and
MBA from Boston College.
4
<PAGE>
Jack Shirman, age 62, became a member of the Board of Directors when
he became Chief Executive Officer of the Company on September 30, 1996. From
1988 until 1996, Mr. Shirman served as Corporate Vice President and Group
President of Dynatech Corporation, a designer and manufacturer of a diversified
line of instruments, equipment, and software used to support voice, data, and
video communications. Prior to such time, Mr. Shirman served as President and
Chief Executive Officer of Telco Systems, Inc., a manufacturer of fiber optic
and customer premise transmission equipment. Mr. Shirman received his BS and MS
degrees in Electrical Engineering from Cornell University, and his MBS from the
Rochester Institute of Technology.
Steven B. Rothenberg, age 51, has been Vice President Finance, Chief
Financial Officer, and Treasurer of the Company since September 1995. In
January 1996, he was elected to the Board of Directors and elected Corporate
Secretary. During the two year period prior to joining the Company, Mr.
Rothenberg was a financial consultant to the telecommunications industry. From
1992 to 1994, Mr. Rothenberg was Chief Financial Officer of H2O Plus, L.P., a
specialty retailer in the cosmetics and skincare business. From 1988 to 1991,
Mr. Rothenberg was Chief Financial Officer of Ellesse USA, a subsidiary of
Reebok International, Ltd. In addition, Mr. Rothenberg has held senior
financial management positions with Warner Communications, Inc., Revlon Inc.,
and Ernst and Young, LLP. Mr. Rothenberg received a BS in accounting and
finance from The American University.
Norman Barkeley, age 65, became a member of the Board of Directors on
March 20, 1997. Mr. Barkeley is the Chairman of Ducommun Incorporated, a New
York Stock Exchange company ("Ducommun"). Ducommun is a manufacturer of
components and assemblies for the aerospace and wireless telecommunications
industries. Mr. Barkeley has been with Ducommun since 1988. Prior to joining
Ducommun, Mr. Barkeley had 30 years experience with Lear Siegler, Inc., a
manufacturer of aerospace, automotive, and commercial industrial products and
attained the positions of Chairman and Chief Executive Officer in 1986. Mr.
Barkeley received his bachelor's degree from Michigan State University.
John R. Glankler, age 39, has been a director of the Company since
August 1995. He has been associated with the law firm of Sebaly, Shillito &
Dyer, a Legal Professional Association ("Sebaly, Shillito & Dyer"), Dayton,
Ohio, counsel to the Company, since April 1, 1995, and has been a shareholder
and director of Sebaly, Shillito, & Dyer since July 1, 1996. For more than five
years prior to April 1995, Mr. Glankler was associated with another law firm in
Ohio. Mr. Glankler obtained a BA in economics from Duke University and a JD
from the University of Cincinnati.
All directors hold office until their successors have been duly
elected and qualified or until their earlier resignation or removal. Directors
are elected annually.
The Board of Directors held 12 meetings during 1996. In addition,
from time to time during the year, the members of the Board of Directors acted
by unanimous written consent. All
5
<PAGE>
of the members of the Board of Directors attended at least 75% of the meetings
of the Board of Directors.
Committees of the Board of Directors
The Company has a Compensation Committee and an Audit Committee. The
Compensation Committee reviews, analyzes and makes recommendations to the Board
of Directors regarding salaries, incentive compensation and stock option grants
for officers, employees and directors of the Company. The current members of
the Compensation Committee are John R. Glankler, John Ruggiero and Norman
Barkeley. The Audit Committee reviews the results and scope of the Company's
audits and other services provided by the Company's independent auditors and
approves the selection of the auditors. The current members of the Audit
Committee are John R. Glankler, John Ruggiero and Norman Barkeley.
Executive Compensation
Summary of Compensation in 1996. The following summary compensation
table sets forth information concerning compensation for services in all
capacities awarded to, earned by or paid to the executive officers of the
Company whose salary and bonus exceeded $100,000 during the year ended December
31, 1996 ("Named Executive Officers").
<TABLE>
<CAPTION>
Annual Compensation Long Term
------------------- Compensation Awards
-------------------
Securities
Name Other Underlying
and Annual Options/ All Other
Principal Position Year Salary($) Compensation ($) SARs (#) Compensation ($)
------------------ ---- --------- ---------------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Jack Shirman 1996 50,997 - 246,000(2) 0
(Chief Executive
Officer(1))
Ted Ralston 1996 0 - 0 100,000(4)
(Interim Chief Executive 1995 75,000
Officer and Chairman of
the Board(3))
John E. Haines 1996 178,700 - 0 0
(Chief Executive 1995 67,742
Officer(5))
Steven B. Rothenberg 1996 153,333 - 8,200(6) 0
(Chief Financial Officer) 1995 24,167
Peter Beck 1996 106,250 241,494(7) 8,200(6)
(Vice President Market 1995 69,421
Development)
Vernon L. Jackson(8) 1996 235,767
1995 166,250
</TABLE>
(1) Mr. Shirman became Chief Executive Officer of the Company on
September 30, 1996.
6
<PAGE>
(2) Reflects options to purchase shares of Common Stock at $1.56 per share
granted on January 23, 1997. The options are exercisable as follows:
82,000 on March 27, 1998, 82,000 on March 27, 1999, 50,000 on March
27, 2000, and 50,000 on March 27, 2001. These options were received on
January 23, 1997 in exchange for 300,000 previously granted options.
(3) From January 1996 until September 30, 1996, Mr. Ralston was serving as
the interim Chief Executive Officer at the request of the Board of
Directors. Mr. Ralston did not receive a salary for this position. Mr.
Ralston resigned as Chairman of the Board of Directors and as a
director in November 1995.
(4) Reflects consulting fees paid to Mr. Ralston for the period January 1,
1996 to December 31, 1996 pursuant to a consulting agreement with the
Company. This consulting agreement required Mr. Ralston to provide at
least thirty hours of service per week and provided for a monthly
payment to Mr. Ralston of $10,000 in consideration of his performance
of services.
(5) Mr. Haines' employment as Chief Executive Officer ceased in January
1996.
(6) Reflects options to purchase shares of Common Stock at $1.56 per share
granted on January 23, 1997. 50% of these options become exercisable
on February 9, 1999 and the remaining 50% become exercisable on
February 9, 2000. These options were received on January 23, 1997 in
exchange for 10,000 previously granted options.
(7) Reflects net proceeds received by Mr. Beck from the sale of shares
obtained upon the exercise of certain options.
(8) Mr. Jackson's employment with the Company ceased in December 1996.
Stock Options. The following table sets forth certain information
regarding option grants to Named Executive Officers during the year ended
December 31, 1996.
7
<PAGE>
<TABLE>
<CAPTION>
% of Total
Options
Granted to
Options Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year Price ($/sh) Date
- ---- ----------- ----------- ------------ ----
<S> <C> <C> <C> <C>
Jack Shirman 246,000(1) 35.1% $1.56 3/27/00
Ted Ralston 0 0 0 0
John E. Haines 0 0 0 0
Steven B. 8,200(2) 1.2% $1.56 2/9/00
Rothenberg
Peter Beck 8,200(2) 1.2% $1.56 2/9/00
Vernon L. Jackson 0 0 0 0
</TABLE>
(1) Reflects options to purchase shares of Common Stock at $1.56 per share
granted on January 23, 1997. The options are exercisable as follows:
82,000 on March 27, 1998, 82,000 on March 27, 1999, 50,000 on March
27, 2000, and 50,000 on March 27, 2001. These options were received on
January 23, 1997 in exchange for 300,000 previously granted options.
(2) Reflects options to purchase shares of Common Stock at $1.56 per share
granted on January 23, 1997. 50% of these options become exercisable
on February 9, 1999 and the remaining 50% become exercisable on
February 9, 2000. These options were received on January 23, 1997 in
exchange for 10,000 previously granted options.
Option Exercises in 1996 and Year-End Option Values
The following table provides information relating to the number and
value of stock options held by the Named Executive Officers at December 31,
1996. Except as noted below, the Named Executive Officers did not exercise any
stock options during 1996.
8
<PAGE>
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options/ In-the-Money Options/
SARs At FY-End (#) SARs At FY-End ($)
------------------ ------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jack Shirman 0 246,000(1) 0 0
Ted Ralston 0 100,000(2) 0 0
John E. Haines 100,000(3) 0 0 0
Steven B. 40,000(4) 68,200(5) 0 0
Rothenberg
Peter Beck 50,000(6) 8,200(6) 0 0
Vernon L. Jackson
</TABLE>
(1) Reflects options to purchase shares of Common Stock at $1.56 per share
granted on January 23, 1997. The options are exercisable as follows:
82,000 on March 27, 1998, 82,000 on March 27, 1999, 50,000 on March
27, 2000, and 50,000 on March 27, 2001. These options were received on
January 23, 1997 in exchange for 300,000 previously granted options.
(2) Reflects options to purchase shares of Common Stock at $2.00 per share
granted on March 1, 1995. These options are not exercisable until the
Company has cumulative net income before income taxes of $1,000,000.
These options were canceled pursuant to Mr. Ralston's resignation as
Chief Executive Officer in August 1995.
(3) Reflects options to purchase shares of Common Stock at $3.00
per share granted pursuant to Mr. Haines' termination and release
agreement on January 17, 1996.
(4) Represents options to purchase shares of Common Stock at $1.56
per share granted on January 23, 1997 and exercisable within 60 days
of July 24, 1997. These options were received on January 23, 1997 in
exchange for 50,000 previously granted options.
(5) Represents options to purchase (i) 21,500 shares of Common Stock at
$1.56 per share granted on January 23, 1997 and exercisable within 60
days of July 24, 1997; (ii) 20,000 shares of Common Stock at $1.56
per share granted on January 23, 1997 and exercisable on February 15,
1998; (iii) 4,100 shares of Common Stock at $1.56 per share granted
on January 23, 1997 and exercisable on February 9, 1999; and (iv)
4,100 shares of Common Stock at $1.56 per share granted on January
23, 1997 and exercisable on February 9, 2000. All of these options
were received on January 23, 1997 in exchange for previously granted
options.
(6) Represents options to purchase 50,000 shares of Common Stock at
$1.56 and exercisable within 60 days of July 24, 1997. These options
were received on January 23, 1997 in exchange for 61,000 previously
granted options.
(7) Mr. Beck exercised 14,000 options in 1966 at an exercise price of
$3.00 and sold the shares for net proceeds in the amount of $241,494.
9
<PAGE>
Employment and Consulting Agreements
On April 17, 1995, the Company entered into a three-year
employment agreement with Peter Beck to serve as Chief Operating Officer
of the Company at an annual salary of $60,000. Mr. Beck's annual salary
was increased to $100,000 annually on August 17, 1995. Mr. Beck also
received options to purchase 75,000 shares of Common Stock pursuant to a
stock option agreement. Mr. Beck exercised 14,000 options in 1996 and
exchanged the remaining 61,000 for 50,000 options at an exercise price
of $1.56. Mr. Beck is required to devote his full time and attention to
the Company. Mr. Beck's employment agreement contains a confidentiality
provision as well as a noncompetition provision which prohibits Mr. Beck
from competing with the Company during the term of his employment
agreement and for two years thereafter. Pursuant to the terms of Mr.
Beck's employment agreement, the Company is obligated to pay Mr. Beck
severance in the amount of three months' salary plus one month's salary
for each full year that Mr. Beck is employed by the Company prior to his
termination, if Mr. Beck's termination is due to death or disability or
if Mr. Beck's termination is other than for cause.
On September 1, 1995, the Company entered into a two-year consulting
agreement with Ted Ralston, the Company's Chairman of the Board. Effective on
the same date, Mr. Ralston resigned as Chief Executive Officer and Treasurer of
the Company, and his previous employment agreement was terminated. Mr.
Ralston's consulting agreement requires him to provide at least 30 hours of
service per week and provides for a monthly payment to Mr. Ralston of $10,000
in consideration of his performance of services.
On September 1, 1995, the Company entered into a two-year
employment agreement with Steven Rothenberg to serve as Vice President
Finance, Treasurer, and Chief Financial Officer at an annual salary of
$145,000. Pursuant to the terms of Mr. Rothenberg's employment
agreement, termination by the Company for any reason without cause
would entitled Mr. Rothenberg to receive his salary for six months. Mr.
Rothenberg's employment agreement contains a noncompetition provision
which prohibits Mr. Rothenberg from competing with the Company during
the term of his employment agreement and for two years thereafter.
On January 17, 1996, Mr. John E. Haines' employment as Chief Executive
Officer of the Company ceased. As a result of his termination and release
agreement with the Company, Mr. Haines received $15,625 per calendar month,
prorated for partial months, through September 24, 1996. The termination and
release agreement allows Mr. Haines to retain vested options to purchase
150,000 shares of common stock at $3 per share granted to him under his
consulting agreement. The termination and release agreement also required the
Company to register 50,00 of the 150,000 shares on June 20, 1996 and provides
Mr. Haines certain piggyback registration rights for the remaining 100,000
options. Upon entering the termination and release agreement, Mr. Haines
resigned as a director of the Company.
On June 1, 1996, the Company entered into a three year consulting
agreement with Jacques O. de Labry to provide certain consulting services to the
Company for the annual salary of $100,008. Mr. de Labry was also granted options
to purchase 30,000 shares of the Company's Common Stock pursuant to a stock
option agreement. Pursuant to the terms of Mr. de Labry's consulting agreement,
Mr. de Labry is to provide consulting services to the Company for no more than
12 full working days during any calendar month. Termination by the Company
without cause and without providing Mr. de Labry with six months notice would
entitle Mr. de Labry to receive his salary for six months. Mr. de Labry's
consulting agreement contains a noncompetition provision which prohibits Mr. de
Labry from competing with the Company during the term of his consulting
agreement and for six months thereafter.
On September 27, 1996, Mr. Jack Shirman joined the Company as Chief
Executive Officer. His employment contract is for a two-year term. Mr.
Shirman's annual base salary is $200,000 with possible bonuses in an amount to
be determined at a later date. Mr. Shirman was also granted 300,000 stock
options at an exercise price of $6.12 per share. Mr. Shirman may exercise
100,000 stock options on September 27, 1997 and 1998, and 50,000 shares on
September 27, 1999 and 2000. The options expire on September 27, 2001.
Effective with Mr. Shirman taking over as Chief Executive Officer, Mr. Ted
Ralston resigned as interim Chief Executive Officer.
In December of 1996, Mr. Vernon L. Jackson's employment with the
Company ceased. Terms of Mr. Jackson's severance have not been resolved.
10
<PAGE>
Compensation of Directors
The Company does not currently compensate directors who are also
executive officers of the Company for service on the Board of Directors. Under
Company policy, each non-employee director of the Company is entitled to
reimbursement of expenses incurred in connection with attending meetings of the
Board of Directors. Non-employee directors also receive immediately exercisable
options to purchase 10,000 shares of Common Stock, at the then fair market
value, on the date of their initial election to the Board of Directors and on
each of the first and second anniversary dates of their election to the Board
of Directors, if they are re-elected.
AMENDMENT OF ARTICLE FOURTH, SECTION 1 OF THE
CERTIFICATE OF INCORPORATION TO CAUSE A ONE-FOR-TEN
REVERSE STOCK SPLIT OF COMMON STOCK
(Item 2 on the Proxy Card)
At the Annual Meeting, stockholders will be asked to approve the
proposed amendment (the "Amendment") to Article Fourth, Section 1 of the
Company's Certificate of Incorporation to effect a 1-for-10 reverse stock split
(the "Reverse Split") whereby every ten shares of the Company's currently
authorized and outstanding common stock (the "Old Common Stock") will be
exchanged for one share of newly created common stock (the "New Common Stock").
The Company's 5,000,000 shares of authorized Preferred Stock ("Preferred
Stock") will not be affected by the proposed Reverse Split.
The Board of Directors has adopted a resolution to amend the Company's
Certificate of Incorporation to cause an exchange of each ten shares of Old
Common Stock for 1 share of New Common Stock. The Reverse Split will be
accompanied by a reverse split in the number of authorized shares from
80,000,000 shares of Old Common Stock to 8,000,000 shares of New Common Stock.
A copy of Article Fourth, Section 1 of the Certificate of Incorporation as it
would read following adoption of Amendment is included herewith as Exhibit A.
Description of and Reasons for the Proposed Amendment
The Board of Directors is submitting for 1-for-10 Reverse Split of
Common Stock for approval of the stockholders primarily because it believes the
Reverse Split would increase the likelihood of generating interest in the
Company's stock by more investors and members of the securities brokerage
industry and also would enhance the likelihood for success of any acquisition
or refinancing efforts which might be undertaken by the Company. As a result of
discussions by the Company's executive officers with members of the brokerage
and investment banking industries, the Company has been advised by some members
of the investment banking industry that brokerage firms might be more willing
to evaluate the Company's securities as a possible investment opportunity for
their clients and to act as a market maker in the Company's securities if the
price range for the Company's Common Stock were higher. Additionally, the
Company
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believes that the likelihood of the Company's Common Stock becoming marginable
maybe increased following the proposed Reverse Split to the extent the Reverse
Split has a positive effect on the trading market. Were the Company's Common
Stock to become marginable under the rules of the Federal Reserve Board, this
may generate additional interest on the part of the investment community. Based
upon such discussions, the Company believes that additional interest by the
investment community in the Company's stock (which is not assured) might result
in a more liquid trading market for the stock and that potential acquisition
candidates might be more willing to accept shares of Common Stock if the
trading prices were in a higher range and the market for the Common Stock were
believed to be less volatile. Although the Company believes that its ability to
complete acquisitions or conduct refinancings might be benefitted by the
proposed Reverse Split, there can be no assurance that this will occur. At the
current time the Company has no agreements for any acquisition offers or
financings.
The Board of Directors also believes that the proposed 1-for-10
Reverse Split is advisable to increase the per share price of the Company's
Common Stock and decrease the number of securities outstanding, with a view to
placing the Company in a better position to maintain the listing of its Common
Stock on The Nasdaq SmallCap Market. To remain eligible for continued listing
on The Nasdaq SmallCap Market under current requirements, the Company's Common
Stock must maintain a minimum bid price of $1.00 or, as an alternative if the
bid price is less than $1.00, maintain capital and surplus of $2,000,000 and a
market value of the public float of $1,000,000. However, the Nasdaq Stock
Market recently announced proposed rule changes that would, among other
proposed changes, eliminate the alternative test and require removal of listed
status for any security trading at less than a minimum bid price of $1.00 per
share. Bid prices for the Company's Common Stock have been consistently less
than $1.00 per share throughout the period from ______________ through
_____________. As of ____________ the closing bid price
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for the Company's Common Stock as quoted by The Nasdaq SmallCap Market was
$_____ per share. There can be no assurance, notwithstanding the Reverse Split,
that the Company's Common Stock will remain qualified for listing on The Nasdaq
SmallCap Market or on another securities exchange.
The Board of Directors further believes that low trading prices of the
Company's equity securities may have an adverse impact upon the efficient
operation of the trading market in the securities. In particular, brokerage
firms often charge a greater percentage commission on low-priced shares than
that which would be charged on a transaction in the same dollar amount of
securities with a higher per share price. A number of brokerage firms will not
recommend purchases of low-priced stock to their clients or make a market in
such shares, which tendencies may adversely affect the Company. Stockholders
should note that the effect of the Reverse Split upon the market prices for the
Company's Common Stock cannot be accurately predicted. In particular, there is
no assurance that prices for share of New Common Stock will be ten times the
prices for shares of Old Common Stock immediately prior to the Reverse Split.
Furthermore, there can be no assurance that the proposed Reverse Split will
achieve the desired results which have been outlined above, nor can there be
any assurance that the Reverse Split will not adversely impact the market price
of the Common Stock or, alternatively, that any increased price per share of
the Common stock immediately after the proposed Reverse Split will be sustained
for any prolonged period of time. In addition, the Reverse Split may have the
effect of creating odd lots of stock for some stockholders and such odd lots
may be more difficult to sell or have higher brokerage commissions associated
with the sale of such odd lots.
The Board of Directors is hopeful that the decrease in the number of
shares of Common Stock outstanding as a consequence of the proposed Reverse
Split, and the anticipated corresponding increased price per share, will
stimulate interest in the Company's post-split Common Stock and possibly
promote greater liquidity for the Company's stockholders with respect to those
shares held by them. However, the possibility does exist that such liquidity
could be adversely affected by the reduced number of shares which would be
outstanding after the proposed Reverse Split. The Board of Directors is also
hopeful that the Reverse Split will increase the trading price of the Common
Stock and thereby increase the Company's sales.
Exchange of Stock Certificate and
Determination of Number of Shares Issuable Upon Such Exchange
If the Reverse Split is adopted by the stockholders, one share of New
Common Stock would be exchanged for each ten shares of Old Common Stock. Shares
of New Common Stock may be obtained by surrendering certificates representing
shares of Old Common Stock to the Company's transfer agent, Continental Stock
Transfer & Trust Co., 2 Broadway, New York, New York 10004 (the "Transfer
Agent"). HOWEVER, THE COMPANY HAS ESTABLISHED NO DEADLINE FOR THE EXCHANGE OF
CERTIFICATES, AND THE PRESENT CERTIFICATES OF OLD COMMON STOCK WILL BE
EXCHANGEABLE FOR SHARES OF NEW COMMON STOCK AT ANY TIME IN THE FUTURE FOR A FEE
TO BE PAID BY THE STOCKHOLDER, WHICH IS PRESENTLY $10.00 PER CERTIFICATE. To
determine the number of shares of New Common Stock issuable to any record
holder, the total number of shares represented by certificates issued in the
name of that record holder as set forth on the records of the Transfer Agent (on
the date upon which the Reverse Split becomes effective) will be divided by ten.
The holder will, upon surrender of the share certificate(s) representing shares
of Old Common Stock, receive a share certificate representing the appropriate
number of shares of New Common Stock. Any fractional share which might result
from the Reverse Split will be rounded up to a full share. Holders of
certificates of Old Common Stock may transmit their certificates to the Transfer
Agent whenever they wish to obtain shares of New Common Stock. The Company will
not require any stockholder to exchange his certificate(s) of Old Common Stock
for New Common Stock. It is anticipated that the Reverse Split will be effected
only after shareholder approval and after required notices have been given to
the Securities and Exchange Commission and to the National Association of
Securities Dealers, and Nasdaq. If the necessary stockholder vote is received
at the scheduled stockholder meeting, the Company will seek to effect the
Reverse Split as soon thereafter as possible.
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Effects of Approval of the Reverse Split
General Effects. Theoretically the market price of the Company's
Common Stock should increase approximately ten-fold following the proposed
Reverse Split. It is hoped that this will result in a price level which will
overcome the reluctance, policies and practices of broker-dealers referred to
above and increase interest in the Company's securities by investors. However,
there can be no assurance that the foregoing will occur or that the per share
price level of the New Common Stock immediately after the proposed Reverse
Split actually will increase ten-fold or be maintained at the level for any
period of time.
An additional effect of the adoption of the Reverse Split would be
change in the par value of the Company's Common Stock to $.10 per share. This
change is being made to ensure that shares of New Common Stock will not be
confused with shares of Old Common Stock. The change in par value is not
expected to have a material effect upon the Company and its stockholders. Par
value represents the minimum consideration which may be received by the Company
for the issuance of a share of Common Stock and Preferred Stock.
The following table illustrates the effects of the proposed Reverse
Split and increase in the authorized shares of Common Stock on authorized and
outstanding numbers of shares of Common Stock:
Number of Shares of Prior to Proposed After Proposed
Common Stock Reverse Split Reverse Split
- ------------ ------------- -------------
Authorized 80,000,000 8,000,000
Outstanding 14,050,385 1,405,038
Available for future issuance
Percent of authorized available
for future issuance
- ---------------
* Reserved for issuance (i) upon exercise of outstanding options, (ii)
for exercises of options which might be granted under the Company's
1995 Stock Option Plan, and (iii) upon conversion of the Company's
outstanding warrants.
Effects on Voting Rights and Other Rights Attributable to Common
Stock. The voting rights and other rights attributable to Common Stock will not
be altered by the Reverse Split. Except for the rounding up of fractional
shares (which will result in only minor adjustments), the proposed Reverse
Split will not affect any stockholder's proportionate equity interest in the
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Company. The only effect of the Company's financial statements will be a
reclassification of the capital accounts on the Company's balance sheet and a
recalculation of loss per share and weighted average shares outstanding as if
the Reverse Split had occurred on the first day of each period presented.
Effect Upon Outstanding Options and Warrants. In connection with the
Reverse Split, all outstanding options and warrants will be adjusted so that
the number of shares issuable upon the exercise of such outstanding options or
warrants will be decreased in proportion for the 1-for-10 Reverse Split, and
the exercise price per share under such outstanding options and warrants will
be rounded up to the nearest whole share and no cash payment will be made in
respect of any fractional share.
In particular, as a result of the Reverse Split, the Company will make
adjustments in the number of shares granted and reserved under the Company's
1995 Stock Option Plan. This plan provides that the number of shares granted and
reserved thereunder is to be adjusted appropriately to give effect to any
recapitalization such as a Reverse Split. Adoption of the Reverse Split would
require adjustments in the outstanding options granted under the 1995 Stock
Option Plan which would decrease the number of shares issuable upon exercise of
the options and increase the exercise price per share by a factor of ten. If the
Reverse Split is approved, the number of shares reserved for issuance under the
existing 1995 Stock Option Plan will be decreased from 2,000,000 to 200,000
shares.
Effect on Preferred Stock. The Company also has outstanding 5,000
shares of Preferred Stock which are convertible into Common Stock of the
Company. Under the terms of the Company's Certificate of Incorporation, the
number of shares of Common Stock issuable upon conversion of the Preferred
Stock will be decreased in proportion to the 1-for-10 Reverse Split, and the
conversion price per share will be proportionately increased.
Federal Income Tax Consequences. A summary of the federal income tax
consequences of the proposed Reverse Split is set forth below. The following
discussion is based upon present federal tax law and does not purport to be a
complete discussion of such consequences. Accordingly, STOCKHOLDERS ARE ADVISED
TO CONSULT THEIR OWN TAX ADVISORS FOR MORE DETAILED INFORMATION REGARDING THE
EFFECTS OF THE PROPOSED REVERSE SPLIT ON THEIR INDIVIDUAL TAX STATUS.
1. The proposed Reverse Split will not be a taxable transaction
to the Company.
2. A stockholder will not recognize any gain or loss as a result
of the Reverse Split.
3. The aggregate tax basis of a stockholder's New Common Stock
(including any fractional shares issued in connection with
the rounding up of fractional shares) will equal the
aggregate tax basis of the stockholder's shares of Old Common
Stock. The holding period of the New Common Stock generally
will include the
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holding period of the stockholder's Old Common Stock,
provided the shares of Old Common Stock were capital assets
in the hands of such stockholder.
Votes Required
The affirmative vote for the majority of the outstanding shares
entitled to vote thereon at the Annual Meeting will be required to adopt the
proposed amendment to Article Fourth, Section 1 of the Certificate of
Incorporation. The Board of Directors recommends a vote FOR approval of Item 2.
ADOPTION OF 1997 EMPLOYEE STOCK PURCHASE PLAN
(Item 3 on the Proxy Card)
At the Annual Meeting, stockholders will be asked to approve the 1997
Employee Stock Purchase Plan (the "1997 Plan"). The following summary of the
material provisions of the 1997 Plan does not purport to be complete and is
qualified in its entirety by reference to the 1997 Plan, a copy of which is
attached as Exhibit B.
Purpose of the 1997 Plan
The purpose of the 1997 Plan is to provide employees of the Company
with an opportunity to participate in the growth of the Company and to further
identify the interests of the employees with the interests of the Company
through the purchase of shares of the Company's Common Stock.
Eligibility and Participation
Any employee of the Company whose customary employment is more than
twenty hours per week and more than five months in any calendar year (each an
"Eligible Employee" or a "Participant") may participate in the 1997 Plan during
particular offering periods set by the Board of Directors (the "Offering
Period") as long as the Eligible Employee has completed 90 days of employment
with the Company. However, an Eligible Employee may not participate in the 1997
Plan if, upon the employee's purchase of the largest amount of shares available
to him or her for purchase during a particular Offering Period, the employee
would own stock, and/or hold outstanding options to purchase stock, possessing
5% or more of the total combined voting power or value of all classes of stock
of the Company.
Administration
The 1997 Plan is administered by the Board of Directors, provided that
the Board of Directors may appoint a committee (the "Committee") to carry out
administration of the 1997 Plan. If a Committee is appointed by the Board of
Directors, the Board of Directors will have
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the power set the number of members on the Committee and to add or remove
members from the Committee. The act of a majority of the members of the
Committee present at any meeting will constitute a valid act of the Committee.
Subject to the express terms and conditions of the 1997 Plan, the Committee
will have the sole power to (i) construe and interpret the 1997 Plan; (ii)
establish, amend or waive rules and for its administration; and (iii) correct
any inconsistencies in the 1997 Plan. All determinations and decisions made by
the Board of Directors or the Committee pursuant to the provisions of the 1997
Plan will be final, conclusive and binding.
Shares Available Under The 1997 Plan
In general, the number of shares of Common Stock reserved for issuance
under the 1997 Plan is 1,000,000 shares. If the Reverse Split is approved the
number of shares of Common Stock reserved for issuance under the 1997 Plan will
be 100,000. In the event of a merger, reorganization, consolidation,
recapitalization, reclassification, split-up, spin-off, separation,
liquidation, stock dividend, stock split, reverse stock split, share
repurchase, share combination, share exchange or other change in the corporate
structure of the Company affecting the Common Stock, the Board of Directors
will equitably substitute or adjust the total number and class of shares of
Common Stock or other stock or securities which may be issued under the 1997
Plan.
Offering Period
The Board of Directors will, from time to time in its discretion,
designate Offering Periods with a duration of up to twelve months, during which
time all Eligible Employees may elect to purchase stock under the 1997 Plan.
The Board of Directors may designate a maximum number of shares of Common Stock
that may be purchased by each Eligible Employee during the Offering Period or
restrict purchases by Eligible Employees to a set percentage of their
compensation, provided that no Participant in the 1997 Plan will be eligible to
purchase Common Stock with a value in excess of $25,000 in any calendar year.
During each Offering Period, each Eligible Employee may elect to purchase
Company Stock in accordance with the rules set by the Board of Directors or the
Committee for that particular offering period.
Payroll Deductions
The Committee may, in its discretion, allow Eligible Employees to
purchase stock during an Offering Period by payroll deduction. If payroll
deduction is available during an Offering Period, an Eligible Employee will
signify his or her election to participate in the 1997 Plan for the Offering
Period by completing a form provided by the Committee (the "Election Form") and
returning it to the Committee by the date indicated on the Election Form. A
Participant's election to have amounts withheld from his or her pay for the
purchase of Company Stock during an Offering Period is irrevocable.
Furthermore, no interest shall be paid on amounts withheld from a Participant's
pay during an Offering Period.
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Purchase Price
Purchases of Common Stock under the 1997 Plan will occur on the last
day of each Offering Period (the "Purchase Date"). Unless otherwise specified
by the Board of Directors, the purchase price (the "Purchase Price") of each
share of Common Stock will be the lesser of:
(i) 85% of the closing price of the Common Stock on the first
day of the Offering Period, or the nearest prior business day
on which trading occurred, on The Nasdaq SmallCap System, or
(ii) 85% of the closing price of the Common Stock on the last
day of the Offering Period or the nearest prior business day
on which trading occurred on The Nasdaq SmallCap System.
If the Common Stock is not admitted to trading on any of the dates in
(i) or (ii) above for which closing prices of the Common Stock are to be
determined, then reference shall be made to the fair market value of the Common
Stock on that date, as determined by the Board of Directors.
Fractional Shares
Fractional shares will not be issued under the 1997 Plan. Any
accumulated payroll deductions which would have been used to purchase
fractional shares will be returned to the Participant promptly after the last
day of the Offering Period, without interest.
Issuance of Common Stock
The purchase of Common Stock pursuant to the 1997 Plan will be
effective as of the Purchase Date and the shares of Common Stock purchased will
be deemed outstanding as of such date. Stock certificates will be issued on the
Purchase Date, or as soon thereafter as is possible.
Termination of Employment or Death of the Participant
In the event a Participant ceases to be an employee of the Company for
any reason, including death, prior to the end of an Offering Period, all
amounts deducted from the Participant's pay or otherwise paid to by the
Participant towards the purchase of Common Stock during the Offering Period and
prior to the date of termination shall be used to purchase shares of Common
Stock on the next Purchase Date. Notwithstanding the preceding sentence, if a
Participant was not an employee of the Company during the 90 day period
preceding the Purchase Date, the Company will return all amounts withheld from
pay or paid to the Company for the purchase of Common Stock during the Offering
Period and no Common Stock will be issued to such Participant or his or her
heirs under the 1997 Plan. In the event of a Participant's death, the Common
Stock to be issued under the 1997 Plan, if any, and any other rights of the
Participant
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with respect to an Offering Period, will be issued to or exercised by the
Participant's surviving spouse, or if the Participant is not survived by a
spouse, by the Participant's estate.
Assignment
No Participant may assign or transfer his or her rights under the 1997
Plan to any other person.
Amendment, Modifications and Termination
Except as specifically provided in the 1997 Plan, the Board of
Directors or the Committee may, at any time, amend, modify or terminate the
1997 Plan.
Votes Required
The affirmative vote for the majority of the outstanding shares
entitled to vote thereon at the Annual Meeting will be required to adopt the
1997 Plan. The Board of Directors recommends a vote FOR approval of Item 3.
SELECTION OF INDEPENDENT ACCOUNTANTS
(Item 4 on the Proxy Card)
The Board of Directors has selected, subject to ratification by the
stockholders of the Company at the Annual Meeting, the firm of Grant Thornton
LLP as the independent accountants for the Company to audit the Company's
financial statements for its year ending December 31, 1997. Grant Thornton LLP
has served as the independent accountants for the Company since 1996. A
representative of Grant Thornton LLP is expected to be present at the Annual
Meeting, will have the opportunity to make a statement if such representative
desires to do so, and will be available to respond to appropriate questions.
In order for the ratification of Grant Thornton LLP as the independent
accountants for the Company to receive stockholder approval, a majority of the
shares of Common Stock represented and entitled to vote at the Annual Meeting
must be affirmatively voted FOR approval of this proposal. The Board of
Directors is of the opinion that Grant Thornton LLP is well qualified to
continue in such service and therefore recommends that the stockholders vote
FOR ratification of the selection of Grant Thornton LLP as the Company's
independent accountants.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
A stockholder who desires to include a proposal in the proxy material
relating to the 1998 Annual Meeting of Stockholders of the Company must submit
the same in writing, so as to be received at the principal executive office of
the Company (to the attention of the Secretary) on or before _______________,
1998, for such proposal to be considered for inclusion in the proxy
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statement for such meeting. Such proposal must also meet the other requirements
of the Securities and Exchange Commission relating to stockholder proposals
required to be included in the Company's proxy statement as well as the special
notice provisions in the Company's amended and restated By-laws.
OTHER MATTERS
The Board of Directors does not know of any other business to be
presented for consideration at the Annual Meeting. If other matters properly
come before the Annual Meeting, the persons named in the accompanying form of
proxy intend to vote thereon in accordance with their best judgment.
The Company will bear the cost of the Annual Meeting and the cost of
soliciting proxies, including the cost of mailing the proxy materials. In
addition to solicitation by mail, directors, officers and regular employees of
the Company (none of whom will be specifically compensated for such services)
may solicit proxies by telephone or otherwise. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to forward
forms of proxy and proxy materials to their principals and the Company will
reimburse them for their expenses in connection therewith in accordance with
the regulations of the Securities and Exchange Commission for sending proxies
and proxy materials to the beneficial owners of shares of Common Stock.
The Company will furnish, without charge, to each person whose proxy
is being solicited, upon request, a copy of its Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, including the financial statements, notes to the financial
statements and the financial schedules contained therein. Copies of any
exhibits thereto also will be furnished upon the payment of a reasonable
duplicating charge. Requests for copies of any such materials should be
directed to Steven B. Rothenberg, Secretary, VideoLan Technologies, Inc., 100
Mallard Creek Road, Suite 250, Louisville, Kentucky 40207.
By Order of the Board of Directors
Steven B. Rothenberg
Secretary
________, 1997
--------------------
Please date, sign and return the enclosed proxy at your earliest
convenience in the enclosed envelope. No postage is required for mailing in the
United States.
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EXHIBIT A
Article Fourth, Section 1
1. The aggregate number of shares which the Corporation shall have
authority to issue is $13,000,000 of which 8,000,000 shares shall have
a par value of $.0001 per share and shall be designated "Common
Stock", and 5,000,000 shares shall have a par value of $.01 per share
and shall be designated "Preferred Stock".
<PAGE>
EXHIBIT B
VIDEOLAN TECHNOLOGIES, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
(Effective April 30, 1997)
Section 1 -- PURPOSE
VideoLan Technologies, Inc. (the "Company") hereby establishes this
employee stock purchase plan (the "Plan") for the benefit of its employees, as
set forth below.
The purpose of this Plan is to provide employees of the Company with
an opportunity to participate in the growth of the Company and to further
identify the interests of the employees with the interests of the Company
through the purchase of shares of the Company's common stock. This Plan is
intended to be an employee stock purchase plan under Section 423 of the Code.
Section 2 -- DEFINITIONS
For purposes of the Plan, the following terms shall have the meanings
below unless the context clearly indicates otherwise:
2.1 "Board" means the Board of Directors of the Company.
2.2 "Common Stock" means the Company's voting common stock, $.01
par value per share.
2.3 "Code" means the Internal Revenue Code of 1986, as it may be
amended from time to time.
2.4 "Committee" means the committee appointed by the Board, if
any, pursuant to Section 6 to administer the Plan. If no Committee has been
appointed, Committee shall mean the Board.
2.5 "Compensation" means the Participant's base salary plus any
overtime and commissions, excluding cash bonuses.
2.6 "Eligible Employee" means any employee of the Company, or any
Subsidiary that, with the approval of the Company, has elected to participate
in this Plan, whose customary employment is more than twenty hours per week and
more than five months in any calendar year.
2.7 "Offering Period" means an offering period set by the Board
pursuant to Section 5.1 during which Eligible Employees may elect to purchase
Common Stock under the Plan.
2.8 "Participant" means an Eligible Employee who has elected to
participate in the Plan and who has not ceased participation herein.
2.9 "Subsidiary" means any entity in which the Company owns
directly or indirectly 50% or more of the voting stock, as determined in
accordance with Code Section 424(f).
Section 3 -- ELIGIBILITY AND PARTICIPATION
<PAGE>
3.1 Initial Eligibility. An Eligible Employee may participate in
the Plan for any Offering Period that begins after the Eligible Employee has
completed 90 days of employment with the Company or a participating Subsidiary.
3.2 Limitation on Eligibility. Notwithstanding Section 3.1, no
Eligible Employee may participate in the Plan for an Offering Period if, upon
the employee's purchase of the largest amount of shares available to him for
purchase during the Offering Period, the employee would own stock, and/or hold
outstanding options to purchase stock, possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company (for
purposes of this paragraph, the rules of Code Section 424(d) shall apply in
determining stock ownership of any employee).
Section 4 -- SHARES AVAILABLE UNDER THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section
4.2, the number of shares of Common Stock reserved for issuance under the Plan
is 1,000,000 shares. Any shares of Common Stock issued under the Plan may
consist, in whole or in part, of authorized and unissued Common Stock or
treasury shares purchased in the open market or in private transactions.
4.2 Adjustments in Authorized Shares. In the event of a merger,
reorganization, consolidation, recapitalization, reclassification, split-up,
spin-off, separation, liquidation, stock dividend, stock split, reverse stock
split, share repurchase, share combination, share exchange or other change in
the corporate structure of the Company affecting the Common Stock, the Board
shall substitute or adjust the total number and class of shares of Common Stock
or other stock or securities which may be issued under the Plan as it
determines to be appropriate and equitable to prevent dilution or enlargement
of the rights of Participants hereunder. If any of the events referred to above
occur, outstanding shares of Common Stock shall be treated like all other
shares of Common Stock.
Section 5 -- STOCK PURCHASES UNDER THE PLAN
5.1 Offering Periods. The Board shall, from time to time in its
discretion, designate Offering Periods with a duration of up to twelve months,
during which all Eligible Employees may elect to purchase stock under the Plan.
The Board may designate a maximum number of shares of Common Stock that may be
purchased by each Eligible Employee during the Offering Period or restrict
purchases by Eligible Employees to a set percentage of Compensation, provided
that no Participant shall be eligible to purchase Common Stock with a value in
excess of $25,000 in any calendar year. During each Offering Period, each
Eligible Employee may elect to purchase Company Stock in accordance with the
rules set by the Committee for that offering period.
5.2 Payroll Deductions. The Committee may, in its discretion,
allow Eligible Employees to purchase stock during an Offering Period by payroll
deduction. If payroll deduction is available during an Offering Period, an
Eligible Employee shall signify his election to participate in the Plan for the
Offering Period by completing a form provided by the Committee (the "Election
Form") and returning it to the Committee by the date indicated thereon. A
Participant's election to have amounts withheld from
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his pay for the purchase of Company Stock during an Offering Period shall be
irrevocable. No interest shall be paid on amounts withheld from a Participant's
pay during an Offering Period.
5.3 Purchase Price. Purchases of Common Stock under the Plan shall
occur on the last day of each Offering Period (the "Purchase Date"). Unless
otherwise specified by the Board when an Offering Period is designated under
Section 5.1, the purchase price (the "Purchase Price") of each share of Common
Stock will be the lesser of:
(i) 85% of the closing price of the Common Stock on the first
day of the Offering Period, or the nearest prior business day
on which trading occurred, on the Nasdaq SmallCap System, or
(ii) 85% of the closing price of the Common Stock on the last
day of the Offering Period or the nearest prior business day
on which trading occurred on the Nasdaq SmallCap System.
If the Common Stock is not admitted to trading on any of the
dates referenced in (i) or (ii) above for which closing prices of the Common
Stock are to be determined, then reference shall be made to the fair market
value of the Common Stock on that date, as determined on such basis as shall be
established or specified for the purpose by the Committee.
5.4 Fractional Shares. Fractional shares will not be issued
under the Plan. Any accumulated payroll deductions which would have been used to
purchase fractional shares will be returned to the Participant promptly after
the last day of the Offering Period, without interest.
5.5 Issuance of Common Stock. The purchase of Common Stock
pursuant to the Plan will be effective as of the Purchase Date and the shares of
Common Stock purchased will be deemed outstanding as of such date. Stock
certificates will be issued on the Purchase Date, or as soon thereafter as is
possible.
5.6 Termination of Employment or Death of the Participant. In
the event a Participant ceases to be an employee of the Company or a Subsidiary
(except in the case of transfer from one of such companies to another) for any
reason, including death, prior to the end of an Offering Period, all amounts
deducted by the from the Participant's Compensation or otherwise paid to by the
Participant toward the purchase of Common Stock during the Offering Period and
prior to the date of termination shall be used to purchase shares of Common
Stock on the next Purchase Date. Notwithstanding the preceding sentence, if a
Participant was not an employee of the Company or a Subsidiary during the 90 day
period preceding the Purchase Date, the Company shall return all amounts
withheld from pay or paid to the Company for the purchase of Common Stock during
the Offering Period and no Common Stock shall be issued to such Participant or
his heirs under this Plan. In the event of a Participant's death, the Common
Stock to be issued under this Section 5.6, if any, and any other rights of the
Participant with respect to an Offering Period, shall be issued to or exercised
by the Participant's surviving spouse, or if the Participant is not survived by
a spouse, by the Participant's estate.
Section 6 -- ADMINISTRATION
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6.1 Governance. This Plan shall be administered by the Board,
provided that the Board may appoint a Committee to carry out its administrative
duties under the Plan. If a Committee is appointed by the Board, the following
provisions shall apply: The number of Committee members shall be determined by
the Board. The Board shall add or remove members from the Committee as the Board
sees fit, and vacancies shall be filled by the Board. The Committee shall select
one of its members as the chairperson of the Committee and shall hold meetings
at such times and places as it may determine. The Committee may appoint a
secretary and, subject to the provisions of the Plan and to policies determined
by the Board, may make such rules and regulations for the conduct of its
business as it shall deem advisable. Writ ten action of the Committee may be
taken by a majority of its members, and actions so taken shall be fully
effective as if taken by a vote of a majority of the members at a meeting duly
called and held. A majority of Committee members shall constitute a quorum for
purposes of meeting. The act of a majority of the members present at any meeting
for which there is a quorum shall be a valid act of the Committee.
6.2 Committee to Interpret Plan. Subject to the express terms and
conditions of the Plan, the Committee shall have sole power to (i) construe and
interpret the Plan; (ii) establish, amend or waive rules and for its
administration; and (iii) correct any inconsistencies in the Plan.
6.3 Exculpation. No member of the Board or the Committee, nor any
officer or employee acting on their behalf, shall be liable for actions,
determinations or interpretations made in good faith with respect to the Plan.
All members of the Board and the Committee and each officer or employee of the
Company acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination or interpretation.
6.4 Decisions Binding. All determinations and decisions made by
the Board or the Committee pursuant to the provisions of the Plan shall be
final, conclusive and binding on all persons, including the Company, its
shareholders, Participants and their estates and beneficiaries.
Section 7 -- SECURITIES COMPLIANCE
It is the intention of the Company that the Plan and the
administration of the Plan comply in all respects with Section 16(b) of the
Securities Exchange Act of 1934, as amended, and the regulations adopted
thereunder (collectively, "Section 16(b)"), the exemption from Kentucky's
Short-Swing Profits Statute for certain acquisitions of shares of stock and
stock options under certain stock bonus, stock option or similar plans. If any
Plan provision, or any aspect of the administration of the Plan, is found not
to be in compliance with Section 16(b), the provision or administration shall
be deemed null and void, and in all events the Plan shall be construed in favor
of its meeting the requirements of Section 16(b).
Section 8 -- NO ASSIGNMENT
No Participant may assign or transfer his rights under the Plan to any
other person.
Section 9 -- AMENDMENT, MODIFICATION AND TERMINATION
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9.1 Right to Amend, Modify and Terminate. Except as provided in
Section 9.2, the Board may, at any time, amend, modify or terminate the Plan.
9.2 Limitations on Amendment, Modification and Termination. The
Plan may not be amended, modified or terminated without shareholder approval to
the extent such approval is required to meet the conditions for exemption under
Section 16(b) or the requirements of any national securities exchange or system
on which the Common Stock is then listed or reported or a regulatory body having
jurisdiction with respect thereto.
Section 10 -- GENERAL PROVISIONS
10.1 Not a Contract of Employment. Neither the Plan, nor any action
taken under the Plan, shall be construed as conferring upon a Participant any
right to continue as an employee of the Company or a Subsidiary.
10.2 Withholding. The Company shall be entitled to take whatever
steps it deems necessary to satisfy its Federal, state and local taxes
withholding obligations under applicable law, if any, with respect to the Plan.
10.3 Governing Law. To the extent not preempted by Federal law,
the Plan shall be governed by, and construed in accordance with, the laws of the
Commonwealth of Kentucky without regard to its conflict of laws rules.
10.4 Gender and Number. Except where otherwise indicated by the
context, reference to the masculine gender shall include the feminine gender,
the plural shall include the singular and the singular shall include the
plural.
10.5 Severability. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
10.6 Not a Shareholder. No person entitled to purchase Common Stock
with respect to an Offering Period hereunder will have any rights as a
shareholder of the Company with respect to the Common Stock to be purchased
during an Offering Period until such person has become the holder of record of
such shares of Common Stock on the Company's corporate records.
10.7 Headings. The headings in this Plan have been inserted
solely for convenience of reference and shall not be considered in the
interpretation or construction of this Plan.
Section 11 -- EFFECTIVE DATE AND TERM OF PLAN
The Plan shall be effective on the date (the "Effective Date") when
the Board adopts the Plan, subject to approval of the Plan by a majority of the
total votes eligible to be cast at a meeting of shareholders following adoption
of the Plan by the Board, which vote shall be taken within 12 months of the
Effective Date; provided, however, that the Board may designate an Offering
Period to begin before
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shareholder approval is obtained, but no shares of Common Stock may be issued
pursuant to such Offering Period prior to the date on which shareholder approval
is obtained. The Plan shall begin on the Effective Date and shall continue until
all Common Stock authorized for issuance under Section 4 has been issued under
the Plan or until the Board terminates the Plan, if sooner.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by
the undersigned officer this ____ day of ___________, 1997.
VIDEOLAN TECHNOLOGIES, INC.
By ______________________________________
Title:___________________________________
Date:____________________________________
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
VIDEOLAN TECHNOLOGIES, INC.
100 Mallard Creek Road, Suite 250
Louisville, Kentucky 40207
PROXY - ANNUAL MEETING OF SHAREHOLDERS
The undersigned, a stockholder of VIDEOLAN TECHNOLOGIES, INC., a
Kentucky corporation (the "Company"), hereby appoints JACK SHIRMAN and STEVEN
B. ROTHENBERG and each of them, the true and lawful attorneys and proxies with
full power of substitution, for and in the name, place and stead of the
undersigned, to vote all of the shares of Common Stock of the Company which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders to be held at the Boston Harbor Rowes Wharf Hotel,
Boston, Massachusetts, on Tuesday, July 24, 1997, at 10:00 a.m. (EDT), and at
any adjournment thereof.
The undersigned hereby instructs said proxies of their substitutes:
1. ELECTION OF DIRECTORS:
John Ruggiero, Jack Shirman, Steven B. Rothenberg, Norman Barkeley
and John R. Glankler.
/ / Vote FOR all nominees listed above / / WITHHOLD AUTHORITY
(except those listed below) to vote for all nominees
listed above
INSTRUCTION: To withhold authority to vote for any individual
nominee write that nominee's name in the space below.
2. PROPOSAL TO ADOPT AMENDMENT TO CERTIFICATE OF INCORPORATION TO
CAUSE A ONE-FOR-TEN REVERSE STOCK SPLIT OF THE COMPANY'S COMMON
STOCK.
/ / For / / Against / / Abstain
This Proxy is continued on the reverse side. Please sign on the reverse side
and return promptly.
3. PROPOSAL FOR ADOPTION OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN.
<PAGE>
/ / For / / Against / / Abstain
4. PROPOSAL TO RATIFY THE APPOINTMENT OF GRANT THORNTON LLP AS
INDEPENDENT ACCOUNTANTS FOR THE COMPANY FOR THE YEAR ENDING
DECEMBER 31, 1997.
/ / For / / Against / / Abstain
This Proxy, when properly executed, will be voted in accordance with any
directions heretobefore given. Unless otherwise specified, the proxy will be
voted FOR Proposals 1, 2, 3 and 4. MANAGEMENT RECOMMENDS A VOTE FOR THE ABOVE
MATTERS.
5. DISCRETIONARY AUTHORITY: To vote with discretionary authority with
respect to all other matters which may properly come before the
Meeting.
The undersigned hereby revokes all proxies heretofore given and
ratifies and confirms all that the proxies appointed hereby, or either of them,
or their substitutes, may lawfully do or cause to be done by virtue thereof.
The undersigned hereby acknowledges receipt of a copy of the Notice of Annual
Meeting and Proxy Statement, both dated __________, 1997, and a copy of the
Company's Annual Report for the period ended December 31, 1996.
Please sign exactly as shares are registered. If shares are
held by joint tenants, all parties in the joint tenancy must sign. When signing
as attorney, executor, administrator, trustee or guardian, please indicate the
capacity in which signing. If a corporation, please sign in full corporate name
by president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
-------------------------------------------------
Signature Date
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Signature, if held jointly Date
