LASER STORM, INC.
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [x]
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Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[x] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
LASER STORM, INC.
(Name of Registrant as Specified In Its Charter)
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[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)() and 0-11.
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previously. Identify the previous filing by registration statement number,
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LASER STORM, INC.
7808 Cherry Creek South Drive, Unit 301
Denver, Colorado 80231
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on August 15, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Laser Storm, Inc., a Colorado corporation (the "Company"), will be
held at Laser Storm of Arapahoe Village, 5150 East Arapahoe Road, Littleton,
Colorado 80122, on August 15, 1997, at 9:00 a.m. Mountain Time, for the purpose
of considering and voting upon proposals to:
(1) Elect three directors to serve until the next Annual Meeting of
Stockholders;
(2) Approve the 1996 Incentive and Nonstatutory Stock Option Plan;
(3) Adopt an amendment to Article II of the Company's Restated Articles of
Incorporation With Amendments to add paragraph 7 which specifically
provides that the Company's shareholders do not have preemptive rights
to acquire unissued shares of the Company; and
(4) Transact such other business as may lawfully come before the Meeting.
Only stockholders of record at the close of business on June 13, 1997, are
entitled to notice of and to vote at the Meeting, and at any adjournment
thereof.
The enclosed Proxy is solicited by and on behalf of the Board of Directors of
the Company. All stockholders are cordially invited to attend the Meeting in
person. Whether you plan to attend or not, please date, sign and return the
accompanying proxy in the enclosed return envelope, to which no postage need be
affixed if mailed in the United States. The giving of a proxy will not affect
your right to vote in person if you attend the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT J. COONEY,
CHAIRMAN OF THE BOARD
Denver, Colorado
July 21, 1997
LASER STORM, INC.
7808 Cherry Creek South Drive, Unit 301
Denver, Colorado 80231
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 15, 1997
This proxy statement ("Proxy Statement") is being furnished in connection
with the solicitation of proxies by the Board of Directors of Laser Storm, Inc.
(the "Company") to be used at the Annual Meeting of Stockholders (the "Meeting")
to be held at Laser Storm of Arapahoe Village, 5150 East Arapahoe Road,
Littleton, Colorado 80122, on August 15, 1997, at 9:00 a.m. Mountain Time, and
at any adjournment thereof.
It is planned that this Proxy Statement and the accompanying Proxy will be
mailed to the Company's stockholders on or about July 21, 1997.
Any person signing and mailing the enclosed Proxy may revoke it at any time
before it is voted by (i) giving written notice of the revocation to the
Company's corporate secretary; (ii) voting in person at the Meeting; or (iii)
voting again by submitting a new proxy card. Only the latest dated proxy card,
including one which a person may vote in person at the Meeting, will count.
ACTIONS TO BE TAKEN AT MEETING
The Meeting is called by the Board of Directors of the Company (the
"Directors") to consider and act upon the following matters:
(1) The election of three directors of the Company;
(2) The adoption of the 1996 Incentive and Nonstatutory Stock Option Plan;
(3) The adoption of an amendment to Article II of the Company's Restated
Articles of Incorporation With Amendments to add paragraph 7 which
specifically provides that the Company's shareholders do not have
preemptive rights to acquire unissued shares of the Company; and
(4) Such other business as may properly come before the Meeting or any
adjournment thereof.
The holders of one-third of the outstanding shares of Common Stock of the
Company, present at the Meeting in person or represented by proxy, shall
constitute a quorum. If a quorum is present, directors are elected by a
plurality of the vote, i.e., the candidates receiving the highest number of
votes cast in favor of their election will be elected to the Board of Directors.
The 1996 Incentive and Nonstatutory Stock Option Plan and the amendment to the
Restated Articles of Incorporation With Amendments will be approved and adopted,
respectively, if a quorum exists and if the votes cast for approval and
adoption, respectively, exceed the votes cast against approval and adoption,
respectively. Where brokers have not received any instruction from their clients
on how to vote on a particular proposal, brokers are permitted to vote on
routine proposals but not on nonroutine matters. The absence of votes on
nonroutine matters are "broker nonvotes." Abstentions and broker nonvotes will
be counted as present for purposes of establishing a quorum, but will have no
effect on the election of directors. Abstentions and broker nonvotes on
proposals other than the election of directors, if any, will be counted as
present for purposes of the proposal and will have the effect of a vote against
the proposal.
VOTING SECURITIES
Voting rights at the Meeting are vested in the holders of the Company's
$0.001 par value common stock (the "Common Stock") with each share entitled to
one vote. Cumulative voting in the election of directors is not permitted. Only
holders of record of the Common Stock at the close of business on June 13, 1997,
are entitled to notice of and to vote at the Meeting or any adjournments
thereof. On June 13, 1997, the Company had 3,824,836 shares of Common Stock
outstanding.
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
Effective at the Meeting, the number of directors on the Company's Board of
Directors has been established by resolution of the Board of Directors as three
directors. The terms of all of the current directors expire at this Meeting.
The persons named in the enclosed form of Proxy will vote the shares
represented by Proxies received by them for the election of the three nominees
for director named below. If, at the time of the Meeting, any of these nominees
shall become unavailable for any reason, which event is not expected to occur,
the persons entitled to vote the Proxies will vote for such substitute nominee
or nominees, if any, as they determine in their sole discretion. If elected,
Robert J. Cooney, John E. McNutt and William R. Bauerle will hold office until
the next annual meeting of stockholders or until their successors are duly
elected or appointed. The nominees for director, each of whom has consented to
serve if elected, are as follows:
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Name and Director
Nominee Since Age Principal Occupation for Last Five Years
- -------- -------- --- ----------------------------------------
Robert J. Cooney 1990 33 Chairman of the Board and Chief Executive
Officer of the Company since March 1990,
President and Secretary of the Company since
June 1997 and the Treasurer of the Company
from October 1994 to February 1997. President
of the Company from February 1992 to April
1994.
John E. McNutt 1997 40 Chief Financial Officer, Treasurer and a
director of the Company since February 1997
and was Vice President of Finance of the
Company from July 1996 to February 1997.
Associated with CAIRE, Inc., formerly
Mountain Medical Equipment, Inc., a
manufacturer and seller of home health care
respiratory equipment, from 1981 to July
1996, where Mr. McNutt served in various
capacities including corporate controller and
Vice President of a subsidiary, Mountain
Medical Leasing Co.
William R. Bauerle 1994 46 From 1985 to the present, President and a
director of Asset Development Corporation, a
business consulting firm. President and Chief
Operating Officer of the Company from April
1994 to July 1997, Secretary of the Company
from July 1994 to July 1997, and a director
of the Company since July 1994.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ELECTION OF THE
NOMINEES LISTED ABOVE.
SECURITY OWNERSHIP OF CERTAIN PERSONS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock, outstanding as of June 13, 1997, by (i)
each person who owned of record, or who is known to the Company to own
beneficially, more than 5% of the outstanding Common Stock with the address of
each such person, (ii) each of the Company's directors and executive officers
and (iii) all of the Company's executive officers and directors as a group.
3
Name and Address of Beneficial Owner Amount and Nature of Percent of
or Name of Director or Executive Officer Beneficial Ownership(1) Class(2)
- ---------------------------------------- ---------------------- ----------
Robert J. Cooney ...................................... 841,800 22.0%
7808 Cherry Creek South Drive, Unit 301
Denver, Colorado 80231
John E. McNutt ........................................ 75,000(3) 1.9%
Frank J. Ball ......................................... 76,250 2.0%
William R. Bauerle .................................... 76,250(4) 2.0%
Harold Skripsky ....................................... 50,000(5) 1.3%
All Executive Officers and Directors .................. 1,119,300(6) 28.0%
as a Group (5 Persons)
Edward J. Bonis ....................................... 411,750 10.8%
7808 Cherry Creek South Drive, Unit 301
Denver, Colorado 80231
- -----------------
(1) The beneficial owners listed have sole voting and investment power with
respect to the shares of Common Stock.
(2) Assumes the stock option of each person who has a stock option is
exercised whether or not the stock option is vested.
(3) Consists of 75,000 shares of Common Stock underlying stock options,
none of which are exercisable until August 1997.
(4) Does not include 75,000 shares of Common Stock underlying stock options
that expired on June 30, 1997, when Mr. Bauerle terminated his employment with
the Company. On June 13, 1997, options relating to 50,000 shares were
exercisable.
(5) Consists of 50,000 shares of Common Stock underlying a stock option,
37,500 of which are currently exercisable and 12,500 of which are not
exercisable until October 1997.
(6) Includes 175,000 shares of Common Stock underlying the outstanding
stock options described above.
EXECUTIVE OFFICERS
The executive officers of the Company are Robert J. Cooney and John E.
McNutt, information pertaining to whom is set forth above under "Election of
Directors." Each executive officer holds office until his or her successor is
duly elected and qualified or until his resignation or until he shall be removed
in the manner provided in the Company's bylaws.
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DIRECTORS MEETINGS
The Company's Board of Directors held 21 meetings during the Company's last
fiscal year ended December 31, 1996. Fourteen of such meetings consisted of
consent directors minutes signed by all directors and seven of such meetings
were actual meetings at which all of the directors were present in person or by
telephone. The Board of Directors currently has no standing audit, nominating or
compensation committees or committees performing similar functions. No current
director attended less than 75% of the aggregate of all board of director
meetings and all committee meetings on which he served during the fiscal year
ended December 31, 1996.
There was no arrangement or understanding between any director or executive
officer and any other person pursuant to which any person was selected as a
director.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers and persons who beneficially own more than
10% of a registered class of the Company's equity securities to file various
reports with the Securities and Exchange Commission concerning their holdings
of, and transactions in, securities of the Company. Copies of these filings must
be furnished to the Company.
Based on a review of the copies of such forms furnished to the Company and
written representations from the Company's officers and directors, the Company
believes that all of the persons who were officers or directors of the Company
during the year ended December 31, 1996, made all filings required under Section
16(a) on a timely basis during the year ended December 31, 1996, except for
James E. Johnson, a former officer of the Company, who was late in filing his
Form 3.
COMPENSATION
The following table sets forth certain information concerning the
compensation paid by the Company for services rendered in all capacities to the
Company for the fiscal years ended December 31, 1996, 1995 and 1994, to those
persons who were, at December 31, 1996 (i) the chief executive officer of the
Company and (ii) the other most highly compensated executive officers of the
Company whose annual salary and bonus from the Company exceeded $100,000 for the
fiscal year ended December 31, 1996.
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Summary Compensation Table
Long Term
Annual Compensation Compensation
------------------------------- ------------
Securities
Name and Principal Other Annual Underlying All Other
Positions at 12/31/96 Year Salary Bonus Compensation Options Compensation
- ---------------------------------------- ---------- ------- -------- ------------ -------- ------------
Robert J. Cooney ........................... 1996... $ 150,000 - 0 - $28,942(1) -0- None
Chairman of the Board and 1995... $ 150,000 - 0 - $24,335(1) -0- None
Chief Executive Officer 1994... $ 97,500 - 0 - $ 3,883(1) -0- None
William R. Bauerle ......................... 1996... $ 150,000 -0- $26,681(2) -0- -0-
President and Secretary 1995... $ 150,000 -0- $21,099(2) -0- -0-
until July 1997 1994... $ 71,250 -0- $ 2,934(2) 75,000(3) $21,727(4)
and Director
Eric B. Schwartzman ........................ 1996... $ 100,000 -0- $11,294(5) -0- -0-
Vice President of Marketing 1995... $ -0- -0- -0- 75,000(6) -0-
and Product Development until January 1997 1994... $ -0- -0- -0- -0- -0-
Frank J. Ball .............................. 1996... $ 120,000 -0- $12,016(7) -0- $15,238(8)
Vice President of Manufacturing, 1995... $ 95,411 -0- $ 5,685(7) -0- $14,020(8)
Executive Vice President, 1994... $ -0- -0- -0- -0- $14,000(8)
Operations and General
Counsel until December
1996, October 1996 and
October 1996, respectively,
and Director
Michael D. Kessler ......................... 1996... $ 110,000 -0- $43,571(9) -0- -0-
Vice President of Retail 1995... $ 13,749 -0- -0- 75,000(6) -0-
Operations until December 1994... $ -0- -0- -0- -0- -0-
1996
- ------------------
(1) Includes amounts paid by the Company for automobile expenses ($12,159
in 1996, $8,988 in 1995 and $3,218 in 1994), health club dues ($1,490 in 1996,
$1,559 in 1995 and $665 in 1994), life insurance premiums advanced on behalf of
Mr. Cooney ($12,110 in 1996 and $12,111 in 1995) and disability insurance
premiums ($3,183 in 1996 and $1,677 in 1995). Does not include any value that
may have been realized by Mr. Cooney when he used whatever equity there was in a
Company automobile as a down payment on a personal automobile. The Company
estimates the amount of the equity to be less than $5,000.
(2) Includes amounts paid by the Company for automobile expenses ($11,637
in 1996 and $7,204 in 1995), health club dues ($250 in 1995 and $660 in 1994),
life insurance premiums advanced on behalf of Mr. Bauerle ($11,635 in 1996,
$11,635 in 1995 and $1,939 in 1994) and disability insurance premiums ($3,407 in
1996, $2,010 in 1995 and $335 in 1994).
(3) This stock option expired on June 30, 1997, when Mr. Bauerle terminated
his employment with the Company.
6
(4) Represents consulting fees paid to a corporation owned by Mr. Bauerle
prior to Mr. Bauerle becoming an employee of the Company.
(5) Includes amounts paid by the Company for automobile expenses ($11,294
in 1996).
(6) These stock options expired on the date upon which Mr. Schwartzman's
and Mr. Kessler's employment with the Company terminated, which dates were
February 15, 1997 and January 5, 1996, respectively.
(7) Includes amounts paid by the Company for automobile expenses ($10,526
in 1996 and $4,605 in 1995) and health club dues ($1,490 in 1996 and $1,080 in
1995).
(8) Represents amounts paid in legal fees for services rendered by the law
firm owned by Mr. Ball.
(9) Includes amounts paid by the Company for automobile expenses ($8,742 in
1996), health club dues ($1,320 in 1996) and a commission ($33,509 in 1996).
FISCAL YEAR END OPTION VALUES
The following table sets forth information with respect to the unexercised
options held by the following persons as of December 31, 1996.
Aggregate Fiscal Year End Option Values
-------------------------------------------------------------------------
Number of Securities Underlying Un- Value of Unexercised In-the-
exercised Options at Fiscal Year End Money Options at Fiscal Year
Exercisable/Unexercisable End Exercisable/Unexercisable
------------------------------------- -----------------------------
Robert J. Cooney............... -0- -0-
William R. Bauerle............. 50,000/25,000 $40,000/$20,000(1)
Eric B. Schwartzman............ 25,000/50,000 -0-
Frank J. Ball.................. -0- -0-
Michael D. Kessler............. 25,000/50,000 -0-
- ----------------------
(1) The value is based on the closing sale price of $1.00 of the Company's
Common Stock on December 31, 1996 minus the exercise price of the options.
No options to purchase the Company's Common Stock were exercised by Messrs.
Cooney, Bauerle, Schwartzman, Ball or Kessler during the Company's fiscal year
ended December 31, 1996.
Until December 31, 1997, the Company has agreed with Laidlaw Equities,
Inc., the representative of the underwriters of the Company's initial public
offering which was completed in April 1996, that the Company will not increase,
7
without shareholder approval, the compensation of Messrs. Cooney and Bauerle by
more than an aggregate of 15% per annum above current levels. Subject to the
foregoing limitations, the Company may reserve up to 10% of net pre-tax profits
over $1,000,000 for bonuses to Company executives and employees.
Compensation of Directors. During 1996, the Company paid to each of
Harrison A. Price, a former director of the Company, and Harold Skripsky, a
current director of the Company, $20,000 per year. From January 1, 1997, through
the date of the Meeting, the Company will pay $5,000 per quarter to Harold
Skripsky. In 1995, the Company also granted to each of Harrison A. Price and
Harold Skripsky an option to purchase 50,000 shares of Common Stock at $4.00 per
share. One-half of each option vested in October 1995 and one quarter of each
option vested in October 1996. One quarter of Harrison A. Price's option (i.e.,
12,500 shares) terminated when he resigned as a director of the Company in March
1997. One quarter of Harold Skripsky's option (i.e., 12,500 shares) will
terminate on the date of the Meeting. The options must be exercised within 5
years from the date of vesting. The options were not granted under the 1996
Plan, defined and described below.
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements. Mr. Cooney has an employment agreement with the Company. The
employment agreement provides that Mr. Cooney will not disclose Company
confidential information and will not compete with the Company for 24 months
after termination of the agreement. Mr. Cooney's agreement was effective October
1, 1994, extends through September 10, 1998, and provides for an annual salary
of $150,000. Effective February 1, 1997, Mr. Cooney temporarily reduced his
annual salary to $100,000. The amount not being paid is being accrued by the
Company for later payment. The Company may terminate the agreement with or
without cause. If the Company terminates Mr. Cooney's agreement without cause,
the Company must continue to pay Mr. Cooney his salary until September 10, 1998.
Mr. McNutt does not have an employment agreement with the Company. Mr.
McNutt receives a salary of $78,000 annually and was granted options to purchase
75,000 shares of the Company's Common Stock at an exercise price of $2.25 per
share. The options vest 25,000 on August 15, 1997, 25,000 on August 15, 1998,
and 25,000 on August 15, 1999, and expire on August 15, 2002, August 15, 2003,
and August 15, 2004, respectively.
Each executive officer also receives a $725 per month vehicle allowance and
is reimbursed for all other business related expenses.
Termination Arrangements with Former Officers
Frank J. Ball, the former Executive Vice President and General Counsel of
the Company and a Director of the Company had an employment agreement with the
Company that was terminated on December 6, 1996. As a result, the Company must
pay Mr. Ball his salary and benefits through June 1997.
8
William R. Bauerle, the former President, Chief Operating Officer and
Secretary of the Company and currently a Director of the Company had an
employment agreement with the Company that terminated on June 30, 1997. As a
result, the Company must pay Mr. Bauerle his salary (including all previously
accrued salary) and benefits through December 1997. Mr. Bauerle has agreed to
provide consulting services to the Company at his published rates on an as
needed basis in the future. Mr. Bauerle remains as a Director of the Company and
has been nominated for election at the Meeting.
Michael D. Kessler, the former Vice President of Retail Operations of the
Company, had an employment agreement with the Company that was terminated by
notice by the Company dated December 6, 1996. As a result, the Company paid Mr.
Kessler his salary and benefits through July 4, 1997.
Eric B. Schwartzman, the former Vice President of Marketing and Product
Development, had an employment agreement with the Company that was terminated by
notice by the Company dated January 16, 1997. As a result, the Company must pay
Mr. Schwartzman his salary and benefits through August 15, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1995, Robert J. Cooney, the Company's Chairman of the Board and
Chief Executive Officer, individually guaranteed, until December 31, 2000, the
obligations of the Company under the lease for the Company's facilities. The
lease expires on January 31, 2006 and requires base rental rate payments of
$20,645 per month for the first 36 months with increased rentals thereafter tied
to the Consumer Price Index.
In February 1997, Robert J. Cooney also personally guaranteed an equipment
lease for Laser Storm of Arapahoe Village, Inc., a wholly owned subsidiary of
the Company that owns and operates a Laser Storm(R) game system. The lease is
for a term of 36 months and requires monthly rental payments of approximately
$4,929.
PROPOSAL NUMBER TWO
APPROVAL OF 1996 INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN
Summary. The Company's Board of Directors has adopted the 1996 Incentive
and Nonstatutory Stock Option Plan (the "1996 Plan"), subject to stockholder
approval at the Meeting. A copy of the 1996 Plan is attached to this Proxy
9
Statement as Exhibit A. The following is a brief summary of the 1996 Plan, which
is qualified in its entirety by reference to Exhibit A.
Options granted under the 1996 Plan may be either Nonstatutory Options or
Incentive Options. The purpose of the 1996 Plan is to advance the interests of
the Company, its stockholders and its subsidiaries by encouraging and enabling
selected officers, directors, employees, and consultants of the Company, upon
whose judgment, initiative and effort the Company is largely dependent for the
successful conduct of its business, to acquire and retain a proprietary interest
in the Company by ownership of its stock through the exercise of stock options.
Amount of Common Stock Subject to Options Under the 1996 Plan. The 1996
Plan provides for the grant of stock options covering an aggregate of 1,000,000
shares of Common Stock. The number of shares of Common Stock subject to options
is subject to equitable adjustments for any stock dividends, stock splits,
reverse stock splits, combinations, recapitalizations, reclassifications or any
other similar changes which may be required in order to prevent dilution. Any
option which is not exercised prior to expiration or which otherwise terminates
will thereafter be available for further grant under the 1996 Plan.
Administration of the 1996 Plan. The 1996 Plan may be administered by the
Board of Directors or by a committee appointed by the Board of Directors
consisting of not fewer than two non-employee members of the Board of Directors
(the "Committee"). Subject to the conditions set forth in the 1996 Plan, the
Board of Directors or the Committee has full and final authority to determine
the number of shares to be represented by each option, the individuals to whom
and the time or times at which such options shall be granted and be exercisable,
their exercise prices and the terms and provisions of the respective agreements
to be entered into at the time of grant, which may vary. The 1996 Plan is
intended to be flexible, and a significant amount of discretion is vested in the
Board of Directors or the Committee with respect to all aspects of the options
to be granted under the 1996 Plan.
Participants. Nonstatutory Options may be granted under the 1996 Plan to
any person who is or who agrees to become an officer, director, employee or
consultant of the Company or any of its subsidiaries. Incentive Options may be
granted only to persons who are employees of the Company or any of its
subsidiaries. As of June 16, 1997, the Company and its subsidiaries had
approximately 98 employees. The participants will not be required to pay any
sums for the granting of options, but may be required to pay the Company for
extending the options.
On November 1, 1996, the Board of Directors granted Incentive Options to
John E. McNutt and James E. Johnson to purchase a total of 100,000 shares of the
Company's Common Stock. All 100,000 Incentive Options granted have an exercise
price of $2.25 per share and expire at times between October 31, 2002 and
October 31, 2004. Mr. McNutt is an employee of the Company. Mr. Johnson's
10
employment with the Company terminated on February 15, 1997, thereby terminating
the option and making it available for further grant under the 1996 Plan. The
Incentive Options are not exercisable until the earlier of the date that the
1996 Plan is approved by the shareholders or October 31, 1997. If the 1996 Plan
is not approved by the shareholders, the Incentive Options granted under the
1996 Plan will automatically become Nonstatutory Options.
The following table provides certain information as to the options that
have been granted under the 1996 Plan:
Number of Shares
Optionee Underlying the Options Granted
-------- ------------------------------
John E. McNutt .......................................... 25,000
All current executive officers (as a group) ............. 25,000
All current directors who are not
executive officers (as a group) ......................... -0-
All employees (other than
executive officers) ..................................... 365,000(1)
(1) Included is a grant of an option relating to 75,000 shares that was
granted to James E. Johnson and represented 5% or more of the total options
granted under the 1996 Plan. However, Mr. Johnson's option terminated on
February 15, 1997, when his employment with the Company terminated, and the
shares underlying such option are available for further option grants under the
1996 Plan. Further, options relating to an additional 60,000 shares have
terminated when the employment of the persons to whom such options were granted
terminated.
Exercise Price. The exercise price of each Nonstatutory Option granted
under the 1996 Plan is determined by the Board of Directors or the Committee.
The exercise price of each Incentive Option granted under the 1996 Plan is
determined by the Board of Directors or the Committee and shall in no event be
less than 100% (110% in the case of a person who owns directly or indirectly
more than 10% of the Common Stock) of the fair market value of the shares on the
date of grant. The payment of the exercise price of an option may be made in
cash or shares of Common Stock. Fair market value is to be determined by the
Board of Directors or the Committee in accordance with the 1996 Plan and such
determination shall be binding upon the Company and upon the holder. The closing
sale price of the Common Stock on June 16, 1997 as reported on the Nasdaq
Small-Cap Market was $0.50 per share.
11
Terms of Options. Options may be granted for a term of up to 10 years (five
years in the case of Incentive Options granted to a person who owns directly or
indirectly more than 10% of the Company's outstanding Common Stock), which may
extend beyond the term of the 1996 Plan.
Exercise of Options. The terms governing the exercise of options granted
under the 1996 Plan are to be determined by the Board of Directors or the
Committee, which may limit the number of options exercisable in any period.
Payment of the exercise price upon exercise of an option may be made in any
combination of cash and shares of Common Stock, including the automatic
application of shares of Common Stock received upon exercise of an option to
satisfy the exercise price of additional options (unless the Board of Directors
or the Committee provides otherwise). Where payment is made in Common Stock,
such Common Stock shall be valued for such purpose at the fair market value of
such shares on the date of exercise.
Nontransferability. Incentive Options granted under the 1996 Plan are not
transferable or assignable, other than by will or the laws of descent and
distribution, and, during the lifetime of the holder, options are exercisable
only by the holder. Nonstatutory Options do not contain restrictions on
transferability.
Termination of Relationship. Except as the Board of Directors or the
Committee may expressly determine otherwise, if the holder of an Incentive
Option ceases to be employed by the Company or any of its subsidiaries other
than by reason of the holder's death or permanent disability, all Incentive
Options granted to such holder under the 1996 Plan terminate immediately. In the
event of the death or permanent disability of the holder of an Incentive Option,
the option may be exercised to the extent that the holder might have exercised
the option on the date of death or permanent disability for a period of up to 12
months following the date of death or permanent disability, unless by its terms
the option expires before the end of such 12 month period.
Amendment and Termination of the 1996 Plan. The Board of Directors may at
any time and from time to time amend or terminate the 1996 Plan, but may not,
without the approval of the stockholders of the Company representing a majority
of the voting power present at a stockholders' meeting or represented and
entitled to vote thereon, or by unanimous written consent of the stockholders,
(i) increase the maximum number of shares of Common Stock subject to options
which may be granted under the 1996 Plan, other than in connection with an
equitable adjustment, (ii) change the class of employees eligible for Incentive
Options, or (iii) make any material amendment under the 1996 Plan that must be
approved by the Company's stockholders for the Board of Directors to be able to
grant Incentive Options under the 1996 Plan. No amendment or termination of the
1996 Plan by the Board of Directors may alter or impair any of the rights under
any option granted under the 1996 Plan without the holder's written consent.
12
Effective Date and Term of the 1996 Plan. Options may be granted under the
1996 Plan during its 10 year term which commenced on November 1, 1996.
Certain Federal Income Tax Consequences.
Incentive Options. The Company believes that with respect to Incentive
Options granted under the 1996 Plan, no income generally will be recognized by
an optionee for federal income tax purposes at the time such an option is
granted or at the time it is exercised. If the optionee makes no disposition of
the shares so received within two years from the date the Incentive Option was
granted and one year from the receipt of the shares pursuant to the exercise of
the Incentive Option, the optionee will generally recognize long term capital
gain or loss upon disposition of the shares.
If the optionee disposes of shares acquired by exercise of an Incentive
Option before the expiration of the applicable holding period, any amount
realized from such a disqualifying disposition will be taxable as ordinary
income in the year of disposition generally to the extent that the lesser of the
fair market value of the shares on the date the option was exercised or the fair
market value at the time of such disposition exceeds the exercise price. Any
amount realized upon such a disposition in excess of the fair market value of
the shares on the date of exercise generally will be treated as long term or
short term capital gain, depending on the holding period of the shares. A
disqualifying disposition will include the use of shares acquired upon exercise
of an Incentive Option in satisfaction of the exercise price of another option
prior to the satisfaction of the applicable holding period.
The Company will not be allowed a deduction for federal income tax purposes
at the time of the grant or exercise of an Incentive Option. At the time of a
disqualifying disposition by an optionee, the Company will be entitled to a
deduction for federal income tax purposes equal to the amount taxable to the
optionee as ordinary income in connection with such disqualifying disposition
(assuming that such amount constitutes reasonable compensation).
Nonstatutory Options. The Company believes that the grant of a Nonstatutory
Option under the 1996 Plan will not be subject to federal income tax. Upon
exercise, the optionee generally will recognize ordinary income and the Company
will be entitled to a corresponding deduction for federal income tax purposes
(assuming that such compensation is reasonable) in an amount equal to the excess
of the fair market value of the shares on the date of exercise over the exercise
price. Gain or loss on the subsequent sale of shares received on exercise of a
Nonstatutory Option generally will be long term or short term capital gain or
loss, depending on the holding period of the shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE APPROVAL OF THE
1996 PLAN.
13
PROPOSAL NUMBER THREE
ADOPTION OF AN AMENDMENT TO ARTICLE II OF THE
RESTATED ARTICLES OF INCORPORATION WITH AMENDMENTS
TO ADD PARAGRAPH 7
Background and Discussion of Proposed Amendment. The Company was
incorporated under the laws of the State of Colorado on March 12, 1990. Under
the Colorado Corporation Code in effect at that time ("Prior Corporate Code"),
shareholders of a corporation were entitled to preemptive rights to purchase
unissued shares of the corporation unless the corporation's articles of
incorporation expressly denied such rights to its shareholders. Article V,
Section 4 of the Company's Original Articles expressly denied preemptive rights
to its shareholders.
When the Colorado Business Corporation Act ("CBCA") became effective on
July 1, 1994, Section 7-106-301(1) of the CBCA revised the Prior Corporate Code
by providing that shareholders of a corporation do not have preemptive rights to
acquire unissued shares of the corporation unless otherwise provided its
articles of incorporation. In addition, the transition provisions (Section
7-117-101(3) of the CBCA) governing changes between the Prior Corporate Code and
the CBCA provide that shareholders of an existing corporation (one that was in
existence on June 30, 1994) shall have preemptive rights unless the original
articles of incorporation denied such preemptive rights. Thus, shareholders of
the Company continued to have no preemptive rights under the transition
provisions as well.
On November 1, 1994, the directors and shareholders of the Company by
unanimous consent adopted and filed its Restated Articles of Incorporation With
Amendments ("Restated Articles") so that the Company's Articles of Incorporation
would comply with the CBCA. The Company filed Articles of Amendment to its
Restated Articles on September 27, 1995, October 3, 1995 and February 13, 1996,
and filed Articles of Correction on January 29, 1996. The Company's Restated
Articles, as amended and corrected, are silent on the issue of shareholders'
preemptive rights. Based upon Section 7-110-101(1) of the CBCA, which provides
that "whether a provision is required or permitted in the articles of
incorporation is determined as of the effective date of the amendment," the
Company intended the silence in the Restated Articles regarding preemptive
rights to indicate that Section 7-106-301(1) of the CBCA governed preemptive
rights, rather than the transition provisions. In either case, however, the
position of the Board of Directors of the Company is that the Company's
shareholders have no preemptive rights.
To resolve any confusion that may arise due to the silence in the Restated
Articles, as amended and corrected, on the issue of shareholder preemptive
rights, the Board of Directors of the Company recommends that the Restated
Articles, as amended and corrected, be amended by adding paragraph 7 to Article
II of the Restated Articles, as amended and corrected, which provides as
follows:
14
"7. The shareholders of the corporation do not have a preemptive right
to acquire unissued shares of the corporation."
Effect of Amendment on Stockholders. When the Restated Articles, as amended
and corrected, were adopted subsequent to the CBCA's enactment, the Board of
Directors intended that Section 7-106-301(1) of the CBCA governed preemptive
rights. Therefore, it is the position of the Company's Board of Directors that
the proposed amendment will not change the preemptive rights of the Company's
shareholders but will only serve to clarify the Company's position with respect
to the silence in the Restated Articles, as amended and corrected, regarding
preemptive rights.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ADOPTION OF THE
AMENDMENT TO ARTICLE II OF THE RESTATED ARTICLES OF INCORPORATION WITH
AMENDMENTS TO ADD PARAGRAPH 7.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's principal independent public accountants for the fiscal year
ended December 31, 1996 were HEIN + ASSOCIATES LLP. The Board of Directors has
not met to select the principal independent public accountants for the fiscal
year ended December 31, 1997. Representatives of HEIN + ASSOCIATES LLP are
expected to be present at the Meeting, to have an opportunity to make a
statement if they desire to do so and to be available to respond to appropriate
questions.
ANNUAL REPORT TO STOCKHOLDERS
This proxy statement is accompanied by a copy of the Company's Annual
Report to Stockholders for the fiscal year ended December 31, 1996. The Company
will provide without charge to each person to whom a copy of this Proxy
Statement has been delivered, on the written request of such person, by first
class mail or equally prompt means, a copy of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996, as filed with the
Securities and Exchange Commission. Requests for such copies should be directed
to Shareholder Relations, at the Company at its principal offices, 7808 Cherry
Creek South Drive, Unit 301, Denver, Colorado 80231
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next annual
meeting of the Company's stockholders must be received by the Company within a
reasonable time prior to the mailing of the proxy statement for such Meeting but
no later than March 23, 1998.
15
SOLICITATION OF PROXIES
The cost of soliciting proxies, including the cost of preparing, assembling
and mailing this proxy material to stockholders, will be borne by the Company.
Solicitations will be made only by use of the mails, except that, if necessary
to obtain a quorum, officers and regular employees of the Company may make
solicitations of proxies by telephone or electronic facsimile or by personal
calls. Brokerage houses, custodians, nominees and fiduciaries will be requested
to forward the proxy soliciting material to the beneficial owners of the
Company's shares held of record by such persons and the Company will reimburse
them for their charges and expenses in this connection.
OTHER BUSINESS
The Company's Board of Directors does not know of any matters to be
presented at the Meeting other than the matters set forth herein. If any other
business should come before the Meeting, the persons named in the enclosed form
of Proxy will vote such Proxy according to their judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT J. COONEY,
CHAIRMAN OF THE BOARD
Denver, Colorado
July 21, 1997
16
PROXY
LASER STORM, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 15, 1997
The undersigned hereby constitutes and appoints Robert J. Cooney, William
R. Bauerle and John E. McNutt and each of them, the true and lawful attorneys
and proxies of the undersigned with full power of substitution and appointment,
for and in the name, place and stead of the undersigned, to act for and to vote
all of the undersigned's shares of $0.001 par value common stock ("Common
Stock") of Laser Storm, Inc. (the "Company") at the Annual Meeting of
Stockholders (the "Meeting") to be held at Laser Storm of Arapahoe Village, 5150
East Arapahoe Road, Littleton, Colorado 80122, on August 15, 1997, at 9:00 a.m.
Mountain Time, and at all adjournments thereof for the following purposes:
1. Election of Directors;
[ ] FOR THE DIRECTOR [ ] WITHHOLD AUTHORITY TO
NOMINEES LISTED BELOW VOTE FOR ALL NOMINEES
(EXCEPT AS MARKED TO LISTED BELOW
THE CONTRARY BELOW)
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
Robert J. Cooney
John E. McNutt
William R. Bauerle
2. Approve the 1996 Incentive and Nonstatutory Stock Option Plan;
[ ] FOR [ ] AGAINST [ ] ABSTAIN FROM
VOTING
3. Adopt an amendment to Article II of the Company's Restated Articles of
Incorporation With Amendments to add paragraph 7 which specifically
provides that the Company's shareholders do not have preemptive rights
to acquire unissued shares of the Company; and
[ ] FOR [ ] AGAINST [ ] ABSTAIN FROM
VOTING
4. In their discretion, the Proxies are authorized to vote upon such
other business as lawfully may come before the Meeting.
The undersigned hereby revokes any proxies as to said shares heretofore
given by the undersigned and ratifies and confirms all that said attorneys and
proxies lawfully may do by virtue hereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THEN THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
AT THE MEETING (1) FOR ELECTION OF THE NOMINEES FOR DIRECTOR AS SELECTED BY THE
BOARD OF DIRECTORS; (2) TO APPROVE THE 1996 INCENTIVE AND NONSTATUTORY STOCK
OPTION PLAN; AND (3) TO ADOPT AN AMENDMENT TO ARTICLE II OF THE RESTATED
ARTICLES OF INCORPORATION WITH AMENDMENTS TO ADD PARAGRAPH 7.
It is understood that this proxy confers discretionary authority in respect
to matters not known or determined at the time of the mailing of the Notice of
Annual Meeting of Stockholders to the undersigned. The proxies and attorneys
intend to vote the shares represented by this proxy on such matters, if any, as
determined by the Board of Directors.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and the Proxy Statement and Annual Report to Shareholders
furnished therewith.
Dated and Signed:
, 1997
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Signature(s) should agree with the name(s)
stenciled hereon. Executors,
administrators, trustee, guardians and
attorneys should so indicate when signing.
Attorneys should submit powers of attorney.