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SCHEDULE 14C
(RULE 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
[X] Definitive Information Statement
DENCOR ENERGY COST CONTROLS, INC.
(name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box:)
[X] No Fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-1
[ ] Set forth the amount on which the filing fee is calculated and state
how it was determined:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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DENCOR ENERGY COST CONTROLS, INC.
1450 WEST EVANS
DENVER, COLORADO 80223
303-922-1888
INFORMATION STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 10, 2001
MARCH 7, 2001
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND A PROXY
TO ALL SHAREHOLDERS OF DENCOR ENERGY COST CONTROLS. INC.
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of Dencor Energy Cost Controls, Inc., a Colorado a corporation (the
"Company"), will be held at the offices of the Company, 1450 West Evans, Denver,
Colorado 80223, on April 10, 2001, at 9:30 a.m. Mountain Time. Management of
the Company may conduct and participate in the Meeting by conference telephone.
An Information Statement for the Meeting is enclosed. The purpose of the meeting
is to consider and take action on the proposals summarized below.
1. To amend the Company's Articles of Incorporation to increase the
authorized common stock to 195,000,000 shares, no par value;
2. To effectuate a 1 for 18 reverse stock split with all fractional
shares being rounded to the nearest whole share;
3. To amend the Company's Articles of Incorporation to decrease the
authorized common stock from 195,000,000 shares, no par value to 65,000,000
shares, no par value;
4. To increase the authorized preferred stock from 5,000,000 shares,
no par value to 15,000,000 shares, no par value;
5. To amend the Articles of Incorporation to change the Company's name
from Dencor Energy Cost Controls, Inc. to Reliable Power Systems, Inc.
6. To amend the Company's Articles of Incorporation to eliminate the
right of cumulative voting for directors;
7. To approve the Reliable Power Systems Equity Incentive Plan;
8. To conduct such other business as properly comes before the
Meeting.
The close of business on March 6, 2000, has been fixed as the record
date for determining shareholders entitled to notice of and to vote at the
Meeting and any adjournments thereof.
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For a period of at least ten days prior to the Meeting, a complete list of
shareholders entitled to vote at the Meeting will be open to examination by
any shareholder during ordinary business hours at the offices of the
Company, 1450 West Evans, Denver, Colorado 80223.
The description of the proposals set forth above is intended only as a
summary. Information concerning the matters to be acted upon at the Meeting
is contained in the accompanying Information Statement. The shareholders of
approximately 94.7% of the shares entitled to vote at the Meeting have
agreed to vote in favor of the proposals summarized above. Therefore, we
are not asking you for a proxy and you are requested not to send us a
proxy.
By Order of the Board of Directors:
Thomas J. Wiens, Chairman
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WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY
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DENCOR ENERGY COST CONTROLS, INC.
1450 WEST EVANS
DENVER, COLORADO 80223
303-922-1888
INFORMATION STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
ON APRIL 10, 2001
This Information Statement of Dencor Energy Cost Controls, Inc.,
a Colorado corporation (the "Company"), is being furnished to the
shareholders of the Company in connection with a Special Meeting of
the Shareholders of the Company to be held at the offices of the
Company, 1450 West Evans, Denver, Colorado 80223, on April 10, 2001,
at 9:30 a.m. Mountain Time (the "Meeting"). Management of the Company
may conduct and participate in the Meeting by conference telephone.
At the Meeting, the Company's shareholders will consider and take
action on the following Proposals:
1. To amend the Company's Articles of Incorporation to increase
the authorized common stock to 195,000,000 shares, no par value;
2. To effectuate a 1 for 18 reverse stock split with all
fractional shares being rounded to the nearest whole share;
3. To amend the Company's Articles of Incorporation to decrease
the authorized common stock from 195,000,000 shares, no par value to
65,000,000 shares, no par value;
4. To increase the authorized preferred stock from 5,000,000
shares, no par value to 15,000,000 shares, no par value;
5. To amend the Articles of Incorporation to change the Company's
name from Dencor Energy Cost Controls, Inc. to Reliable Power Systems,
Inc.
6. To amend the Company's Articles of Incorporation to eliminate
the right of cumulative voting for directors;
7. To approve the Reliable Power Systems Equity Incentive Plan;
8. To conduct such other business as properly comes before the
Meeting.
The Company plans to continue its current operations and expand its
operations to include energy management and energy generation solutions to
commercial and industrial customers. The Company currently manufactures and
distributes energy cost control devices out of Denver, Colorado offices and is
seeking to acquire additional companies and products to expand its operations.
The Colorado Business Corporation Act requires the approval of shareholders
who hold at least a majority of the outstanding shares entitled to vote to
approve a recapitalization, to effect a reverse stock split, to change the
corporate name, and to eliminate cumulative voting for directors. The Internal
Revenue Code requires shareholder approval of the IntelliReady Equity Incentive
Plan.
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Thomas J. Wiens, Chairman of the Company, who is deemed to be an "affiliate" of
the Company, owns or has voting power over approximately 94.7% of the issued and
outstanding voting securities of the Company as of the Record Date, has
consented to vote for and adopt the resolutions of the Board of Directors to
increase the authorized capital of the Company to 195,000,000 shares of common
stock, no par value, to effectuate a 1 for 18 reverse stock split, to decrease
the authorized common stock to 65,000,000 shares, no par value, to increase the
authorized preferred stock to 15,000,000 shares, no par value, to change the
Company's name to Reliable Power Systems, Inc., to eliminate the right of
cumulative voting, and to adopt the Reliable Power Systems Equity Incentive
Plan. No further votes are required, and none will be solicited. See the caption
"Voting Securities and Record Date," herein.
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WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY
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The date of this Information Statement is March 7, 2001.
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VOTING SECURITIES AND RECORD DATE
The Company's currently has two classes of stock outstanding. Those classes
are common stock and preferred stock. The Company currently has two series of
preferred stock outstanding, consisting of Series A Convertible Preferred Stock
and Series B Redeemable Preferred Stock. All common stockholders are entitled to
one vote per share for each item, provided that cumulative voting is allowed for
directors. Holders of Series A Convertible Preferred Stock are entitled to 50
votes per share and holders of Series B Redeemable Preferred Stock are entitled
to one vote per share. All shareholders at the close of business on March 6,
2001 (the "Record Date") are entitled to vote on the Proposals being presented
to the shareholders.
On the Record Date, there were 22,749,804 shares of common stock, 3,348,000
shares of Series A convertible Preferred Stock and 300,000 shares of Series B
Redeemable Preferred Stock outstanding. In accordance with the Company's
Articles of Incorporation, a majority of the shares of stock entitled to vote on
an issue represented in person or by proxy, will constitute a quorum at this
Special shareholders' meeting. The vote of a majority of all outstanding shares
is necessary to approve each of the Proposals except the adoption of the
reliable Powersystems Equity Incentive Plan. The Chairman of the Board, Mr.
Wiens, has enough votes to approve all of the Proposals outlined herein, and has
indicated that he will approve the Proposals at the Meeting. The following
tables sets forth information as of March 6, 2001 with respect to the ownership
of the common stock and preferred stock for all persons who own or have voting
control over more than five percent of each class or series of stock. The
following shareholders have sole voting and investment power with respect to the
shares, unless indicated otherwise.
Number of Shares
Name of Beneficial Owner Beneficially Owned(1) Percent of Class
- ------------------------ --------------------- ----------------
COMMON STOCK
First Western Industries, LLC(2) 6,804,000 29.9%
New West Capital, LLC(2) 126,000 .55%
New West Partners, LLC(2) 1,890,000 8.33%
Thomas J. Wiens(2) 3,780,000 16.6%
Venture Vest Capital Corporation(3) 1,800,000 7.91%
Maynard L. Moe(4) 2,103,650 9.25%
Edmund Barbour 610,000 2.68%
All Executive Officers and 72.54%
Directors as a group (3 persons) 15,313,650
SERIES A CONVERTIBLE PREFERRED STOCK
First Western Industries, LLC 1,807,920(5) 54%
New West Capital, LLC 33,480(5) 1%
New West Partners, LLC 502,200(5) 15%
Thomas J. Wiens 1,004,400(5) 30%
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SERIES B REDEEMABLE PREFERRED STOCK
Maynard L. Moe 150,000 50.00%
Theodore Hedman(6) 150,000 50.00%
1. All calculations are on a fully diluted basis and are based on stock
ownership immediately prior to the proposed 18 for 1 reverse stock
split. These calculations do not include the effects of stock payments
that are required to be made to consultants for services that have or
currently are being rendered because these payments are based on the
fair market value of the Company's stock following the reverse stock
split. Furthermore, the net effect of these payments are not
anticipated to materially alter the ownership interest of the
officers, directors and 5% shareholders.
2. First Western Industries, LLC, d.b.a. New West Holdings, LLC, New West
Capital, LLC, and Capital Partners, LLC are located at 5567 South
Perry Park Road, Sedalia, Colorado 80135. These entities are
controlled by Thomas J. Wiens and his immediate family.
3. The address for Venture Vest Capital Corporation is 26 West Dry Creek
Cir., Suite 600, Littleton, Colorado 80120.
4. The address for Maynard L. Moe is 1450 West Evans, Denver Colorado
80223.
5. The Series A Convertible Preferred Stock, as a group represents a
total of 167,400,000 votes
6. The address for Theodore Hedman is 1450 West Evans, Denver Colorado
80223.
PRINCIPAL OFFICE
The principal office of the Company shall remain 1450 West Evans, Denver,
Colorado 80223. It may be necessary to move the principal office in the near
future. At this time, the Company intends to keep its principal office in the
Denver metropolitan area.
CHANGE IN CONTROL
On February 7, 2001, pursuant to the terms of the Merger Agreement and Plan
of Reorganization dated February 7, 2001, by and among the Company, Denmer
Corporation, Reliable Power Systems, Inc. and certain shareholders of the
Company, the shareholder of Reliable Power Systems, Inc. acquired 12,600,000
shares of the Company's common stock. Under the terms of the Agreement, Theodore
Hedman, a former director of the Company, resigned on February 7, 2001 and
Thomas J. Wiens was appointed as Chairman of the Board of Directors.
Additionally, the former shareholders of Reliable Power Systems, Inc. were
granted 3,348,000 shares of Series A Convertible Preferred Stock. The Series A
Convertible Preferred Stock is convertible, in the aggregate, into 167,400,000
shares of common stock and is entitled to 50 votes per share. Finally, Maynard
Moe and Theodore Hedman exchanged accrued wages for 300,000 shares of Series B
Redeemable Preferred Stock. For a more complete description of the change in
control and the terms of the Agreement see "MERGER AGREEMENT".
MERGER AGREEMENT
The Company executed a Merger Agreement and Plan of Reorganization (the
"Agreement") whereby the Company issued 12,600,000 shares of no par value common
stock and 3,348,000 shares of no par value Series A Convertible Preferred Stock
to the shareholder of Reliable Power Systems, Inc. $339,588.59 of the Company's
debt was converted into Series B Redeemable Preferred Stock. Reliable Power
Systems, Inc. merged into the Company's wholly owned subsidiary, Denmer
Corporation. At the time of closing, Reliable Power Systems, Inc. was required
to have $300,000 of unrestricted cash in excess of its liabilities. This cash
was immediately loaned to the Company and used to pay off $300,000 of the
Company's liabilities. The Articles of Merger were filed with the Colorado
Secretary of State on February 8, 2001.
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Reliable Power Systems, Inc. was a small start-up Company located in
Sedalia, Colorado. Reliable Power Systems, Inc. intends to provide commercial
and industrial customers with a complete energy management and energy generating
product line. The combined companies intend to accomplish this by locating and
hiring an experienced management team, raising additional capital and acquiring
existing businesses with complimentary product lines.
As a result of the merger, the shareholders of Reliable Power Systems, Inc.
acquired approximately 94.7% of the voting control of the Company. Reliable
Power Systems, Inc.'s shareholders, First Western Industries, LLC, d.b.a. New
West Holdings, LLC, New West Capital, LLC, Thomas J. Wiens and Capital Partners,
LLC were issued 12,600,000 shares of the Company's common stock and 3,348,000
shares of Series A Convertible Preferred Stock. Each share of Series A
Convertible Preferred Stock will convert into 50 shares of common stock after
the increase of authorized common stock to 195,000,000 shares. Each share of
Series A Convertible Preferred Stock is entitled to 50 votes on all matters
submitted to the shareholders. Therefore, these shareholders have 180,000,000 of
a possible 190,149,804 votes. A condition of Reliable Power Systems, Inc.'s
willingness to close the transaction was the resignation of a director and the
appointment of Thomas J. Wiens to the Board of Directors.
INCREASE IN AUTHORIZED CAPITAL
The sole reason for authorizing 195,000,000 shares of common stock is to
allow the Company to convert the Series A Convertible Preferred Stock into
common stock and to comply with the terms of the Merger Agreement. Management
believes that the Series A Preferred Stock is detrimental to its ability to
raise additional capital and support a sufficient per share value for its stock.
Immediately following the conversion of the series A Convertible Preferred Stock
into common stock, the Company will effectuate the 1 for 18 reverse stock split.
SHARE CONVERSION FOLLOWING REVERSE STOCK SPLIT
Each share of common stock of the Company shall, upon the effective date of
reverse stock split, be converted into 1/18 share of common stock of the
Company. The Company will round all fractional shares in accordance with normal
rounding rules. Shareholders will be required to send their existing share
certificates to the Company's transfer agent in exchange for a new certificate.
The cost of the new certificates shall be paid by the individual shareholders.
Management believes that it is imperative to preserve the Company's cash and
control expenses. Therefore, the Company has made the difficult decision to
require shareholders to pay the expense of converting their share certificates.
PURPOSE AND PRINCIPAL REASONS FOR THE REVERSE STOCK SPLIT
The principal reason to effect the reverse stock split is to assure that
the Company's capital structure will be suitable for a small cap publicly traded
company. The Company believes that it will not be able to maintain a sufficient
price per share without effectuating the reverse stock split.
The Company currently manufactures and sells energy cost control devices.
While the Company was initially profitable in the 1970s, it has had limited
success and has not been profitable in the past several years. As a result the
Company's shares have had very little value and the bid and ask prices on
February 8, 2001 were $.05 and $.06 respectively. The Company believes that its
products are still viable and may result in future profits. The new majority
shareholder plans to continue the current product line and pursue business
opportunities in energy management and generation business, which it believes
will add value to the Company's common stock. The management of the Company
believes that reducing the number of outstanding and authorized shares of
capital stock of the Company will encourage a higher trading price for the
Company's stock in the future. Management of the Company believes that, in
general, low trading prices have an adverse impact on the efficient level of the
trading market for securities. In particular, brokerage firms often charge
higher commissions for transaction involving low- priced stocks than they would
for the same dollar amount of securities with a higher per share price. Some
brokerage firms will not recommend purchases of low-priced stocks to their
clients or make a market in such stocks, which
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tendencies adversely affect the liquidity for shareholders. In addition, a low
priced stock adversely affects a corporation's ability to obtain equity
financing. Finally, low priced stock are subject to the penny stock regulations.
PENNY STOCK REGULATION
The Securities and Exchange Commission (the "SEC") has adopted rules that
regulate broker-dealer practices in connection with transactions in "penny
stocks". Generally, penny stocks are equity securities with a price of less than
$5.00 (other than securities registered on national securities exchanges or
quoted on the NASDAQ system). So long as the Company's shares are traded for
less than $5 per share, the shares will be subject to the SEC's penny stock
rules unless (1) the Company's net tangible assets exceed $5,000,000 during its
first three years of continuous operations or $2,000,000 after its first three
years of continuous operations; or (2) the Company has had average revenue of at
least $6,000,000 for the last three years. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document prescribed by the
SEC that provides information about penny stocks and the nature and level of
risks in the penny stock market. The broker-dealer also must provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules require that prior to
a transaction in a penny stock not otherwise exempt from those rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These requirements may have the effect of reducing
the level of trading activity in the secondary market for a stock that becomes
subject to the penny stock rules. As long as the common stock is subject to the
penny stock rules, shareholders may find it difficult to sell their common
stock.
DECREASE IN AUTHORIZED COMMON STOCK AND INCREASE IN AUTHORIZED
PREFERRED STOCK
Immediately following the reverse stock split, the Company will file an
amendment to its Articles of Incorporation decreasing the authorized common
stock to 65,000,000 shares and increasing the authorized preferred stock to
15,000,000 shares. At that time the Company will have 10,563,878 shares of
common stock and 300,000 shares of Series B Redeemable Preferred Stock
outstanding. The principal reason for this recapitalization is to have a capital
structure suitable for a small cap publicly traded company while giving the
Board of Directors sufficient ability to carry out its acquisition strategy. The
Company believes that a decrease in the authorized common stock will allow it
access to more capital. The Company believes the increase in authorized
preferred stock is necessary to carry out its acquisition strategy.
BLANK CHECK PREFERRED STOCK
Following the increase in authorized preferred stock, the Board of
Directors, without further action by the shareholders, unless otherwise required
by law, will be authorized to issue up to 14,700,000 shares of preferred stock
at such times, for such purposes and for such consideration as it may determine,
subject only to limitations imposed by the Certificate of Designations for the
Series B Redeemable Preferred Stock. The foregoing is a summary of the terms and
conditions relating to the ability of the Board of Directors of the Company to
issue preferred stock.
The issuance of preferred stock could be used to create voting impediments
and to make it more difficult for persons seeking to effect a merger or
otherwise gain control of the Company. At this time, neither the Board of
Directors nor management of the Company is considering the use of preferred
stock for such purposes. The authorization and issuance of a series of preferred
stock could have certain effects on the holders of common stock. Such effects
might include (a) restrictions on dividends on common stock if dividends on
preferred stock are in arrears, (b) possible dilution of the voting power of the
common stock to the extent that the preferred stock has voting rights, and (c)
holders of the common stock not being entitled to share in the Company's assets
upon liquidation until satisfaction of any liquidation preference granted to the
preferred stock. The ability to issue preferred stock gives the Company greater
flexibility for future financing needs, acquisitions, and other corporate
purposes.
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SERIES B REDEEMABLE PREFERRED STOCK
The Series B Redeemable Preferred Stock has a stated value of $1.00 per
share and liquidation preference for its holders. This means that the holders of
the Series B Redeemable Preferred stock are entitled to receive $300,000 in cash
or Company assets prior to any distributions to common stockholders. The Series
B Redeemable Preferred stockholders are entitled to one voter per share and to
participate in dividends on the same basis as the common stockholders.
Management has no intention of declaring dividends in the foreseeable future.
The Series B Redeemable Preferred stock is required to be redeemed by the
Company in three equal installments on February 7, 2002, February 7, 2003 and
February 7, 2004. The Company has the option of redeeming this preferred stock
for cash at its stated value or with common stock at its then fair market value,
provided that the fair market value shall be deemed to not be less than $2.00
per share nor more than $10.00 per share. Until such time as all of the Series B
Redeemable Preferred Stock is redeemed, the Company may not issue any preferred
stock with liquidation preferences in favor of the Series B Redeemable Preferred
Stock.
FEDERAL INCOME TAX CONSEQUENCES OF THE RECAPITALIZATION
The recapitalization is intended to be a tax-free transaction under the
Internal Revenue Code of 1986, as amended. Assuming the recapitalization
qualifies as a tax free transaction, no gain or loss will be recognized to the
holders of capital stock of the Company as a result of consummation of the
recapitalization, and no gain or loss will be recognized by the Company. Each
former holder of capital stock of the Company will have the same basis in the
capital stock following the recapitalization as such holder has in the capital
stock of the Company held by such holder at the time of consummation of the
recapitalization. Each shareholder's holding period with respect to his capital
stock will include the period during which such holder held the corresponding
Company capital stock. The Company has not obtained a ruling from the Internal
Revenue Service or an opinion of legal or tax counsel with respect to the
consequences of the recapitalization.
The Company is making no representation regarding the proper tax treatment
of this transaction. The IRS may view this transaction differently than the
Company and could conclude that it is a taxable event.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS REGARDING THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE PROPOSED REINCORPORATION, INCLUDING THE
APPLICABILITY OF THE LAWS OF ANY STATE OR OTHER JURISDICTION.
CHANGE OF CORPORATE NAME TO RELIABLE POWER SYSTEMS, INC.
The Board of Directors has proposed changing the corporate name to Reliable
Power Systems, Inc. The Board of Directors believes that this name will be
better received by its customers and will result in an identifiable brand name.
The Board of Directors intends to retain ownership of the name Dencor Energy
Cost Controls to preserve any goodwill that has been created in that name and
will initially continue to market its existing products under that name.
ELIMINATION OF CUMULATIVE VOTING
The Board of Directors is recommending the elimination of cumulative
voting. The Board of Directors believe that cumulative voting is generally not
viewed favorably by institutional investors and is unnecessarily complicated.
REGULATORY REQUIREMENTS
With the exception of filings to be made with the Colorado Secretary of
State, there are no federal or state regulatory requirements to be complied with
or approvals that must be obtained in connection with the proposed amendments to
the Articles of Incorporation.
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REPORTS, OPINIONS OR APPRAISALS
No report, opinion or appraisal has been sought in connection with the
proposed amendments to the Articles of Incorporation.
ADOPTION OF EQUITY INCENTIVE PLAN
The Company's Board of Director has adopted the Equity Incentive Plan and
is submitting it for shareholder approval. The Board of Directors believes that
the Equity Incentive Plan is important to permit the Company to continue to
attract and retain officers, directors, key employees, advisors and consultants,
to encourage stock ownership by employees and management, and to give the Board
of Directors flexibility to provide incentives and promote the financial success
and progress of the Company.
Below is a summary description of the Equity Incentive Plan:
The Equity Incentive Plan will be administered by the Compensation
Committee of the Board of Directors (the "Committee") of the Company or the
Board of Directors if a Committee is not appointed. At this time, the Committee
has not been formed. Subject to the Equity Incentive Plan, the Committee has the
authority to determine to whom stock options or stock appreciation rights may be
granted, the time or times at which options and rights are granted, the number
of shares covered by each such grant, and the duration of the options or rights.
All decision, determinations and interpretations made by the Committee are
binding on participants of the Equity Incentive Plan.
UNDERLYING SECURITIES
The securities underlying stock options and stock appreciation rights under
the Equity Incentive Plan are shares of the Company's no par value common stock.
Pursuant to the Equity Incentive Plan the maximum number of shares of common
stock that may be issued upon exercise or payment will not exceed 900,000
shares. Pursuant to the terms of the Equity Incentive Plan, shares subject to
stock options or stock appreciation rights which for any reason expire or are
terminated unexercised as to such shares may again be the subject of a grant
under the Equity Incentive Plan. In addition, for purposes of calculating the
maximum number of shares which may be issued under the Equity Incentive Plan,
only shares issued as a result of the exercise of stock appreciation rights are
counted and any shares tendered as payment of the exercise price of an option
will be added back to the Equity Incentive Plan.
ELIGIBLE EMPLOYEES AND OTHERS
Stock options and stock appreciation rights may be granted under the Equity
Incentive Plan to officers, directors and employees of, and advisors and
consultants to, the Company. Options granted under the Equity Incentive Plan
that are incentive stock options ("ISOs") within the meaning of Section 422 of
the Internal Revenue Code (the "Code") may only be granted to employees
(including officers and directors who are employees) of the Company. Advisors
and consultants may receive grants only if they provide bona fide services that
are not rendered in connection with the offer or sale of securities or in a
capital-raising transaction. The Committee's discretion in granting options or
stock appreciation rights to its members is limited. See "Option Grants to
Committee Members" below.
OPTION GRANTS TO COMMITTEE MEMBERS
Grants to Committee members may only be made by the Board of Directors
(with members of the Committee abstaining). Additionally, the Board of Directors
may establish a formula by which options are granted to Committee members.
OPTION PRICE AND DURATION
Pursuant to the Equity Incentive Plan, the option price for nonqualified
options, may be less than the fair market value of the stock on the date of
grant, but in no event will the option price be less than 50% of the fair market
value of the stock on the valuation date. For ISOs, the exercise price per share
is 100% of the fair market value of the
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common stock on the date of valuation, or in the case of ISOs granted to
employees holding more than 10% of the total combined voting power of all
classes of stock of the Company, 110% of the fair market value of the common
stock on the valuation date.
"Fair Market Value" means (a) if there is an established market for the
Company's common stock on a stock exchange, in an over-the-counter market or
otherwise, the average closing price of the Company's stock for the ten
consecutive trading days immediately before the valuation date, provided that
the Committee may in its discretion provide an alternative definition of Fair
Market Value, or (b) if there were no such sales on the valuation date, then in
accordance with Treas. Reg. Sect. 10.2031-2 or successor regulations. Unless
otherwise specified by the Committee at the time of grant or in the Equity
Incentive Plan (as in the case of automatic grants to Committee members), the
valuation date for purposes of determining Fair Market Value is the date of
grant. The Committee may, however, specify in any grant of an option or stock
appreciation right that, instead of the date of the grant, the valuation date
shall be a valuation period of up to 90 days preceding the date of grant, and
fair market value for purposes of such grant shall be the average over the
valuation period of the mean of the highest and lowest quoted selling prices on
each date on which sales were made in the valuation period.
Unless otherwise prescribed by the Committee, options granted under the
Equity Incentive Plan expire ten years from the date of grant, or in the case of
ISOs granted to employees holding more than 10% of the total combined voting
power of all classes of stock of the Company, five years from the date of grant.
EXERCISE OF OPTIONS AND PAYMENT FOR STOCK
Options are exercisable in accordance with the terms and conditions of the
grant to the participant. The exercise price of options may be paid in cash or
in shares of the Company's common stock (valued at the fair market value of the
shares on the date of exercise) or by a combination thereof. The Committee may,
in its discretion, loan one or more participants all or a portion of the
exercise price, together with the amount of any tax liability incurred by the
participant as a result of the exercise of the option, for up to three years
with interest payable at the prime rate quoted in the Wall Street Journal on the
date of exercise. Members of the Committee may receive such loans for the
exercise of their options with Board approval. In addition, the Committee or the
Board of Directors may elect to permit a participant to effect a net exercise of
an option without tendering shares of the Company's stock as payment for the
option. In such an event, the participant would be deemed to have paid for the
exercise of the option with shares of the Company's stock and would receive from
the Company a number of shares equal to the difference between the shares that
would have been tendered and the number of options exercised.
STOCK APPRECIATION RIGHTS
Stock appreciation rights may be granted by the Committee under the Equity
Incentive Plan. A stock appreciation right entitles its holder to receive the
excess of the fair market value (at the date of exercise) of a share of common
stock over the exercise price of the stock appreciation right.
EXERCISE OF STOCK APPRECIATION RIGHTS
A stock appreciation right is exercisable at the time prescribed by the
Committee. Exercise of a stock appreciation right is effected by written notice
to the Company. The Company may pay the stock appreciation right in cash or
shares of common stock in its sole discretion.
NO TRANSFERABILITY
During a participant's lifetime, an option may be exercisable only by the
participant. Options granted under the Equity Incentive Plan and the rights and
privileges conferred thereby are not subject to execution, attachment or similar
process and may not be transferred, assigned, pledged or hypothecated in any
manner (whether by operation of law or otherwise) other than by will or by the
applicable laws of descent and distribution. Notwithstanding the foregoing, to
the extent permitted by applicable law and Rule 16b-3, the Committee may (i)
permit a recipient of a nonqualified stock option to designate in writing during
the participant's lifetime a beneficiary to receive and exercise the
participant's nonqualified stock options in the event of such participant's
death, (ii) grant nonqualified stock options that are transferable to the
immediate family or a family trust of the recipient, and (iii) modify existing
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nonqualified stock options to be transferable to the immediate family or a
family trust of the recipient. Any other attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of any option under the Equity Incentive Plan
or of any right or privilege conferred thereby contrary to the provisions of the
Equity Incentive Plan would be null and void.
AMENDMENT, SUSPENSION AND TERMINATION
The Board of Directors or the Committee may at any time suspend, terminate
or amend the Equity Incentive Plan, except that, without the approval of the
shareholders, (i) the total number of shares available for grants under the
Equity Incentive Plan may not be increased, and (ii) no change may be made that
requires shareholder approval under applicable law. No amendment, suspension or
termination of the Equity Incentive Plan will, without the participant's
consent, alter or impair any of the rights or obligations under any option or
stock appreciation right granted prior to that amendment, suspension or
termination. Unless earlier terminated by the Committee, the Equity Incentive
Plan will terminate on March __, 2011, and no stock option or stock appreciation
right maybe granted after that date.
FEDERAL INCOME TAX CONSEQUENCES
A. Incentive Stock Options. The following general rules are applicable for
Federal income tax purposes under existing law to employees of the Company who
receive and exercise ISOs granted under the Equity Incentive Plan:
1. Generally, no taxable income results to the optionee upon the
grant of an ISO or upon the issuance of shares to him or her upon
exercise of the ISO.
2. No tax deduction is allowed to the Company upon either grant or
exercise of an ISO under the Equity Incentive Plan.
3. If shares acquired upon exercise of an ISO are not disposed of
prior to the later of (i) two years following the date the Option
was granted or (ii) one year following the date the shares are
transferred to the optionee pursuant to the exercise of the
Option, the difference between the amount realized on any
subsequent disposition of the shares and the exercise price will
generally be treated as long-term gain or loss to the optionee.
4. If shares acquired upon exercise of an ISO are disposed of before
the expiration of one or both of the requisite holding periods (a
"disqualifying disposition"), then in most cases the lesser of
(i) any excess of the Fair Market Value of the shares at the time
of exercise of the Option over the exercise price or (ii) the
actual gain on disposition, will be treated as compensation to
the optionee and will be taxed as ordinary income in the year of
such disposition.
5. In any year that an optionee recognizes compensation income on a
disqualifying disposition of shares acquired by exercising an
ISO, the Company will generally be entitled to a corresponding
deduction for income tax purposes.
6. Any excess of the amount realized by the optionee as the result
of a disqualifying disposition over the sum of (i) the exercise
price and (ii) the amount of ordinary income recognized under the
above rules will be treated as either long-term or short-term
capital gain, depending upon the time elapsed between receipt and
disposition of such shares.
7. The bargain element at the time of exercise of an ISO, i.e., the
amount by which the fair market value of the common stock
acquired upon exercise of the ISO exceeds the exercise price, may
be taxable to the optionee under the "alternative minimum tax"
provision of the Code.
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B. Nonqualified Options. Nonqualified Options are taxed in accordance with
Section 83 of the Code and the Regulations issued thereunder. The following
general rules are applicable to United States holders of such options and to the
Company for Federal income tax purposes under existing law:
1. The optionee does not realize any taxable income upon the grant
of a Nonqualified Option, and the Company is not allowed a
business expense deduction by reason of such grant.
2. The optionee will recognize ordinary compensation income at the
time of exercise of a Nonqualified Option in an amount equal to
the excess, if any, of the fair market value of the shares on the
date of exercise over the exercise price. The Company will
require employees to make appropriate arrangements for the
withholding of taxes on this amount.
3. When the optionee sells the shares, he or she will recognize a
capital gain or loss in the amount equal to the difference
between the amount realized upon the sale of the shares and his
or her basis in the shares (i.e., the exercise price plus the
amount taxed to the optionee as compensation income). If the
optionee holds the shares for longer than one year, this gain or
loss will be a long-term capital gain or loss.
4. In general, the Company will be entitled to a tax deduction in
the year in which compensation income is recognized by the
optionee.
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BOARD OF DIRECTORS' RECOMMENDATIONS
The Board of Directors has considered each of the Proposals set forth in
this information statement and is recommending that the shareholders adopt each
of the proposals.
THE CHAIRMAN OF THE BOARD OF DIRECTORS OWNS SUFFICIENT VOTING SECURITIES OF THE
COMPANY TO ADOPT, RATIFY AND APPROVE ALL OF THE ITEMS TO BE VOTED UPON AT THE
SPECIAL MEETING OF THE SHAREHOLDERS. NO FURTHER CONSENTS, VOTES OR PROXIES ARE
NEEDED, AND NONE ARE REQUESTED.
The information contained in this Information Statement constitutes the
only notice any shareholder will be provided.
FINANCIAL INFORMATION
A copy of the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1999 will be made available upon request.
INTEREST OF CERTAIN PERSONS IN OR OPPOSITION TO MATTERS TO BE ACTED UPON
With the exception of the amendments to the Company's Articles of
Incorporation which will benefit Thomas J. Wiens and his affiliate entities by
allowing the Series A Convertible Preferred Stock to be converted to common
stock, none of the Company's officers, directors or any of their respective
affiliates has any interest in any of the proposals to be acted upon at the
Meeting. None of the Company's directors has indicated to the Company an
intention to oppose any of the proposals to be acted upon at the Meeting. The
Chairman of the Board, Mr. Wiens, has enough votes to approve the Proposals
outlined herein and has indicated that he will approve the Proposals at the
Meeting.
FORWARD-LOOKING STATEMENTS
This Information Statement may contain certain "forward-looking" statements
as such term is defined in the Private Securities Litigation Reform Act of 1995
or by the Securities and Exchange Commission in its rules, regulations and
releases, which represent the Company's expectations or beliefs, including but
not limited to, statements concerning the Company's operations, economic
performance, financial condition, growth and acquisition strategies,
investments, and future operational plans. For this purpose, any statements
contained herein that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may," "will," "expect," "believe," "anticipate," "intend,"
"could," "estimate," "might," or "continue" or the negative or other variations
thereof or comparable terminology are intended to identify forward-looking
statements. These statements, by their nature, involve substantial risks and
uncertainties, certain of which are beyond the company's control, and actual
results may differ materially depending on a variety of important factors,
including uncertainty related to acquisitions, governmental regulation, managing
and maintaining growth, volatility of stock prices and any other factors
discussed in this and other Company filings with the Securities and Exchange
Commission.
AVAILABLE INFORMATION
The Company reports under the information requirements of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information filed with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, NW, Washington, DC
20549 or at the Regional Offices of the Commission which are located as follows:
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade
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Center, 13th Floor, New York, New York 10048. Copies of such material can also
be obtained from the Commission at prescribed rates. Written requests for such
material should be addressed to the Public Reference Section, Securities and
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549. The Commission
maintains a Web site that contains reports, proxy statements and other
information filed electronically by the Company with the Commission which can be
accessed over the Internet at http://www.sec.gov.
OTHER BUSINESS
Management of the Company knows of no other matter which may come before
the Meeting. However, if any additional matters are properly presented at the
Meeting, Mr. Wiens has enough votes to establish a quorum and will vote in
accordance with his judgment on such matters.
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