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
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
SYNTHONICS TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
SYNTHONICS TECHNOLOGIES, INC.
- - - ----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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pursuant to Exchange Act Rule 0-11:(1)
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[ ] 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
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(1) Amount Previously Paid:
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was determined.
Synthonics Technologies, Inc.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 22, 1999
To The Shareholders:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Shareholders of
Synthonics Technologies, Inc., a Utah Corporation, will be held on April 22,
1999 at 3:00 p.m., Pacific Time at The Westlake Hyatt Hotel located at 880 South
Westlake Blvd., Westlake Village, CA 91361. At the meeting, shareholders will
act on the following matters:
1. Election of 1 Director for a term of three (3) years,
2. Ratification of the appointment of Jones, Jensen & Company as the
Company's independent accountants for the fiscal year 1999;
3. To approve a proposal to amendment to the company's articles of
incorporation to increase the number of common shares which the
company is authorized to issue to 100,000,000 shares of Common
Stock, $0.01 par value and to authorize the issuance of up to
20,000,000 shares of Class B Preferred Stock.
4. To transact such other business as may properly come before the
meeting of any adjournment thereof.
Shareholders of record at the close of business on March 4, 1999, are
entitled to notice and to vote at the meeting or any postponements or
adjournments. A complete list of the shareholders entitled to vote at the
meeting will be open to the examination of any shareholder, for any purpose
germane to the meeting, during normal business hours for the ten-day period
ending immediately preceding the date of the meeting, at the Company's offices
at 31324 Via Colinas, Suite 106, Westlake Village, CA 91362.
Attendance at the Annual Meeting will be limited to shareholders of the
Company. Shareholders will be required to furnish proof of ownership of the
Company's common stock before being admitted to the meeting. Shareholders
holding shares in the name of a broker or other nominee are requested to bring a
statement from the broker or nominee confirming their ownership in the Company's
Stock. Directions to the meeting's location accompany the Proxy Statement.
To ensure your representation at the meeting, you are urged to vote, sign,
date and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. The shareholders attending
the meeting may vote in person even if they have returned a proxy.
By Order of the Board of Directors
Charles S. Palm
Corporate Secretary
March __, 1999
Westlake Village, California
Directions to the
1999 Annual Meeting of Shareholders
to be held at:
Westlake Hyatt Hotel
880 South Westlake Blvd.
Westlake Village, CA 91361
(Thursday, April 22, 1999, 3:00 P.M.)
[MAP WITH DIRECTIONS TO THE ANNUAL MEETING]
Synthonics Technologies, Inc.
31324 Via Colinas, Suite 106
Westlake Village, CA 91362
1999 Annual Meeting of Shareholders
April 22, 1999
- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
General
- -------
The enclosed proxy is solicited on behalf of the Board of Directors of
Synthonics Technologies, Inc. (the "Company") for use at the Annual Meeting of
Shareholders to be held April 22, 1999 at 3:00 p.m. local time, or at any
adjournment thereof, for purposes set forth herein and in the accompanying
Notice of Annual Meeting of Shareholders. The meeting will be held at the
Westlake Hyatt Hotel, 880 South Westlake Blvd., Westlake Village, CA 91361,
(805) 497-9991. Directions to the meeting room will be posted in the lobby of
the hotel. When proxies are properly dated, executed and returned, the shares
they represent will be voted at the meeting in accordance with the instructions
of the shareholder. If no specific instructions are given, the shares will be
voted for the election of the nominees for directors set forth herein and, at
the discretion of the proxy holders, upon such other business as may properly
come before the meeting or any adjournment or postponement thereof.
Record Date and Voting Securities
- ---------------------------------
Shareholders of record at the close of business on March 4, 1999, (the
"Record Date") are entitled to notice and to vote at the meeting or any
postponements or adjournments. At the record date there were issued and
outstanding, and eligible to vote, 19,951,279 shares of the Company's Common
Stock, $0.01 par value.
Revocability of Proxies
- -----------------------
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Investor Relations) a written notice of revocation or a duly executed proxy
bearing a later date or by attending the meeting and voting in person.
Solicitation
- ------------
The cost of solicitation will be borne by the Company. In addition, The
Company may reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation materials to such
beneficial owners. The Company's directors, officers and employees, without
additional compensation, may solicit proxies personally or by telephone,
facsimile or telegram. Although the exact cost of preparation, mailing and
holding of the meeting is not known at this time, it is anticipated that the
cost will be approximately $5,000.
1
Voting Securities and Principal Holders
The Company has two classes of stock, Common Stock, $0.01 Par Value
("Common Stock") and Preferred Stock, $10.00 Par Value ("Preferred Stock"). The
Common Stock is the only class of stock entitled to notice and the right to vote
on the matters of the Corporation. At the Record Date, there were issued and
outstanding 19,951,279 shares of the Company's Common stock held of record by
approximately 537 shareholders.
Voting Rights
- -------------
Under the Utah Revised Business Corporation Act and the Company's Articles
of Incorporation, as amended and its Bylaws, the holder of Common Stock shall be
entitled to vote and shall be entitled to one vote for each share of Company's
Common stock held at the Record Date for all matters, including the election of
directors. The required quorum for the transaction of business at the Annual
Meeting is a majority of the votes eligible to be cast by holders of shares of
common stock issued and outstanding on the Record Date. Shares that are voted
"FOR," "AGAINST," "WITHHELD" OR "ABSTAIN" are treated as being present at the
Annual Meeting for the purposes of establishing a quorum and are also treated as
shares entitled to vote at the Annual Meeting (the "Votes Cast") with respect to
such matter. Abstentions will not be counted as a vote FOR or AGAINST a
proposal. Broker non-votes will be counted for the purpose of determining the
presence or absence of a quorum for the transaction of business, but such
non-votes will not be counted for the purposes of determining the number of
Votes Cast with respect to the particular proposal on which a broker has
expressly not voted. Thus a broker non-vote will not effect the outcome of the
voting on a proposal. Except with respect to elections of directors, any
shareholder entitled to vote may vote part of his or her shares in favor of a
proposal and refrain from voting the remaining shares or vote them against the
proposal. If a shareholder fails to specify the number of shares he or she is
affirmatively voting, it will be conclusively presumed that the shareholder's
approving vote is with respect to all shares the shareholder is entitled to
vote.
With respect to voting on the election of directors, shareholders shall not
be entitled to cumulate votes unless the candidates' names have been placed in
nomination before the commencement of the voting and a shareholder has given
notice at the meeting, and before the voting has begun, of his or her intention
to cumulate votes. If any shareholder has given such notice, then all
shareholders entitled to vote may cumulate their votes by giving one candidate a
number of votes equal to the number of directors to be elected multiplied by the
number of his or her shares or by distributing such votes on the same principle
among any number of candidates as he or she thinks fit. The candidates receiving
the highest number of votes, up to the number of directors to be elected, shall
be elected. Votes cast against a candidate or which are withheld shall have no
effect. Upon the demand of any shareholder made before the voting begins, the
election of directors shall be by ballot rather than by voice vote. In the event
that cumulative voting is invoked, the proxy holders will have the discretionary
authority to vote all proxies received by them in such a manner as to ensure the
election of as many of the Board of Directors' nominees as possible
Voting Proxies
- --------------
The shares of common stock represented by all properly executed proxies
received in time for the meeting will be voted in accordance with the directions
given by the shareholders. If no specification is made, the shares will be voted
FOR the nominee named herein as a director, or their respective substitute as
may be appointed by the Board of Directors and FOR all other proposals.
2
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth security ownership information as of the
close of business on December 31, 1998, for individuals or entities in the
following categories at the Company's fiscal year end: (i) persons known by the
Company to own beneficially more than five percent (5%) of the Company's Common
stock, (ii) each director, (iii) each Named Executive Officer listed in the
"Summary Compensation Table" set forth herein, and (iv) all directors and
executive officers as a group. Said percentages are based on the total number of
shares issued and outstanding as of December 31, 1998.
Name of Beneficial Owner Amount of Ownership Percent of Class
---------------------------------------------------------------------------------
LeRoy K. Speirs 200,334 1.0%
F. Michael Budd 1,130,750 5.7%
Charles S. Palm 428,751 2.1%
David L. Stewart 8,892 0.0%
Ronald Speirs 50,000 0.3%
Joseph R. Maher 110,000 0.6%
Thomas K. Carpenter 0 0.0%
Timothy G. Paulson 20,000 0.1%
All Directors and Officers as a Group 1,948,727 9.8%
Section 16(a) Compliance
- ------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company's Common Stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes of ownership of Common Stock
of the Company. Officers, directors and greater than ten percent stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, with respect to the year ended December 31,
1998, all Section 16(a) filing requirements applicable to each person who, at
any time during the fiscal year ended December 31, 1998, was an officer,
director and greater than ten percent beneficial owner, were complied with, with
the exception of the Annual Statement of Changes in Beneficial Ownership for the
following officers and directors, which were filed 4 days late: F. Michael Budd,
Charles S. Palm, LeRoy K. Speirs, Ronald S. Speirs, Timothy G. Paulson, Thomas
K. Carpenter, Joseph R. Maher, and David L. Stewart.
3
Compensation of Directors and Executive Officers
- ------------------------------------------------
The following table shows certain information concerning the compensation
of each executive officer of the Company for the fiscal year ended December 31,
1998.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Awards
------------
Annual Compensation Other Common Stock
----------------------------- Annual Underlying All Other
Salary Bonus Compensation Options /SARs Compensation
Name and Position Year ($) ($) ($) (#) ($)
- -------------------------------------------------------------------------------------------------------------------
F. Michael Budd,
President and CEO 1998 $ 45,000 $0 $0 720,465 $0
Charles S. Palm
Secretary and Chief
Technical Officer 1998 $ 75,000 $0 $0 385,142 $0
Joseph R. Maher
Vice President of
Marketing and Sales 1998 $101,500 $0 $0 78,195 $0
Employment Contracts
- --------------------
F. Michael Budd and Charles S. Palm both have employment contracts with the
Company. Both are effective until December 31, 2000. Each contract contains an
Incentive Stock Option for 750,000 shares of common stock. The option price per
share is $.050 and the 750,000 shares vest over a four year period with all
shares being vested by July 1, 2000.
Joseph R. Maher has an employment contract with the Company. It is
effective until September 30, 2001. His contract contains an Incentive Stock
Option for 750,000 shares of common stock. The option price per share is $1.00
and the 750,000 shares vest over a three year period. The total number of shares
that vest is dependent on the overall performance of Christopher Raphael, Inc.
but cannot exceed a total of 750,000 shares.
Compensation of Directors
- -------------------------
Thomas K. Carpenter received compensation for Business Development
consulting services totaling $10,000 during the fiscal year ended December 31,
1998. No other non-employee directors received cash compensation during the
fiscal year ended December 31, 1998
4
Option Grants Table
- -------------------
The following tables reflect certain information, with respect to stock
options granted under the Company's stock option plans to certain executive
officers and directors during fiscal 1998.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
---------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#) YEAR(%) ($/SH) DATE
- ------------------------------- ---------- ---------- --------- ----------
F. Michael Budd ............... 720,465 60.05% $0.53 12/31/98
Charles S. Palm ............... 385,142 31.24% $0.53 12/31/03
LeRoy K. Speirs ............... 0 0.00% N/A N/A
Ronald S. Speirs .............. 0 0.00% N/A N/A
Timothy G. Paulson ............ 0 0.00% N/A N/A
Thomas K. Carpenter ........... 29,177 2.37% $0.53 12/31/03
Joseph R. Maher ............... 78,195 6.34% $0.53 12/31/03
David L. Stewart .............. 0 0.00% N/A N/A
- ---------------
(1) All options were granted on December 31, 1998 at an exercise price equal to
the closing price of the Common Stock on the OTC Bulletin Board ("OTCBB")
on such date.
Option Exercise and Year End-Value Table
- ----------------------------------------
The following tables reflect certain information, with respect to the
exercise of stock options by certain executive officers during fiscal 1998.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND
FY-END OPTION VALUES
-------------------------------------------------------
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)
SHARES VALUE --------------- -------------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------- ----------- -------- --------------- -------------------
F. Michael Budd ............... 0 0 1,549,325 0
Charles S. Palm ............... 0 0 2,861,832 279,788
LeRoy K. Speirs ............... 0 0 200,000 0
Ronald S. Speirs .............. 0 0 200,000 0
Timothy G. Paulson ............ 0 0 90,000 0
Thomas K. Carpenter ........... 0 0 209,177 0
Joseph R. Maher ............... 0 0 858,195 0
David L. Stewart .............. 0 0 100,000 0
- --------------------
(1) Based on the closing price on the OTCBB on December 31, 1998 of $0.469.
5
PROPOSAL 1.
ELECTION OF DIRECTOR
One director is to be elected at the annual meeting, to hold office for a
term of 3 years. It is intended that the accompanying proxy will be voted in
favor of the nominee to serve as director unless the shareholder indicates to
the contrary on the proxy. Management expects that the nominee will be available
for election, but if any such nominee is not a candidate at the time the
election occurs, it is intended that such proxy will be voted for the election
of another nominee to be designated by the Board of Directors to fill any such
vacancy. Votes withheld will be counted for the purpose of determining the
presence or absence of a quorum for the transaction of business at the meeting
but have no other legal effect upon the election of directors under California
law.
The nominee and continuing directors of the Company were elected by the
Company's shareholders at the 1998. The continuing directors will serve for the
terms indicted and until their successors are duly elected and qualified.
PRESENT DIRECTOR WHO IS A NOMINEE FOR REELECTION
------------------------------------------------
Position
Name of Nominee Age (Proposed Term as Director)
- -------------------------------- --- ---------------------------
David L. Stewart............... 55 Director - 3 Year Term
Nominees
- --------
David L. Stewart Esq., has served as a member of the Board since May 30,
1995. David is a patent attorney and partner in the firm of McDermott, Will and
Emory in Alexandria Virginia. He holds a Bachelor of Science degree in physics
from California State University at Los Angeles and a Juris Doctor degree from
George Washington University in the District of Columbia. Mr. Stewart was a
Ph.D. candidate in information technology at George Mason University in Fairfax,
Virginia. He also served four years as Administrative Patent Judge
(Examiner-in-Chief) at the Board of Patent Appeals and Interference's, United
States Patent and Trademark Office.
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE NOMINEE LISTED ABOVE
CONTINUING DIRECTORS WHOSE TERMS ARE NOT EXPIRING
-------------------------------------------------
Position
Name of Nominee Age (Proposed Term as Director)
- -------------------------------- --- ---------------------------
Ronald S. Speirs ............... 47 Director - 1 Year
Thomas K. Carpenter ............ 57 Director - 1 Year
Timothy G. Paulson ............. 52 Director - 1 Year
F. Michael Budd ................ 52 Directors, President and
Chief Executive Officer - 2 Years
LeRoy K. Speirs ................ 75 Chairman of the Board - 2 Years
Charles S. Palm ................ 55 Director, Chief Technology Officer
and Secretary - 2 Years
6
Continuing Directors
- --------------------
Ronald S. Speirs has served as a member of the Board since February 28,
1996. Ron was awarded BS and MS degrees in Computer Integrated Manufacturing by
Brigham Young University in 1986/1987. Ron is currently an independent computer
consultant and project facilitator for various high-tech enterprises. Timothy G.
Paulson has served as a member of the Board since October 31, 1997. Tim has been
a Corporate Vice President and the Treasurer of Litton Industries, Inc. since
1994. With Litton since 1970, Tim started his career as a staff auditor and has
progressed through several senior level management positions prior to being
appointed its Treasurer. He also earned his Certified Public Accountant status
in 1974.
Thomas K. Carpenter has served as a member of the Board since October 31,
1997. Tom is an experienced executive with extensive P&L responsibility and a
heavy involvement in operational, technical, and marketing/sales
responsibilities. Mr. Carpenter has gained particular expertise with software
tools and applications within industrial, retail, government, distribution, and
medical marketplaces. Tom, a veteran of the software industry, is playing a key
role for the Company in the formation and execution of its operating strategy.
Tom is currently a member of the Board of Directors or the Board of Advisors for
three other companies all involved in the software industry. LeRoy K. Speirs has
served as Chairman of the Board of the Company since 1978. LeRoy has been a
successful entrepreneur throughout his entire adult life with a number of
different companies. He was a founder of the Brigham Young University Center for
Entrepreneurship in the Marriott School of Management and recently received the
prestigious Honorary Alumni Award (a life achievement award) from Brigham Young
University.
F. Michael Budd has served as a director of the Company since May 30, 1995
and has served as President and Chief Executive Officer of the Company since
July 1, 1996. Michael holds a Bachelor of Science (B.S.) degree in Industrial
Engineering from the General Motors Institute in Flint, Michigan and a Masters
in Business Administration (M.B.A.) from the University of Detroit.
Charles S. Palm has served as Chief Technology Officer and member of the
Board of the Company since May 30, 1995. Charles holds a Doctorate of Philosophy
(Ph.D.) in Engineering Sciences from the University of Florida.
There are no arrangements or understandings between any of the directors or
executive officers, or any other person or person pursuant to which they were
selected as directors and/or officers. The Chairman of the Board, LeRoy K.
Speirs is the father of director Ronald S. Speirs. Other than the father - son
relationship of Messrs. Speirs, there is no family relationship between any
director or executive officer of the Company.
PROPOSAL 2.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Company has appointed Jones, Jensen & Company as the Company's
independent accountants for the fiscal year ending December 31, 1999. Jones,
Jensen & Company have served as the Company's independent accountants since
1995. Services provided to the Company and its subsidiaries by Jones, Jensen &
Company in fiscal 1998 included examination of the Company's consolidated
financial statements, limited reviews of quarterly reports and services in
connection with licensees and consultations on various tax and information
matters.
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR SUCH RATIFICATION
7
PROPOSAL 3.
AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF
COMMON SHARES WHICH THE COMPANY IS AUTHORIZED TO ISSUE TO 100,000,000 SHARES OF
COMMON STOCK, $0.01 PAR VALUE AND TO AUTHORIZE THE ISSUANCE OF UP TO
20,000,000 SHARES OF CLASS B PREFERRED STOCK.
On March 9, 1999, the Company's Board of Directors approved the Amendment
and Restatement of the Company's Articles of Incorporation in order to authorize
the Company to issue, from time to time, as determined by the Board of
Directors, up to 20,000,000 shares of Class B Preferred Stock, $0.01 par value
per share ("Preferred Stock" or "Preferred Shares"), and increase the number of
Common Shares which the Company is authorized to issue from 50,000,000 shares,
$0.01 par value to 100,000,000 shares of Common Stock, $0.01 par value (the
"Common Stock" or "Common Shares").
Having the authorization to issue Class B Preferred Stock will provide the
Company with a more significant and flexible ability to access the necessary
capital required from time to time to rapidly expand and grow the business of
the Company, thus enhancing the value of the Company for the benefit of the
shareholders.
If the proposed amendment is approved, the Board of Directors would be
empowered, without the necessity of further action or authorization by the
Company's shareholders (unless such action or authorization is required in a
specific case by applicable laws or regulations or stock exchange rules), to
authorize the issuance of the Preferred Shares from time to time in one or more
series or classes, and to fix by resolution the designations, preferences,
limitations, and relative rights of each such series or class. Each series or
class of Preferred Shares could, as determined by the Board of Directors at the
time of issuance, rank, with respect to dividends and redemption and liquidation
rights, senior to the Company's shares of Common Stock, $0.01 par value per
share. At present the Company's Articles of Incorporation, as previously amended
and restated authorize 550,000 shares of Preferred Stock with a stated par value
of $10.00 per share and certain other rights, preferences and privileges. These
shares of Preferred Stock shall remain in effect and be designed as the Class A
Preferred Stock.
The additional Preferred Shares which will be designated as Class B
Preferred Stock will provide authorized and unissued shares of Preferred Stock
which may be used by the Company for any proper corporate purpose. Such purpose
might include, without limitation, issuance as part or all of the consideration
required to be paid by the Company in the acquisition of other businesses or
properties, or issuance in public or private sales for cash as a means of
obtaining additional capital for use in the Company's business and operations.
There are various proposals presently under review by the Board of Directors
which may contemplate the issuance of Preferred Shares, but further negotiations
are ongoing and no definitive transactions, agreements or terms and conditions
have been formalized.
It is not possible to state the precise effects of the authorization of the
Preferred Shares upon the rights of the holders of the Company's Common Shares
until the Board of Directors determines the respective preferences, limitations,
and relative rights of the holders of each class or series of the Preferred
Shares. However, such effects might include: (a) reduction of the amount
otherwise available for payment of dividends on Common Shares, to the extent
dividends are payable on any issued Preferred Shares; (b) restrictions on
dividends on the Common Shares; (c) dilution of the voting power of the Common
Shares to the extent that the Preferred Shares had voting rights; (d) conversion
of the Preferred Shares into Common Shares at such prices as the Board
determines, which could include issuance at below the fair market value or
original issue price of the Common Shares; and (e) the holders of Common Shares
not being entitled to share in the Company's assets upon liquidation until
satisfaction of any liquidation preference granted to holders of the Preferred
Shares.
Although the Board of Directors would authorize the issuance of additional
Preferred Shares based on its judgment as to the best interests of the Company
and its shareholders, the issuance of authorized Preferred Shares could have the
effect of diluting the voting power per share and could have the effect of
diluting the book value per share of the outstanding Common Shares. In addition,
the Preferred Shares could, in certain instances, render more difficult or
discourage a merger, tender offer, or proxy contest and thus potentially have an
8
"anti-takeover" effect, especially if Preferred Shares were issued in response
to a potential takeover. In addition, issuances of authorized Preferred Shares
can be implemented, and have been implemented by some companies in recent years,
with voting or conversion privileges intended to make acquisition of the Company
more difficult or more costly. Such an issuance could deter the types of
transactions which may be proposed or could discourage or limit the
shareholders' participation in certain types of transactions that might be
proposed (such as a tender offer), whether or not such transactions were favored
by the majority of the shareholders, and could enhance the ability of officers
and directors to retain their positions. This is not the Board of Directors of
the Company's intention in proposing the authorization of the Class B Preferred
Shares.
If the proposed amendments are approved and authorized by the shareholders
the Restated Articles of Incorporation will read as set forth in Exhibit 1,
attached hereto.
There are currently 50,000,000 Common Shares, $0.01 Par Value authorized
under the Company's Amended and Restated Articles of Incorporation. The proposed
amendment would change the number of Common Shares currently authorized to
100,000,000 shares of Common Stock, $0.01 Par Value.
Vote Required For Adoption
- --------------------------
The affirmative vote of holders of a majority of the Common Shares entitled
to vote at the meeting is required to approve the proposed amendment. If the
amendment is not approved by the shareholders, the Company's Amended and
Restated Articles of Incorporation, as presently in effect, will continue in
effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
Deadline for Receipt of Shareholder Proposals for the 2000 Annual Meeting.
- --------------------------------------------------------------------------
Proposals of shareholders of the Company which are intended to be presented
at the Company's 2000 Annual Meeting of Shareholders, must be received by the
Company no later than September 30, 1999 and otherwise be in compliance with the
Company's Certificate of Incorporation and Bylaws and with applicable laws and
regulations in order to be included in the proxy statement and form of Proxy
relating to that meeting.
OTHER BUSINESS
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting or any adjournment or
postponement thereof, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend.
By Order of the Board of Directors
Charles S. Palm
March __, 1999 Corporate Secretary
A COPY OF THE COMPANY'S FORM 10-KSB REPORT FOR THE FISCAL YEAR 1998 CONTAINING
INFORMATION ON OPERATIONS, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS
AVAILABLE AND CAN BE ACCESSED AND DOWNLOADED VIA THE INTERNET AT
HTTP://WWW.SEC.GOV/CGI-BIN/SRCH-EDGAR, AND SIMPLY TYPING IN "SYNTHONICS", OR
PLEASE WRITE TO:
Investor Relations Department
Synthonics Technologies, Inc.
31324 Via Colinas, Suite 106
Westlake Village, CA 91362
9
Appendix A
RESTATED
ARTICLES OF INCORPORATION
OF
SYNTHONICS TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
F. Michael Budd and Charles S. Palm hereby certify that:
They are the President and Secretary, respectively, of Synthonics
Technologies, Inc., a Utah corporation (the "Corporation").
The Articles of Incorporation of this Corporation are amended and restated
in their entirety to read as follows and supersede and take the place of the
existing Articles of Incorporation and all prior amendments thereto and
restatements thereof:
ARTICLE 1.
----------
Name
1.1 The name of this corporation is Synthonics Technologies, Inc.
ARTICLE 2.
---------
Duration
2.1 The corporation shall continue in existence perpetually unless sooner
dissolved according to law.
ARTICLE 3.
----------
Purpose
3.1 The Corporation is organized to engage in any and all lawful acts
and/or activities for which corporations may be organized under the Utah Revised
Business Corporation Act ("URBCA").
ARTICLE 4.
----------
Board of Directors
4.1. Number. The board of directors of the Corporation shall consist of
such number of persons, not less than three, as shall be determined in
accordance with the bylaws from time to time. As of the effective date of this
article the number of directors is nine.
4.2. Staggered Board; Tenure. The directors shall be divided into three
classes: Class I, Class II, and Class III. The term of office of directors shall
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be three years, staggered by class so that one class is elected each year. Such
classes shall be as nearly equal in number as possible. Directors chosen to
succeed those who have been removed or whose terms have expired shall be
identified as being of the same class as the directors they succeed and shall be
elected for a term expiring at the expiration date of such class or thereafter
when their respective successors are elected and have been qualified. If the
number of directors is changed, any increase or decrease in directors shall be
apportioned among the classes so as to maintain all classes as nearly equal in
number as possible, and any individual director elected to any class shall hold
office for a term which shall coincide with the term of such class. In no case,
will a decrease in the number of directors shorten the term of any incumbent
director.
ARTICLE 5.
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Capitalization
5.1 The total number of shares that may be issued by the Corporation and
that the Corporation will be authorized to have is One Hundred Twenty Million
Five Hundred Fifty Thousand (120,550,000) of the par value per share hereinafter
set forth. A description of the classes of shares and a statement of the number
of shares in each class and the relative rights, voting power, and preferences
granted to the and restrictions imposed upon the shares of each class are as
follows:
5.2 Common Stock. The total number of shares of Common Stock this
Corporation shall have the authority to issue is One Hundred Million
(100,000,000). The Common Stock shall have a stated par value of $0.01 per
share. Each share of Common Stock shall have, for all purposes one (1) vote per
share. Subject to the cumulative dividend preference to holders of Class A and
Class B Preferred Shares as provided in herein, the shares of Common Stock are
entitled to participate in any dividends available therefor in equal amounts per
share on all outstanding Preferred Shares and Common Stock. Subject to the
provisions for the payment of the liquidation preference to the holders of Class
A and Class B Preferred Shares as provided herein, the Common Stock is entitled
to participate in all distributions to shareholders made upon liquidation,
dissolution, or winding up of the corporation in equal amounts per share as all
outstanding Class A and Class B Preferred Shares and Common Stock. The holders
of Common Stock issued and outstanding have and possess the right to receive
notice of shareholders' meetings and to vote upon the election of directors or
upon any other matter as to which approval of the outstanding shares of Common
Stock or approval of the common shareholders is required or requested.
Shareholders will not have a right to cumulate their votes for the election of
directors.
5.3 Class A Preferred Shares. The total number of shares of Class A
Preferred Shares this Corporation is authorized to issue is Five Hundred fifty
Thousand (550,000), with a stated par value of $10.00 per share. The
designations, powers, preferences, rights and restrictions granted or imposed
upon the Class A Preferred Shares and holders thereof are as follows:
5.3.1 Dividend Preference. The Class A Preferred Shareholders are
entitled to receive dividends on a cumulative basis at the rate of
twelve percent (12%) of its stated par value per annum (the "Dividend
Preference"), payable on a quarterly basis on the fifteenth (15th) day
of the next month following the end of each fiscal quarter. Such
dividends shall accrue from the date of issuance whether or not
earned. Dividends on the Class A Preferred Shares shall be cumulative
so that if dividends required to be paid on said shares are not paid
or set apart for payment by the Board of Directors on or before
fifteenth day of the month following the end of each fiscal quarter,
in which the same are due, the rights thereof shall cumulate and
remain due and payable by the Corporation. No dividends or other
distributions may be made to the Common Stock during any fiscal year
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of the Corporation until dividends on the Preferred Shares in the
amount of the Dividend Preference have been paid or set apart for
payment.
5.3.2 Liquidation Preference.
(a) In the event of a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of Class A
Preferred Shares shall be entitled to receive out of the assets of the
Corporation, whether such assets are capital or surplus of any nature,
an amount equal to the stated par value less the aggregate amount of
all prior distributions to its Preferred Shareholders made to holders
of all classes of Preferred Shares, plus any accrued previously
declared but unpaid dividends (the amount so determined being
hereinafter referred to as the "liquidation Preference"). No
distribution shall be made to the holders of the Common Shares upon
liquidation, dissolution, or winding up until after the full amount of
the Liquidation Preference has been distributed or provided to the
holders of the Preferred Shares.
(b) If, upon such liquidation, dissolution or winding up the
assets thus distributed among the Preferred Shareholders shall be
insufficient to permit payment to such shareholders of the full amount
of the Liquidation Preference, the entire assets of the Corporation
shall be distributed ratably among the holders of all classes of
Preferred Shares.
(c) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, when the Corporation has
completed distribution of the full Liquidating Preference to the
holders of the Class A Preferred Shares, the Class A Preferred Shares
shall be considered to have been redeemed, and thereafter, the
remaining assets of the Corporation shall be paid in equal amounts on
all outstanding shares of Common Stock.
(d) A consolidation or merger of the Corporation with or into any
other corporation or corporations, or a sale of all or substantially
all of the assets of the Corporation shall not be deemed a
liquidation, dissolution or winding up within the meaning of this
5.3.2.
5.3.3 Redemption Rights. The Corporation, at the option of the Board
of Directors, may at any time redeem after December 31, 1998, all of
the outstanding Class A Preferred Shares by paying, in cash, a sum
equal to the $10.50 per share for each Class A Preferred Share so
redeemed, hereinafter referred to as the "redemption price" by giving
to each Class A Preferred Shareholder of record at his or her last
known address, as shown on the records of the Corporation at least
thirty (30) days prior notice in writing, by first-class mail, postage
prepaid stating the date and plan of redemption, hereinafter called he
"redemption notice." On or after the date fixed for redemption, each
holder of shares called for redemption shall surrender his or her
certificate(s) for such shares to the Corporation at the place
designated in the redemption notice and shall thereupon be entitled to
receive payment of the redemption price. If the redemption notice is
duly given, and if sufficient funds are available therefore on the
date fixed for redemption, then, whether or not the certificates
evidencing the shares to be redeemed are surrendered, all rights with
respect to such shares shall terminate on the date fixed for
redemption, except the right of the holders to receive the redemption
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price, without interest, on surrender of their certificates therefor.
Shares redeemed by the Corporation shall be restored to the status of
authorized but unissued shares of the Corporation.
5.3.4 Conversion Rights. At any time up to and including two (2) days
before the date fixed for redemption of redeemable shares in a notice
of redemption (as provided above), holders of the Class A Preferred
Shares being redeemed who endorse the share certificates and deliver
them together with a written notice of their intent to convert to the
corporation at its principal office, shall be entitled to convert and
receive five (5) shares of Common Stock for each share being converted
at the rate of $2.00 per share of Common Stock being converted into.
Such redemption is subject to the following adjustments, terms, and
conditions:
(a) If the number of outstanding shares of common Stock has been
increased or decreased since the initial issuance of the Class A
Preferred Shares (or series having conversion rights (by reason of any
split, stock dividend, merger, consolidation or other capital change
or reorganization affecting the number of outstanding shares of Common
Stock), the number of shares of common Stock to be issued on
conversion to the holders or Class A Preferred Shares shall equitably
be adjusted by appropriate amendment of this article. The purpose of
such adjustment is to preserve fairly and equitably (as far as
reasonably possible) the original conversion rights of the Class A
Preferred shares being converted. No redemption notice pursuant to
this article shall be given until an amendment to the articles
required to effect this adjustment has been made.
(b) Shares converted under this article shall not be reissued.
The corporation shall at all times reserve and keep available a
sufficient number of authorized but unissued common shares, and shall
obtain and keep in effect any required permits to enable it to issue
and deliver all common shares required to implement the conversion
rights granted herein.
(c) No fractional shares shall be issued upon conversion, but the
corporation shall pay cash for any fractional shares of Common Stock
to which shareholders may be entitled at the fair value of such shares
at the time of conversion. The board of directors shall determine such
fair value.
5.3.5 Default Conversion Rights. If the Corporation is in default in
the payment of any dividend to be paid to the holders of the Class A
Preferred Shares, at any time up to and including two (2) days before
the date fixed for redemption of redeemable shares in a notice of
redemption (as provided above), who endorse the share certificates and
deliver them together with a written notice of their intent to convert
to the corporation at its principal office, shall be entitled to
convert and receive seven (7) shares of Common Stock for each share
being converted at the rate of $1.43 per share of Common Stock being
converted into. Such conversion and redemption is subject to the
adjustments, terms and conditions set forth in paragraph 5.3.4 above.
5.3.6 Voting Rights. The Class A Preferred Shares shall be non-voting
and the holders of Class A Preferred Shares shall not be entitled to
vote upon the election of directors or upon any other matters.
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5.4. Issuance and Terms of Class B Preferred Shares. The total number of
shares of Class B Preferred Shares this Corporation is authorized to issue is
Twenty Million (20,000,000), with a stated par value of $0.01. The Board of
Directors is hereby authorized from time to time, without shareholder action, to
provide for the issuance of Class B Preferred Shares in one or more series not
exceeding in the aggregate the number of Class B Preferred Shares authorized by
these Articles of Incorporation, as amended from time to time; and to determine
with respect to each such series the voting powers, if any (which voting powers,
if granted, may be full or limited), designations, preferences, and relative,
participating, option, or other special rights, and the qualifications,
limitations, or restrictions relating thereto, including without limiting the
generality of the foregoing, the voting rights relating to Class B Preferred
Shares of any series (which may be one or more votes per share or a fraction of
a vote per share, which may vary over time, and which may be applicable
generally or only upon the happening and continuance of stated events or
conditions), the rate of dividend to which holders of Class B Preferred Shares
of any series may be entitled (which may be cumulative or non-cumulative), the
rights of holders of Class B Preferred Shares of any series in the event of
liquidation, dissolution, or winding up of the affairs of the Corporation, the
rights, if any, of holders of Class B Preferred Shares of any series to convert
or exchange such Class B Preferred Shares of such series for shares of any other
class or series of capital stock or for any other securities, property, or
assets of the Corporation or any subsidiary (including the determination of the
price or prices or the rate or rates applicable to such rights to convert or
exchange and the adjustment thereof, the time or times during which the right to
convert or exchange shall be applicable, and the time or times during which a
particular price or rate shall be applicable), whether or not the shares of that
series shall be redeemable, and if so, the terms and conditions of such
redemption, including the date or dates upon or after which they shall be
redeemable, and the amount per share payable in case of redemption, which amount
may vary under different conditions and at different redemption dates, and
whether any shares of that series shall be redeemed pursuant to a retirement or
sinking fund or otherwise and the terms and conditions of such obligation.
5.5 Before the Corporation shall issue any Class B Preferred Shares of any
series, Articles of Amendment or Restated Articles of Incorporation, fixing the
voting powers, designations, preferences, the relative, participating, option,
or other rights, if any, and the qualifications, limitations, and restrictions,
if any, relating to the Class B Preferred Shares of such series, and the number
of Class B Preferred Shares of such series authorized by the Board of Directors
to be issued shall be filed with the Division of Corporations of state in
accordance with the Utah Revised Business Corporation Act ("URBCA") and shall
become effective without any shareholder action. The Board of Directors is
further authorized to increase or decrease (but not below the number of such
shares of such series then outstanding) the number of shares of any series
subsequent to the issuance of shares of that series.
ARTICLE 6.
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Preemptive Rights
6.1 No holder of any stock of the Corporation shall be entitled, as of
right, to purchase or subscribe for any part of any unissued shares of stock of
the Corporation or for any additional shares of stock, of any class or series,
which may at any time be issued, whether now or hereafter authorized, or for any
rights, options, or warrants to purchase or receive shares of stock or for any
bonds, certificates of indebtedness, debentures, or other securities convertible
into shares of stock, or any class or series thereof, but any such unissued or
additional shares, rights, options, or warrants or convertible securities of the
Corporation may, from time to time, be issued and disposed of by the Board of
Directors to such persons, firms, corporations, or associations, and upon such
terms, as the Board of Directors may, in its discretion, determine, without
offering; any part thereof to any shareholders of any class, or series then of
record; and any shares, rights, options or warrants or convertible securities
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which the Board of Directors may at any time determine to offer to shareholders
for subscription, may be offered to holders of shares of any class or series at
the time existing, to the exclusion of holders of shares of any or all other or
classes or series at the time existing, in each case as the Board of Directors
may, in its discretion, determine.
ARTICLE 7.
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Action by Written Consent of Shareholders
7.1 The corporation may take action by the written consent of fewer than
all of the shareholders entitled to vote with respect to the subject matter of
an action in question; provided, however, that in order to be valid any and all
such written consents shall be made and provided in accordance with all
applicable requirements of ss.16-10a-704 of the Utah Revised Business
Corporation Act and signed by the holders of not less than a majority of the
corporation's outstanding shares (calculated as of the record date provided for
by ss.16-10a-704(6)) of that Act.
ARTICLE 8.
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Indemnification
8.1 The Corporation shall indemnify its directors, officers, employee,
fiduciaries and agents as those terms are defined in, and to the fullest extent
permitted by, Part 9 of the Utah Revised Business Corporation Act.
The foregoing Restated Articles of Incorporation have been duly approved by
the board of directors.
The foregoing Restated Articles of Incorporation have been duly approved by
the required vote of shareholders in accordance with the Utah Revised Business
Corporation Act. The total number of outstanding shares of the corporation is
__________________. The number of votes entitled to be cast on the amended and
restated articles of incorporation is _________________ and the number of votes
indisputably represented at the meeting at which the foregoing amended and
restated articles of incorporation was approved was _________________. The total
number of undisputed votes cast for the amended and restated articles of
incorporation was ________________, which was sufficient for approval of the
same.
IN WITNESS WHEREOF, We certify that the matters set forth in this
certificate are true and correct of our own knowledge.
/S/
Dated: -----------------------------
By: F. Michael Budd
Its: President
/S/
Dated: -----------------------------
By: Charles S. Palm
Its: Secretary
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SYNTHONICS TECHNOLOGIES, INC.
PROXY
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The undersigned hereby appoints the Board of Directors, as Proxies, each
with the power to appoint his or her substitute, and hereby authorizes them to
represent and to vote ALL of the shares of the common stock of Synthonics
Technologies, Inc., standing in the name of the undersigned at the ANNUAL
Meeting of SHAREHOLDERS to be held April 22, 1999, and upon such other matters
as may properly come before the meeting. Any prior proxy or voting instructions
are hereby revoked.
The Directors Recommend a vote FOR Proposals 1, 2 and 3.
1. Election of Directors: The Election of David L. Stewart as a Director of
the Company to serve for a term of three (3) years until the 2002 annual
meeting of Shareholders and until his successor is duly appointed and
qualified.
[ ] FOR Nominee [ ] WITHHOLD AUTHORITY for Nominee
2. Ratification of the appointment of Jones, Jensen & Company as the Company's
independent accountants for the fiscal year 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. The proposal to amend and restate the Company's Articles of Incorporation
to increase the number of common shares which the company is authorized to
issue to 100,000,000 shares of Common Stock, $0.01 par value and to
authorize the issuance of up to 20,000,000 shares of Class B Preferred
Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
- --------------------------------------------------------------------------------
PROXY/VOTING INSTRUCTIONS
Annual Meeting of Shareholders - April 22, 1999
The shares represented by this proxy will be voted as directed by the
Shareholder. If no specification is made, the shares will be voted FOR ALL
proposals. When signing as attorney, executor, administrator, trustee or
guardian, give full title as such, and when stock has been issued in the names
of two or more persons, all should sign unless evidence of authority to sign on
behalf of the others is attached.
Dated:
---------------
Number of Shares Represented by this Proxy:
----------------------------------
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Signatures Signatures
- -------------------------------------- ----------------------------------
Name of Shareholder Name of Shareholder
PLEASE RETURN ALL PROXIES TO: SYNTHONICS TECHNOLOGIES, INC.
31324 Via Colinas, #106
Westlake Village, California 92362