SYNERGISTICS, INC.
9 TECH CIRCLE
NATICK, MASSACHUSETTS 01760
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
To Be Held September ___, 2002
A. THE MEETING
1. MEETING AND VOTING DETAILS
This Proxy Statement is furnished to shareholders on behalf of the
Board of Directors of Synergistics in connection with the
solicitation of proxies to be used at the Special Meeting of
Shareholders of Synergistics to be held at the offices of
Synergistics at 9 Tech Circle, Natick, Massachusetts 01760, on
September __, 2002 at 10:00 A.M. and at any adjournments thereof
(the "Special Meeting"). This Proxy Statement and the accompanying
form of proxy, shall be mailed on or about August __, 2002.
The close of business on August 7, 2002 has been fixed as the
record date (the "Record Date") for determining shareholders of
Synergistics entitled to notice of and to vote at the Special
Meeting. As of the Record Date, there were 10,285,806 shares of
common stock outstanding. Shareholders entitled to vote shall have
one (1) vote for each share of stock entitled to be voted.
The following matters shall be voted upon at the Special Meeting:
To adopt the Agreement and Plan of Merger ("Merger Agreement")
dated as of July 25, 2002, a copy of which is annexed as Exhibit A
to this Proxy Statement, providing for the merger of Synergistics
into Synergistics Acquisition Corp., a Massachusetts corporation
(the "Merger"), pursuant to which the surviving company shall be
Synergistics Acquisition Corp.
Any other matters as may properly be brought before the meeting or
at any adjournment.
In accordance with the By-Laws of Synergistics, a majority of the
issued and outstanding shares of Synergistics' common stock must
be represented at any meeting of Synergistics' shareholders. The
affirmative vote of two-thirds (2/3) of votes of shares of common
stock outstanding and entitled to vote at the Special Meeting is
required to approve the proposed Merger. Shares not represented
at the meeting and shares which are not voted for or against the
proposed Merger, including improperly executed votes and broker
nonvotes, shall not be counted.
2. APPROVAL BY CERTAIN LARGE SHAREHOLDERS
Certain large shareholders of Synergistics have entered into an
agreement under which they have agreed to vote in favor of the
Merger. The shareholders who are parties to this agreement are
Gray, Seifert & Co., Inc. ("Gray, Seifert") and David S.
Longworth (President and a director of Synergistics).
Collectively, these persons hold approximately 70.73% of the
outstanding shares of the Company, and their vote would be
sufficient to assure approval of the merger.
3. BOARD APPROVAL OF THE MERGER
Our Board of Directors believes the Merger is in the best
interests of Synergistics and its shareholders, and unanimously
recommends that shareholders vote "FOR" approval of the Merger
Agreement. In reaching its decision to approve and recommend
shareholder approval of the Merger Agreement, the Board
considered a number of factors which are discussed at page 10
below.
Execution of the enclosed proxy will not affect the shareholder's
right to attend the meeting and vote in person, since a shareholder
giving a proxy has the power to revoke it by delivering a notice of
revocation, or a duly executed proxy bearing a later date, to
Synergistics at any time before the proxy is exercised at the
meeting.
The accompanying proxy is solicited by the Board of Directors of
Synergistics. None of the Directors has informed Synergistics in
writing that he intends to oppose the Merger. The expense of
solicitation, estimated not to exceed $3,000.00, will be borne by
Synergistics. To the extent necessary to assure sufficient
representation of the shareholders at the meeting, officers and
employees of Synergistics may personally, by telephone or by other
means, contact shareholders to request the return of proxies. Such
officers and employees will receive no additional compensation for
such services. Banks, brokerage houses and other institutions,
nominees or fiduciaries will be requested to forward the proxy
material to beneficial owners in order to solicit authorizations
for the execution of proxies. Synergistics may, upon request,
reimburse such banks, brokerage houses and other institutions,
nominees and fiduciaries for their expenses in forwarding such
material.
4. SUMMARY TERM SHEET
Parties - Synergistics is the selling company, and Synergistics
Acquisition Corp. is the buying/surviving company.
The Merger - If the Merger is approved, Synergistics will be merged
into Synergistics Acquisition Corp., which shall be the surviving
company. Upon the effectiveness of the Merger, the separate
existence of Synergistics shall cease and all of the rights,
privileges, powers, franchises, properties, assets, liabilities and
obligations of Synergistics shall be vested in and assumed by
Synergistics Acquisition Corp. See page 7 Part B(3)(a).
Consideration - $350,000, payable on the effective date, less legal
fees and expenses. See pages 7-8 Part B(3)(b).
Per Share Consideration - The Per Share Cash Consideration is
$0.025. See page 8 Part B(3)(b)
Financing - Synergistics Acquisition Corp. is funding the Merger in
cash, therefore no third parties are providing financing.
Shareholder Rights - Upon the effectiveness of the Merger, holders
of Synergistics' common stock shall have no further rights with
respect to the stock except to surrender the shares in exchange for
cash consideration or to perfect appraisal rights as dissenting
shareholders. See page 4 Part A(5) and page 7 Part B(3)(a).
Timing - The Merger shall become effective upon the filing of
Articles of Merger with the Secretary of the Commonwealth of
Massachusetts. See page 7 Part B(3)(a).
Shareholder Agreement - Attached to the Merger Agreement, as
Exhibit A thereto, is a form of Stockholder Agreement between
Synergistics Acquisition Corp. and certain shareholders of
Synergistics, namely Gray, Seifert (the principal shareholder of
Synergistics) and David S. Longworth (President and Director of
Synergistics). Pursuant to this Stockholder Agreement, Gray,
Seifert, holding 70.73% of issued outstanding shares, and Mr.
Longworth, holding 0.0003% of issued shares, have agreed to vote
their shares in favor of the Merger at the Special Meeting, which
is sufficient to approve the Merger.
Required Vote - Two-thirds (2/3) of shares of common stock
outstanding and entitled to vote. See page 8 Part B(3)(d)
Appraisal Rights - A shareholder who gives written notice that he
or she dissents from the Merger and who follows the appraisal
rights procedures set forth in Massachusetts General Laws chapter
156B, Sections 86-98 shall be entitled to receive the fair value in cash
of the shareholder's common stock. See page 4 Part A(3)
Reasons for Merger - Synergistics has insufficient funds to
continue operating for a significant period of time, therefore a
merger will result in the most orderly liquidation of Synergistics
and the highest value per share to its shareholders. See page 8
Part B(3)(c).
Board Recommendation - The Board unanimously recommends that
shareholders vote "FOR" approval of the Merger Agreement.
Material Conditions -
(a) The Merger must be approved by the shareholders. See page
8 Part B(3)(d).
(b) The Merger must be completed before the termination date of
December 31, 2002. See page 8 Part B(3)(e)
(c) Synergistics must not solicit any other acquisition
proposals. See page 8 Part B (3)(f).
Tax Consequences - There are no material tax consequences from the
Merger. See page 9 Part B(3)(i).
After Merger - Shareholders may surrender their certificates in
exchange for the Per Share Cash Consideration or perfect their
rights of appraisal in compliance with the procedures set forth in
Massachusetts General Laws chapter 156B, sections 86 through 98.
See page 4 Part A(5) and page 9 Part B(3)(g). Synergistics
registration will terminate and it will no longer be a public
company.
5. DISSENTERS' RIGHT OF APPRAISAL
The proposed merger of Synergistics into Synergistics Acquisition
Corp. gives rise to dissenters' right of appraisal. Under
Massachusetts law, a shareholder of Synergistics who has given
written notice at or prior to the Special Meeting that he or she
dissents from the Merger (each a "Dissenting Shareholder") shall,
upon compliance with certain statutory procedures, be entitled to
receive the fair value in cash of the shareholder's common stock,
as determined in accordance with Massachusetts law.
Massachusetts law provides that any holder of Synergistics'
common stock (1) who files with Synergistics, before the taking
of the vote on the Merger, a written objection stating that he or
she intends to demand payment for his shares if the adoption of
the Merger is effected, and (2) whose shares are not voted in
favor of the Merger, may have the right to demand in writing the
fair value in cash of the shares of common stock held by the
shareholder from Synergistics Acquisition Corp. (the surviving
entity), within twenty (20) days after the date of mailing to him
of notice in writing that the corporate action has become
effective, requesting payment for his shares and an appraisal of
the value of the shares. The corporation and any such
shareholder shall have the rights and duties and shall follow the
procedures set forth in sections 86 to 98, inclusive, of chapter
156B of the General Laws of Massachusetts, copies of which are
included in this Proxy Statement as Exhibit B.
If the Merger is approved by Synergistics' shareholders, the Merger
will become effective upon the filing of Articles of Merger with
the Secretary of the Commonwealth of Massachusetts. Within ten
(10) days from the effectiveness of the Merger, Synergistics will
send notice of the effectiveness of the Merger to Dissenting
Shareholders whose shares were not voted in favor of the Merger.
6. VOTING AND PRINCIPAL HOLDERS OF SECURITIES
Synergistics has one class of common stock, $.01 par value, of
which 10,285,806 shares were issued and outstanding as of July 25,
2002. The following table sets forth the holdings of Synergistics'
common stock by each person who, as of July 25, 2002 held of record
or was known by Synergistics to own beneficially more than five
percent (5%) of the outstanding common stock, by each director,
each named executive officer, and by all directors and officers as
a group.
Name and Address of Amount and Nature % ofClass
Beneficial Owner of Beneficial Ownership (1)
David S. Longworth 3,575 0.0003%
65 School Street Ext.
Natick, MA 01760
(President, COO, Director)
Robert L. Pogorelc 0 0%
P.O. Box 622
West Barnstable, MA 02668
(VP, Sales Manager, Director)
J. Thomas Gehman 0 0%
141 Marked Tree Road
Needham, MA 02192
(Director)
Gray, Seifert & Co., Inc. 7,233,275 (2) 70.73%
380 Madison Ave.
New York, NY 10017
(5% Beneficial Owner)
Directors and Officers 3,575 0.0003%
as a Group (3 people)
(1) Unless otherwise indicated in the following footnotes,
ownership is both beneficial and of record. Shareholders listed
have sole voting and investment powers of shares.
(2) This number is based upon information contained in the
Schedule 13D filed by Gray, Seifert on February 15, 2002.
According to the Schedule 13D, Gray, Seifert, as discretionary
investment adviser to its clients, acquired beneficial ownership
of 1,142,871 shares of common stock at an aggregate cost to such
clients of $1,171,377. As described in the Schedule 13D,
pursuant to agreements dated December 27, 2001, December 31, 2001
and January 31, 2002, Gray, Seifert acquired from three (3)
investment advisory clients beneficial ownership of 6,235,444
shares of common stock using its own working capital at an
aggregate cost of $249,418.
(3) All options are considered non-dilutive since exercise price
exceeds last known market price.
Other than the transactions described herein, there were no
material transactions during 2001 to which any of the following
persons has a direct or indirect material interest: (1) any
director or officer of Synergistics, (2) any nominee for election
as a director, (3) any person who, to Synergistics' knowledge, owns
5% or more of Synergistics' stock, or (4) any relative or spouse
(or relative of such spouse) of the foregoing persons.
B. PROPOSED MERGER OF SYNERGISTICS INTO
SYNERGISTICS ACQUISITION CORP.
(THE "MERGER")
THE MERGER AGREEMENT ATTACHED HERETO AS EXHIBIT A DESCRIBES IN DETAIL THE
TERMS OF THE PROPOSED MERGER. THE ANNUAL REPORT TO SHAREHOLDERS, ATTACHED
HERETO AS EXHIBIT C, CONTAINS DETAILED INFORMATION ABOUT SYNERGISTICS' BUSINESS
OPERATIONS AND FINANCIAL POSITION AS OF DECEMBER 31, 2001. WE URGE YOU TO
READ THESE EXHIBITS IN THEIR ENTIRETY.
1. CONTACT INFORMATION
Synergistics - 9 Tech Circle, Natick, Massachusetts 01760, (508)
655-1340, attention President David S. Longworth
Synergistics Acquisition Corp. - c/o Renaissance Industrial LLC,
Ten Post Office Square, Suite 600 South, Boston, Massachusetts
02109, (617) 988-2891, attention President Gregory I. Goldman.
2. BUSINESS CONDUCTED
(a) Synergistics . Synergistics, organized on May 13, 1960, is
located at 9 Tech Circle, Natick, Massachusetts 01760, telephone
(508) 655-1340, web site www.synergisticsinc.com. Synergistics'
principal activity consists of manufacturing and marketing access
control systems which it sells to banks, corporate accounts and
other commercial customers. Synergistics' principal activity has
not changed substantially in the past three (3) years.
(b) Synergistics Acquisition Corp. Synergistics Acquisition Corp.,
a Massachusetts corporation, was organized on July 18, 2002 by
Gregory I. Goldman. Since its incorporation, the Buyer has engaged
in no business other than as necessary and incidental to effecting
the Merger. Upon the consummation of the Merger, the Buyer will be
the surviving company and will continue to do business at
Synergistics' offices in Natick, Massachusetts.
3. MATERIAL TERMS OF THE TRANSACTION
(a) Brief description of the Merger.
The proposed Merger Agreement, if adopted, would result in the
merger of Synergistics into Buyer, which shall be the surviving
company. Upon the effectiveness of the Merger, the separate
existence of Synergistics shall cease and all of the rights,
privileges, powers, franchises, properties, assets, liabilities and
obligations of Synergistics shall be vested in and assumed by the
Buyer. The Merger shall become effective upon the filing of
Articles of Merger with the Secretary of the Commonwealth of
Massachusetts.
With respect to Synergistics' common stock, holders of certificates
representing shares of Synergistics' common stock shall have no
rights after the effectiveness of the Merger except (a) to
surrender their certificates in exchange for the Per Share Cash
Consideration, defined below or (b) to perfect the rights of
appraisal as a holder of Dissenting Shares (as defined below)
pursuant to the applicable provisions of Massachusetts law.
(b) Consideration offered to Shareholders.
Upon the effectiveness of the Merger, each share of Synergistics'
common stock issued and outstanding immediately prior to the
Merger's effectiveness (other than Dissenting Shares) shall be
converted into and exchangeable for the Per Share Cash
Consideration, which shall be determined by dividing the Total Cash
Consideration (as defined below) by the number of shares issued
and outstanding.
Upon surrender of the certificates representing shares of
Synergistics' common stock for exchange and cancellation, the
Shareholder shall be entitled to receive in exchange a check
representing the Per Share Cash Consideration for each of the
surrendered shares. Certificates so surrendered shall be canceled.
The Shareholders shall be notified in writing of the date of the
consummation of the Merger and shall be instructed at that time as
to the procedure for exchanging their shares.
Total Cash Consideration to be paid to Synergistics' Shareholders
is equal to $350,000 less an amount equal to Synergistics'
outstanding legal fees and expenses as of the effective date of the
Merger. As of July 29, 2002, Synergistics owed $84,963.18 in
attorney fees and expenses. Synergistics shall pay half of the
legal fees and expenses, less $25,000 paid by Buyer, less the
amount already paid by Synergistics prior to closing, but not to
exceed $25,000. Synergistics' shareholders shall pay either
$50,000 or the remaining fees and expenses, whichever is less. See
Merger Agreement Sections 2.3, 5.6, and 6.6. Buyer shall pay the Cash
Consideration on the effective date of the Merger.
Based on the Total Cash Consideration and the estimated legal fees
and expenses which will be due on effective date of the Merger, the
Per Share Cash Consideration will be equal to $350,000 less
$84,963.18, divided by 10,285,806 shares outstanding, or $0.025 per
share.
(c) Background and reasons for engaging in the Merger.
Without substantial outside investment, Synergistics has
insufficient financial resources to continue business operations
for a significant period of time. Synergistics' Board of Directors
is of the opinion, after careful consideration of various
alternatives, including the solicitation of investors, that the
merger of Synergistics is in the best interest of its shareholders
because a merger will result in the most orderly liquidation of
Synergistics and the highest value per share to Synergistics'
shareholders.
(d) Vote required to approve the Merger Agreement.
In accordance with the Massachusetts General Laws and the By-Laws
of Synergistics, a vote of two-thirds (2/3) of shares of common
stock outstanding and entitled to vote at the Special Meeting is
required to approve the Merger.
(e) Termination Date
If the closing shall not have occurred on or before the earlier
of five (5) business days after the date of the Special Meeting
and December 31, 2002 or such later date as Synergistics and
Buyer shall have agreed to in writing the Merger Agreement shall
become void and have no further force, except that the provisions
of Sections 9.2, 9.3, 9.4, 9.5, 10.1, 11.1, 11.7, 11.10 and 11.11
of the Merger Agreement shall survive such termination and remain
in full force and effect.
(f) No Solicitation
Synergistics, including without limitation its officers, directors,
employees or agents, may not solicit any merger, sale,
consolidation, share, exchange, recapitalization, business
combination or other similar transaction involving Synergistics,
its business and its assets.
(g) The material differences in rights of shareholders as a result
of the Merger.
Upon the effectiveness of the Merger, the holders of Synergistics'
common stock will have no rights with respect to such stock except
(a) to surrender their certificates in exchange for the Per Share
Cash Consideration or (b) to perfect the rights of appraisal as a
holder of Dissenting Shares pursuant to the applicable provisions
of Massachusetts law.
(h) Accounting treatment of the transaction.
Not material.
(i) Federal income tax consequences of the transaction, if
material.
The Merger presents no material federal income tax consequences to
Synergistics. Because the cost basis of Synergistics' common stock
to Synergistics' shareholders likely exceeds the consideration
which the shareholders will receive pursuant to the Merger
Agreement, Synergistics' shareholders likely will suffer a capital
loss as a result of the Merger. The actual tax consequences of the
Merger to the shareholders will depend on each shareholder's
specific situation and other factors not within Synergistic's
control. Shareholders are encouraged to consult their own tax
advisors to determine the actual federal income tax consequences
arising from the Merger with respect to Synergistics' common stock,
as well as any state, local and other tax consequences.
4. REGULATORY APPROVALS
None.
5. REPORTS, OPINIONS, APPRAISALS
None.
6. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
In the past two (2) years there have been no negotiations,
transactions or material contracts between Synergistics and the
Buyer, except for negotiations related to the Merger, as discussed
below. Aside from the Merger Agreement and the Stockholder
Agreement, each discussed above, there are no present or proposed
material agreements, arrangement, understandings or relationships
between the Buyer (or any of its executive officers, directors,
controlling persons or subsidiaries) and Synergistics (or any of
its executive officers, directors, controlling persons or
subsidiaries).
Synergistics engaged the investment banking firm Legg Mason Wood
Walker, Inc. ("Legg Mason") (an affiliate of principal shareholder
Gray, Seifert & Co., Inc.) to handle the sale of Synergistics.
Legg Mason requested indications of interest from potential bidders
for Synergistics in mid-January. In addition to the offer by
Synergistics Acquisition Corp., Legg Mason received an offer from
a group Synergistics' employees and informal expressions of
interest from four other possible buyers. The group of employees
offered approximately $100,000.00 less than Synergistics
Acquisition Corp. and required obtaining financing from a third
party. In May 2002, Legg Mason approached President David
Longworth about the possible acquisition of Synergistics by a an
entity formed as a subsidiary of Renaissance Industrial LLC
("Renaissance"). Renaissance signed a confidentiality agreement
with Synergistics on May 28, 2002. Renaissance submitted a
preliminary indication of interest in June, which they revised and
resubmitted in July. Legg Mason requested formal offers in early
July, and Synergistics Acquisition Corp. submitted a bid of
$350,000 cash with otherwise substantially similar terms as
previously negotiated with the group of employees. Negotiations
between Synergistics and Synergistics Acquisition Corp., with the
participation of Legg Mason, Gray, Seifert & Co., Inc., Craig and
Macauley Professional Corporation and Steve London, Esq. (attorney
for Renaissance), continued through July. After the Board
discussed extensively the informal expressions of interest, the
employee group offer and the Synergistics Acquisition Corp. offer,
the Board decided to sign the Merger Agreement with Synergistics
Acquisition Corp. and the Stockholder Agreement on July 25, 2002
because this offer resulted in higher per share consideration for
the shareholders and provided fewer contingencies to closing the
Merger than any other offer.
7. STOCKHOLDER AGREEMENT
Gray, Seifert and David S. Longworth specifically agreed that they
will be bound by the terms of the Merger Agreement, use all
reasonable efforts to cause a special meeting of stockholders of
Synergistics to be held as soon as is practicable to vote to
approve the Merger and the Merger Agreement, cause all of the
shares each may be entitled to vote to be voted in favor of the
Merger and the Merger Agreement, and vote against the approval of
any other agreement providing for a merger, consolidation, sale of
assets or other business combination of Synergistics with any
person or entity other than Buyer.
8. SELECTED FINANCIAL DATA
Not applicable.
9. PRO FORMA SELECTED FINANCIAL DATA
Not applicable.
10. PRO FORMA INFORMATION
Not applicable.
11. FINANCIAL INFORMATION
Synergistics' Annual Report to Shareholders, containing financial
statements for the year ending December 31, 2001, prepared in
accordance with generally accepted accounting principles, is
attached hereto as Exhibit C. Synergistics' Quarterly Report to
Shareholders, containing financial statements for the quarter
ending March 31, 2002, prepared in accordance with generally
accepted accounting principles, is attached hereto as Exhibit D.
Additional copies of such reports may be obtained without charge
upon request to James French, Clerk of Synergistics at 9 Tech
Circle, Natick, Massachusetts 01760. Pro forma financial data
concerning the surviving company after the consummation of the
Merger is not presented because it would involve no meaningful
change in the information contained in Synergistics' Annual Report.
12. PARTY INFORMATION
Synergistics and the Buyer are the parties to the proposed Merger.
The Annual Report to Shareholders, attached hereto as Exhibit C,
contains detailed information about Synergistics' business
operations and financial position as of December 31, 2001.
As described in Part B(3)(b) above, the Buyer has no history of
operations.
OTHER MATTERS
Synergistics has received written threats of litigation from the
group of employees for breach of contract with respect to their
offer. No formal complaint has been filed by the group of
employees as of this date.
The Board of Directors of Synergistics knows of no other matters to
be presented at the Special Meeting. If any other matter should be
presented at the Special Meeting upon which a vote properly may be
entered, shares represented by all proxies received by the Board of
Directors will be voted with respect thereto in accordance with the
judgment of the Board of Directors.
Proposals of the shareholder of Synergistics intended to be
presented at the 2003 Annual Meeting must be received by the Clerk
of Synergistics not later than one hundred twenty (120) days before
such meeting for inclusion in the 2003 proxy statement and form of
proxy, or forty-five (45) days before such meeting if the proposal
is not allowed to be included in the materials by law.
The Board of Directors urges you to mark, sign, date and return the
enclosed proxy as promptly as possible, whether or not you plan to
attend the Special Meeting in person. If you do attend, you may
then withdraw your proxy, or you may withdraw your proxy by a
subsequently dated proxy delivered to James French, Clerk,
Synergistics, Inc., 9 Tech Circle, Natick, Massachusetts 01760.
By Order of the Board of Directors
David S. Longworth