ERIC M. HELLIGE
DIRECT TEL: 212-326-0846
DIRECT FAX: 212-798-6380
ehellige@pryorcashman.com
September 13, 2005
VIA FACSIMILE - (202) 942-9542
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Ms. Maryse Mills-Apenteng
Re: Robocom Systems International, Inc.
Preliminary Schedule 14A
Filed on August 26, 2005
Form 10-KSB for the years ended May 31, 2004 and 2005
File No. 0-22735
Dear Ms. Mills-Apenteng:
Thank you for taking the time last week to answer our questions regarding
the Staff's letter dated September 7, 2005 relating to the above-referenced
preliminary proxy statement on Schedule 14A (the "Proxy Statement"). Our client,
Robocom Systems International, Inc. (the "Company"), intends to file with the
Securities and Exchange Commission (the "Commission") Amendment No. 1
("Amendment No. 1") to the Proxy Statement on Schedule 14A containing its
responses to the Staff's comment letter. In an effort to focus our responses in
Amendment No. 1, we have set forth below our proposed responses to the
Commission's comments along with a copy of Amendment No. 1 which is marked to
show the proposed changes to the Proxy Statement. The numbered responses below
correspond to the numbered paragraphs of the Staff's letter. Capitalized terms
not otherwise defined in this letter have the meanings ascribed to them in the
Proxy Statement.
Responses
1. We understand that the responses set forth the Company's letter dated
September 9, 2005 to Kathleen Collins of the Commission were acceptable to
the Commission.
2. The Company acknowledges the Staff's comment and has revised the Proxy
Statement to include as Annex C the unaudited, pro forma balance sheet and
statement of operations
Securities and Exchange Commission
September 13, 2005
Page 2
for its fiscal year ended May 31, 2005 which gives effect to the asset
sale as if it was consummated on June 1, 2004 (the beginning date of the
period covered by the pro forma financial statements).
3. The Company confirms that Avantce RSI, LLC is not an affiliate of the
Company. Amendment No. 1 contains the appropriate disclosure in "Questions
and Answers about the Special Meeting", the "Summary Term Sheet" and the
section titled "Information about the Buyer" under Proposal No. 1.
4. The requested Summary Term Sheet and pro forma financial information have
been added to Amendment No. 1 in response to this comment. With regard to
the Staff's request to provide historical information regarding the
business being sold, the Company notes that it is selling all of its
business and believes that the incorporation by reference of its Annual
Report on Form 10-KSB for the fiscal year ended May 31, 2005 satisfies
this requirement.
5. Additional disclosure has been added to the section titled "Background of
the Asset Sale" under Proposal No. 1 in response to this comment.
6. Additional disclosure has been added to "Questions and Answers about the
Special Meeting", the "Summary Term Sheet" and the section titled "Use of
Proceeds of the Asset Sale" under Proposal No. 1 to clarify that no
dividend has been declared in connection with the asset sale and that
there can be no assurance that the Company's board of directors will
declare a dividend in the future.
7. Additional disclosure has been added to "Questions and Answers about the
Special Meeting", the "Summary Term Sheet" and the section titled
"Business of the Company Following the Asset Sale" under Proposal No. 1 to
indicate that the Company has no current commitments or agreements to
pursue any particular transaction or strategy following the consummation
of the asset sale.
8. Additional disclosure has been added to "Questions and Answers about the
Special Meeting", the "Summary Term Sheet" and the section titled
"Purchase Price" under Proposal No. 1 to clarify that there are no other
purchase price adjustments and that the Company anticipates that it will
have working capital on the closing date in excess of the target amount,
although there can be no assurance of any such excess.
9. The disclosure in the section titled "Treatment of Outstanding Options"
under Proposal No. 1 has been revised to indicate that outstanding options
to purchase the Company's common stock will remain outstanding on the same
terms following the consummation of the asset sale.
Securities and Exchange Commission
September 13, 2005
Page 3
10. The Company acknowledges the Staff's comment. The Company understands that
no specific change to the Proxy Statement is required as a result of this
comment.
The Company acknowledges that (i) it is responsible for the adequacy and
accuracy of the disclosure in its filings; (ii) Staff comments or changes to
disclosure in response to Staff comments do not foreclose the Commission from
taking any action with respect to the Company's filings; and (iii) the Company
may not assert any Staff comments as a defense in any proceeding initiated by
the Commission or any person under the federal securities laws of the United
States.
The Company believes it has fully responded to the comments of the
Commission. We hereby respectfully request that the Staff review our proposed
responses on an expedited basis. If the Commission has any questions or further
comments, the Company respectfully requests that such comments be directed to
the undersigned as soon as practicable as the Company would like to file
Amendment No. 1 by the close of business on Wednesday, September 14, 2005, and
begin mailing it definitive proxy statement to shareholders not later than
Friday, September 16, 2005.
Very truly yours,
/s/ Eric M. Hellige
Eric M. Hellige
cc: Mr. Irwin Balaban, Chief Executive Officer
Eisner & Lubin LLP
As filed with the Securities and Exchange Commission on September 13, 2005
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
AMENDMENT NO. 1
----------
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for the use of the Commission only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-12
----------
ROBOCOM SYSTEMS INTERNATIONAL INC.
(Name of Registrant as Specified in Its Charter)
(Name(s) of Person Filing Proxy Statement, if Other than Registrant)
----------
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 0-11 (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 0-1l(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:
ROBOCOM SYSTEMS INTERNATIONAL INC.
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON OCTOBER 11, 2005
September __, 2005
To Our Shareholders:
Notice is hereby given that a special meeting of shareholders of Robocom
Systems International Inc., a New York corporation (referred to herein as "we"
or "us"), will be held in the Executive Conference Room of our corporate offices
located at 511 Ocean Avenue, Massapequa, New York 11758, on October 11, 2005, at
10:00 a.m., local time, for the following purposes:
1. To approve the proposed sale of substantially all of our assets to
Avantce RSI, LLC pursuant to the asset purchase agreement annexed to
the accompanying proxy statement.
2. To transact such other business as may properly come before the
special meeting and any adjournments thereof.
The foregoing items of business are more fully described in the proxy
statement accompanying this notice.
Our board of directors has fixed August 19, 2005 as the record date for
the determination of our shareholders entitled to notice of, and to vote at, the
special meeting. A list of such shareholders will be available for examination
by a shareholder for any purpose germane to the special meeting during ordinary
business hours at our corporate office located at 511 Ocean Avenue, Massapequa,
New York 11758, during the ten (10) business days prior to the special meeting
and during the special meeting.
Whether or not you plan to attend the special meeting, you should
complete, sign, date and promptly return the enclosed proxy card, to ensure that
your shares will be represented at the meeting. If you attend the special
meeting and wish to vote in person, you may withdraw your proxy and vote in
person. You should not send any certificates representing stock with your proxy
card.
For the Board of Directors
Irwin Balaban
Chairman of the Board
and Chief Executive Officer
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING ........................... i
SUMMARY TERM SHEET ........................................................ v
INFORMATION CONCERNING SOLICITATION AND VOTING ............................ 1
Record Date and Voting Securities ...................................... 1
Revocability of Proxies ................................................ 1
Voting and Solicitation ................................................ 1
Quorum; Abstentions; Broker Non-Votes .................................. 2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS ......................... 2
PROPOSAL NO. 1 TO APPROVE THE PROPOSED ASSET SALE ......................... 3
General ................................................................ 3
Background of the Asset Sale ........................................... 3
Information about the Buyer ............................................ 4
Our Reasons for the Asset Sale ......................................... 5
Summary of the Terms of the Asset Purchase Agreement ................... 6
Assets to be Sold ...................................................... 6
Obligations to be Assumed by Avantaee .................................. 7
Purchase Price ......................................................... 7
Indemnification ........................................................ 8
Termination ............................................................ 8
Other Terms ............................................................ 8
Interests of our Directors and Executive Officers ...................... 9
Regulatory Approvals ................................................... 9
Use of Proceeds from the Proposed Asset Sale ........................... 10
Business of the Company Following the Asset Sale ....................... 11
Material United States Federal Income Tax Consequences ................. 11
Treatment of Outstanding Stock Options ................................. 12
Appraisal Rights ....................................................... 12
Vote Required and Board Recommendation ................................. 14
SHAREHOLDER PROPOSALS ..................................................... 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ............ 15
OTHER MATTERS ............................................................. 15
EXPERTS ................................................................... 16
ANNUAL REPORT ............................................................. 16
PRO FORMA FINANCIAL STATEMENTS ............................................ 16
INCORPORATION OF DOCUMENTS BY REFERENCE ................................... 16
WHERE YOU CAN FIND MORE INFORMATION ....................................... 16
TABLE OF CONTENTS
(continued)
ANNEX A - Asset Purchase Agreement
ANNEX B - Copy of Section 623 and 910 of the New York Business Corporation Law
regarding Appraisal Rights
ANNEX C - Pro Forma Financial Statements
ii
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING
Q: What proposal will be voted on at the special meeting?
A: The proposal to be voted on at the special meeting is whether to approve
the sale of substantially all of our assets to Avantce RSI, LLC, a
Delaware limited liability company ("Avantce"). The assets that we propose
to sell to Avantce primarily consist of our RIMS software product, all of
our intellectual property rights, contracts, accounts receivables and
tangible personal property and certain cash, all pursuant to the terms of
the Asset Purchase Agreement attached to the accompanying proxy statement
as Annex A. The proposed sale of assets is referred to as the "asset
sale". The assets to be sold in the asset sale are substantially all of
the assets of our company.
Q: Who is the purchaser?
A: The purchaser of our assets will be Avantce RSI, LLC, a Delaware limited
liability company. Avantce is a private investment company focused on
investments in mature segments of the information technology industry. Its
principal place of business is 508 Ashley Way, Peachtree City, Georgia.
Avantce is not an affiliate of our company. For more information regarding
Avantce, you may visit Avantce's website at www.avantce.com. See "Proposal
No. 1 - To Approve the Proposed Asset Sale - Information about the Buyer."
Q: What is the purchase price for our company's assets?
A: Avantce will pay us a total purchase price of $3,170,000 for our assets,
subject to certain adjustments. Of such amount, $2,970,000 will be paid in
cash at the closing, subject to certain 90-day deferrals, and $200,000 of
the purchase price will be paid pursuant to a promissory note that will be
payable over a period not to exceed two years. The cash portion of the
purchase price payable at closing will be reduced, dollar-for-dollar, to
the extent the value of our working capital (defined as the sum of our
cash on hand plus the amount of our accounts receivable minus the amount
of our accounts payable assumed by Avantce) at the time of closing is less
than a targeted amount of $1,025,000. We anticipate that our working
capital on the closing date will exceed $1,025,000, although there can be
no assurance of any such excess. The Asset Purchase Agreement does not
provide for any other adjustments to the purchase price amount. See
"Proposal No. 1 - To Approve the Proposed Asset Sale - Purchase Price."
Q: What are the interests of the Company's officers and directors in the
asset sale?
A: Upon consummation of the asset sale, Irwin Balaban, our Chairman of the
Board and Chief Executive Officer, and Herbert Goldman and Lawrence Klein,
members of our Board of Directors, will each receive $76,667, payable in
four equal quarterly installments, in consideration of their willingness
(i) to agree not to compete with Avantce for a five-year period and (ii)
to make certain representations and warranties in the Asset Purchase
Agreement about our company and the assets being sold. Messrs. Balaban,
Goldman and Klein beneficially own approximately 24%, 22% and 16%,
respectively, of our outstanding shares of common stock and also were
founders of our company. As shareholders of our company, Messrs. Balaban,
Goldman and Klein will receive their pro rata portion of the dividends, if
any, paid to our shareholders of certain proceeds of the asset sale.
Q: What will happen if the asset sale is approved?
A: If the asset sale is approved, we will proceed to consummate the sale of
assets subject to the satisfaction of the closing conditions set forth in
the Asset Purchase Agreement. We anticipate the transaction will close
shortly following the special meeting; however, the timing of the closing
is dependent upon the satisfaction
i
of such closing conditions. See "Proposal No. 1 - To Approve the Proposed
Asset Sale - Summary Terms of the Asset Purchase Agreement."
Q: Will our company continue to operate after consummation of the asset sale?
A: We have not yet made any determination about future business plans once
the asset sale is consummated. Our Board of Directors is evaluating
several possible directions, including (i) the liquidation and dissolution
of our company, including the payment of a liquidating cash dividend to
our shareholders or (ii) the payment of a cash dividend equal to a portion
of the proceeds of the asset sale and a transaction in which we merge our
"public shell" corporation with a privately-held operating business and
our shareholders retain some ownership interest in the surviving public
corporation. We have not determined which option we will pursue.
Furthermore, we may not choose any of the foregoing options and may,
instead, pursue one or more options not yet considered. Currently, we have
no commitments or agreements with any other person or entity regarding a
proposed transaction.
Immediately following the consummation of the asset sale, we will have no
operating business or source of revenues. Furthermore, we have agreed
that, for a period of five (5) years following the consummation of the
asset sale, we will not engage in any business that develops or markets
computer software products that perform functions substantially similar to
the RIMS software product being sold to Avantce in the asset sale. Irwin
Balaban, our Chairman of the Board and Chief Executive Officer, and
Herbert Goldman and Lawrence Klein, members of our Board of Directors,
have also agreed to be bound by such restrictions. See "Proposal No. 1 -
To Approve the Proposed Asset Sale - Business of the Company Following the
Asset Sale."
Q: How will our company use the proceeds from the asset sale?
In connection with the asset sale, we will receive approximately
$2,970,000, of which an estimated $75,000 will be used to pay expenses
related to the asset sale transaction, including legal, accounting and
printing fees and expenses and $130,000 will be used to pay the fee of
Brummel Holdings, LLC. Any remaining proceeds, together with any retained
excess working capital, will be used for general business purposes, such
as the expenses of meeting our reporting obligations under the Securities
Exchange Act of 1934 as we seek a merger partner for our remaining "public
shell" company, and, if necessary, for the settlement or satisfaction of
our retained liabilities, or will be distributed to our shareholders as a
dividend. Our Board of Directors has not approved a dividend in connection
with the proposed transaction and, thus, no amounts will be paid to you
upon consummation of the asset sale unless a dividend is hereafter
declared. There can be no assurance that our Board will declare a dividend
in the future. See "Proposal No. 1 - To Approve the Proposed Asset Sale -
Use of Proceeds from the Proposed Asset Sale."
Q: What will happen if the asset sale is not approved?
A: We will review all options for continuing operations, and we will
potentially seek to sell our stock or assets to a third party. There can
be no assurance that any third party will offer to purchase our stock or
assets for a price equal to or greater than the price proposed to be paid
by Avantce in the asset sale, or that our stock or assets can be sold at
all. See "Proposal No. 1 - To Approve the Proposed Asset Sale - Other
Terms."
Q: What is our Board of Directors' recommendation with respect to the asset
sale proposal?
A: Our Board of Directors recommends a vote "FOR" approval of the asset sale.
See "Proposal No. 1 -To Approve the Proposed Asset Sale - Vote Required
and Board Recommendation."
Q: Why does our Board of Directors believe the asset sale is in the best
interest of our company's shareholders?
ii
A: The Board considered the risks and challenges facing our company in the
future as compared to the opportunities available to our company in the
future and concluded that the asset sale was the best alternative for
maximizing value to our shareholders. See "Proposal 1 - To Approve the
Proposed Asset Sale - Background of the Asset Sale" and "Proposal 1 - To
Approve the Proposed Asset Sale Reasons for the Asset Sale."
Q: Do I have any appraisal rights in connection with the asset sale?
A: Yes. Under Section 910 of the New York Business Corporation Law,
shareholders that duly exercise their appraisal rights in connection with
the proposed asset sale will be entitled to have their shares of our
common stock appraised by a New York State Court and to receive the "fair
value" of such shares. Each party in any appraisal proceeding will bear
its own costs and expenses, including the fees of counsel and any experts
employed by it, unless the court determines otherwise. See "Proposal No. 1
- To Approve the Proposed Asset Sale - Appraisal Rights."
Q: What vote is required to approve the asset sale?
A: The proposal to approve the asset sale to Avantce requires the affirmative
vote of our shareholders holding two-thirds (2/3) of our outstanding
shares of common stock. See "Proposal No. 1 - To Approve the Proposed
Asset Sale - Vote Required and Board Recommendation."
Q: What do I need to do now?
A: After carefully reading and considering the information contained in the
accompanying proxy statement, you should complete and sign your proxy and
return it in the enclosed return envelope as soon as possible so that your
shares may be represented at the special meeting. A majority of shares
entitled to vote must be represented at the meeting to enable our company
to conduct business at the special meeting. See "Information Concerning
Solicitation and Voting."
Q: Can I change my vote after I have mailed my signed proxy?
A: Yes. You can change your vote at any time before proxies are voted at the
special meeting. You can change your vote in one of three ways. First, you
can send a written notice via registered mail to our Secretary at our
executive offices, stating that you would like to revoke your proxy.
Second, you can complete and submit a new proxy. If you choose either of
these two methods, you must submit the notice of revocation or the new
proxy to us. Third, you can attend the meeting and vote in person. See
"Information Concerning Solicitation and Voting."
Q: If my broker holds my shares in "street name", will the broker vote the
shares on my behalf?
A: A broker will vote shares ONLY if the holder of the shares provides the
broker with instructions on how to vote. Shares held in "street name" by
brokers or nominees who indicate on their proxies that they do not have
discretionary authority to vote such shares as to a particular matter,
referred to as "broker non-votes," will not be voted in favor of such
matter. The proposal to approve the asset sale is a proposal that requires
the affirmative vote of two-thirds (2/3) of our outstanding shares to be
approved by our shareholders. Accordingly, broker non-votes will have the
effect of a vote against the proposal. We encourage all shareholders whose
shares are held in street name to provide their brokers with instructions
on how to vote. See "Information Concerning Solicitation and Voting -
Quorum; Abstentions; Broker Non-Votes."
iii
Q: Who can help answer my questions?
A: If you have any questions or need assistance with regard to voting your
shares, please contact our proxy solicitor at:
The Altman Group, Inc.
1275 Valley Brook Avenue
Lyndhurst, NJ 07071
Telephone No.: (201) 806-2214
Facsimile No.: (201) 460-0050
If you have any questions about the special meeting or the proposals to be
voted on at the special meeting, or if you need additional copies of the
accompanying proxy statement or copies of any of our public filings
referred to in the accompanying proxy statement, you should contact our
Investor Relations Department at (516) 795-5100. Our public filings can
also be accessed at the Securities and Exchange Commission's web site at
www.sec.gov. See "Where You Can Find More Information."
iv
SUMMARY TERM SHEET
You are being asked to vote on the proposed asset sale. For your
convenience, we have set forth below a summary of certain information relating
to the asset sale that is contained under Proposal No. 1 in the accompanying
proxy statement. This summary does not contain all of the information that you
may consider to be important in determining how to vote on the proposed asset
sale. You should carefully read the entire proxy statement and the other
documents to which we refer. These will give you a more detailed description of
the proposed asset sale. Each item in this summary refers to the pages where
that subject is discussed in greater detail elsewhere in the accompanying proxy
statement.
General (Page 3)
On August 16, 2005, our Board of Directors unanimously approved the Asset
Purchase Agreement between our company and Avantce RSI, LLC, under which we
agreed to sell substantially all of our assets to Avantce for a total purchase
price of $3,170,000 (subject to certain adjustments), to be paid by Avantce by a
combination of cash and the delivery of a promissory note. A copy of the Asset
Purchase Agreement is attached as Annex A to the accompanying proxy statement.
We encourage you to read the Asset Purchase Agreement in its entirety.
Background of the Asset Sale (Page 3)
On an ongoing basis, our Board of Directors and senior management
periodically reviewed the outlook for the inventory and warehouse management
services industry, as well as our company's financial condition and growth
prospects. Based on the belief that future growth would require a significant
investment of cash for operations, updates and enhancements to our RIMS product
offerings and marketing, senior management proposed to our Board of Directors
that our company explore alternative strategies for maximizing shareholder
value.
In November 2004, we retained Brummel Holdings LLC, an investment banking
advisory firm based in Sands Point, New York ("Brummel") and between November
2004 and February 2005, Brummel contacted several companies about a possible
transaction with our company. In February 2005, Irwin Balaban, our Chief
Executive Officer, received an unsolicited telephone call from a representative
of Avantce who indicated an interest on the part of Avantce in exploring a
possible acquisition transaction with our company. The inquiry was referred to
Lawrence Balaban of Brummel, who contacted Mr. Aivers Lode, a Managing Director
of Avantce. During the period from March 2005 through May 2005, representatives
of Avantce made several visits to our offices and Brummel negotiated the terms
of the asset sale on behalf of our company. In June 2005, we began negotiating
an asset purchase agreement.
On August 16, 2005, our Board of Directors met to consider the proposed
draft of the asset purchase agreement. Following a full discussion, the Board
unanimously approved the proposed asset purchase agreement and authorized
officers of our company to execute the definitive asset purchase agreement. The
Board also determined that the financial terms of the asset sale were fair to
our company's shareholders. On August 17, 2005, the definitive asset purchase
agreement was executed by the parties.
Information about the Buyer (Page 4)
The purchaser of our assets will be Avantce RSI, LLC, a Delaware limited
liability company. Avantce is a private investment company focused on
investments in mature segments of the information technology industry. Its
principal place of business is 508 Ashley Way, Peachtree City, Georgia. Avantce
is not an affiliate of our company. For more information regarding Avantce, you
may visit Avantce's website at www.avantce.com.
Our Reasons for the Asset Sale (Page 5)
Our Board of Directors considered the risks and challenges facing our
company in the future as compared to the opportunities available to our company
in the future and concluded that the asset sale was the best alternative for
maximizing value to our shareholders. In approving the proposed asset sale to
Avantce, our Board of Directors considered a number of factors, including the
following:
v
* Future growth will require significant investments of cash for
operations and marketing and we have been unsuccessful in
raising any significant new cash;
* We have explored other strategic alternatives and received no
offers;
* The value of our assets, particularly of our intellectual
property and certain contracts and customer relationships, may
decline with the passage of time;
* Avantce will assume substantially all of our liabilities and,
therefore, we will be free of any significant liabilities
after consummation of the asset sale, other than (i) a certain
contingent liability in connection with a dispute with one of
our former distributors, (ii) a certain contingent "change of
control" liability to Judy Frenkel, our Senior Vice President
and Chief Operating Officer, and (iii) surviving
indemnification obligations to Messrs. Balaban, Klein and
Goldman (see "Use of Proceeds From the Proposed Asset Sale").
Our Board of Directors believes this fact will increase our
attractiveness to private companies that might be interested
in a business combination transaction with a "public shell"
company, upon which our shareholders would retain an equity
interest in the new public company;
* As a result of the asset sale, our shareholders will be
foregoing any opportunity to share in the future growth or
increase in value of our company under its current line of
business;
* Public interest in our common stock has been low as reflected
by the low trading activity of our common stock over the past
few years and low price per share of our common stock. As
such, our Board of Directors perceived that the current
business is not attractive to the investing public and that
the we might be better off divesting ourselves of our current
business and assets in favor of distributing the net proceeds
of such divestiture in the form of a dividend to our
shareholders and/or merging our "public shell" corporation
with a privately-held operating business with broader appeal
to the investing public;
* The cost of being a publicly-traded company is becoming more
expensive due to recent increases in compliance requirements,
including the requirements of the Sarbanes-Oxley Act of 2002.
Such requirements have increased legal and accounting expenses
and placed a strain on our limited personnel resources; and
* In the event we receive an offer from a third party to
purchase our assets at a price higher than $3,170,000, we can
elect to terminate the asset sale with the payment of
liquidated damages of $340,000 and sell the assets to a third
party.
Assets to be Sold (Page 6)
The assets we propose to sell to Avantce primarily consist of our RIMS
software product, all of our intellectual property rights, contracts, accounts
receivables and tangible personal property and certain cash. The assets to be
sold are substantially all of the assets of our company.
Obligations to be Assumed by Avantce (Page 6)
Avantce will assume all of the liabilities pertaining to our business and
the assets to be sold, except for certain liabilities specifically excluded.
Purchase Price (Page 7)
Avantce will pay us a total purchase price of $3,170,000 for our assets,
subject to certain adjustments. Of such amount, $2,970,000 will be paid in cash
at the closing, subject to certain 90-day deferrals, and $200,000 of the
purchase price will be paid pursuant to a promissory note that will be payable
over a period not to exceed two years. The cash portion of the purchase price
payable at closing will be reduced, dollar-for-dollar, to the extent the value
of our working capital (defined as the sum of our cash on hand plus the amount
of our accounts receivable minus the
vi
amount of our accounts payable assumed by Avantce) at the time of closing is
less than a targeted amount of $1,025,000. We anticipate that our working
capital on the closing date will exceed $1,025,000, although there can be no
assurance of any such excess. The Asset Purchase Agreement does not provide for
any other adjustments to the purchase price amount.
Indemnification (Page 8)
Each of Irwin Balaban, our Chairman of the Board and Chief Executive
Officer, and Herbert Goldman and Lawrence Klein, members of our Board of
Directors (collectively, the "Principal Shareholders") has agreed to indemnify
Avantce and its affiliates against any damages that Avantce may incur resulting
from any material misrepresentation contained in the Asset Purchase Agreement or
any material breach of warranty or any default in the performance of any
covenant or obligation of our company under the Asset Purchase Agreement. The
indemnification obligations of the Principal Shareholders are capped at a total
of $2,500,000 for claims relating to intellectual property and $500,000 for all
other claims. The representations and warranties of the Principal Shareholders
survive for one year after the closing. Furthermore, the Principal Shareholders
are not required to indemnify Avantce unless and until its losses exceed
$50,000, and then only to the extent the losses exceed such amount up to the
applicable cap. Under an indemnification agreement dated as of August 17, 2005,
our company has agreed to indemnify each of the Principal Shareholders for any
damages that any Principal Shareholder may incur as a result of the
indemnification obligations undertaken by the Principal Shareholders in the
Asset Purchase Agreement.
Termination of the Asset Purchase Agreement (Page 8)
The Asset Purchase Agreement may be terminated by us or Avantce by mutual
written consent or if we fail to obtain shareholder approval of the asset sale.
It may also be terminated by either party (1) upon the material breach any of
representation, warranty or covenant by the other party that is not cured within
15 days of receipt of written notice thereof or (2) if the closing of the asset
sale shall not have occurred on or before October 31, 2005 because one or more
of the conditions to the other party's obligation to close has not been met.
Other Terms of the Asset Purchase Agreement (Page 8)
In the Asset Purchase Agreement, the Principal Shareholders make certain
customary representations and warranties to Avantce about our business and
assets. In addition, the Asset Purchase Agreement contains closing conditions to
the asset sale, including the condition that we shall have received shareholder
approval of the asset sale, among other conditions.
Interests of our Directors and Executive Officers (Page 9)
Upon consummation of the asset sale, Irwin Balaban, our Chairman of the
Board and Chief Executive Officer, and Herbert Goldman and Lawrence Klein,
members of our Board of Directors, will each receive $76,667, payable in four
equal quarterly installments, in consideration of their willingness (i) to agree
not to compete with Avantce for a five-year period and (ii) to make certain
representations and warranties in the Asset Purchase Agreement about our company
and the assets being sold. Messrs. Balaban, Goldman and Klein beneficially own
approximately 24%, 22% and 16%, respectively, of our outstanding shares of
common stock and also were founders of our company. As shareholders of our
company, Messrs. Balaban, Goldman and Klein will receive their pro rata portion
of the dividends, if any, paid to our shareholders of certain proceeds of the
asset sale.
Use of Proceeds from the Proposed Asset Sale (Page 9)
In connection with the asset sale, we will receive approximately
$2,970,000, of which an estimated $75,000 will be used to pay expenses related
to the asset sale transaction, including legal, accounting and printing fees and
expenses and $130,000 will be used to pay the fee of Brummel Holdings, LLC. Any
remaining proceeds, together with any retained excess working capital, will be
used for general business purposes, such as the expenses of meeting our
reporting obligations under the Securities Exchange Act of 1934 as we seek a
merger partner for our remaining "public shell" company, and, if necessary, for
the settlement or satisfaction of our retained liabilities, or will be
distributed to our shareholders as a dividend. Our Board of Directors has not
approved a dividend in
vii
connection with the proposed transaction and, thus, no amounts will be paid to
you upon consummation of the asset sale unless a dividend is hereafter declared.
There can be no assurance that our Board will declare a dividend in the future.
Business of Our Company Following the Asset Sale (Page 11)
We have not yet made any determination about future business plans once
the asset sale is consummated. Our Board of Directors is evaluating several
possible directions, including (i) the liquidation and dissolution of our
company, including the payment of a liquidating cash dividend to our
shareholders or (ii) the payment of a cash dividend equal to a portion of the
proceeds of the asset sale and a transaction in which we merge our "public
shell" corporation with a privately-held operating business and our shareholders
retain some ownership interest in the surviving public corporation. We have not
determined which option we will pursue. Furthermore, we may not choose any of
the foregoing options and may, instead, pursue one or more options not yet
considered. Currently, we have no commitments or agreements with any other
person or entity regarding a proposed transaction.
Appraisal Rights (Page 12)
Under Section 910 of the New York Business Corporation Law ("NYBCL"),
holders of our company's common stock who follow the procedures set forth in
Section 623 of the NYBCL (the "Appraisal Statute") will be entitled to have
their common stock appraised by a New York State Court and to receive payment of
the "fair value" of such shares as determined by such court. The Appraisal
Statute is reprinted in its entirety as Annex B to the accompanying proxy
statement. Any shareholder who wishes to exercise such appraisal rights or to
preserve the right to do so, should review the discussion on Page 11 of the
accompanying proxy statement and Annex B carefully because failure to timely and
properly comply with the procedures specified will result in the loss of
dissenters' appraisal rights under the NYBCL. Each party in any appraisal
proceeding will bear its own costs and expenses, including the fees of counsel
and any experts employed by it, unless the court determines otherwise.
Vote Required and Board Recommendation (Page 14)
The approval of the asset sale to Avantce requires the affirmative vote of
the shareholders holding at least two-thirds (2/3) of the outstanding shares of
our common stock. All members of the Board of Directors and each of our
executive officers who hold (or are deemed to hold) as of the record date an
aggregate of approximately 2,587,300 shares of our common stock (approximately
56.36% of the outstanding shares of common stock as of the record date) have
indicated that they will vote in favor of the proposal. The Board of Directors
believes that the asset sale is in the best interests of our company and our
shareholders and recommends a vote "FOR" the proposal.
viii
ROBOCOM SYSTEMS INTERNATIONAL INC.
511 Ocean Avenue
Massapequa, New York 11758
PROXY STATEMENT
FOR THE SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON OCTOBER 11, 2005
Proxies in the form enclosed with this proxy statement are solicited by
the Board of Directors of Robocom Systems International Inc. for use at our
special meeting of Shareholders (the "special meeting") to be held on October
11, 2005 at 10:00 a.m., local time, or at any adjournments or postponements
thereof, for the purposes set forth in the accompanying Notice of Special
Meeting of Shareholders. The special meeting will be held in the Executive
Conference Room of our corporate offices located at 511 Ocean Avenue,
Massapequa, New York 11758.
This proxy statement and the enclosed proxy card are first being mailed on
or about September __, 2005 to our shareholders entitled to vote at the meeting.
Accompanying this proxy statement is a copy of our Annual Report on Form 10-KSB
for the fiscal year ended May 31, 2005.
INFORMATION CONCERNING SOLICITATION AND VOTING
Record Date and Voting Securities
Shareholders of record as of August 19, 2005 (the "record date") are
entitled to notice of and to vote at the special meeting. As of the record date,
4,540,984 shares of our common stock were issued and outstanding.
Revocability of Proxies
Execution of a proxy will not in any way affect a shareholder's right to
attend the special meeting and vote in person. Any shareholder giving a proxy
has the right to revoke it by written notice delivered to our Secretary at our
principal executive offices at any time before it is exercised, by completing
and submitting a new proxy, or by voting in person at the special meeting.
Voting and Solicitation
Each share of common stock outstanding as of the record date will be
entitled to one vote and shareholders may vote in person or by proxy. At the
special meeting, we will be asking our shareholders to vote on a proposal to
approve the sale of substantially all of our assets to Avantce RSI, LLC., a
Delaware limited liability company ("Avantce"). We are soliciting shareholders
to authorize proxies to vote with respect to this proposal. The proposed sale of
assets to Avantce is referred to as the "asset sale". Our Board of Directors
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 may be
properly taken, shares represented by all proxies received by the Board of
Directors will be voted with respect thereto in accordance with the judgment of
the persons named as proxies.
The solicitation of proxies in the accompanying form is made by, and on
behalf of, our Board of Directors and we will bear the cost of soliciting
proxies. We have retained The Altman Group, Inc. to assist us in soliciting
proxies, and estimate that their fees for such service will be approximately
$4,500 plus an amount for reimbursable expenses. There will be no solicitation
of proxies other than through the proxy solicitor or by mail or personal
solicitation by our officers, directors and employees, and no additional
compensation will be paid to such persons in connection with such services. We
or the proxy solicitor will make arrangements with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of proxy material to the
beneficial owners of shares held of record by such persons, and such persons
will be reimbursed for reasonable expenses incurred by them.
Quorum; Abstentions; Broker Non-Votes
The presence in person or by proxy of the holders of at least a majority
of the outstanding shares of common stock entitled to vote at the special
meeting is necessary to establish a quorum for the transaction of business. The
Inspector of Elections will tabulate votes cast by proxy or in person at the
special meeting with the assistance of our transfer agent. The Inspector of
Elections will also determine whether or not a quorum is present. Abstentions
are included in the number of shares present or represented at the special
meeting.
Shares held in "street name" by brokers or nominees who indicate on their
proxies that they do not have discretionary authority to vote such shares as to
a particular matter, referred to as "broker non-votes," and shares which abstain
from voting as to a particular matter, will not be voted in favor of such
matters. The proposal to approve the asset sale to Avantce also requires the
affirmative vote of shareholders holding at least two-thirds (2/3) of our
outstanding shares. Accordingly, abstentions and broker non-votes will have the
effect of a vote against the proposal to approve the asset sale to Avantce.
Broker non-votes will be counted for purposes of determining the absence or
presence of a quorum. We encourage all shareholders whose shares are held in
street name to provide their brokers with instructions on how to vote.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS MADE IN THIS PROXY STATEMENT ARE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY TERMINOLOGY SUCH AS "MAY",
"WILL", "SHOULD", "EXPECTS", "INTENDS", "ANTICIPATES", "BELIEVES", "ESTIMATES",
"PREDICTS", OR "CONTINUE" OR THE NEGATIVE OF THESE TERMS OR OTHER COMPARABLE
TERMINOLOGY AND INCLUDE, WITHOUT LIMITATION, STATEMENTS BELOW REGARDING:
COMPLETION OF THE ASSET SALE, POSSIBLE ADJUSTMENTS TO THE PURCHASE PRICE,
ASSESSMENT OF PROSPECTS OF CONTINUING IN BUSINESS, OUR COMPANY'S DIFFICULTY IN
RAISING CAPITAL, OUR COMPANY'S RIGHTS TO ITS TECHNOLOGIES, PROSPECTIVE TAX
TREATMENT UNDER U.S. AND OTHER LAW OF ASSET SALE, OUR COMPANY'S NET-OPERATING
LOSS CARRY-FORWARDS, OTHER POTENTIAL ACQUIRORS, REGULATORY APPROVALS RELATING TO
THE ASSET SALE, POTENTIAL INDEMNIFICATION PAYMENTS RELATING TO THE ASSET SALE,
EFFECTS OF THE ASSET SALE, REASONS FOR THE ASSET SALE, OUR COMPANY'S PLANS
FOLLOWING COMPLETION OF THE ASSET SALE, OR SUFFICIENCY OF CASH RESERVES
FOLLOWING THE ASSET SALE. BECAUSE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES, THERE ARE IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING
STATEMENTS. ALTHOUGH WE BELIEVE THAT EXPECTIONS REFLECTED IN THE FORWARD-LOOKING
STATEMENTS ARE REASONABLE, WE CANNOT GUARANTEE FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS. MOREOVER, NEITHER WE NOR ANY OTHER PERSON ASSUMES RESPONSIBILITY
FOR THE ACCURACY AND COMPLETENESS OF THESE FORWARD-LOOKING STATEMENTS. WE ARE
UNDER NO DUTY TO UPDATE ANY FORWARD-LOOKING STATEMENTS AFTER THE DATE OF THIS
PROXY STATEMENT TO CONFORM SUCH STATEMENTS TO ACTUAL RESULTS.
2
PROPOSAL NO. 1
TO APPROVE THE PROPOSED ASSET SALE
General
On August 16, 2005, our Board of Directors unanimously approved the Asset
Purchase Agreement between our company and Avantce RSI, LLC, under which we
agreed to sell substantially all of our assets to Avantce for a total purchase
price of $3,170,000 (subject to certain adjustments), to be paid by Avantce by a
combination of cash and the delivery of a promissory note. The material terms of
the Asset Purchase Agreement are summarized below. A copy of the Asset Purchase
Agreement is attached as Annex A to this proxy statement. We encourage you to
read the Asset Purchase Agreement in its entirety.
Background of the Asset Sale
On an ongoing basis, our Board of Directors and senior management
periodically reviewed the outlook for the inventory and warehouse management
services industry, as well as our company's financial condition and growth
prospects. Based on the belief that future growth would require a significant
investment of cash for operations, updates and enhancements to our RIMS product
offerings and marketing, senior management proposed to the Board of Directors
that our company explore alternative strategies for maximizing shareholder
value.
In November 2004, we retained Brummel Holdings LLC, an investment banking
advisory firm based in Sands Point, New York ("Brummel"), to assist us in
developing a plan for the future of our company. We asked Brummel to conduct
research in three alternative areas: mergers and acquisitions, institutional
investment and financing, and sales enhancements. At a meeting of our Board of
Directors on December 8, 2004, Brummel made a presentation that outlined the
proposed scope of its services and cited examples of transactions in each of the
areas mentioned above.
Between November 2004 and February 2005, Brummel contacted several
companies about a possible transaction with our company. On November 4, 2005,
Brummel presented senior management with an offer by a privately-held financial
firm to make an investment of $1 million in our company through the purchase of
shares of convertible preferred stock representing approximately 60% of our
outstanding shares of common stock on as as-converted basis. After negotiations,
our senior management deemed the terms unacceptable and declined to proceed with
the transaction.
During late January 2005, Brummel entered into discussions with a private
equity group that held a controlling interest in another company in the
warehouse management systems field about a possible stock sale transaction.
Brummel informed senior management of its discussions and a conference call was
held on February 2, 2005 among Mr. Irwin Balaban, Mr. Lawrence Balaban of
Brummel and certain executive officers of the private equity group. After
several additional conversations, in early February 2005, the private equity
group advised us that it would not pursue further negotiations.
In February 2005, Irwin Balaban, our Chief Executive Officer, received an
unsolicited telephone call from a representative of Avantce who indicated an
interest on the part of Avantce in exploring a possible acquisition transaction
with our company. The inquiry was referred to Lawrence Balaban of Brummel, who
contacted Mr. Aivars Lode, a Managing Director of Avantce. Following the
telephone call, Brummel conducted preliminary research on Avantce and contacted
Irwin Balaban to inform him of the conversation with Mr. Lode. Our senior
management agreed to further explore a sale transaction with Avantce and
subsequently signed a mutual non-disclosure agreement. A conference telephone
call was held on March 1, 2005 among Mr. Lawrence Balaban of Brummel, Mr. Irwin
Balaban, Mr. Lode and Mr. Jonathan Scheumann, a Managing Director of Avantce,
wherein the parties discussed the state of the inventory and warehouse
management services industry, among other related topics. The parties agreed to
meet in person at our corporate offices to further explore the possibility of a
transaction and to allow Avantce to conduct its initial due diligence on our
business. Avantce also immediately prepared and sent to Brummel a draft of a
non-binding letter of intent that provided for a purchase price not to exceed
$3.5 million, among other terms. The Board was notified telephonically of
management's discussions with Avantce and the terms contained in the draft
letter of intent. The letter of intent was signed on March 14, 2005.
3
From March 28, 2005 through March 30, 2005, Messrs. Lode and Scheumann and
other representatives of Avantce visited our corporate offices in Massapequa,
New York and performed due diligence on our operations, financial information
and personnel, among other areas. Following the visit, our senior management had
a telephone conference with Mr. Scheumann of Avantce and Mr. Balaban of Brummel
for the purpose of answering Avantce's follow-up questions. On April 6, 2005 and
April 15, 2005, Mr. Scheumann and Mr. Balaban of Brummel had telephone
discussions to review Avantce's revised offer price of $3 million, which was
based upon its due diligence review of our company. Avantce also required that
Messrs. Balaban, Klein and Goldman agree not to compete with Avantce for a
five-year period and to make certain representations and warranties in the Asset
Purchase Agreement about our company and the assets being sold.
On April 18, 2005, the Board of Directors met to consider the asset sale
on the terms set forth in the letter of intent, as modified by subsequent
telephone discussions, and to discuss a counter-proposal with regard to the
purchase price. At the meeting, the Board discussed financial terms and other
aspects of the asset sale and directed Brummel, on behalf of our company, to
negotiate a revised letter of intent with Avantce having a purchase price of
$3.4 million, which amount was to include $230,000 payable to Messrs. Balaban,
Klein and Goldman in consideration of their willingness to agree not to compete
with Avantce for a five-year period and to make certain representations and
warranties in the Asset Purchase Agreement about our company and the assets
being sold. Following a full discussion, the Board approved the proposed asset
sale on the terms generally described in the letter of intent, provided the
agreed upon additional terms were included in the asset purchase agreement, and
authorized officers of our company to negotiate the asset purchase agreement.
Following the meeting, Mr. Balaban of Brummel had a telephone conference
with representatives of Avantce to provide the terms of the counter-proposal.
Ultimately, Avantce agreed to the purchase price of $3,170,000 (representing
$3.4 million less an aggregate of $230,000 to be paid to Messrs. Balaban, Klein
and Goldman); provided, however, that $200,000 of such amount would be payable
out of the receipts of the business over a period not to exceed two years and
provided, further, that the parties would continue to negotiate the amount of
working capital that would be transferred to Avantce on the closing date.
Representatives of Avantce again visited our corporate offices on May 2,
2005 and May 3, 2005 to conduct further due diligence. Following the visit,
Avantce prepared and sent to us a revised, non-binding letter of intent,
reflecting the new purchase price and payment terms, that was executed on May
18, 2005. On June 9, 2005, Avantce prepared and sent us a draft asset purchase
agreement. During the next five weeks, our senior management, along with our
attorneys, negotiated the terms of the asset purchase agreement and prepared and
negotiated the related disclosure schedules and exhibits.
During the negotiations, the principal economic term that remained to be
negotiated was the amount of working capital that would be transferred to
Avantce at the closing. The parties agreed that the amount to be transferred
would not exceed our normal amount of working capital and that we would retain
any excess working capital. We prepared for Avantce's review a schedule of
month-end working capital for the prior twelve (12) month period showing that
our average working capital was approximately $1,025,000. The parties agreed
that this amount would be the target amount of working capital on the closing
date.
On August 16, 2005, the Board of Directors met to consider the proposed
draft of the asset purchase agreement. Following a full discussion, the Board
unanimously approved the proposed asset purchase agreement and authorized
officers of our company to execute the definitive asset purchase agreement. The
Board also determined that the financial terms of the asset sale were fair to
our company's shareholders.
On August 17, 2005, the definitive asset purchase agreement was executed
by the parties.
Information about the Buyer
The purchaser of our assets will be Avantce RSI, LLC, a Delaware limited
liability company. Avantce is a private investment company focused on
investments in mature segments of the Information Technology industry. Its
principal place of business is 508 Ashley Way, Peachtree City, Georgia.
According to its principals, Avantce's investment strategy is to purchase equity
interests in mature companies and apply additional capital for growth
4
opportunities and acquisitions. The three principals of Avantce collectively
have over 60 years of experience in the supply chain execution, software and
professional services industries. Seeking to leverage this experience, Avantce
is focused on additional acquisitions within the warehouse management software
industry. Avantce is not an affiliate of our company. For more information
regarding Avantce, you may visit Avantce's website at www.avantce.com.
Our Reasons for the Asset Sale
In approving the proposed asset sale to Avantce, our Board of Directors
considered a number of factors before recommending that our shareholders approve
the proposed asset sale, including the following:
* Future growth will require significant investments of cash for
operations and marketing and we have been unsuccessful in
raising any significant new cash;
* We have explored other strategic alternatives and received no
offers;
* The value of our assets, particularly of our intellectual
property and certain contracts and customer relationships, may
decline with the passage of time;
* Avantce will assume substantially all of our liabilities and,
therefore, we will be free of any significant liabilities
after consummation of the asset sale, other than (i) a certain
contingent liability in connection with a dispute with one of
our former distributors, (ii) a certain contingent "change of
control" liability to Judy Frenkel, our Senior Vice President
and Chief Operating Officer, and (iii) surviving
indemnification obligations to Messrs. Balaban, Klein and
Goldman (see "Use of Proceeds From the Proposed Asset Sale").
Our Board of Directors believes this fact will increase our
attractiveness to private companies that might be interested
in a business combination transaction with a "public shell"
company, upon which our shareholders would retain an equity
interest in the new public company;
* As a result of the asset sale, our shareholders will be
foregoing any opportunity to share in the future growth or
increase in value of our company under its current line of
business;
* Public interest in our common stock has been low as reflected
by the low trading activity of our common stock over the past
few years and low price per share of our common stock. As
such, our Board of Directors perceived that the current
business is not attractive to the investing public and that
the we might be better off divesting ourselves of our current
business and assets in favor of distributing the net proceeds
of such divestiture in the form of a dividend to our
shareholders and/or merging our "public shell" corporation
with a privately-held operating business with broader appeal
to the investing public;
* The cost of being a publicly-traded company is becoming more
expensive due to recent increases in compliance requirements,
including the requirements of the Sarbanes-Oxley Act of 2002.
Such requirements have increased legal and accounting expenses
and placed a strain on our limited personnel resources; and
* In the event we receive an offer from a third party to
purchase our assets at a price higher than $3,170,000, we can
elect to terminate the asset sale with the payment of
liquidated damages of $340,000 and sell the assets to a third
party.
The foregoing discussion of the information and factors considered by our
Board of Directors is not intended to be exhaustive, but includes the material
factors considered. In view of the variety of factors considered in connection
with its evaluation of the transaction and the purchase price, our Board of
Directors did not find it practicable to, and did not, quantify or otherwise
assign relative weight to the specific factors considered in reaching its
determination and recommendations, and individual directors may have given
different weight to different factors.
5
Our Board of Directors did not engage an independent financial advisor to
determine the fairness of the asset sale to our shareholders and determined,
based on the factors set forth above, that the asset sale contemplated by the
Asset Purchase Agreement is fair to our shareholders. Further, based on the
procedural safeguards provided under the New York Business Corporation Law,
including the required approval of our Board of Directors, the required approval
of our shareholders owning at least two-thirds (2/3) of our outstanding common
stock and the availability of appraisal rights to our shareholders, our Board of
Directors believes that the asset sale is procedurally fair to our shareholders.
A fairness opinion from an independent financial advisor typically entails a
substantial fee to the requesting company. In the context of an asset sale, the
financial advisor would typically review a company's historical and projected
revenues, and the operating results of the company and those of comparable
public companies, and make certain assumptions regarding the value of the assets
and liabilities of the associated business or assets, which may be difficult to
predict in order to render its opinion. In addition to the speculative nature of
such analysis, our Board of Directors believes that undertaking these analyses
would involve a significant unnecessary expense that would reduce the amount of
proceeds available to our company from the proposed asset sale. For the
foregoing reasons, our Board of Directors believes that the asset sale, as
contemplated by the Asset Purchase Agreement, is fair to our shareholders.
Summary of the Terms of the Asset Purchase Agreement
The following sets forth a summary of the material provisions of the Asset
Purchase Agreement. The summary description does not purport to be completed and
is qualified in its entirety by reference to the Asset Purchase Agreement, a
copy of which is attached hereto as Annex A. All shareholders are urged to read
the Asset Purchase Agreement in its entirety.
Assets to be Sold
The Asset Purchase Agreement provides that, subject to approval by our
shareholders and satisfaction of certain other conditions described below, we
will sell substantially all of our assets to Avantce.
The assets proposed to be sold to Avantce, referred to as "the assets,"
consist of the assets currently used to operate our business, including, without
limitation:
* all intellectual property of any kind owned or used by our
company;
* our RIMS computer software product;
* all software licenses, maintenance agreements, distributor
agreements, vendor contracts and other material contracts;
* all accounts receivable;
* all rights under our benefit plans;
* all permits;
* all tangible assets, including furniture and equipment;
* all cash on hand, subject to certain holdbacks;
* all documents related to these assets, including all
technical, regulatory, marketing and sales related documents;
and
* other designated assets.
6
The assets to be sold do not include:
* any working capital in excess of $1,025,000;
* all claims, rights and interest to any tax refunds;
* all life insurance policies of officers or employees of our
company; and
* corporate assets, such as qualifications to do business,
taxpayer identification numbers and minute books.
If on the closing date of the asset sale our working capital (defined as
the sum of our cash on hand plus the amount of our accounts receivable minus the
amount of our accounts payable assumed by Avantce) exceeds $1,025,000, we will
retain, and the assets sold to Avantce will not include, an amount of cash equal
to the amount by which our working capital exceeds $1,025,000. If, after
deducting such cash, the amount of our cash on hand to be transferred to Avantce
is less than $770,000, then the amount of the cash purchase price to be
delivered on the closing date shall be reduced by the amount of such difference,
and Avantce shall be required to deliver to us within 90 days of the closing
date, the difference between $770,000 and the actual amount transferred.
Obligations to be Assumed by Avantce
At the closing, Avantce will agree to assume, undertake, pay, perform or
discharge all of the liabilities pertaining to our business and the assets to be
sold, except for those specifically excluded. Excluded liabilities will include
only the following:
* any expenses and liabilities relating to any existing
litigation;
* income tax liabilities of our company relating to the asset
sale;
* our legal, investment banking and broker fees relating to the
asset sale;
* any payments owed by our company under any existing employment
contracts; and
* any indebtedness to third parties other than accounts payable
incurred in the ordinary course of business.
Purchase Price
Avantce will pay us a total purchase price of $3,170,000 for the assets,
subject to adjustments set forth in the Asset Purchase Agreement. Of such
amount, $2,970,000 will be paid in cash at the closing; provided, however, that
such cash portion of the purchase price payable at closing will be reduced,
dollar-for-dollar, to the extent the value of our working capital (defined as
the sum of our cash on hand plus the amount of our accounts receivable minus the
amount of our accounts payable assumed by Avantce) at the time of closing is
less than a targeted amount of $1,025,000. We anticipate that our working
capital on the closing date will exceed $1,025,000, although there can be no
assurance of any such excess. If the amount of our cash on hand to be
transferred to Avantce is less than $770,000, then the amount of the purchase
price payable in cash on the closing date shall be reduced by an amount equal to
the difference between $770,000 and the actual amount of cash transferred to
Avantce on the closing date, and Avantce shall be required to pay to us within
90 days of the closing date the amount of such reduction. Each of the three
principals of Avantce has agreed to personally guarantee the payment of such
amount to our company. The Asset Purchase Agreement does not provide for any
other adjustments to the purchase price amount.
The purchase price will be paid as follows (1) $2,970,000 in cash at the
closing (subject to the adjustments described above) and (2) $200,000 through
the payment of a promissory note. The promissory note will provide that Avantce
shall make quarterly principal payments equal to 2.75% of the gross receipts
derived from the assets purchased by Avantce, until the full amount of the note
shall have been paid. In addition, Avantce will pay $76,667, payable in four
equal quarterly installments, to each of Messrs. Balaban, Klein and Goldman in
7
consideration of certain representations, warranties and covenants to be made by
such persons in the Asset Purchase Agreement. Each of the three principals of
Avantce has agreed to personally guarantee the payment of such amount to Messrs.
Balaban, Klein and Goldman.
Indemnification
Under the terms of the Asset Purchase Agreement, each of Irwin Balaban,
Herbert Goldman and Lawrence Klein (collectively, the "Principal Shareholders")
has agreed to indemnify Avantce and its affiliates against any damages, losses
or liabilities, including reasonable legal fees and expenses, that Avantce may
incur (1) resulting from any material misrepresentation by our company or the
Principal Shareholders contained in the Asset Purchase Agreement or any other
certificate, instrument or agreement delivered in connection with the asset sale
or (2) any material breach of warranty or any default in the performance of any
covenant or obligation of our company under or in connection with the Asset
Purchase Agreement. The indemnification obligations of the Principal
Shareholders are capped at a total of $2,500,000 for claims relating to
intellectual property and $500,000 for all other claims. The representations and
warranties of the Principal Shareholders survive for one year after the closing.
Furthermore, the Principal Shareholders are not required to indemnify Avantce
unless and until its losses exceed $50,000, and then only to the extent the
losses exceed such amount up to the applicable cap.
Under an indemnification agreement dated as of August 17, 2005, our
company has agreed to indemnify each of the Principal Shareholders for any
damages, losses or liabilities, including reasonable legal fees and expenses,
that any Principal Shareholder may incur as a result of the indemnification
obligations undertaken by the Principal Shareholders in the Asset Purchase
Agreement.
The Principal Stockholders agreed to assume the indemnification
obligations to Avantce in the Asset Purchase Agreement, rather than to permit
such indemnification obligations to run directly from our company to Avantce, in
an effort to make our company more attractive as a "public shell" company
following the asset sale. The indemnification obligations in the Asset Purchase
Agreement will continue for a period of one year following the date of closing
of the asset sale, and we believe our company will be less attractive to
potential merger partners so long as we remain contingently liable for such
indemnification obligations during such one-year period. While our company has
retained an indemnification obligation to the Principal Shareholders during such
one-year period, based on discussions with the Principal Shareholders, we
believe it is possible that the Principal Shareholders will release us from our
indemnification obligation to the Principal Shareholders if an attractive merger
transaction is identified, although there can be no assurance that they will do
so.
Termination
The Asset Purchase Agreement provides that it may be terminated by us or
Avantce by mutual written consent or if we fail to obtain shareholder approval
of the asset sale. The Asset Purchase Agreement may also be terminated by
Avantce if (1) we breach any of our representations, warranties or covenants in
any material respect and such breach is not cured within 15 days of our receipt
of written notice of such breach or (2) the closing of the asset sale shall not
have occurred on or before October 31, 2005 because one or more of the
conditions to Avantce's obligation to close has not been met. In addition, the
Asset Purchase Agreement may be terminated by us if (1) Avantce breaches any of
its representations, warranties or covenants in any material respect and such
breach is not cured within 15 days of Avantce's receipt of written notice of
such breach or (2) the closing of the asset sale shall not have occurred on or
before October 31, 2005 because one or more of the conditions to our obligation
to close has not been met.
If, prior to termination of the Asset Purchase Agreement in accordance
with the termination provisions of the agreement, we consummate an alternative
transaction involving the sale of all or substantially all of our assets, we
will be obligated to pay Avantce, as liquidated damages, the amount of $340,000.
Other Terms
In the Asset Purchase Agreement, the Principal Shareholders make
representations and warranties to Avantce, including representations and
warranties regarding our corporate status, authority to complete the asset sale,
contracts being assumed by Avantce, intellectual property, financial statements,
liabilities, litigation, insurance,
8
accounts receivable, customers, distributors and suppliers, tax matters, and
title to the assets being sold. Avantce makes representations and warranties to
us regarding Avantce's corporate status and authority to complete the asset
sale. We also agree that between signing the Asset Purchase Agreement and
closing the transaction we will carry on our business in the ordinary course
consistent with past practice, we will use commercially reasonable efforts to
preserve for Avantce's benefit the relations with our customers and suppliers,
we will not modify any material contracts or enter into new contracts for the
distribution, sale or marketing of our products other than in the ordinary
course of business, we will not sell, lease or encumber our assets except in the
ordinary cause of business, and we will not enter into any settlement agreement
for any litigation, except as approved by Avantce.
The Asset Purchase Agreement contains closing conditions related to the
following: each party's representations and warranties remain true, each party
has complied with its covenants, we shall have no previously undisclosed
liabilities in excess of $20,000, the parties shall have received any third
party or governmental consents required for the consummation of the transaction
and consents pertaining to the transfer of certain of the assumed contracts, no
legal action is pending that would prevent the closing, we shall have received
shareholder approval of the asset sale, and each party shall have delivered
appropriate documents and certificates set forth in the Asset Purchase
Agreement.
If the asset sale is not approved by our shareholders at the special
meeting, we will review all options for continuing operations, and we will
potentially seek to sell our stock or assets to a third party. There can be no
assurance that any third party will offer to purchase our stock or assets for a
price equal to or greater than the price proposed to be paid by Avantce in the
asset sale, or that our stock or assets can be sold at all.
The following resolution will be offered at the special meeting:
"RESOLVED, THAT THE ASSET SALE, PURSUANT TO THE ASSET PURCHASE AGREEMENT,
TO AVANTCE RSI, LLC BE APPROVED."
Interests of our Directors and Executive Officers
Upon consummation of the asset sale, the Principal Shareholders will each
receive $76,667 in consideration of their willingness to (i) agree not to
compete with Avantce for a five-year period and (ii) to make certain
representations and warranties about our company and the assets being sold as
provided in the Asset Purchase Agreement.
Although no formal offer of employment has been extended, we anticipate
that, on or prior to the date we consummate the asset sale, Avantce will make an
offer of employment to Judy Frenkel, our Senior Vice President and Chief
Operations Officer, following which an employment agreement may be executed. We
cannot determine or anticipate the amount of any compensation that may
ultimately be agreed upon. Under the terms of an existing agreement between our
company and Ms. Frenkel, if Ms. Frenkel is not offered employment with Avantce
or she terminates her employment with Avantce for `good reason' (as defined in
the agreement) or Avantce terminates the employment of Ms. Frenkel without
`cause' (as defined in the agreement) on or prior to the first anniversary of
the closing date, we will be obligated to pay to Ms. Frenkel the sum of $67,500,
payable in three equal installments. Ms. Frenkel's cash and non-cash
compensation for our fiscal ended May 31, 2005 is set forth in the accompanying
Annual Report on Form 10-KSB.
In connection with the consummation of the asset sale, we will pay a fee
in the amount of $130,000 to Brummel Holdings, LLC, a principal of which is Mr.
Larry Balaban, in consideration of the performance of business advisory services
to our company. Larry Balaban is the son of Irwin Balaban, our Chairman of the
Board and Chief Executive Officer.
Regulatory Approvals
No United States Federal or state regulatory requirements must be complied
with or approvals obtained as a condition of the proposed asset sale other than
the federal securities laws.
9
Use of Proceeds from the Proposed Asset Sale
As a result of the consummation of the asset sale, we will be entitled to
receive a purchase price of up to $3,170,000. On the closing date, we will
receive approximately $2,970,000 less an amount equal to the amount by which our
cash on hand is less than $770,000, of which
o an estimated $75,000 will be used to pay expenses
related to the asset sale transaction, including legal,
accounting and printing costs and fees; and
o $130,000 will be used to pay the fee of Brummel
Holdings, LLC.
Any remaining proceeds, together with any retained excess working capital,
will be used for general business purposes, such as the expenses of meeting our
reporting obligations under the Securities Exchange Act of 1934 as we seek a
merger partner for our remaining "public shell" company, and, if necessary, for
the settlement or satisfaction of our retained liabilities, or will be
distributed to our shareholders as a dividend. Our Board of Directors has not
approved a dividend in connection with the proposed transaction and, thus, no
amounts will be paid to you upon consummation of the asset sale unless a
dividend is hereafter declared. There can be no assurance that our Board will
declare a dividend in the future.
Following the asset sale, we will have surviving indemnification
obligations to the Principal Shareholders for a period of one year following the
consummation of the asset sale. In addition, we will have the following retained
liabilities:
o We will continue to be a respondent in an arbitration
commenced in London by Robocom UK Ltd., an unaffiliated
company, under the UNCITRAL arbitration rules. In this
proceeding, Robocom UK Ltd. alleges that it was terminated
without cause by our company as a non-exclusive distributor in
the United Kingdom and Ireland, and it is purportedly seeking
damages of (pound)200,000. We have denied all claims and have
asserted counterclaims alleging that Robocom UK Ltd. was
properly terminated and that we suffered actual damages in
excess of US$30,000 and damages in excess of US$100,000
relating to lost opportunities. We are now in the process of
selecting arbitrators.
o Under the terms of an existing agreement between our company
and Ms. Judy Frenkel, our Senior Vice President and Chief
Operations Officer, if Ms. Frenkel is not offered employment
with Avantce or she terminates her employment with Avantce for
`good reason' (as defined in the agreement) or Avantce
terminates the employment of Ms. Frenkel without `cause' (as
defined in the agreement) on or prior to the first anniversary
of the closing date, we will be obligated to pay to Ms.
Frenkel the sum of $67,500, payable in three equal
installments.
o Under an indemnification agreement dated as of August 17,
2005, our company has agreed to indemnify each of the
Principal Shareholders for any damages, losses or liabilities,
including reasonable legal fees and expenses, that any
Principal Shareholder may incur as a result of the
indemnification obligations undertaken by the Principal
Shareholders in the Asset Purchase Agreement. See "Summary of
the Terms of the Asset Purchase Agreement - Indemnification".
Management believes we have sufficient usable net operating losses to
offset substantially all of any federal income or gain recognized by us for
federal income tax purposes as a result of the asset sale. Therefore, we will
not set aside any material amounts specifically for the payment of any tax
liability.
We anticipate that the remaining proceeds from the asset sale, together
with any interest on such proceeds, will provide us with sufficient liquidity
until such time as we determine to pay a dividend equal to all or a portion of
such proceeds to our shareholders prior to the merger of our company as a
"public shell" company with another operating business or the liquidation and
dissolution our company in the absence of any attractive business opportunities.
10
Business of Our Company Following the Asset Sale
Our Board of Directors has not yet determined what our strategic direction
will be following the consummation of the asset sale and is considering several
alternatives. Immediately following the closing, we will have no material
liabilities other than the retained liabilities described above and ordinary
course payables, including payables for the maintenance of directors and
officers insurance policies, and payments to professionals in connection with
the maintenance of our reporting obligations under the Securities Exchange Act
of 1934, as amended.
Currently, our Board of Directors is evaluating several possible
directions following the asset sale, including (i) the liquidation and
dissolution of our company, including the payment of a liquidating cash dividend
to our shareholders or (ii) the payment of a cash dividend equal to a portion of
the proceeds of the asset sale and a transaction in which we merge our "public
shell" company with a privately-held operating business and our shareholders
retain some ownership interest in the surviving public corporation. We have not
determined which option we will pursue. Furthermore, we may not choose any of
the foregoing options and may, instead, pursue one or more options not yet
considered. Currently, we have no commitments or agreements with any other
person or entity regarding a proposed transaction.
Our Board of Directors currently favors attempting to identify new
strategic business opportunities. In doing so, our Board of Directors will
attempt to find a privately-held company that seeks to achieve the status of a
reporting company without having to undertake an initial public offering and the
filing of a registration statement in connection therewith. Our Board of
Directors intends to explore opportunities with only those companies that have
already successfully operated their businesses or have commenced doing business
in an area or industry in which the Board of Directors considers to be
promising. When evaluating potential targets for a business combination, we will
consider the operating history of the target, the anticipated cash needs of the
target during the short-term and long-term, the experience of the target's
management team in the target's business, and the short-term and long-term
prospects of the business of the target. When making its decision on a future
business combination, our Board of Directors will also consider the percentage
of ownership in the surviving company that our shareholders will retain.
Material United States Federal Income Tax Consequences
Federal Income Taxation of the Company. Following the consummation of the
asset sale, we will continue to be subject to Federal income taxation on our
taxable income, if any, such as interest income, gain from the sale of our
assets or income from operations. We will recognize gain or loss with respect to
the sale of our assets in an amount equal to the fair market value of the
consideration received for each asset over our adjusted tax basis in the asset
sold. Management believes that we have sufficient usable net operating losses to
offset substantially all of any federal income or gain recognized by us for
federal income tax purposes.
Federal Income Taxation of our Shareholders. We do not expect that our
shareholders will recognize any gain or loss for United States Federal income
tax purposes as a result of the asset sale, other than shareholders who choose
to exercise appraisal rights as provided under the New York Business Corporation
Law to the extent such shareholders receive cash for their shares of our common
stock. The procedures for exercising appraisal rights are discussed below.
Shareholders choosing to exercise appraisal rights should consult their own tax
advisor for a full understanding of the tax consequences of exercising such
rights.
In the event we determine to liquidate and dissolve our company, amounts
received by shareholders pursuant to the dissolution will be treated as full
payment in exchange for their shares of our common stock. Shareholders will
recognize gain or loss equal to the difference between (1) the sum of the amount
of cash distributed to them and the fair market value (at the time of
distribution) of property, if any, distributed to them, and (2) their tax basis
for their shares of our common stock. A shareholder's tax basis in his, her or
its shares will depend upon various factors, including the shareholder's cost
and the amount and nature of any distributions received with respect thereto.
The tax consequences of any such dissolution may vary depending upon the
particular circumstances of the shareholder. We recommend that each shareholder
consult his, her or its own tax advisor regarding the Federal income tax
consequences of the plan of dissolution as well as the state, local and foreign
tax consequences.
11
Treatment of Outstanding Stock Options
The asset sale will constitute the sale of substantially all of our assets
and, as such, will have certain effects under our 1997 Stock Option and Long
Term Incentive Compensation Plan, as amended (the "Plan"). Under the Plan, in
the event of a sale of substantially all of our assets, the Compensation
Committee of our Board of Directors (the "Committee"), in its absolute
discretion, has the power to cancel, effective immediately prior to the
consummation of the asset sale, each option to purchase shares of our common
stock (an "Option") outstanding immediately prior to such event (whether or not
then exercisable), and, in full consideration of such cancellation, pay to the
employee, officer, director or consultant to whom the Option was granted (a
"Participant") an amount in cash, for each share of our common stock subject to
such Option equal to the excess of (A) the value, as determined by the Committee
in its absolute discretion, of the property (including cash) received by the
holder of a share of our common stock as a result of such event over (B) the
exercise price of such Option (subject to applicable withholding payment
requirements).
On August 16, 2005, the Committee adopted a resolution pursuant to which
it resolved not to exercise such authority in connection the asset sale. As a
result, all outstanding Options will remain subject to their existing terms and
conditions. Information regarding the Plan and any outstanding Options held by
our officers and directors is set forth in the accompanying Annual Report on
Form 10-KSB.
Appraisal Rights
Pursuant to Section 910 of the New York Business Corporation Law
("NYBCL"), holders of our company's common stock who follow the procedures set
forth in Section 623 of the NYBCL (the "Appraisal Statute") will be entitled to
have their common stock appraised by a New York State Court and to receive
payment of the "fair value" of such shares as determined by such court. The
Appraisal Statute is reprinted in its entirety as Annex B to this proxy
statement. While the following discussion summarizes all material terms of the
law pertaining to appraisal rights under the NYBCL, it is qualified in its
entirety by the full text of the Appraisal Statute. Any shareholder who wishes
to exercise such appraisal rights or to preserve the right to do so, should
review the following discussion and Annex B carefully because failure to timely
and properly comply with the procedures specified will result in the loss of
dissenters' appraisal rights under the NYBCL.
All references in the Appraisal Statute and in this summary to a
"shareholder" are to the record holder of our company's common stock on the
record date specified in the Notice of Special Meeting. A person having a
beneficial interest in shares of our company's common stock that are held of
record by another person such as a broker or nominee must act promptly to cause
the record holder to follow the steps summarized below properly and in a timely
manner to perfect whatever appraisal rights the beneficial owner may have.
A shareholder wishing to exercise appraisal rights must (i) deliver to us,
prior to or at the special meeting but before the vote is taken on this Proposal
1, a written objection to the proposed sale of our company's assets as provided
in this Proposal 1 (the "Notice of Election"), which must include a notice of
his election to dissent, the shareholder's name, residence address, the number
of shares as to which the shareholder dissents and a demand for payment of the
fair value of such shares (which Notice of Election must be in addition to and
separate from any proxy or vote against the proposed asset sale contemplated by
this Proposal 1) and (ii) not vote for approval of the asset sale. BECAUSE A
PROXY WHICH DOES NOT CONTAIN VOTING INSTRUCTIONS WILL, UNLESS REVOKED, BE VOTED
FOR APPROVAL OF THE ASSET SALE, A SHAREHOLDER WHO VOTES BY PROXY AND WHO WISHES
TO EXERCISE APPRAISAL RIGHTS MUST (A) VOTE AGAINST APPROVAL OF THE ASSET SALE OR
(B) ABSTAIN FROM VOTING ON THE ASSET SALE. Neither a vote against the asset
sale, in person or by proxy, nor a proxy directing such vote for an abstention,
will in and of itself constitute a written objection to the asset sale under the
Appraisal Statute (shareholders who timely file such Notice of Election and who
do not vote in favor of the asset sale are referred to as "Dissenting
Shareholders").
A shareholder may not dissent as to less than all of the shares, as to
which such shareholder has a right to dissent, held by such shareholder of
record and owned beneficially. A nominee or fiduciary may not dissent on behalf
of any beneficial owner as to less than all of the shares held of record by such
nominee or fiduciary on behalf of such
12
owner and as to which such nominee or fiduciary has a right to dissent. All
Notices of Election should be addressed to Robocom Systems International Inc.,
511 Ocean Avenue, Massapequa, New York, 11758, Attn: Secretary.
Within 10 days after the date on which shareholders approve the asset
sale, we must send written notice by registered mail to each Dissenting
Shareholder to such effect (the "Dissenting Shares"). At the time of the
completion of the asset sale (the "Effective Time"), each Dissenting Shareholder
will cease to have any rights of a shareholder of our company except the right
to be paid the fair value of his shares and rights under the Appraisal Statute.
A Notice of Election may be withdrawn by a Dissenting Shareholder prior to
his acceptance in writing of an offer made by us to pay the value of such
Dissenting Shares, except that a Notice of Election may not be withdrawn later
than 60 days following the Effective Time unless we fail to make a timely offer
to pay such value, in which case such Dissenting Shareholder shall have 60 days
from the date an offer is made to withdraw his election. In either event, after
such time, a Notice of Election may not be withdrawn without our written
consent. In order to be effective, withdrawal of a Notice of Election must be
accompanied by a return to us of any advance payment made by us to the
Dissenting Shareholder as described below.
Upon filing the Notice of Election, or within one month thereafter,
Dissenting Shareholders must submit to us the certificates representing their
shares of common stock, at the address set forth above or to our transfer agent,
Continental Stock Transfer and Trust Company, 2 Broadway, 19th Floor, New York,
New York 10004 and there will be noted thereon that a Notice of Election has
been filed and the certificates will be returned to the Dissenting Shareholders.
Any Dissenting Shareholders who fail to submit such certificates for such
notation will, at our option exercised by written notice to such Dissenting
Shareholders within 45 days of the date of filing of such Notice of Election,
lose their appraisal rights unless a court, for good cause shown, shall
otherwise direct.
Within 15 days after the expiration of the period within which
shareholders may file their Notice of Election, or within 15 days after the
Effective Time, whichever is later (but in no case later than 90 days after the
shareholders' vote to approve the asset sale), we must make a written offer to
pay for the Dissenting Shares held by such Dissenting Shareholder at a price
which we consider to be their fair value. This offer will be accompanied by a
statement setting forth the aggregate number of shares, which will be at the
same price for all Dissenting Shares, with respect to which Notices of Election
to dissent have been received and the aggregate number of holders of such
shares.
If the Effective Time has occurred at the time the offer is made, the
offer will be accompanied by (i) advance payment to each Dissenting Shareholder
who has submitted certificates for notation thereon of the election to dissent
of an amount equal to 80% of such offer or (ii) as to each Dissenting
Shareholder who has not yet submitted certificates for notation thereon of the
election to dissent, a statement that advance payment of an amount equal to 80%
of the amount of such offer will be made by us promptly upon submission of
certificates. If the Effective Time of the asset sale has not occurred at the
time of the making of such offer, such advance payment or statement as to
advance payment will be sent to each Dissenting Shareholder entitled thereto
upon the Effective Time. Acceptance of such advance payment by a Dissenting
Shareholder will not constitute a waiver of dissenter's rights. If the asset
sale transaction is not completed within 90 days after approval of the asset
sale by shareholders, such offer will be conditioned upon consummation of the
asset sale.
If within 30 days after making such offer, we and any Dissenting
Shareholder agree on the price to be paid for such Dissenting Shareholder's
Dissenting Shares, we will pay the agreed price to such holder within 60 days
after the later of the date such offer was made or the Effective Time, upon
surrender of certificates representing such holder's shares of common stock.
If we fail to make an offer within the 15-day period described above, or
if we make an offer and any Dissenting Shareholder fails to agree within 30 days
of the making of such offer, we must, within 20 days thereafter, institute a
special proceeding in an appropriate court to determine the rights of Dissenting
Shareholders and to fix the fair value of the shares. If we do not institute
such a proceeding within such 20-day period, any Dissenting Shareholder may,
within 30 days after such 20-day period expires, institute a proceeding for the
same purpose. If such proceeding is not instituted by any Dissenting Shareholder
within such 30-day period, all dissenters' rights will be extinguished unless
the New York Supreme Court, for good cause shown, otherwise directs. All
Dissenting Shareholders, other than those who agree with us to the price to be
paid for their shares, will be made parties to such proceeding.
13
With respect to Dissenting Shareholders entitled to payment, the court
will proceed to fix the value of our common stock, which will be the fair value
as of the close of business on the day prior to the special meeting. In fixing
the fair value of the shares of our common stock, the court will consider the
nature of the asset sale and the effects on us and our shareholders, the
concepts and methods then customary in relevant securities and financial markets
for determining fair value of shares of a corporation engaging in a similar
transaction under comparable circumstances and all other relevant factors.
The court will determine the fair value of such shares without a jury and
without referral to an appraiser or referee. The final order by the court will
include an allowance for interest (unless the court finds the refusal of any
Dissenting Shareholder to accept our offer thereof as arbitrary, vexatious, or
otherwise not in good faith) of such rate as the court finds to be equitable,
accruing from the Effective Time of the asset sale to the date of payment.
Each party in the appraisal proceeding will bear its own costs and
expenses, including the fees of counsel and any experts employed by it. The
court may, however, in its discretion, assess any of the costs, fees and
expenses incurred by us against Dissenting Shareholders (including those who
withdraw their Notice of Election) if the court finds that their refusal to
accept our offer was arbitrary, vexatious or otherwise not in good faith.
Similarly, the costs, fees and expenses incurred by Dissenting Shareholders may
be assessed by the court in its discretion, against us if the fair value of the
shares as determined by the court materially exceeds the amount that we offered
to pay, we failed to follow certain procedures of the Appraisal Statute or our
manner of compliance with the Appraisal Statute was arbitrary, vexatious or not
otherwise in good faith.
Within 60 days after the final determination of the proceeding, we will
pay to each Dissenting Shareholder the amount found in such proceeding to be due
such shareholder, upon the Dissenting Shareholder's surrender of certificates of
the our common stock.
Any shareholder who duly demands, prior to the special meeting, an
appraisal in compliance with the Appraisal Statute will not, after the Effective
Time, be entitled to vote the shares subject to such demand for any purpose or
to the payment of dividends or other distributions on those shares, except
dividends or other distributions payable to shareholders of record as of a date
prior to the Effective Time.
Failure to follow the steps required by the Appraisal Statute for
perfecting appraisal rights may result in the loss of such rights. IN VIEW OF
THE COMPLEXITY OF THE PROVISIONS OF THE APPRAISAL STATUTE, SHAREHOLDERS WHO ARE
CONSIDERING DISSENTING FROM THE ASSET SALE SHOULD CONSULT THEIR LEGAL ADVISORS.
Vote Required and Board Recommendation
The approval of the asset sale to Avantce requires the affirmative vote of
the shareholders holding at least two-thirds (2/3) of the outstanding shares of
our common stock. All members of the Board of Directors and each of our
executive officers who hold (or are deemed to hold) as of the record date an
aggregate of approximately 2,587,300 shares of our common stock (approximately
56.36% of the outstanding shares of common stock as of the record date) have
indicated that they will vote in favor of the proposal.
The Board of Directors believes that the asset sale is in the best
interests of our company and our shareholders and recommends a vote "FOR" this
proposal. It is intended that the shares represented by the enclosed form of
proxy will be voted in favor of this proposal unless otherwise specified in such
proxy.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended for presentation at our 2006 annual
meeting and intended to be included in our proxy statement and form of proxy
relating to that meeting must be received at our executive offices a reasonable
time before we print our proxy materials for the meeting and comply with the
requirements of Rule 14a-8(e) promulgated under the Securities Exchange Act of
1934. In addition, if we do not receive notice of a shareholder proposal within
a reasonable time before we mail our proxy materials to our shareholders, then
we may vote proxies in our discretion with respect to the proposal. Our Board of
Directors has not determined when the 2006 annual meeting will take place.
14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 19, 2005, the names, addresses and
number of shares of our common stock beneficially owned by (i) all persons known
to the our management to be beneficial owners of more than 5% of the outstanding
shares of our common stock, (ii) each director of our company, (iii) each named
executive officer and (iv) all executive officers and directors of our company
as a group (except as indicated, each beneficial owner listed exercises sole
voting power and sole dispositive power over the shares beneficially owned):
Number of Shares
Name and Address of Beneficially Percentage of Outstanding
Beneficial Owner (1) Owned (2) Shares Beneficially Owned (2)
-------------------- --------- -----------------------------
Irwin Balaban............................................... 1,111,100(3) 23.81%
Judy Frenkel................................................ 108,200(4) 2.34
Robert B. Friedman.......................................... 160,000(5) 3.44
Herbert Goldman............................................. 1,004,000(6) 21.54
Lawrence B. Klein........................................... 754,000(7) 16.21
All executive officers and directors as a group (5
persons)................................................. 3,137,300(8) 61.62
- ----------
(1) The address of each beneficial owner of more than 5% of the outstanding
shares of our common stock is c/o Robocom Systems International Inc., 511
Ocean Avenue, Massapequa, New York 11758.
(2) Except as indicated in the footnotes to this table, we believe that all
persons named in the table have sole voting and investment power with
respect to all shares of our common stock shown as beneficially owned by
them. In accordance with the rules of the Securities and Exchange
Commission, a person or entity is deemed to be the beneficial owner of our
common stock that can be acquired by such person or entity within 60 days
upon the exercise of options or warrants or other rights to acquire our
common stock. Each beneficial owner's percentage ownership is determined
by assuming that options and warrants that are held by such person (but
not those held by any other person) and which are exercisable within 60
days have been exercised. The inclusion herein of such shares listed as
beneficially owned does not constitute an admission of beneficial
ownership.
(3) Includes 564,000 shares held by I&T Balaban L.P. and 125,000 shares
subject to options that are presently exercisable.
(4) Includes 36,667 shares subject to options that are presently exercisable.
(5) Includes 115,000 shares subject to options that are presently exercisable.
(6) Includes 564,000 shares held by H & N Goldman L.P., 160,000 shares held by
the Herbert Goldman Revocable Trust, 160,000 shares held by the Naomi J.
Goldman Revocable Trust and 120,000 shares subject to options that are
presently exercisable.
(7) Includes 110,000 shares subject to options that are presently exercisable.
(8) Includes 550,000 shares subject to options that are presently exercisable.
OTHER MATTERS
Other than as described above, our Board of Directors knows of no matters
to be presented at the special meeting, but it is intended that the persons
named in the proxy will vote your shares according to their best judgment if any
matters not included in this proxy statement do properly come before the meeting
or any adjournment thereof.
15
EXPERTS
Our audited financial statements for the fiscal years ended May 31, 2005
and 2004 incorporated by reference into this proxy statement have been included
in reliance on the report of Eisner and Lubin LLP, independent accountants,
given on the authority of said firm as experts in accounting and auditing.
ANNUAL REPORT
The information contained in our Annual Report on Form 10-KSB for the
fiscal year ended May 31, 2005, as filed with the Securities and Exchange
Commission on August 29, 2005 is incorporated herein by reference. A copy of
such Annual Report is enclosed herewith. If, for any reason, you wish to receive
another copy of the Annual Report, please contact Robocom Systems International
Inc., 511 Ocean Avenue, Massapequa, New York 11758, Attention: Shareholder
Relations, and another copy will be sent to you.
PRO FORMA FINANCIAL STATEMENTS
Our unaudited pro forma condensed balance sheet and statement of
operations for our fiscal year ended May 31, 2005 is annexed to this proxy
statement as Annex C. The unaudited pro forma condensed balance sheet of our
company at May 31, 2005 gives effect to the proposed asset sale as if it had
occurred on that date. The unaudited pro forma condensed statement of operations
for the fiscal year ended May 31, 2005 gives effect to the proposed asset sale
as if it had occurred as of June 1, 2004.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This proxy statement incorporates by reference the materials and
information contained in our Annual Report on Form 10-KSB for the fiscal year
ended May 31, 2005, including audited financial statements.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements, and other
information with the United States Securities and Exchange Commission (the
"SEC"). You may read and copy any document filed by our company at the SEC's
public reference room at 450 Fifth Street, N.W. , Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
room. You can review our electronically filed reports, proxy statements and
other information on the SEC's website at http://www.sec.gov. Our common stock
is traded under the symbol "RIMS.OB."
By Order of the Board of Directors,
/s/Irwin Balaban
Irwin Balaban Chairman of the Board
and Chief Executive Officer
Dated: September 13, 2005
Massapequa, New York
16
REVOCABLE PROXY
ROBOCOM SYSTEMS INTERNATIONAL INC.
|X| PLEASE MARK VOTES
AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Irwin Balaban and Lawrence B. Klein or
any of them, lawful attorneys and proxies of the undersigned with full power of
substitution, for and in the name, place and stead of the undersigned to attend
the special meeting of Shareholders of Robocom Systems International Inc. to be
held in the Executive Conference Room of our corporate offices located at 511
Ocean Avenue, Massapequa, New York 11758 on Tuesday, October 11, 2005 at 10:00
a.m., local time, and any adjournment(s) or postponement(s) thereof, with all
powers the undersigned would possess if personally present and to vote the
number of votes the undersigned would be entitled to vote if personally present.
The Board of Directors recommends a vote "FOR" the proposal set forth
herein.
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Please be sure to sign and date
this Proxy in the box below. ----------------------------------------
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Shareholder sign above Co-holder (if any) sign above
PROPOSAL 1: Proposal to approve the sale of substantially all of our assets to
Avantce RSI, LLC.
For Against Abstain
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In accordance with their discretion, said Attorneys and Proxies are
authorized to vote upon such other matters or proposals not known at the time of
solicitation of this proxy which may properly come before the meeting.
This proxy when properly executed will be voted in the manner described
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted for the Proposal set forth herein. Any prior proxy is hereby revoked.
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ROBOCOM SYSTEMS INTERNATIONAL INC.
Please sign exactly as your name appears on this proxy card. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or corporation, please sign in full corporate name by
president or other authorized person. If a partnership, please sign in
partnership name by authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD
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