UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14A INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant [X]
x
Filed by a partyParty other than the Registrant [ ]
o
Check the appropriate box:
[ ]
o Preliminary Proxy Statement.
[ ]Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ]
x | Definitive Proxy Statement |
o Definitive Additional Materials.
[ ]Materials
o Soliciting Material Pursuant to Sec.240.14a-11(c) or
Sec.240.14a-12.
under §240.14a-12
ATSI COMMUNICATIONS, INC.
(Name
(Name of Registrant as Specified in itsIn Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check(Check the appropriate box):
[X]
x No Fee Required.
[ ]fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1)
(1) Title of each class of securities to which transaction applies:
2)
(2) Aggregate number of securities to which transaction applies:
3)
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set(set forth the amount on which the filing fee is calculated and state how it was determined):
4)
(4) Proposed maximum aggregate value of transaction:
5)
(5) Total fee paid:
[ ]
o Fee paid previously with preliminary materials.
[ ]
o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offeringoffsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of theits filing.
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2)Previously Paid:
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ATSI COMMUNICATIONS, INC.
8600 WURZBACH ROAD,
3201 CHERRY RIDGE
BUILDING C, SUITE 700W
300
SAN ANTONIO, TX 78240
(210) 614-7240
Dear Stockholders:
You are cordially invited to attendTEXAS 78230
NOTICE OF SOLICITATION FOR ACTION
TO BE TAKEN BY WRITTEN CONSENT IN LIEU
OF A MEETING OF STOCKHOLDERS
To the 2004 Annual Meeting of Stockholders of ATSI Communications, Inc. ("ATSI") that will be held at 10:00 AM (local time)
on May 6, 2004, at:
Attached hereto is a solicitation statement which solicits the Conference Hallwritten consent of the Dr. Burton E. Grossman
International Conference Center, Universitystockholders of ATSI Communications, Inc., a Nevada corporation (the “Corporation”) to authorize and approve an amendment to the Corporation’s Articles of Incorporation to change the name of the Incarnate Word, 4301
Broadway, San Antonio, Texas.
Persons owning sharesCorporation to Digerati Technologies, Inc. The amendment to the Corporation’s Articles of Incorporation to change the name of the Common Stock, $.001 par value per share (the
"Common Stock") or the Series A Convertible Preferred Stock, $.001 par value per
share (the "Series A Preferred Stock") of record as of March 25, 2004 are
entitledCorporation to notice of and to vote at the Annual Meeting. At the meeting you
will be asked to consider and vote upon the following matters more fullyDigerati Technologies, Inc. is described in detail in the accompanying Proxy Statement:
PROPOSAL 1. ELECTION OF DIRECTORS. You will havesolicitation statement attached to this notice. If approved by the opportunity to elect
------------------------------------
two membersstockholders of the Corporation, the Board of Directors for a termwill have the authority to change the name of three years. the Corporation without future stockholder approval of such change, except as may otherwise be required by the Corporation’s Articles of Incorporation, the rules of any securities exchange on which the Corporation’s securities are listed or applicable law.
The following persons are our nominees for election:
Murray R. Nye
Richard C. Benkendorf
PROPOSAL 2. APPOINTMENT OF AUDITORS. You will be asked to ratifysolicitation of written consents is being made by the ----------------------------------------
selectionCorporation’s Board of MaloneDirectors. The Board of Directors approved and Bailey, PLLC as our independent auditors forrecommended that the year ending July 31, 2004.
PROPOSAL 3. RE-INCORPORATION IN NEVADA. You will be asked tostockholders of the Corporation approve the ------------------------------------------
re-incorporationamendment to the Corporation’s Articles of Incorporation to change the name of the Corporation to Digerati Technologies, Inc. on December 13, 2010.
Stockholders are urged to read and to consider carefully the information contained in this solicitation statement.
After reading this solicitation statement, please date, sign and deliver promptly to the Corporation the enclosed consent, for which a pre-addressed return envelope is provided. This solicitation statement is first being mailed to stockholders of the Corporation on or about January 28, 2011.
| BY ORDER OF THE BOARD OF DIRECTORS |
| |
| |
San Antonio, Texas | Arthur L. Smith |
January 28, 2011 | President |
ATSI in Nevada by merging ATSICOMMUNICATIONS, INC.
SOLICITATION
FOR
STOCKHOLDER ACTION BY WRITTEN CONSENT
GENERAL INFORMATION
Although copies of these solicitation materials have been filed with and intoexamined by the Securities and Exchange Commission (the “Commission”), such filing and examination by the Commission does not represent and shall not be deemed to be a wholly
owned subsidiary created forfinding that purpose.
If other businessthe materials are accurate or complete or not false and misleading or that the Commission has passed upon the merits of or approved any statement contained in these materials or any matter to be acted upon by the stockholders. No representation to the contrary has been made or should be implied. A representation to the contrary is properly raiseda criminal offense.
Under Section 78.390 of the Nevada Corporations Code, stockholders of the Corporation must approve an amendment to the Corporation’s Articles of Incorporation to change the name of the Corporation. Under Section 78.320 of the Nevada Corporations Code, as well as the Corporation’s bylaws, any action that may be taken at
an annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a majority of the
meeting or if we need to
adjourn the meeting, you will be askedholders of outstanding stock entitled to vote
on these matters, too. This
Noticeconsent in writing to such action and
if written notice of such action is delivered to the
accompanying Proxy Materialsstockholders who fail to provide consent. To eliminate the cost and
Proxy were first mailed on March
31, 2004.
YOUR VOTE IS IMPORTANT. WE ASK YOU TO COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
SIGNATURE OF A PROXY WILL NOT AFFECT YOUR RIGHT TO REVOKE THE PROXY IF YOU LATER
DECIDE TO ATTEND THE MEETING AND VOTE IN PERSON. IF YOU PLAN TO ATTEND THE
ANNUAL MEETING TO VOTE IN PERSON AND YOUR SHARES ARE REGISTERED IN THE NAME OF
YOUR BROKER, NOMINEE OR BANK, YOU MUST SECURE A PROXY FROM THE BROKER, NOMINEE
OR BANK ASSIGNING VOTING RIGHTS TO YOU FOR YOUR SHARES.
Sincerely,
Arthur L. Smith
Presidenttime associated with holding a special meeting of stockholders and
Chief Executive Officer
ATSI COMMUNICATIONS, INC.
8600 WURZBACH ROAD, SUITE 700W
SAN ANTONIO, TX 78240
(210) 614-7240
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PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 6, 2004, AND ADJOURNMENTS
-----------------------
APPROXIMATE DATE PROXY MATERIAL FIRST SENT TO STOCKHOLDERS:
MARCH 31, 2004
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SOLICITATION BY THE BOARD OF DIRECTORS
The accompanying proxy, for use only atto effect the 2004 Annual Meetingamendment to the Corporation’s Articles of Stockholders (the "Annual Meeting")Incorporation to be held at 10:00 AM (local time) on May
6, 2004, and any and all adjournments thereof, is solicited bychange the name of the Corporation as early as possible, the Board of Directors voted to proceed with the amendment by obtaining the written consent of ATSI Communications, Inc. (the "Company" or "ATSI"). We are making
this solicitation by mail and in person or by telephone through our officers,
directors and regular employees. We may make arrangements with brokerage houses
or other custodians, nominees and fiduciaries to send proxy material to their
principals. All expenses incurred inthe holders of a majority of shares of the Corporation’s outstanding Common Stock. In this solicitation of proxies will be paid
by the Company.
MATTERS TO BE CONSIDERED
Asconsents, written and unrevoked consents from holders of record of a majority of the dateissued and outstanding shares of these proxy materials,Common Stock as of the Record Date (as hereinafter defined) must be delivered to the Corporation to approve the amendment to the Articles of Incorporation to change the name of the Corporation.
RECORD DATE AND VOTING RIGHTS
The Board of Directors is aware of the following matters that will be considered atCorporation has fixed the meeting:
PROPOSAL 1. ELECTION OF DIRECTORS. You will haveclose of business on January 17, 2011 (the “Record Date”) as the opportunity to elect
------------------------------------
two members of the Board of Directors for a term of three years. The
following persons are our nominees for election:
Murray R. Nye
Richard C. Benkendorf
PROPOSAL 2. APPOINTMENT OF AUDITORS. You will be asked to ratify the
----------------------------------------
selection of Malone and Bailey, PLLC as our independent auditorsdate for the year ending July 31, 2004.
PROPOSAL 3. RE-INCORPORATION IN NEVADA. You will be askeddetermination of stockholders entitled to approve the ------------------------------------------
re-incorporation of ATSI in Nevada by merging ATSI with and into a wholly
owned subsidiary created for that purpose.
In addition, other proper matters relatingproposed amendment to the administrationCorporation’s Articles of Incorporation to change the name of the meeting and matters of which the Board of Directors has no knowledge may be
brought before the meeting for a vote. The accompanying Proxy grants
discretionary authorityCorporation to the proxy to vote on such matters.
QUORUM REQUIRED
Holders of Common Stock and Series A Preferred Stock as of March 25, 2004
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.Digerati Technologies, Inc. As of the Record Date, there were 143,631,119the Corporation had 53,302,887 shares of Common Stock outstanding, which were held by approximately 1,500 holders of recordissued and approximately 13,000 beneficial owners, and 4,370 shares of Series A Preferred
Stock held by nine (9) holders of record. Together, there are a total of
144,282,249 voting interests entitled to vote at the Annual Meeting. outstanding.
Each share of Common Stock is entitled to one (1) vote on each matterper share in connection with the matters described above. Pursuant to come beforeapplicable Nevada law, there are no dissenter’s or appraisal rights relating to the Annual Meeting and one (1) vote for each vacancy onamendment to the Corporation’s Articles of Incorporation to change the name of the Corporation to Digerati Technologies, Inc.
The Board of Directors.
Each shareDirectors requests that each stockholder complete, date and sign the consent enclosed with this solicitation statement and deliver the consent in the return envelope provided. The consent should be returned as soon as possible and, in any event, not later than March 9, 2011. Any consent received by the Corporation after March 9, 2011 will not be counted and will be treated as votes against the amendment to the Articles of Series A Preferred Stock is entitledIncorporation to 149 votes on each matter
to come beforechange the Meeting and 149 votes for each vacancy on the Board of
Directors. Neither the Common Stock nor the Series A Preferred Stock are
entitled to cumulate their votes.
The presencename of the holdersCorporation to Digerati Technologies, Inc.
Any consent executed and delivered by a stockholder may be revoked at any time by marking, dating, signing and delivering to the Secretary of the Corporation a written revocation before March 9, 2011. A revocation may be in any written form validly signed by the record holder as long as it clearly states that the consent previously given is no longer effective. The delivery of a subsequently dated consent which is received before March 9, 2011 and is properly marked, dated, signed and delivered to the Corporation will constitute a revocation of an earlier consent.
The amendment to the Articles of Incorporation to change the name of the Corporation to Digerati Technologies, Inc. will be adopted when properly completed and unrevoked consents are signed and submitted to the Corporation by stockholders of record holding a majority of the issuedvoting power of the outstanding shares of Common Stock. Because a consent to corporate action is effective only if expressed by stockholders of record holding a majority of the voting power of the outstanding shares of Common Stock, the failure to deliver a consent before March 9, 2011, or the revocation of a previously delivered consent before March 9, 2011 will have the same effect as withholding consent.
Abstentions and
outstanding
voting interests entitled to vote, either in person“broker non-votes” (shares held of record by brokers or
represented by proxy, is
necessary to constitutenominees which are not voted on a
quorum forparticular matter because the
transaction of business at the Annual
Meeting. Proxies that withhold authority to vote for a nominee or abstain from
voting on any matter are counted for the purpose of determining whether a quorum
is present. Broker non-votes, which may occur when a broker or nominee has not received
timely voting instructions
on certain proposals, are not counted forfrom the
purpose of
determining whether a quorum is present. If there are not sufficient voting
interests represented at the meeting to constitute a quorum, the meeting may be
adjourned until a specified future date to allow the solicitation of additional
proxies.
VOTE REQUIRED FOR ADOPTION OF CERTAIN MATTERS
Directors are elected by a plurality of the votes cast at the meeting. The
two (2) nominees that receive the greatest number of votes will be elected even
though the number of votes received may be less than a majority of the shares
represented in person or by proxy at the meeting. Proxies that withhold
authority to vote for a nominee and broker non-votes will not prevent the
electionbeneficial owner of such nominee if other stockholders vote for such a nomineeshares and a
quorum is present.
The ratification of Malone and Bailey, PLLC as the Company's independent
public accountants requires the affirmative vote of a majority of thedoes not have discretionary voting interests represented in person or by proxy at the meeting. Proxiespower with respect to that abstain
from voting on this proposalmatter) have the same effect as not delivering a vote against this
proposal. Broker non-votes will not have any effect on this proposal if a quorum
is present.
The approval ofconsent to the re-incorporation of the Company in Nevada requires the
affirmative vote of a majority of the issued and outstanding voting interests,
voting together as a class, and a majority of the Common Stock, voting
separately as a class. Proxies that abstain from voting on this proposal and
broker non-votes will have the same effect as a vote against this proposal.
Failure to return a proxy or to vote your shares at the meeting will also have
the same effect as a vote against this proposal.
Other matters that are properly brought before the meeting will require the
affirmative vote of at least a majority of the voting interests represented in
person or by proxy at the meeting. Certain matters, such as an amendment to the Articles of Incorporation may require a greater numberto change the name of votes if they are
properly brought before the meeting. We are not aware of any other matters that
will be brought beforeCorporation to Digerati Technologies, Inc. If the meeting at the time these Proxy Materials were
mailed.
REVOCABILITY OF PROXIES; DISCRETIONARY AUTHORITY
Any stockholder executing a proxy retains the right to revoke it by signing
and delivering a proxy bearing a later date, by giving notice of revocation in
writingamendment to the SecretaryArticles of Incorporation to change the name of the Company at any time priorCorporation to its use, orDigerati Technologies, Inc. is approved by votingstockholders, the Corporation will promptly give written notice thereof to all stockholders who have not consented.
The Corporation will pay the expenses of printing, assembling and mailing this solicitation statement. The Corporation will also reimburse brokerage firms and nominees for out-of-pocket expenses incurred in person at the meeting. All properly executed proxies received by the
Companysending these solicitation materials to, and not revoked will be voted at the meeting, or any adjournment
thereof, in accordance with the specifications of the stockholder. IF NO
INSTRUCTIONS ARE SPECIFIED ON THE PROXY, SHARES REPRESENTED THEREBY WILL BE
VOTED FOR THE ELECTIONobtaining instructions from, beneficial owners.
RECOMMENDATION OF THE NOMINEES DESCRIBED HEREIN, FOR RATIFICATION OF
MALONE AND BAILEY, PLLC AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
CURRENT FISCAL YEAR, AND FOR THE RE-INCORPORATION OF THE COMPANY IN NEVADA.
PROXIES ALSO GRANT DISCRETIONARY PROPER AUTHORITY AS TO APPROVAL OF THE MINUTES
OF THE PRIOR ANNUAL MEETING, MATTERS INCIDENT TO THE CONDUCT OF THE MEETING, AND
MATTERS PRESENTED AT THE MEETING OF WHICH THE BOARD OF DIRECTORS HAD NO NOTICE
ON THE DATE HEREOF.
The Board of Directors of the Corporation unanimously recommends that you consent to the proposed amendment to the Articles of Incorporation to change the name of the Corporation to Digerati Technologies, Inc. Our current name does not adequately reflect the nature of our current business and operations. We believe that the new name will increase the brand recognition of our products and services and will be more recognizable. We intend to undertake a marketing campaign in connection with the name change to increase the public awareness of our products and services. The name change will not affect the rights of our stockholders.
VOTING SECURITIES AND OWNERSHIP THEREOF
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists the beneficial ownership of shares of
the
Company'sour Common
Stock and Series A Preferred Stock by (i) all persons and groups
known by the Company tothat own beneficially more than 5% of the outstanding shares of
the Company'sour Common
Stock or Series A Preferred Stock, (ii) each
of our directors or nominees for director,
and nominee, (iii) each person who held the office of Chief Executive Officer
during the last fiscal year or at any time during the
fiscal year ended July 31,
2003,2010, (iv)
the four highestour two most highly compensated executive officers
other than our Chief Executive Officer who were serving as executive officers on July 31,
2003,2010 and to whom we paid more than $100,000 in compensation during the last fiscal year and (v)
each person who would have been one
of the four highest compensated executive officers but was not serving as an
executive officer on July 31, 2003, and (vi) all directors and officers as a group. None of
theour directors, nominees or officers
of the Company ownedowns any equity security issued by
the Company's subsidiaries other than director's
qualifying shares.our subsidiaries. Information with respect to
our officers, directors and their families is as of
March 25, 2004January 14, 2011 and is based on
theour books and records
of the
Company and information obtained from each individual. Information with respect to
our other stockholders is based upon the Schedule 13D or Schedule 13G filed by such stockholders with the Securities and Exchange Commission. Unless otherwise stated, the business address of each individual or group is the same as the address of
the Company'sour principal executive
office and all shares are
beneficially owned solely by the person indicated.
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PERCENT SERIES A
NAME OF COMMON OF PREFERRED PERCENT OF TOTAL VOTING PERCENT OF
INDIVIDUAL OR GROUP STOCK CLASS(1) STOCK CLASS(2) INTERESTS TOTAL(3)
- ------------------------------------------ --------- -------- --------- ----------- ----------- ----------
5% STOCKHOLDERS
Peter Blindt
30 E. Huron #5407
Chicago, IL 60611 -0- * 500 11.4% 74,500 *
Edward Corcoran
6006 W. 159th Street
Bldg. C 1-W
Oak Forest, IL 60452 -0- * 500 11.4% 74,500 *
Gerald Corcoran
11611 90th Avenue
St. John, IN 46373 -0- * 500 11.4% 74,500 *
Joseph Migilio
13014 Sandburg Ct.
Palos Park, IL 60464 -0- * 1,005 (4) 23.0% 149,745 (4) *
Rocky Dazzo
9931 W. Mission Dr.
Palos Park, IL 60464 -0- * 620 (4) 14.2% 92,300 (4) *
Jeffrey Tessiatore
131 Settlers Dr.
Naperville, IL 60565 -0- * 500 11.4% 74,500 *
Albert Vivo
9830 Circle Parkway
Palos Park, IL 60464 -0- * 500 11.4% 74,500 *
Gary Wright
3404 Royal Fox Dr.
St. Charles, IL 60174 -0- * 750 17.2% 111,750 *
INDIVIDUAL OFFICERS,
DIRECTORS AND
NOMINEES
Arthur L. Smith
President, Chief Executive Officer
Director 3,488,448 (5) 2.4 -0- * 3,488,448 (5) 2.4
Stephen M. Wagner
Former Chief Executive Officer (6) -0- * -0- * -0- *
Raymond G. Romero
Former Interim Chief Executive Officer (7) -0- * -0- * -0- *
John R. Fleming
Director 153,334 (8) * -0- * 153,334 (8) *
Richard C. Benkendorf
Director 320,834 (9) * -0- * 320,834 (9) *
Murray R. Nye
Director 455,844 (10) * -0- * 455,844 (10) *
ALL OFFICERS AND
DIRECTORS AS A GROUP 4,610,960 (11) 3.2 -0- * 4,610,960 (11) 3.2
- ------------
* Less than 1%
-5-
(1)office.Name | | Description | | Sole Voting or Investment Power | | | Shared Voting or Investment Power | | | Total Beneficial Ownership | | | Percent Of Class1 | |
| | | | | | | | | | | | | | |
Arthur L. Smith | | President, Chief Executive Officer and Director | | | 5,255,222 | | | | -0- | | | | 5,255,222 | | | | 8.7 | % |
Antonio Estrada, Jr. | | Senior Vice President Finance and Controller | | | 4,703,161 | | | | -0- | | | | 4,703,161 | | | | 7.8 | % |
Ruben R. Caraveo | | Senior Vice President Sales and Operations | | | 4,517,612 | | | | -0- | | | | 4,517,612 | | | | 7.5 | % |
John R. Fleming | | Director | | | 3,016,757 | | | | -0- | | | | 3,016,757 | | | | 5.0 | % |
Murray R. Nye | | Director | | | 3,016,757 | | | | -0- | | | | 3,016,757 | | | | 5.0 | % |
All Officers and Directors as a Group | | | | | 20,509,509 | | | | -0- | | | | 20,509,509 | | | | 34.1 | % |
1 Based on 143,631,119 shares of Common Stock outstanding as of March
25, 2004. Any shares represented by options exercisable within 60 days
after March 25, 2004 are treated as being outstanding for the purpose
of computing the percentage of class for such person but not for any
other purpose.
(2) Based on 4,370 shares of Series A Preferred Stock outstanding as of
March 25, 2004.
(3) Based on 144,282,249 voting interests outstanding as of March 25,
2004. Any shares represented by options exercisable within 60 days
after March 25, 2004 are treated as being outstanding for the purpose
of computing the percentage of class for such person but not for any
other purpose.
(4) Includes 505 shares owned by a partnership in which Messrs. Dazzo and
Migilio are partners.
(5) Includes 200,000 shares subject to options exercisable within 60 days
after March 25, 2004.
(6) Resigned as of January 2003.
(7) Resigned as of May 2003.
(8) Includes 66,666 shares subject to options exercisable within 60 days
after March 25, 2004.
(9) Includes 66,666 shares subject to options exercisable within 60 days
after March 25, 2004 and 7,500 shares accrued for director fees that
have not been issued.
(10) Includes 66,666 shares subject to options exercisable within 60 days
after March 25, 2004 and 7,500 shares accrued for director fees that
have not been issued.
(11) Includes 359,999 shares subject to options exercisable within 60 days
after March 25, 2004.
EXECUTIVE OFFICERS
The names, ages and positions of all the executive officers of the Company
as of January 31, 2004 are listed below. Except as noted below, each officer
was last elected as an executive officer at the meeting of directors immediately
following the last Annual Meeting of Stockholders in 2003. The executive
officers serve at the pleasure of the Board of Directors. There exist no
arrangements or understandings between any officer and any other person pursuant
to which the officer was elected.
OFFICER
NAME AGE POSITION SINCE
- --------------- --- ------------------------------------- -------
Arthur L. Smith 39 President and Chief Executive Officer 2003
Antonio Estrada 29 Corporate Controller 2003
Mr. Smith has served as our President and Chief Executive Officer since May
2003. Mr. Smith also served as President of ATSI-Mexico from August 2002 to
January 2003, as Chief Executive Officer and a director of the Company from June
1996 to August 2002 and as President of the Company since its formation in June
1996 to July 1998. Mr. Smith also served as President, Chief Operating Officer
and a director of ATSI-Canada since its formation in May 1994. From December
1993 until May 1994, Mr. Smith served in the same positions with Latcomm
International Inc., which company amalgamated with Willingdon Resources Ltd. to
form ATSI-Canada in May 1994. Mr. Smith also served as President and Chief
Executive Officer of American TeleSource International, Inc., one of the
Company's principal operating subsidiaries, from December 1993 to August 2001.
From June 1989 to December 1993, Mr. Smith was employed as director of
international sales by GeoComm Partners, a satellite-based telecommunications
company located in San Antonio, providing telecommunications services to Latin
America.
Mr. Estrada has served as Corporate Controller since May 2003. From
January 2002 through January 2003, Mr. Estrada served as Director of
International Accounting and Treasurer. From January 2001 to January 2002, Mr.
Estrada served in various roles within ATSI, including International Accounting
Manager and general Accountant. Prior to joining ATSI in 1999 he served as a
Senior Accountant for the Epilepsy Association of San Antonio and South Texas.
Mr. Estrada graduated from the University of Texas at San Antonio, with a
Bachelors of Business Administration, with a concentration in Accounting.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the compensation
earned during the Company's last three fiscal years by the Company's Chief
Executive Officer and each of the Company's other four most highly compensated
executive officers whose total cash compensation exceeded $100,000 for services
rendered in all capacities for the fiscal years ended July 31, 2003
(collectively, the "Named Executive Officers").
-6-
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------- ------------------------
OTHER SECURITIES
ANNUAL UNDERLYING
COMPEN- OPTIONS/
FISCAL SALARY BONUS SATION SARS LTIP
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) PAYOUT ($)
Arthur L. Smith
President and Chief Executive Officer 2003 $ 90,808 $ 14,105 (1) 300,000 -0-
2002 $ 174,327 $ 24,004 (1) 1,166,666 -0-
2001 $ 190,000 -0- -0- -0- -0-
Stephen M. Wagner (2)
President and Chief Executive Officer 2003 $ 71,154 $ 30,833 (1) -0- -0-
2002 $ 174,327 -0- (1) 500,000 -0-
2001 -0- -0- -0- -0- -0-
Raymond G. Romero (3)
Interim President and Chief Executive
Officer 2003 $ 56,923 -0- (1) -0- -0-
2002 $ 137,008 -0- (1) 150,000 -0-
2001 $ 140,000 -0- (1) 50,000 -0-
- -----------
(1) The Company has concluded that the aggregate amount of such personal
benefits does not exceed the lesser of $50,000 or 10% of annual salary and
bonus for the Named Executive Officer.
(2) Mr. Wagner resigned in January 2003 and compensation included all
compensation during the period of employment and severance benefits.
(3) Mr. Romero resigned in May 2003 and compensation included all compensation
during the period of employment and severance benefits.
Stock Option Plans
1997 Option Plan: The American TeleSource International Inc. 1997 Stock
------------------
Option Plan (the "1997 Option Plan") was adopted in February 1997 by the Board
of Directors of the Company and approved in May 1997 by the Company's
stockholders. The 1997 Option Plan terminated on February 10, 1998. No further
options will be granted under the 1997 Option Plan. All options outstanding
under the 1997 Option Plan on the date of termination will remain outstanding
under the 1997 Option Plan in accordance with their respective terms and
conditions. As of July 31, 2003, options to purchase 2,000 shares were
outstanding under the 1997 Option Plan at a weighted average exercise price of
$.58 per share, all of which were exercisable. As of July 31, 2003, options to
purchase a total of 4,463,331 shares had been exercised and options to purchase
451,668 shares were forfeited.
1998 Option Plan: The American TeleSource International, Inc. 1998 Stock
------------------
Option Plan (the "1998 Option Plan") was adopted in September 1998 by the Board
of Directors of the Company and approved in December 1998 by the Company's
stockholders. The 1998 Option Plan authorizes the grant of up to 2,000,000
incentive stock options and non-qualified stock options to employees, directors
and certain other persons. The 1998 Option Plan terminated on September 9,
2001. No further options will be granted under the 1998 Option Plan. All
options outstanding under the 1998 Option Plan on the date of termination will
remain outstanding under the 1998 Option Plan in accordance with their
respective terms and conditions. As of July 31, 2003, options to purchase
352,834 shares were outstanding under the 1998 Option Plan at a weighted average
exercise price of $.56 per share. As of July 31, 2003, options to purchase
340,334 shares were exercisable, options to purchase 757,254 had been exercised,
and options to purchase 1,104,712 shares had been forfeited.
2000 Option Plan: The ATSI Communications, Inc. 2000 Incentive Stock
------------------
Option Plan (the "2000 Option Plan") was adopted in December 2000 by the Board
of Directors of the Company and approved in February 2001 by the Company's
stockholders. The 2000 Option Plan authorizes the grant of up to 9.8 million
incentive stock options and non-qualified stock options to employees, directors
and certain other persons. As of July 31, 2002, the Board had granted options
to purchase 7,771,499 shares of Common Stock under the 2000 Option Plan at
exercise prices from $.08 per share to $.64 per share. As of July 31, 2002,
options to purchase 1,976,665 shares were exercisable at a weighted average
exercise price of $.55 per share. No options had been exercised and options to
purchase 3,961,500 shares had been forfeited.
Stock Option Grants in Fiscal 2003
The following table shows stock options granted to each of the Named
Executive Officers during the year ended July 31, 2003.
-7-
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED RATES
OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION
- --------------------------------------------------------------------------------------- --------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEE IN FISCAL EXERCISE OR BASE EXPIRATION
NAME GRANTED (#) YEAR PRICE DATE 5% 10%
Arthur L. Smith 300,000 55.6%
Stephen M. Wagner -0- -0- N/A N/A N/A N/A
Raymond G. Romero -0- -0- N/A N/A N/A N/A
Aggregate Option Exercises in Fiscal 2003 and Fiscal Year-End Option Values
The following table shows stock options exercised by the Named Executive
Officers during the fiscal year ended July 31, 2003, including the aggregate
value of gains on the date of exercise. In addition, the table includes the
number of shares covered by both exercisable and unexercisable stock options
held by each Named Executive Officer as of July 31, 2003 and the value of
"in-the-money" options held by such persons as of July 31, 2003.
NUMBER OF
SHARES SECURITIES VALUE OF
ACQUIRED UNDERLYING UNEXERCISED
ON VALUE UNEXERCISED IN-THE-MONEY
EXERCISE REALIZED ($) OPTIONS/SARS OPTIONS/SARS
NAME (#) (1) AT 07/31/03 AT 07/31/03 (2)
Exercisable Unexercisable Exercisable Unexercisable
Arthur L. Smith -0- -0- 1,099,999 500,000 -0- -0-
Stephen M. Wagner -0- -0- -0- -0- -0- -0-
Raymond G. Romero -0- -0- -0- -0- -0- -0-
- -----------
(1) The values of the exercised options represent the difference between the
closing price of the shares underlying the options on the Over-the-Counter
market and the exercise price of the options on the date of exercise.
(2) The values of the unexercised options are based upon the difference between
the exercise price and the closing price per share on July 31, 2003, as
reported on the Over-the-Counter market.
-8-
PERFORMANCE GRAPH
The Common Stock has been registered under Section 12 of the Securities
Exchange Act of 1934, as amended, since October 20, 1997. The following
Performance Graph compares the cumulative total stockholder return on the Common
Stock from July 31, 1998 through July 31, 2003 with the cumulative total return
of the NASDAQ Market Value Index and the NASDAQ Telecommunications Index. The
graph assumes that the value of the investment in the Common Stock and each
index was $100 at July 31, 1998 and that all dividends were reinvested.
[GRAPHIC OMITED]
Comparison of Cumulative Total Return
Among the Company, NASDAQ Index and NASDAQ Telecommunications Index
July 31, July 31, July 31, July 31, July 31, July 31,
1998 1999 2000 2001 2002 2003
- --------------------------------------------------------------------------------
The Company 100.0 144.32 440.34 46.59 10.23 6.70
NASDAQ Market Index 100.0 136.68 190.82 107.75 66.68 86.07
Telecom Index 100.0 147.7 186.96 65.41 22.53 35.47
The foregoing graph is based on historical data and is not necessarily
indicative of future performance.
-9-
PROPOSAL NUMBER 1:
ELECTION OF DIRECTORS
The business affairs of the Company are managed under the direction of the
Board of Directors consisting of seven (7) persons, divided into three (3)
classes. Members of each class serve offset terms of three (3) years so that
only one class is elected each year. Class C, consisting of Mr. Fleming and a
vacancy for which no nominee has been named, will continue to serve following
this Annual Meeting of Stockholders for a term that will expire at the Annual
Meeting of Stockholders in 2005. Class A, consisting of Mr. Smith and two
vacancies for which no nominees have been named, will continue to serve
following this Annual Meeting of Stockholders for a term that will expire at the
Annual Meeting of Stockholders in 2006. Class B, consisting of Messrs. Nye and
Benkendorf both of whom have been nominated for re-election at this Annual
Meeting of Stockholders, will serve for a term that will expire at the Annual
Meeting of Stockholders in 2007. THE BOARD OF DIRECTORS RECOMMENDS THAT THE
NOMINEES LISTED BELOW BE ELECTED BY THE STOCKHOLDERS. UNLESS OTHERWISE
SPECIFIED, ALL PROPERLY EXECUTED PROXIES RECEIVED BY THE COMPANY WILL BE VOTED
AT THE ANNUAL MEETING OR ANY ADJOURNMENT THEREOF FOR THE ELECTION OF THE PERSONS
WHOSE NAMES ARE LISTED IN THE FOLLOWING TABLE AS NOMINEES FOR DIRECTORS WHOSE
TERM WILL EXPIRE IN 2007.
PERSONS NOMINATED FOR DIRECTORS WHOSE TERM WILL EXPIRE IN 2007
DIRECTOR
NAME AND PRINCIPAL OCCUPATION AGE SINCE
- -------------------------------------------------------------------------------- --- --------
MURRAY R. NYE MR. NYE IS A SELF-EMPLOYED CONSULTANT. SINCE 1994 HE HAS 50 1996
SERVED AS CHIEF EXECUTIVE OFFICER AND A DIRECTOR OF ATSI-CANADA, A DORMANT
SUBSIDIARY. FROM DECEMBER 1993 UNTIL MAY 1994, MR. NYE SERVED AS CHIEF
EXECUTIVE OFFICER AND DIRECTOR WITH LATCOMM INTERNATIONAL INC., WHICH
AMALGAMATED WITH WILLINGDON RESOURCES LTD. TO FORM ATSI-CANADA IN MAY 1994.
FROM 1992 TO 1995, MR. NYE SERVED AS PRESIDENT OF KIRRIEMUIR OIL & GAS LTD.
MR. NYE SERVES AS A DIRECTOR OF D.M.I. TECHNOLOGIES, INC., AN ALBERTA STOCK
EXCHANGE-TRADED COMPANY.
RICHARD C. BENKENDORF FROM 1991 TO PRESENT, MR. BENKENDORF HAS BEEN A 65 1996
PRINCIPAL OF TECHNOLOGY IMPACT PARTNERS, WHICH PROVIDES ADVISORY AND
INVESTMENT SERVICES. FROM 1989 TO 1991, MR. BENKENDORF SERVED AS SENIOR
VICE PRESIDENT INVESTMENT, PLANNING, MERGERS & ACQUISITIONS AND VENTURE
CAPITAL FOR AMERITECH, A COMMUNICATIONS SERVICES COMPANY.
THE FOLLOWING PERSONS HAVE BEEN PREVIOUSLY ELECTED AS DIRECTORS OF THE COMPANY
AND WILL CONTINUE TO SERVE AFTER THE ANNUAL MEETING.
DIRECTORS WHOSE TERM EXPIRES IN 2006
DIRECTOR
NAME AND PRINCIPAL OCCUPATION AGE SINCE
- -------------------------------------------------------------------------------- --- --------
ARTHUR L. SMITH MR. SMITH HAS SERVED AS OUR PRESIDENT AND CHIEF EXECUTIVE 39 2003
OFFICER SINCE MAY 2003. MR. SMITH ALSO SERVED AS PRESIDENT OF ATSI-MEXICO
FROM AUGUST 2002 TO JANUARY 2003, AS CHIEF EXECUTIVE OFFICER AND A DIRECTOR
OF THE COMPANY FROM JUNE 1996 TO AUGUST 2002 AND AS PRESIDENT OF THE
COMPANY SINCE ITS FORMATION IN JUNE 1996 TO JULY 1998. MR. SMITH ALSO
SERVED AS PRESIDENT, CHIEF OPERATING OFFICER AND A DIRECTOR OF ATSI-CANADA
SINCE ITS FORMATION IN MAY 1994. FROM DECEMBER 1993 UNTIL MAY 1994, MR.
SMITH SERVED IN THE SAME POSITIONS WITH LATCOMM INTERNATIONAL INC., WHICH
COMPANY AMALGAMATED WITH WILLINGDON RESOURCES LTD. TO FORM ATSI-CANADA IN
MAY 1994. MR. SMITH ALSO SERVED AS PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
AMERICAN TELESOURCE INTERNATIONAL, INC., ONE OF THE COMPANY'S PRINCIPAL
OPERATING SUBSIDIARIES, FROM DECEMBER 1993 TO AUGUST 2001. FROM JUNE 1989
TO DECEMBER 1993, MR. SMITH WAS EMPLOYED AS DIRECTOR OF INTERNATIONAL SALES
BY GEOCOMM PARTNERS, A SATELLITE-BASED TELECOMMUNICATIONS COMPANY LOCATED
IN SAN ANTONIO, PROVIDING TELECOMMUNICATIONS SERVICES TO LATIN AMERICA.
DIRECTORS WHOSE TERM EXPIRES IN 2005
DIRECTOR
NAME AND PRINCIPAL OCCUPATION AGE SINCE
- -------------------------------------------------------------------------------- --- --------
JOHN R. FLEMING MR. FLEMING IS THE PRINCIPAL AND FOUNDER OF VISION 48 2001
CORPORATION, AN EARLY-STAGE INVESTMENT COMPANY THAT FOCUSES ON
COMMUNICATIONS TECHNOLOGIES, SERVICE AND HARDWARE. PRIOR TO FORMING VISION
CORPORATION, MR. FLEMING SERVED AS PRESIDENT, INTERNATIONAL OF IXC
COMMUNICATIONS, INC. FROM APRIL 1998 TO DECEMBER 1999. IMMEDIATELY PRIOR TO
THAT HE SERVED AS IXC'S PRESIDENT OF EMERGING MARKETS FROM DECEMBER 1997,
AS EXECUTIVE VICE PRESIDENT OF IXC FROM MARCH 1996 THROUGH NOVEMBER 1997
AND AS SENIOR VICE PRESIDENT OF IXC FROM OCTOBER 1994 THROUGH MARCH 1996.
HE SERVED AS VICE PRESIDENT OF SALES AND MARKETING OF IXC FROM ITS
FORMATION IN JULY 1992 UNTIL OCTOBER 1994. PRIOR TO THAT, MR. FLEMING
SERVED AS DIRECTOR OF BUSINESS DEVELOPMENT AND DIRECTOR OF CARRIER SALES OF
CTI FROM 1986 TO MARCH 1990 AND AS VICE PRESIDENT -- MARKETING AND SALES OF
CTI FROM MARCH 1990 TO JULY 1992. MR. FLEMING WAS A BRANCH MANAGER FOR
SATELLITE BUSINESS SYSTEMS FROM 1983 TO 1986.
-10-
Meetings of the Board and Committees
The Board of Directors of the Company held a total of 28 meetings during
the fiscal year ended July 31, 2003. No incumbent director of the Company
during fiscal 2003 attended fewer than 75% of the aggregate number of meetings
of the Board and all committees on which the director served and which he was
entitled to attend.
The Board of Directors does not have a separate Nominating Committee or
Compensation Committee and performs all of the functions of such committees.
The Audit Committee of the Board of Directors is composed of Messrs. Nye and
Benkendorf. Pursuant to the written charter of the Audit Committee, it is
responsible for the financial reports and other financial information provided
by the Company to any governmental body or the public; the Company's systems of
internal controls regarding finance, accounting, legal compliance and ethics
that management and the Board of Directors have established; and the Company's
auditing, accounting and financial reporting processes generally. The Audit
Committee held two meetings during the fiscal year ended July 31, 2003. Both
Mr. Nye and Mr. Benkendorf are independent directors as defined in Rule
4200(a)(15) of the NASD listing standards and the Board of Directors has
determined that Mr. Benkendorf qualifies as an audit committee financial expert
based on his experience in financial matters.
Certain Relationships and Related Transactions
We have entered into a month-to-month agreement with Technology Impact
Partners, a consulting firm of which Director Richard C. Benkendorf is principal
and owner. Under the agreement, Technology Impact Partners provides us with
various services that include strategic planning, business development and
financial advisory services. Under the terms of the agreement, we were
obligated to pay the firm $3,750 per month plus expenses. In November 2000 the
agreement was modified and the Company is obligated only to reimburse the firm
for its expenses. At July 31, 2003, we were obligated to Technology Impact
Partners for $79,794.
In December 2002, the Company entered into a note payable with Director
John R. Fleming, in the original principal amount of $25,000 and bearing
interest at the rate of 7% per annum. During the year ended July 31, 2003, the
Company did not make any payments on this note. At July 31, 2003, we were
obligated to Mr. Fleming for $35,377 for this note, delinquent directors' fees
and related expenses.
Compensation of Directors
Directors are reimbursed their reasonable out-of-pocket expenses in
connection with their travel to and attendance at meetings of the Board of
Directors. In addition, each Director that is not an officer of the Company
receives $1,250 and 1,500 shares of Common Stock for each meeting of the Board
attended in person and $250 for each meeting attended by telephone.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who own more than 10%
of a registered class of the Company's equity securities to file various reports
with the Securities and Exchange Commission concerning their holdings of, and
transactions in, securities of the Company. Copies of these filings must be
furnished to the Company.
Based solely on a review of the copies of such forms furnished to the
Company, the Company believes that, during the fiscal year ended July 31, 2003,
all of its directors and executive officers timely filed all reports required by
Section 16(a) of the Securities Exchange Act.
-11-
BOARD AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the "Audit Committee") has:
1. Reviewed and discussed the audited financial statements for the fiscal
year ended July 31, 2003 with the management of the Company;
2. Discussed with the Company's Independent Auditors the matters required
to be discussed by Statement of Accounting Standards No. 61, as the same
was in effect on the date of the Company's financial statements; and
3. Received the written disclosures and the letter from the Company's
Independent Auditors required by Independence Standards Board Standard No.
1 (Independence Standards Board Standard No. 1, Independence Discussions
with Audit Committees), as the same was in effect on the date of the
Company's financial statements, and has discussed with the Independent
Auditors their independence.
Based on the foregoing materials and discussions, the Audit Committee
recommended to the Board of Directors that the audited financial statements for
the fiscal year ended July 31, 2003 be included in the Company's Annual Report
on Form 10-K.
Respectfully submitted,
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Murray R. Nye
Richard C. Benkendorf
-12-
PROPOSAL NUMBER 2:
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Malone and Bailey, PLLC. to serve as
independent public accountants of the Company for the fiscal year ending July
31, 2004. Although stockholder ratification is not required, the Board of
Directors has directed that such appointment be submitted to the stockholders of
the Company for ratification at the Annual Meeting. A representative of Malone
and Bailey, PLLC will be present at the Annual Meeting, will have an opportunity
to make a statement if he or she desires to do so, and will be available to
respond to appropriate questions.
Tanner + Co. served as the independent accountants of the Company since
2002. On December 9, 2003, the Board of Directors approved the recommendation
of its Audit Committee that the firm of Tanner + Co. be dismissed as its
independent public accountants and that the firm of Malone and Bailey, PLLC be
engaged as the independent auditors of the Company. The opinion of Tanner + Co.
for fiscal 2002 and fiscal 2003 contained a qualification as to the uncertainty
of the Company's ability to continue as a going concern but was not otherwise
qualified or limited. During the year ended July 31, 2002 and 2003 and through
the date hereof, there were no disagreements with Tanner + Co. on any matters of
accounting principle or practice, financial statement disclosure, or auditing
scope or procedure, which, if not resolved to the satisfaction of the former
auditors, would have been referred to in the auditors' report and there were no
"reportable events" as described in Item 304(a)(1)(v) of Regulation S-K.
On December 13, 2001, the Board of Directors approved the recommendation of
its Audit Committee that the firm of Arthur Andersen LLP be dismissed as its
independent public accountants and that the firm of Ernst & Young, LLP be
engaged as the independent auditors of the Company. On November 14, 2002, the
Company's Board of Directors approved the recommendation of its Audit Committee
that the firm of Ernst & Young, LLP be dismissed as its independent public
accountants and that the firm of Tanner + Co. be hired as its independent public
accountants for the fiscal year ending July 31, 2002. The opinion of Arthur
Andersen LLP for fiscal 2001 contained a qualification as to the uncertainty of
the Company's ability to continue as a going concern but was not otherwise
qualified or limited. During the year ended July 31, 2001 and through the date
hereof, there were no disagreements with Arthur Andersen LLP or Ernst & Young,
LLP on any matters of accounting principle or practice, financial statement
disclosure, or auditing scope or procedure, which, if not resolved to the
satisfaction of the former auditors, would have been referred to in the
auditors' report and there were no "reportable events" as described in Item
304(a)(1)(v) of Regulation S-K.
The Company did not consult Malone and Bailey, PLLC with respect to the
application of accounting principles to a specified transaction, proposed or
completed, or the type of audit opinion that might be rendered on the Company's
financial statements, or any other matters or reportable events pursuant to Item
304(a)(1)(v) of Regulation S-K.
The Company paid the following fees to its principal independent
accountants for services during the fiscal years ended July 31, 2002 and July
31, 2003, which the Audit Committee has determined are compatible with
maintaining the independence of Tanner + Co.
YEAR ENDED JULY 31,
DESCRIPTION OF FEES 2002 2003
Audit Fees $ 95,000 $35,000
Audit Related Fees -0- -0-
Tax Fees -0- -0-
All Other Fees -0- -0-
The Audit Committee has instructed Malone and Bailey PLLC that any fees for
non-audit services must be approved before being incurred.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE APPOINTMENT OF MALONE AND
BAILEY, PLLC AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY FOR THE FISCAL
YEAR ENDING JULY 31, 2004 BE RATIFIED BY THE STOCKHOLDERS. UNLESS OTHERWISE
INDICATED, ALL PROPERLY EXECUTED PROXIES RECEIVED BY THE COMPANY WILL BE VOTED
FOR SUCH RATIFICATION AT THE ANNUAL MEETING OR ANY ADJOURNMENT THEREOF. The
ratification of Malone and Bailey, PLLC as the independent public accountants of
the Company will not be binding on the Company and the Audit Committee may
select a new firm to act as the independent public accountants of the Company at
any time in their discretion. An adverse vote will be considered a direction to
the Audit Committee to select other independent public accountants in the
following year.
-13-
PROPOSAL NUMBER 3:
RE-INCORPORATION IN NEVADA
SUMMARY
TRANSACTION: Re-incorporation in Nevada
PURPOSE: To provide greater flexibility and simplicity in corporate transactions, reduce taxes and
other costs of doing business, reduce the number of shares of Common Stock outstanding,
and reduce the amount of short sales of our Common Stock. See "Principal Reasons for
Re-incorporation"
METHOD: Merger of ATSI Communications, Inc. with and into our wholly owned Nevada
subsidiary, ATSI Merger Corporation. See "Principal Features of the Re-incorporation"
EXCHANGE One share of ATSI Merger Corporation Common Stock and ten (10) shares of ATSI
RATIOS: Merger Corporation Series H Convertible Preferred Stock will be issued for each 100
shares of ATSI Communications, Inc. Common Stock held as of the Effective Date. Any
fractional shares of ATSI Merger Corporation Common Stock or Series H Convertible
Preferred Stock will be rounded up to the nearest whole share. See "Principal Features of
the Re-incorporation"
One share of ATSI Merger Corporation Preferred Stock, with substantially similar rights,
preferences, limitations and designations, will be issued for each share of ATSI
Communications, Inc. Preferred Stock outstanding as of the effective date. See
"Principal Features of the Re-incorporation"
EFFECTIVE May 24, 2004, subject to approval by the ATSI Communications, Inc. stockholders.
DATE:
ADDITIONAL Mandatory exchange of outstanding certificates representing shares of ATSI
PROVISIONS: Communications, Inc. Common Stock for certificates representing shares of ATSI
Merger Corporation Common Stock and ATSI Merger Corporation Series H Convertible
Preferred Stock. See "How to Exchange Old ATSI Certificates for New ATSI
Certificates"
TAXATION: We believe that the merger of ATSI Communications, Inc. with and into ATSI Merger
Corporation will not be a taxable transaction. See "Taxation of Re-incorporation"
THE BOARD OF DIRECTORS RECOMMENDS THAT THE MERGER WITH ATSI MERGER CORPORATION
BE APPROVED BY THE STOCKHOLDERS. UNLESS OTHERWISE INDICATED, ALL PROPERLY
EXECUTED PROXIES RECEIVED BY THE COMPANY WILL BE VOTED FOR SUCH APPROVAL AT THE
ANNUAL MEETING OR ANY ADJOURNMENT THEREOF.
The following discussion does not include all of the provisions of the Plan
and Agreement of Merger between the Company ("Old ATSI") and its Nevada
subsidiary, ATSI Merger Corporation ("New ATSI"), a copy of which is attached
hereto as Exhibit "A," the Articles of Incorporation of New ATSI, a copy of
which is attached hereto as Exhibit "B," and a description of the Series H
Preferred Stock, a copy of which is attached hereto as Exhibit "C." Copies of
the Certificate of Incorporation and the bylaws of Old ATSI and the bylaws of
New ATSI are available for inspection at our principal office and we will send
copies to stockholders upon request.
Principal Reasons for Re-incorporation
We believe that the re-incorporation in Nevada will provide a greater
measure of flexibility and simplicity in corporate governance than is available
under Delaware law, save taxes and other expenses, provide additional authorized
and unissued shares of Common Stock, and increase the marketability of our
securities.
-14-
Nevada has adopted a modern code governing the formation and operation of
corporations. It includes by statute many of the concepts developed judicially
in Delaware. In addition, the Nevada law provides for greater flexibility in
raising capital and other corporate transactions and limits the ability of
controlling stockholders to engage in certain transactions. The merger will
result in these provisions being applicable to Old ATSI. Also as a result of
the merger, New ATSI will have a greater number of authorized and unissued
shares of Common Stock that can be issued to raise capital, compensate employees
or consultants or for other corporate purposes.
Nevada imposes no franchise taxes or corporate income taxes on corporations
that are incorporated in Nevada, which will result in an immediate savings. We
also believe that the cost of doing business as a Nevada corporation will be
less because there are fewer reports that must be filed with agencies of the
State of Nevada and the costs of litigation and other legal processes is less in
Nevada.
As of the Record Date there are 143,631,119 shares of Common Stock
outstanding. The large number of shares outstanding makes administration of the
share transfer records expensive and overly complicated for a Company with
limited market capitalization. One of the features of the re-incorporation will
be a conversion of 100 shares of Old ATSI Common Stock into one (1) share of New
ATSI Common Stock which will make it more economical to maintain transfer
records and make transactions in shares of New ATSI more economical.
We believe that the price of our Common Stock may be artificially depressed
due to abnormally high short-selling by speculators who are not stockholders.
We believe that these sales are conducted through a practice commonly known as a
"naked short" sale. Certain brokers may have permitted their customers to sell
shares that are neither owned by such customers nor borrowed from another
stockholder. As a result, the broker has not delivered the shares sold to the
purchasers. If this practice is widespread, it creates severe pressure on the
price of our stock since there is no limit on the number of shares that are
traded. The re-incorporation in Nevada will permit us to require the delivery
of certificates representing our shares for exchange in connection with the
re-incorporation or subsequent changes in our capital structure. We believe
that the practice of naked short sales, and the depression of our stock price
which it has caused, will be discouraged as a result of the merger.
We have been advised by our counsel in certain litigation filed by us that
reincorporation in Nevada would be beneficial to the Company and its
stockholders.
Principal Features of the Re-incorporation
The re-incorporation will be effected by the merger of Old ATSI with and
into our wholly owned subsidiary, New ATSI. New ATSI will be the surviving
entity. The re-incorporation will be effective as soon as reasonably possible
after the approval of the Plan and Agreement of Merger at the Annual Meeting.
On the Effective Date (i) each of our stockholdersoutstanding as of the EffectiveRecord Date will become entitledplus, with respect to receive one share of New ATSI Common Stock and ten (10)
shares of New ATSI Series H Convertible Preferred Stock for each 100 shares of
Old ATSI Common Stock surrendered, (ii) any fractional shares of New ATSI Common
Stock or New ATSI Preferred Stock that would result from the merger will be
rounded up to the nearest whole share, (iii) each of the owners of any series of
our Preferred Stock will be entitled to receive an equal number of shares of the
New ATSI Preferred Stock having identical designations, rights and preferences,
(iv) each share of New ATSI Common Stock owned by Old ATSI prior to the merger
will be canceled and will resume the status of authorized and unissued New ATSI
Common Stock, (v) Old ATSI will cease its corporate existence in the State of
Delaware, and (vi) Old ATSI will cease to trade on the Over-the-Counter market
under the symbol "ATSC" and New ATSI will begin trading under a new symbol and
CUSIP to be assigned.
The Articles of Incorporation and bylaws of New ATSI are substantially
identical to the Certificate of Incorporation and bylaws of Old ATSI. Except
for the differences between the laws of the State of Delaware, which govern Old
ATSI, and the laws of the State of Nevada, which govern New ATSI, your rights as
stockholders will not be affected by the merger. See the information under
"Significant Differences between Old ATSI and New ATSI" for a summary of the
differences between the laws of the State of Delaware and the laws of the State
of Nevada.
The Board of Directors and officers of New ATSI will consist of the persons
who are our directors and officers prior to the merger. Our daily business
operations will continue at the principal executive offices at the locations
operated by Old ATSI.
-15-
Capitalization
The merger will not affect stockholders' equity but will result in a change
to the number and description of the shares of capital stock outstanding andindividual, the number of shares of Common Stock that are authorized and unissued.
The authorized capital of Old ATSI consists of 200,000,000 shares of Common
Stock, $.001 par value, and 10,000,000 shares of Preferred Stock, $.001 par
value. As of March 25, 2004, there were 143,631,119 shares of Old ATSI Common
Stock and 6,567 shares of Old ATSI Preferred Stock outstanding. In addition,
there were 8,673,659 shares of Old ATSI Common Stock reserved for issuance under
outstanding warrants and options. The remaining 47,695,222 authorized shares of
Common Stock are not sufficient to cover the number of shares of Common Stock
issuable upon conversion of all outstanding securities convertible into Common
Stock. As a result, no shares of Common Stock were available for issuance by
the Board of Directors to raise capital for operations, compensation of
employees or other corporate purposes.
The authorized capital of New ATSI consists of 200,000,000 shares of
capital stock divided into 150,000,000 shares of Common Stock, $.001 par value
per share, and 50,000,000 shares of Preferred Stock, $.001 par value per share.
The Board of Directors of New ATSI has adopted designations, rights and
preferences for Preferred Stock which are identical to the rights and
preferences of the Preferred Stock issued by Old ATSI. In addition, the Board
of Directors of New ATSI has adopted rights and preferences of the Series H
Convertible Preferred Stock (the "Series H Preferred Stock") that will be issued
as a result of the merger. See "Description of Capital Stock of New ATSI". As
a result of the merger and mandatory exchange of the Common Stock, New ATSI will
have outstanding approximately 1,437,000 shares of Common Stock, 6,567 shares of
Preferred Stock on terms identical to the outstanding shares of Old ATSI
Preferred Stock, and 14,370,000 shares of Series H Preferred Stock. In
addition, New ATSI has reserved approximately 1,000,000 shares of Series H
Preferred Stock and 23,000,000 shares of Common Stock for issuance under
outstanding warrants, options and convertible securities. Accordingly, the
Board of Directors of New ATSI will have available approximately 126,000,000
shares of Common Stock and, 34,000,000 shares of Preferred Stock which are
authorized but presently unissued and unreserved.
Description of Capital Stock of New ATSI
Shares of New ATSI Common Stock will have one vote for each share and will
otherwise be identical to the shares of Old ATSI Common Stock. Since all
stockholders of Old ATSI will receive at least one (1) share of New ATSI Common
Stock there will not be any change in the number of stockholders and all
stockholders will own the same percentage ownership in New ATSI that they owned
in Old ATSI, subject to minor changes as a result of rounding.
Each owner of Old ATSI Common Stock on the Effective Date will also receive
at least one (1) share of New ATSI Series H Preferred Stock. Each share of the
Series H Preferred Stock may be redeemed by New ATSI at any time for one (1)
share of New ATSI Common Stock, may be converted at the option of the holder to
one and one-fifth (1.2) share of New ATSI Common Stock after one (1) year and
may be converted at the option of the holder to one and one-half (1.5) share of
New ATSI Common Stock after two (2) years. The Series H Preferred Stock does
not vote on any matters (except as required by Nevada law with respect to changes in the rights of the Series H Preferred Stock) and shares equally with
the shares of New ATSI Common Stock in distributions of dividends or liquidation
amounts as though the Series H Preferred Stock had been converted to Common
Stock.
Significant Differences Between the Old ATSI and New ATSI
Old ATSI is incorporated under the laws of the State of Delaware and New
ATSI is incorporated under the laws of the State of Nevada. Those stockholders
that tender their certificates representing the shares of our Common Stock for
exchange will become stockholders of New ATSI. Their rights as stockholders
will be governed by the Nevada Business Corporation Act ("Nevada law") and the
Articles of Incorporation and bylaws of New ATSI rather than the Delaware
General Corporation Law ("Delaware law") and the Old ATSI Certificate of
Incorporation and bylaws.
The corporate statutes of Nevada and Delaware have certain differences,
summarized below. This summary is not intended to be complete, and is qualified
by reference to the full text of, and decisions interpreting, Delaware law and
Nevada law.
Classified Board of Directors. Both Delaware and Nevada law permit
--------------------------------
corporations to classify their Board of Directors so that less than all of the
directors are elected each year to overlapping terms. Both Old ATSI and New
ATSI have classified boards consisting of three classes, elected to three-year
terms. As a result of the merger, our directors will become directors of New
ATSI with terms expiring at the same time as the terms to which they are elected
for Old ATSI.
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Removal of Directors. Under Delaware law, members of a classified Board of
--------------------
Directors may only be removed for cause. Removal requires the vote of a
majority of the outstanding shares entitled to vote for the election of
directors. In addition, the Certificate of Incorporation of Old ATSI requires
the vote of two-thirds (2/3) of the voting interests entitled to vote on the
election of the Directors to remove a Director. Nevada law provides that any or
all directors may be removed by the vote of two-thirds (2/3) of the voting
interests entitled to vote for the election of directors but does not
distinguish between removal of directors with and without cause. The merger may
make it easier for the stockholders of New ATSI to remove a member of the Board
of Directors.
Special Meetings of Stockholders. Delaware law permits special meetings of
--------------------------------
stockholders to be called by the Board of Directors or by any other person
authorized in the certificate of incorporation or bylaws to call a special
stockholder meeting. The Certificate of Incorporation of Old ATSI provides that
only the President of the Company or a majority of the Board of Directors may
call a special meeting of the stockholders. Nevada law does not address the
manner in which special meetings of stockholders may be called but permits
corporations to determine the manner in which meetings are called in their
bylaws. The Articles of Incorporation and bylaws of New ATSI provide that
special meetings of the stockholders may be called only by the Board of
Directors or a committee of the Board of Directors that is delegated the power
to call special meetings by the Board of Directors. The merger will not have a
significant effect on the ability of the stockholders to call a special meeting.
Special Meetings Pursuant to Petition of Stockholders. Delaware law
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provides that a director or a stockholder of a corporation may apply to the
Court of Chancery of the State of Delaware if the corporation fails to hold an
annual meeting for the election of directors or there is no written consent to
elect directors in lieu of an annual meeting taken, in both cases for a period
of thirty (30) days after the date designated for the annual meeting or if there
is no such date designated, within 13 months after the last annual meeting.
Nevada law is more restrictive. Under Nevada law stockholders having not less
than 15% of the voting interest may petition the district court to order a
meeting for the election of directors if a corporation fails to call a meeting
for that purpose within 18 months after the last meeting at which directors were
elected. The merger may make it more difficult for the stockholders of New ATSI
to require that an annual meeting be held without the consent of the Board of
Directors.
Cumulative Voting. Cumulative voting for directors entitles stockholders
------------------
to cast a number of votes that is equal to the number of voting shares held
multiplied by the number of directors to be elected. Stockholders may cast all
such votes either for one nominee or distribute such votes among up to as many
candidates as there are positions to be filled. Cumulative voting may enable a
minority stockholder or group of stockholders to elect at least one
representative to the Board of Directors where such stockholders would not
otherwise be able to elect any directors. Both Delaware and Nevada law permit
cumulative voting if provided for in the certificate or articles of
incorporation and pursuant to specified procedures. Neither the Certificate of
Incorporation of Old ATSI nor the Articles of Incorporation of New ATSI provide
for cumulative voting. The merger does not change the rights of the
stockholders to cumulate their votes.
Vacancies. Under Delaware law and the Certificate of Incorporation of Old
---------
ATSI, vacancies on the Board of Directors may be filled by the affirmative vote
of a majority of the remaining directors then in office, even if less than a
quorum. Any director so appointed will hold office for the remainder of the
full term of the class of directors in which the vacancy occurred. Similarly,
Nevada law provides that vacancies may be filled by a majority of the remaining
directors, though less than a quorum, unless the articles of incorporation
provide otherwise. The bylaws of New ATSI address the election of persons to
fill vacancies on the Board of Directors in the same manner.
Indemnification of Officers and Directors and Advancement of Expenses.
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Delaware and Nevada have substantially similar provisions regarding
indemnification by a corporation of its officers, directors, employees and
agents. Delaware and Nevada law differ in their provisions for advancement of
expenses incurred by an officer or director in defending a civil or criminal
action, suit or proceeding. Delaware law provides that expenses incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of the action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director or officer to repay the amount
if it is ultimately determined that he or she is not entitled to be indemnified
by the corporation. A Delaware corporation has the discretion to decide whether
or not to advance expenses, unless its certificate of incorporation or bylaws
provides for mandatory advancement. Nevada law differs in two respects: first,
Nevada law applies to advance of expenses incurred by both officers and
directors, and second, under Nevada law, the articles of incorporation, bylaws
or an agreement made by the corporation may provide that the corporation must
pay advancements of expenses in advance of the final disposition of the action,
suit or proceedings upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined that he
or she is not entitled to be indemnified by the corporation. There will be no
difference in stockholders' rights with respect to this issue because the bylaws
of Old ATSI and New ATSI each provide for the mandatory advancement of expenses
of directors and officers.
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Limitation on Personal Liability of Directors. Delaware law permits a
-----------------------------------------------
corporation to adopt provisions limiting or eliminating the liability of a
director to a company and its stockholders for monetary damages for breach of
fiduciary duty as a director, provided that such liability does not arise from
certain proscribed conduct, including breach of the duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law or liability to the corporation based on unlawful dividends or
distributions or improper personal benefit. The Certificate of Incorporation of
Old ATSI excluded director liability to the maximum extent allowed by Delaware
law. Nevada law permits, and New ATSI has adopted, a broader exclusion of
liability of directors to the corporation and its stockholders, providing for an
exclusion of all monetary damages for breach of fiduciary duty unless they arise
from act or omissions which involve intentional misconduct, fraud or a knowing
violation of law or payments of dividends or distributions in excess of the
amount allowed. The merger will result in the elimination of any liability of a
director for a breach of the duty of loyalty unless arising from intentional
misconduct, fraud, or a knowing violation of law.
Dividends. Delaware law is more restrictive than Nevada law with respect
---------
to when dividends may be paid. Under the Delaware law, unless further
restricted in the certificate of incorporation, a corporation may declare and
pay dividends, out of surplus, or if no surplus exists, out of net profits for
the fiscal year in which the dividend is declared and/or the preceding fiscal
year (provided that the amount of capital of the corporation is not less than
the aggregate amount of the capital represented by the issued and outstanding
stock of all classes having a preference upon the distribution of assets). In
addition, Delaware law provides that a corporation may redeem or repurchase its
shares only if the capital of the corporation is not impaired and such
redemption or repurchase would not impair the capital of the corporation.
Nevada law provides that no distribution (including dividends on, or redemption
or repurchases of, shares of capital stock) may be made if, after giving effect
to such distribution, the corporation would not be able to pay its debts as they
become due in the usual course of business, or, except as specifically permitted
by the articles of incorporation, the corporation's total assets would be less
than the sum of its total liabilities plus the amount that would be needed at
the time of a dissolution to satisfy the preferential rights of preferred
stockholders. The merger makes it possible for New ATSI to pay dividends or
other distributions that would not be payable under Delaware law.
Restrictions on Business Combinations. Both Delaware and Nevada law
----------------------------------------
contain provisions restricting the ability of a corporation to engage in
business combinations with an interested stockholder. Under Delaware law, a
corporation which is listed on a national securities exchange, included for
quotation on the Nasdaq Stock Market or held of record by more than 2,000
stockholders, is not permitted to engage in a business combination with any
interested stockholder for a three-year period following the time such
stockholder became an interested stockholder unless (i) the transaction
resulting in a person becoming an interested stockholder, or the business
combination, is approved by the Board of Directors of the corporation before the
person becomes an interested stockholder; (ii) the interested stockholder
acquires 85% or more of the outstanding voting stock of the corporation in the
same transaction that makes it an interested stockholder (excluding shares owned
by persons who are both officers and directors of the corporation, and shares
held by certain employee stock ownership plans); or (iii) on or after the date
the person becomes an interested stockholder, the business combination is
approved by the corporation's Board of Directors and by the holders of at least
66-2/3% of the corporation's outstanding voting stock at an annual or special
meeting (and not by written consent), excluding shares owned by the interested
stockholder. Delaware law defines "interested stockholder" generally as a
person who owns 15% or more of the outstanding shares of a corporation's voting
stock.
Nevada law regulates business combinations more stringently. First, an
"interested stockholder" is defined as a beneficial owner (directly or
indirectly) of ten percent (10%) or more of the voting power of the outstanding
shares of the corporation. Second, the three-year moratorium can be lifted only
by advance approval by a corporation's Board of Directors. Finally, after the
three-year period, combinations with "interested stockholders" remain prohibited
unless (i) they are approved by the Board of Directors, the disinterested
stockholders or a majority of the outstanding voting power not beneficially
owned by the interested party, or (ii) the interested stockholders satisfy
certain fair value requirements. As in Delaware, a Nevada corporation may
opt-out of the statute with appropriate provisions in its articles of
incorporation.
Neither the Old ATSI nor New ATSI have opted out of the applicable statutes
and the more stringent requirements of Nevada law apply to mergers and
combinations after the Effective Date of the merger.
Limitations on Controlling Stockholders. Nevada law contains a provision
-----------------------------------------
that limits the voting rights of a person that acquires or makes an offer to
acquire a controlling interest in a Nevada corporation. Under the provisions of
Nevada law, a person acquiring or making an offer to acquire more than 20% of
the voting power in a corporation will have only such voting rights as are
granted by a resolution of the stockholders adopted at a special or annual
meeting. The controlling person is not entitled to vote on the resolution
granting voting rights to the controlling interest. The person acquiring a
controlling interest may request a meeting of the stockholders be called for
this purpose and, if the Board of Directors fails to call the
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meeting or the controlling person is not accorded full voting rights, the
corporation must redeem the controlling shares at the average price paid for
them. Delaware does not have a similar provision and the merger may make it more
difficult for a person to acquire control of New ATSI through acquisition of a
majority of the shares issued.
Amendment to Articles of Incorporation/Certificate of Incorporation or
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Bylaws. Both Delaware and Nevada law require the approval of the holders of a
- ------
majority of all outstanding shares entitled to vote to approve proposed
amendments to a corporation's certificate or articles of incorporation. The
Certificate of Incorporation of Old ATSI requires 66-2/3% of the outstanding
voting interests to approve certain amendments relating to the election of
Directors, meetings of stockholders, exclusion of director liability, and
indemnity of officers and directors. The merger may make it easier for the
stockholders to amend the Articles of Incorporation of New ATSI.
Issuance of Preferred Stock; Increase in Shares. Neither state requires
--------------------------------------------------
stockholder approval for the Board of Directors of a corporation to fix the
voting powers, designation, preferences, limitations, restrictions and rights of
a class of stock provided that the corporation's organizational documents grant
such power to its Board of Directors. Both Delaware and Nevada law permit the
number of authorized shares of any such class of stock to be increased or
decreased (but not below the number of shares then outstanding) by the Board of
Directors unless otherwise provided in the articles or certificate of
incorporation or resolution adopted pursuant to the articles or certificate of
incorporation, respectively.
Actions by Written Consent of Stockholders. Both Delaware and Nevada law
--------------------------------------------
provide that, unless the articles or certificate of incorporation provides
otherwise, any action required or permitted to be taken at a meeting of the
stockholders may be taken without a meeting if the holders of outstanding stock
having at least the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote consents
to the action in writing. Delaware law requires the corporation to give prompt
notice of the taking of corporate action without a meeting by less than
unanimous written consent to those stockholders who did not consent in writing.
Although not required by Nevada law, New ATSI's bylaws require prompt notice to
all stockholders of any action taken by less than unanimous written consent.
Stockholder Vote for Mergers and Other Corporation Reorganizations. Both
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jurisdictions require authorization by an absolute majority of the outstanding
voting rights, as well as approval by the Board of Directors, of the terms of a
merger or a sale of substantially all of the assets of the corporation. Neither
Delaware nor Nevada law require a stockholder vote of the surviving corporation
in a merger (unless the corporation provides otherwise in its certificate of
incorporation) if: (a) the merger agreement does not amend the existing
certificate of incorporation of the surviving corporation; (b) each share of
stock of the surviving corporation outstanding immediately before the effective
date of the merger is an identical outstanding share after the merger; and (c)
either no shares of common stock of the surviving corporation and no shares,
securities or obligations convertible into such stock are to be issued or
delivered under the plan of merger, or the authorized unissued shares or shares
of common stock of the surviving corporation to be issued or delivered under the
plan of merger plus those initially issuable upon conversion of any other
shares, securities or obligations to be issued or delivered under such plan do
not exceed twenty percent (20%) of the shares of common stock of such
constituent corporation outstanding immediately prior to the effective date of
the merger.
Defenses Against Hostile Takeovers
The following discussion summarizes the reasons for, and the operation and
effects of, certain provisions in the New ATSI Articles of Incorporation which
management has identified as potentially having an anti-takeover effect. It is
not intended to be a complete description of all potential anti-takeover
effects, and it is qualified in its entirety by reference to the New ATSI
Articles of Incorporation and bylaws. Substantially similar provisions were
contained in the Old ATSI Certificate of Incorporation and bylaws and the merger
does not change the nature of the anti-takeover provisions or their effect.
The anti-takeover provisions of the New ATSI Articles of Incorporation are
designed to minimize the possibility of a sudden acquisition of control of New
ATSI without approval by the New ATSI Board of Directors. These provisions may
tend to make it more difficult for the stockholders to remove the incumbent
members of the Board of Directors or force other corporate changes without the
approval of the Board of Directors. The provisions would not prohibit an
acquisition of control of New ATSI or a tender offer for all of its capital
stock but may have the effect of discouraging or preventing an acquisition or
tender offer which might be viewed by stockholders to be in their best
interests.
Authorized Shares of Capital Stock. The New ATSI Articles of Incorporation
----------------------------------
authorizes the issuance of up to 150,000,000 shares of Common Stock, of which
only approximately 24,000,000 will be issued or reserved immediately following
the merger. Shares of authorized and unissued Common Stock could be issued to a
person that is friendly to the Board of Directors for the purpose of preventing
an attempted takeover without approval of the stockholders of New ATSI.
Moreover, the existence of a large number of authorized and unissued shares of
capital stock may deter or discourage a
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potential acquirer from making an offer without the approval of the Board of
Directors. The Board of Directors believes that it is advisable to maintain a
significant number of authorized and unissued shares of capital stock so that
the Company can take advantage of potential acquisitions and other opportunities
without the delay inherent in authorization of such shares by the stockholders
for each opportunity.
Authorized Shares of Preferred Stock. The New ATSI Articles of
----------------------------------------
Incorporation authorizes the issuance of up to 50,000,000 shares of serial
Preferred Stock, without any action on the part of the stockholders. Shares of
New ATSI's serial Preferred Stock with voting rights could be issued and would
then represent an additional class of stock required to approve any proposed
acquisition. Issuance of such additional shares may dilute the voting interest
of the New ATSI stockholders. If the Board of Directors of New ATSI determines
to issue an additional class of voting Preferred Stock to a person opposed to a
proposed acquisition, such person might be able to prevent the acquisition
single-handedly.
Stockholder Meetings. Nevada law provides that the annual stockholder
---------------------
meeting may be called by a corporation's Board of Directors or by such person or
persons as may be authorized by a corporation's articles of incorporation or
bylaws. The New ATSI Articles of Incorporation provides that annual stockholder
meetings may be called only by the New ATSI Board of Directors or a duly
designated committee of the board. Although this provision is intended to
prevent the disruption of the company between annual meetings, it may also have
the effect of preventing or making it more difficult for a person to obtain
immediate control of New ATSI even if they own a majority of the outstanding
shares.
Advance Notice Requirements for Nomination of Directors and Proposal of New
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Business at Annual Stockholder Meetings. New ATSI's Articles of Incorporation
- -----------------------------------------
provide that any stockholder desiring to make a nomination for the election of
directors or a proposal for new business at a stockholder meeting must submit
written notice not less than 30 or more than 60 days in advance of the meeting.
This advance notice requirement may give management time to solicit its own
proxies in an attempt to defeat any dissident slate of nominations. Similarly,
adequate advance notice of stockholder proposals will give management time to
study such proposals and to determine whether to recommend to the stockholders
that such proposals be adopted. In certain instances, such provisions could
make it more difficult to oppose management's nominees or proposals, even if the
stockholders believe such nominees or proposals are in their interests. These
provisions may tend to discourage persons from bringing up matters disclosed in
the proxy materials furnished to the stockholders and could inhibit the ability
of stockholders to bring up new business in response to recent developments.
Classified Board of Directors and Removal of Directors. New ATSI's
-------------------------------------------------------------
Articles of Incorporation provide that the Board of Directors is to be divided
into three classes which shall be as nearly equal in number as possible. The
directors in each class serve for terms of three years, with the terms of one
class expiring each year. Each class currently consists of approximately
one-third (1/3) of the number of directors. Each director will serve until his
successor is elected and qualified. A classified Board of Directors could make
it more difficult for stockholders, including those holding a majority of New
ATSI's outstanding stock, to force an immediate change in the composition of a
majority of the Board of Directors. Since the terms of only one-third (1/3) of
the incumbent directors expire each year, it requires at least two annual
elections for the stockholders to change a majority, whereas a majority of a
non-classified board may be changed in one year. The provision for a staggered
Board of Directors affects every election of directors and is not triggered by
the occurrence of a particular event such as a hostile takeover. Thus, a
staggered Board of Directors makes it more difficult for stockholders to change
the majority of directors even when the reason for the change would be unrelated
to a takeover.
Restriction of Maximum Number of Directors and Filling Vacancies on the
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Board of Directors. Nevada law requires that the Board of Directors of a
- --------------------
corporation consist of one or more members and that the number of directors
shall be set by or in the manner described in the corporation's articles of
incorporation or bylaws. New ATSI's Articles of Incorporation provide that the
number of directors (exclusive of directors, if any, to be elected by the
holders of Preferred Stock) shall not be less than one or more than 15, as shall
be provided from time to time in accordance with the bylaws. The power to
determine the number of directors within these numerical limitations is vested
in the Board of Directors and requires the concurrence of at least two-thirds
(2/3) of the entire Board of Directors. The effect of such provisions may be to
prevent a person from quickly acquiring control of New ATSI through an increase
in the number of the directors and election of nominees to fill the newly
created vacancies.
Dissenters Right of Appraisal
Delaware law does not provide for appraisal of dissenting shares in the
merger.
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How to Exchange Old ATSI Certificates for New ATSI Certificates
Enclosed are (i) a form letter of transmittal and (ii) instructions for
surrender of your certificates representing our common stock in exchange for
certificates representing shares of New ATSI Common Stock and New ATSI Series H
Preferred Stock. Upon surrender of a certificate representing Old ATSI Common
Stock to New ATSI, together with a duly executed letter of transmittal, New ATSI
will issue, as soon as practicable after approval of the Plan and Agreement of
Merger, a certificate representing that number of shares of New ATSI Common
Stock and New ATSI Series H Preferred Stock you are entitled to receive.
If you own shares of Old ATSI Common Stock through a nominee or in a
brokerage account, you do not have a certificate to submit for exchange. Since
we believe there have been widespread sales of our stock without actual delivery
of certificates, it is possible that your nominee or broker may not have
certificates representing all of the shares owned by its customers. We
recommend that you contact your nominee or broker and request that a certificate
be issued to you so that you may submit it for exchange with the enclosed letter
of transmittal. This will ensure that there are actually shares of New ATSI
Common Stock and New ATSI Series H Preferred Stock in your name on the books and
records of New ATSI.
You are required to surrender your certificates representing Old ATSI
Common Stock for certificates representing shares of New ATSI Common Stock and
New ATSI Series H Preferred Stock. The Board of Directors of New ATSI
determined that a reasonable period for you to submit certificates for exchange
is 60 days from the Effective Date of the merger. Dividends and other
distributions declared by New ATSI after the Effective Date with respect to
Common Stock or Series H Preferred Stock and payable to holders of record
thereof after the Effective Date will be paid ONLY to the holders of
certificates representing New ATSI Common Stock or Series H Preferred Stock and
not to the holders of unsurrendered certificates representing shares of Old
ATSI. In addition, holders of unsurrendered certificates representing shares of
Old ATSI Common Stock will not be entitled to notice of or to vote at any
meetings of the stockholders of New ATSI until they surrender the certificate
representing Old ATSI Common Stock. New ATSI may enforce the mandatory delivery
of the certificates by action in the Nevada courts if you fail to deliver such
certificates for exchange.
Taxation of Re-incorporation
We have not sought or received an opinion from any person regarding the
effect of the reincorporation on Old ATSI, New ATSI or our stockholders under
federal income tax laws. We believe that for federal income tax purposes no
gain or loss will be recognized by Old ATSI, New ATSI or the stockholders of Old
ATSI who receive New ATSI common stock and Series H Preferred Stock for their
Old ATSI common stock in connection with the reincorporation. The adjusted tax
basis of each whole share of New ATSI common stock and Series H Preferred Stock
received by a stockholder of Old ATSI as a result of the reincorporation will be
the same as the stockholder's aggregate adjusted tax basis in the shares of Old
ATSI common stock. A stockholder who holds Old ATSI common stock will include
in his holding period for the New ATSI common stock and Series H Preferred Stock
that he receives as a result of the reincorporation his holding period for the
Old ATSI common stock.
THE FOREGOING DOES NOT ADDRESS THE EFFECT OF THE INTERNAL REVENUE CODE ON
ANY STOCKHOLDER THAT IS A BANK, REAL ESTATE TRUST, BROKER, DEALER, INVESTMENT
COMPANY OR OTHERWISE SUBJECT TO SPECIAL TAX TREATMENT; IS A FOREIGN PERSON;
HOLDS OUR COMMON STOCK AS PART OF A "STRADDLE," "SYNTHETIC SECURITY," OR OTHER
SECURITY HEDGE POSITION; OR WHOSE FUNCTIONAL CURRENCY IS NOT THE UNITED STATES
DOLLAR. STATE, LOCAL OR FOREIGN INCOME TAX CONSEQUENCES TO STOCKHOLDERS MAY
VARY FROM THE FEDERAL INCOME TAX CONSEQUENCES DESCRIBED ABOVE, AND STOCKHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISOR AS TO THE CONSEQUENCES TO THEM OF THE
REINCORPORATION UNDER ALL APPLICABLE TAX LAWS.
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WHERE YOU CAN FIND MORE INFORMATION
ATSI Communications, Inc. files annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission (the "SEC.") You may read and copy any reports, statements or other
information ATSI files at the SEC's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. ATSI SEC filings are
also available to the public from commercial document retrieval services and at
the web site maintained by the SEC at "http://www.sec.gov."
ATSI WILL PROVIDE ANY PERSON ENTITLED TO VOTE AT THE ANNUAL MEETING A COPY
OF ITS ANNUAL, QUARTERLY AND SPECIAL REPORTS, PROXY STATEMENTS AND OTHER
INFORMATION, AT NO COST, UPON WRITTEN REQUEST AT THE FOLLOWING ADDRESS:
ATSI COMMUNICATIONS, INC.
8600 WURZBACH ROAD, SUITE 700W
SAN ANTONIO, TEXAS 78240
STOCKHOLDER PROPOSALS
FOR 2005 ANNUAL MEETING
To be included in the proxy statement, any proposals of holders of our
Common Stock intended to be presented at the next annual meeting of stockholders
must be received by us no later than December 1, 2004, and must otherwise comply
with the requirements of Rule 14a-8 under the Securities Exchange Act of 1934,
as amended. Any holder of our Common Stock desiring to bring business before
the next annual meeting of stockholders in a form other than a stockholder
proposal in accordance with the preceding paragraph must give written notice
that is received by us no later than the 10th day after notice of that meeting
is published. Each notice of any such matter must include (a) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting; (b) the name and address of
the stockholder who intends to propose such business; (c) a representation that
the stockholder is a holder of record of stock of the Company entitled to vote
at such meeting and intends to appear in person or by proxy at such meeting to
propose such business; and (d) any material interest of the stockholder in such
business.
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EXHIBIT A
PLAN AND AGREEMENT OF MERGER
OF
ATSI COMMUNICATIONS, INC.
(a Delaware corporation)
AND
ATSI MERGER CORPORATION
(a Nevada corporation)
PLAN AND AGREEMENT OF MERGER entered into on March 24, 2004, by ATSI
Communications, Inc., a Delaware corporation ("ATSI"), and ATSI Merger
Corporation, a Nevada corporation ("Merger Corporation").
WHEREAS, ATSI is a business corporation of the State of Delaware; and
WHEREAS, Merger Corporation is a business corporation of the State of
Nevada; and
WHEREAS, the Delaware General Corporation Law permits a merger of a
business corporation of the State of Delaware with and into a business
corporation of another jurisdiction; and
WHEREAS, the General Corporation Law of the State of Nevada permits the
merger of a business corporation of another jurisdiction with and into a
business corporation of the State of Nevada; and
WHEREAS, ATSI and Merger Corporation and the respective Boards of Directors
thereof declare it advisable and to the advantage, welfare, and best interests
of said corporations and their respective stockholders to merge ATSI with and
into Merger Corporation pursuant to the provisions of the Delaware General
Corporation Law and pursuant to the provisions of the General Corporation Law of
the State of Nevada upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement of the parties hereto, being thereunto duly entered into by ATSI and
approved by a resolution adopted by its Board of Directors and being thereunto
duly entered into by Merger Corporation and approved by a resolution adopted by
its Board of Directors, the Merger and the terms and conditions thereof and the
mode of carrying the same into effect, are hereby determined and agreed upon as
hereinafter in this Plan and Agreement of Merger set forth.
1. ATSI shall, pursuant to the provisions of the Delaware General
Corporation Law and to the provisions of the General Corporation Law of the
State of Nevada, be merged with and into Merger Corporation, which shall be the
surviving corporation from and after the effective time of the merger and which
is sometimes hereinafter referred to as the "surviving corporation," and which
shall continue to exist as said surviving corporation under its present name
pursuant to the provisions of the General Corporation Law of the State of
Nevada. The separate existence of ATSI, which is sometimes hereinafter referred
to as the "terminating corporation." shall cease at said effective time in
accordance with the provisions of the Delaware General Corporation Law.
2. The name of the surviving corporation shall be changed to ATSI
Communications, Inc. The surviving corporation shall designate a series of
preferred stock (the "Series H Convertible Preferred Stock") having preferences,
limitations, and relative rights as set forth in Schedule A attached hereto. As
amended, the present Articles of Incorporation of the surviving corporation will
be the Articles of Incorporation of the surviving corporation and will continue
in full force and effect until changed, altered, or amended as therein provided
and in the manner prescribed by the provisions of the General Corporation Law of
the State of Nevada.
3. The present bylaws of the surviving corporation will be the bylaws of
said surviving corporation and will continue in full force and effect until
changed, altered, or amended as therein provided and in the manner prescribed by
the provisions of the General Corporation Law of the State of Nevada.
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4. The directors and officers in office of the surviving corporation at the
effective time of the merger shall be the members of the Board of Directors and
the officers of the surviving corporation, all of whom shall hold their
directorships and offices until the election and qualification of their
respective successors or until their tenure is otherwise terminated in
accordance with the by-laws of the surviving corporation.
5. Each issued share of the common stock of the terminating corporation
shall, from and after the effective time of the merger, be converted into one
one-hundredth (.01) share of the common stock of the surviving corporation and
one-tenth (.1) share of the Series H Convertible Preferred Stock of the
surviving corporation. The surviving corporation shall not issue any certificate
or script representing a fractional share of common stock or preferred stock.
Any fractional shares that would otherwise be issuable will be rounded up to the
next full share. Pursuant to the laws of the State of Nevada, each share of the
terminating corporation shall be tendered to the surviving corporation for
exchange into shares of the surviving corporation within 60 days after the
effective time of the merger. Upon receipt of such shares of the terminating
corporation, the surviving corporation shall issue a certificate for the whole
shares of the common stock and a certificate for the whole shares of the
preferred stock of the surviving corporation that are issuable in exchange for
the shares of the terminating corporation. The shares of the surviving
corporation that are outstanding immediately prior to the effective time of the
merger shall be cancelled and deemed not outstanding as of the effective time of
the merger.
6. Each issued share of the preferred stock of the terminating corporation
shall, from and after the effective time of the merger, be converted into one
share of the preferred stock of the surviving corporation, having substantially
similar powers, designations, preferences and relative, participating, optional
and other rights as the preferred shares of the terminating corporation.
Pursuant to the laws of the State of Nevada, each share of the preferred stock
of the terminating corporation shall be tendered to the surviving corporation
for exchange into shares of the preferred stock of the surviving corporation
within 60 days after the effective time of the merger.
7. The surviving corporation may sue in any court with jurisdiction to
cause any stockholder of the terminating corporation to tender certificates
representing shares owned by such stockholder to be tendered to the surviving
corporation for exchange. Stockholders of the terminating corporation shall have
no rights to notices, distributions or voting with respect to the surviving
corporation unless the certificates representing shares of the terminating
corporation are tendered to the surviving corporation for exchange.
8. Except to the extent otherwise provided in the terms of outstandinghad options warrants or other rights to purchase, or securities convertible into or
exchangeable for common stock ofacquire within sixty (60) days after the terminating corporation (other than shares
of the preferred stock of the terminating corporation), each outstanding option,
warrant or other right to purchase, and each outstanding security convertible
into or exchangeable for common stock shall be converted into an option, warrant
or other right to purchase, or security convertible into or exchangeable for
common stock of the surviving corporation on the basis ofRecord Date.
DELIVERY OF DOCUMENTS TO SECURITY HOLDERS
SHARING AN ADDRESS
Unless we have received contrary instructions, only one
one-hundredth
(.01) share of the Common Stock of the surviving corporation for each share of
common stock of the terminating corporation. The exercise price or conversion
ratio set forth in such option, warrant or other right to purchase, or security
convertible into or exchangeable for common stock of the surviving corporation
shall be ratably adjusted so that the total exercise or conversion price shall
be the same as under the option, warrant, or other right to purchase, or
security convertible into or exchangeable for common stock of the terminating
corporation.
9. In the event that this Plan and Agreement of Merger shall have been
fully approved and adopted upon behalf of the terminating corporation in
accordance with the provisions of the Delaware General Corporation Law and upon
behalf of the surviving corporation in accordance with the provisions of the
General Corporation Law of the State of Nevada, the said corporations agree that
they will cause to be executed and filed and recorded any document or documents
prescribed by the laws of the State of Delaware and by the laws of the State of
Nevada, and that they will cause to be performed all necessary acts within the
State of Delaware and the State of Nevada and elsewhere to effectuate the merger
herein provided for.
10. The Board of Directors and the proper officers of the terminating
corporation and of the surviving corporation are hereby authorized, empowered,
and directed to do any and all acts and things, and to make, execute, deliver,
file, and record any and all instruments, papers, and documents which shall be
or become necessary, proper, or convenient to carry out or put into effect any
of the provisionscopy of this
Plan and AgreementSolicitation Statement (or Notice of
MergerInternet Availability of Solicitation Statement) is being delivered to two or
of the merger herein
provided for.
11. The effective timemore stockholders who share an address. We will provide additional copies of this
Plan and AgreementSolicitation Statement (or Notice of
Merger, and the time
at which the merger herein agreed shall become effective in the StateInternet Availability of
Delaware and the State of Nevada, shall be on the last to occur of:
-24-
(a) the approval of this Plan and Agreement of Merger by the stockholders
of the terminating corporation in accordance with the Delaware General
Corporation Law; or
(b) the date this Plan and Agreement of Merger, or a certificate of merger
meeting the requirements of the General Corporation Law of the State
of Nevada, is filed with the Secretary of State of the State of
Nevada; or
(c) January 25, 2004.
12. Notwithstanding the full approval and adoption of this Plan and
Agreement of Merger, the said Plan and Agreement of Merger may be terminated at
any time prior to the filing thereof with the Secretary of State of the State of
Nevada.
13. Notwithstanding the full approval and adoption of this Plan and
Agreement of Merger, the said Plan and Agreement of Merger may be amended at any
time and from time to time prior to the filing thereof with the Secretary of
State of the State of Delaware and at any time and from time to time prior to
the filing of any requisite merger documents with the Secretary of State of the
State of Nevada except that, without the approval of the stockholders of ATSI
and the stockholders of Merger Corporation, no such amendment may (a) change the
rate of exchange for any shares of ATSI or the types or amounts of consideration
that will be distributed to the holders of the shares of stock of ATSI; (b)
change any term of the Articles of Incorporation of the surviving corporation;
or (c) adversely affect any of the rights of the stockholders of ATSI or Merger
Corporation.
IN WITNESS WHEREOF, this Plan and Agreement of Merger is hereby executed
upon behalf of each of the constituent corporations parties thereto.
Dated: March 24, 2004 ATSI COMMUNICATIONS, INC.
By: /s/ Arthur L. Smith
-------------------------------
Name: Arthur L. Smith
Title: President and Chief Executive Officer
ATSI MERGER CORPORATION
By: /s/ Arthur L. Smith
-------------------------------
Name: Arthur L. Smith
Title: President and Chief Executive Officer
-25-
EXHIBIT B
ARTICLES OF INCORPORATION
(Pursuant to NRS 78)
1. Name of Corporation: ATSI Merger Corporation.
2. Resident Agent Name and Address: CSC Services of Nevada, Inc.
502 East John Street
Carson City, Nevada 89706
3. Shares: 150,000,000 Common Stock, $.001 par value per share
50,000,000 Preferred Stock, $.001 par value per share
4. Name and Address of
Board of Directors/Trustees: Arthur L. Smith
8600 Wurzbach Road
Suite 700W
San Antonio, Texas 78240
Antonio Estrada
8600 Wurzbach Road
Suite 700W
San Antonio, Texas 78240
5. Purpose: The purpose of the corporation shall be to engage in any lawful activity
6. Name, Address and
Signature of Incorporator: Kevin Medill /s/ Kevin Medill
1001 McKinney
Suite 1800
Houston, Texas 77002
7. Certificate of Acceptance
Of Appointment of
Registered Agent: I hereby accept appointment as Resident Agent for the
above named corporation. CSC Services of Nevada, Inc.
/s/
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OPTIONAL PROVISIONS
TO THE
ARTICLES OF INCORPORATION
OF
ATSI MERGER CORPORATION
8. ISSUANCE OF SHARES: The 200,000,000 shares of all classes of
---------------------
capital stock which the corporation has authority to issue may be issued by the
corporation from time to time as approved by the Board of Directors of the
corporation without the approval of the stockholders except as otherwise
provided by the General Corporation Law of the State of Nevada, the Articles of
Incorporation of the corporation, or the rules of a national securities exchange
if applicable. The consideration for the issuance of the shares shall be paid
to or received by the corporation in full before their issuance and shall not be
less than the par value per share. The consideration for the issuance of shares
shall be cash, services rendered, personal property (tangible or intangible),
real property, leases of real property or any combination of the foregoing. In
the absence of actual fraud in the transaction, the judgment of the Board of
Directors as to the value of such consideration shall be conclusive. Upon
payment of such consideration such shares shall be deemed to be fully paid and
nonassessable. In the case of a stock dividend, the part of the surplus of the
corporation which is transferred to stated capital upon the issuance of shares
as a stock dividend shall be deemed to be the consideration for their issuance.
(a) Except as provided in the Articles of Incorporation of the
corporation, or in the powers, designations preferences and relative
rights of any preferred stock, the holders of the common stock shall
exclusively possess all voting power. Subject to the provisions of
these Articles, each holder of shares of common stock shall be
entitled to one vote for each share held by such holders.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class or
series of stock having preference over the common stock as to the
payment of dividends, the full amount of dividends and sinking fund or
retirement fund or other retirement payments, if any, to which such
holders are respectively entitled in preference to the common stock,
then dividends may be paid on the common stock, and on any class or
series of stock entitled to participate therewith as to dividends, out
of any assets legally available for the payment of dividends, but only
when and as declared by the Board of Directors of the corporation.
In the event of any liquidation, dissolution or winding up of the
corporation, after there shall have been paid, or declared and set
aside for payment, to the holders of the outstanding shares of any
class having preference over the common stock in any such event, the
full preferential amounts to which they are respectively entitled, the
holders of the common stock and any class or series of stock entitled
to participate therewith, in whole or in part, as to distribution of
assets shall be entitled, after payment or provision for payment of
all debts and liabilities of the corporation, to receive the remaining
assets of the corporation available for distribution, in cash or in
kind.
Each share of common stock shall have the same relative powers,
preferences and rights as, and shall be identical in all respects
with, all the other shares of common stock of the corporation.
(b) Except as provided in the Articles of Incorporation of the
corporation, the Board of Directors of the corporation is authorized,
by resolution or resolutions from time to time adopted, to provide for
the issuance of preferred stock in series and to fix and state the
powers, designations, preferences and relative, participating,
optional or other special rights of the shares of each such series,
and the qualifications, limitation or restrictions thereof, including,
but not limited to determination of any of the following:
(1) the distinctive serial designation and the number of shares
constituting such series;
(2) the rights in respect of dividends, if any, to be paid on the
shares of such series, whether dividends shall be cumulative and,
if so, from which date or dates, the payment or date or dates for
dividends, and the participating or other special rights, if any,
with respect to dividends;
(3) the voting powers, full or limited, if any, of the shares of
such series;
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(4) whether the shares of such series shall be redeemable and, if
so, the price or prices at which, and the terms and conditions
upon which such shares may be redeemed:
(5) the amount or amounts payable upon the shares of such series
in the event of voluntary or involuntary liquidation, dissolution
or winding up of the corporation;
(6) whether the shares of such series shall be entitled to the
benefits of a sinking or retirement fund to be applied to the
purchase or redemption of such shares, and, if so entitled, the
amount of such fund and the manner of its application, including
the price or prices at which such shares may be redeemed or
purchased through the application of such funds;
(7) whether the shares of such series shall be convertible into,
or exchangeable for, shares of any other class or classes or any
other series of the same or any other class or classes of stock
of the corporation and, if so convertible or exchangeable, the
conversion price or prices, or the rate or rates of exchange, and
the adjustments thereof, if any, at which such conversion or
exchange may be made, and any other terms and conditions of such
conversion or exchange;
(8) the subscription or purchase price and form of consideration
for which the shares of such series shall be issued; and
(9) whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued shares
of preferred stock and whether such shares may be reissued as
shares of the same or any other series of preferred stock.
Each share of each series of preferred stock shall have the same
relative powers, preferences and rights as, and shall be identical in
all respects with, all the other shares of the corporation of the same
series, except the times from which dividends on shares which may be
issued from time to time of any such series may begin to accrue.
(c) No holder of any of the shares of any class of the corporation
shall be entitled as of right to subscribe for, purchase, or otherwise
acquire any shares of any class of the corporation which the
corporation proposes to issue or any rights or options which the
corporation proposes to grant for the purchase of shares of any class
of the corporation or for the purchase of any shares, bonds,
securities, or obligations of the corporation which are convertible
into or exchangeable for, or which carry any rights, to subscribe for,
purchase, or otherwise acquire shares of any class of the corporation;
and any and all of such shares, bonds, securities, or obligations of
the corporation, whether now or hereafter authorized or created, may
be issued, or may be reissued or transferred if the same have been
reacquired and have treasury status, and any and all of such rights
and options may be granted by the Board of Directors to such persons,
firms, corporations, and associations, and for such lawful
consideration, and on such terms, as the Board of Directors in its
discretion may determine, without first offering the same, or any
thereof,Solicitation Statement) to any said holder.
(d) No shares of any classstockholder upon written or series shall have cumulative voting
rights in the election of directors.
9. CONDUCT OF STOCKHOLDER MEETINGS: The following provisions shall
----------------------------------
govern the conduct of meetings of the stockholders of the corporation:
(a) Meetings of the stockholders may be held at such place as the
bylaws may provide.
(b) Any action required or permittedoral request delivered to be taken at any annual or
special meeting of stockholders may be effected by the adoption by the
Board of Directors of resolutions authorizing such action by written
consent of the stockholders and the adoption by the written consent of
stockholders constituting a majority of the voting power entitled to
vote on such matter at a meeting.
(c) Special meetings of the stockholders of the corporation for any
purpose or purposes may be called at any time by the Board of
Directors of the corporation, or by a committee of the Board of
Directors which has been duly designated by the Board of Directors and
whose power and authority include the power and authority to call such
meetings but special meetings may not be called by another person or
persons.
-28-
(d) Nominations for the election of directors and proposals for any
new business to be taken up at any annual or special meeting of
stockholders may be made by the Board of Directors of the corporation
or by any stockholder of the corporation entitled to vote generally in
the election of directors. In order for a stockholder of the
corporation to make any such nominations and/or proposals at an annual
meeting or such proposals at a special meeting, he or she shall give
notice thereof in writing, delivered or mailed by first class United
States mail, postage prepaid, to the Secretary of the corporation not
less than thirty days nor more than sixty days prior to any such
meeting; provided, however, that if less than forty days' notice of
the meeting is given to stockholders, such written notice shall be
delivered or mailed, as prescribed, to the Secretary of the
corporation not later than the close of the tenth day following the
day on which notice of the meeting was mailed to stockholders. Each
such notice given by a stockholder with respect to nominations for the
election of directors shall set forth (1) the name, age, business
address and, if known, residence address of each nominee proposed in
such notice, (2) the principal occupation or employment of each such
nominee, and (3) the number of shares of stock of the corporation
which are beneficially owned by each such nominee. In addition, the
stockholder making such nomination shall promptly provide any other
information reasonably requested by the corporation.
(e) Each such notice given by a stockholder to the Secretary with
respect to business proposals to bring before a meeting shall set
forth in writing as to each matter: (1) a brief description of the
business desired to be brought before the meeting and the reasons for
conducting such business at the meeting; (2) the name and address, as
they appear on the corporation's books, of the stockholder proposing
such business; (3) the class and number of shares of the corporation
which are beneficially owned by the stockholder; and (4) any material
interest of the stockholder in such business. Notwithstanding anything
in these Articles of Incorporation to the contrary, no business shall
be conducted at the meeting except in accordance with the procedures
set forth in this Article.
(f) The Chairman of the annual or special meeting of stockholders may,
if the facts warrant, determine and declare to such meeting that a
nomination or proposal was not made in accordance with the foregoing
procedure, and, if he should so determine, he shall so declare to the
meeting and the defective nomination or proposal shall be disregarded
and laid over for action at the next succeeding adjourned, special or
annual meeting of the stockholders taking place thirty days or more
thereafter. This provision shall not require the holding of any
adjourned or special meeting of stockholders for the purpose of
considering such defective nomination or proposal.
10. INCREASE IN NUMBER AND ELECTION OF DIRECTORS: The governing board
-------------------------------------------------
of the corporation shall be styled as a "Board of Directors," and any member of
said board shall be styled as a "Director." The number of directors of the
corporation may be increased or decreased in the manner provided in the bylaws
of the corporation; provided, that the number of directors shall never be
greater than 15 nor less than one (exclusive of directors, if any, to be elected
by holders of preferred stock of the corporation). Exclusive of directors, if
any, elected by the holders of preferred stock, all vacancies, including
vacancies caused by an increase in the number of directors and including
vacancies resulting from the removal of directors by the stockholders entitled
to vote which are not filled by said stockholders, may be filled by the vote of
a majority of the remaining directors, though less than a quorum. No decrease
in the number of directors shall have the effect of shortening the term of any
incumbent director.
If the Board of Directors consists of six or more persons, the Board of
Directors of the corporation (other than directors which may be elected by the
holders of preferred stock) shall be divided into three classes of directors
which shall be designated Class I, Class II and Class III. The members of each
class shall be elected for a term of three years and until their successors are
elected and qualified. Such classes shall be as nearly equal in number as the
then total number of directors constituting the entire Board of Directors shall
permit, exclusive of directors, if any, elected by holders of preferred stock,
with the terms of office of all members of one class expiring each year. Should
the number of directors not be equally divisible by three, the excess director
or directors shall be assigned to Classes I or II as follows: (1) if there shall
be an excess of one directorship over the number equally divisible by three,
such extra directorship shall be classified in Class I; and (2) if there be an
excess of two directorships over a number equally divisible by three, one shall
be classified in Class I and the other in Class II. Notwithstanding the
foregoing, the director whose term shall expire at any annual meeting shall
continue to serve until such time as his successor shall have been duly elected
and shall have qualified unless his position on the Board of Directors shall
have been abolished by action taken to reduce the size of the Board of Directors
prior to said meeting.
Whenever the holders of any one or more series of preferred stock of the
corporation shall have the right, voting separately as a class, to elect one or
more directors of the corporation, the Board of Directors shall include said
directors so elected in addition to the number of directors fixed as provided in
this provision 10. Notwithstanding the foregoing, and except as otherwise may
be required by law, whenever the holders of any one or more series of preferred
stock of the corporation
-29-
elect one or more directors of the corporation, the terms of the director or
directors elected by such holders shall expire at the next succeeding annual
meeting of stockholders.
11. DURATION OF CORPORATION: The corporation shall have perpetual
--------------------------
existence.
12. LIABILITY OF DIRECTORS: The personal liability of the directors of
-----------------------
the corporation is hereby eliminated to the fullest extent permitted by the
General Corporation Law of the State of Nevada, as the same may be amended and
supplemented. Any repeal or amendment of this Article by the stockholders of
the corporation shall be prospective.
13. INDEMNIFICATION: The corporation shall, to the fullest extent
----------------
permitted by the General Corporation Law of the State of Nevada, as the same may
be amended and supplemented, indemnify any and all persons whom it shall have
power to indemnify under said Law from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said Law, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
14. AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS: The Articles of
-----------------------------------------------------
Incorporation and the Bylaws of the corporation may be repealed, altered,
amended or rescinded only by a vote of a majority of the entire Board of
Directors or a majority of the outstanding shares of capital stock, voting as
classes.
-30-
EXHIBIT C
DESIGNATION
OF
SERIES H CONVERTIBLE PREFERRED STOCK
OF
ATSI MERGER CORPORATION
(The "Corporation")
1. Designation and Amount. Of the Fifty Million (50,000,000) authorized
------------------------
shares of Preferred Stock (the "Preferred Stock") of the Corporation, there
shall be a class of Series H Convertible Preferred Stock of the Corporation
designated as "Series H Convertible Preferred Stock," and the number of shares
constituting such series shall be Sixteen Million (16,000,000). Such class is
referred to herein as the "Series H Convertible Preferred Stock."
2. Stated Capital. The amount to be represented in stated capital at all
---------------
times for each share of the Series H Convertible Preferred Stock shall be $.001.
3. Rank. All shares of Series H Convertible Preferred Stock rank prior to
----
all of the Corporation's Common Stock, par value $.001 per share (the "Common
Stock"), and Preferred Stock, par value $.001 per share, now or hereafter
issued, both as to payment of dividends and as to distributions of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary. All shares of Series H Convertible Preferred Stock shall rank as
junior to any series of Preferred Stock having a designation with a letter
occurring before the letter H.
4. Dividends. The Series H Convertible Preferred Stock shall be entitled
---------
to receive dividends and distributions on parity with the Common Stock as though
the Series H Convertible Preferred Stock had been converted to Common Stock at
the highest conversion rate on the day before the record date for such dividends
and distributions.
5. Liquidation Preference. In the event of a liquidation, dissolution or
-----------------------
winding up of the Corporation, whether voluntary or involuntary, the holders of
Series H Convertible Preferred Stock shall be entitled to receive out of the
assets of the Corporation, whether such assets are stated capital or surplus of
any nature, an amount equal to $.10 per share (the "Liquidation Amount"), and no
more, before any payment shall he made or any assets distributed to the holders
of Common Stock or any other class or series of the Corporation's capital stock
ranking junior as to liquidation rights to the Series H Convertible Preferred
Stock. If the assets of the Corporation available for distribution are not
sufficient to pay to the holders of the Series H Convertible Preferred Stock and
all other series of stock ranking on a parity with the Series H Convertible
Preferred Stock the Liquidation amount, the assets of the Corporation shall be
distributed ratably among the holders of the Series H Convertible Preferred
Stock and such series ranking on a parity with the Series H Convertible
Preferred Stock. Neither a consolidation or merger of the Corporation with
another corporation nor a sale or transfer of all or part of the Corporation's
assets for cash, securities or other property will be considered a liquidation,
dissolution or winding up of the Corporation.
6. Optional Redemptions for Common Stock.
-----------------------------------------
(a) Each issued and outstanding share of Series H Convertible Preferred
Stock is redeemable for one (1) fully paid and non-assessable shares of Common
Stock at the option of the Corporation at any time.
(b) The Corporation shall mail to each record holder of Series H
Convertible Preferred Stock a notice of redemption (the "Redemption Notice")
which shall state the date upon which the Series H Convertible Preferred Stock
will be redeemed, the number of shares of Common Stock to be issued for each
share of Series H Convertible Preferred Stock, and the place or places at which
the Series H Convertible Preferred Stock must be presented for redemption. From
and after the redemption date specified in the Redemption notice all shares of
Series H Convertible Preferred Stock shall be deemed to be converted into the
number of fully paid and non-assessable shares of Common Stock specified in the
Redemption Notice and any certificate representing shares of Series H
Convertible Preferred Stock shall be deemed to represent the number of shares of
Common Stock issuable upon redemption of the Series H Convertible Preferred
Stock represented thereby.
(c) Any Redemption Notice by the Corporation which is mailed as herein
provided shall be conclusively presumed to have been duly given whether or not
the holder of Series H Convertible Preferred Stock receives such Redemption
Notice; and failure to give such Redemption Notice by mail, or any defect in
such Redemption Notice shall not affect the validity of the proceedings for the
redemption of any other shares of Series H Convertible Preferred Stock.
-31-
7. Conversion Privilege.
---------------------
(a) Right of Conversion. Each issued and outstanding share of Series H
---------------------
Convertible Preferred Stock shall be convertible at the option of the holder
thereof, as hereinafter adjusted, into: (i) one and one-fifth (1.2) fully paid
and non-assessable shares of Common Stock by the holder thereof after such share
has been owned of record by such holder for a period of one (1) year; and (ii)
one and one-half (1.5) fully paid and non-assessable shares of Common Stock by
the holder thereof after such share has been owned of record by such holder for
a period of two (2) years.
(b) Conversion Procedure. Any holder of shares of Series H Convertible
---------------------
Preferred Stock desiring to convert such shares into Common Stock shall
surrender the certificate or certificates for such shares of Series H
Convertible Preferred Stock at the office of the transfer agent for the Series H
Convertible Preferred Stock, which certificate or certificates, if the
Corporation shall so require, shall be duly endorsed to the Corporation or in
blank, or accompanied by proper instruments of transfer to the Corporation or in
blank, accompanied by irrevocable written notice to the Corporation that the
holder elects so to convert such shares of Series H Convertible Preferred Stock
and specifying the name or names (with address) in which a certificate or
certificates for Common Stock are to be issued.
The Corporation will, as soon as practicable after such deposit of certificates
for Series H Convertible Preferred Stock accompanied by the written notice and,
compliance with any other conditions herein contained, deliver at the office of
the transfer agent to the person for whose account such shares of Series H
Convertible Preferred Stock were so surrendered, or to his nominee or nominees,
certificates for the number of full shares of Common Stock to which he shall be
entitled as aforesaid, together with a cash adjustment of any fraction of a
share as hereinafter provided. Subject to the following provisions of this
paragraph, such conversion shall be deemed to have been made as of the date of
such surrender of the shares of Series H Convertible Preferred Stock to be
converted, and the person or persons entitled to receive the Common Stock
deliverable upon conversion of such Series H Convertible Preferred Stock shall
be treated for all purposes as the record holder or holders of such Common Stock
on such date; provided, however, that the Corporation shall not be required to
convert any shares of Series H Convertible Preferred Stock while the stock
transfer books of the Corporation are closed for any purpose, but the surrender
of Series H Convertible Preferred Stock for conversion during any period while
such books are so closed shall become effective for conversion immediately upon
the reopening of such books as if the surrender had been made on the date of
such reopening, and the conversion shall be at the conversion rate in effect on
such date.
(c) Adjustment of Conversion Rate. The number of shares of Common Stock and
-----------------------------
number or amount of any other securities and property as hereinafter provided
into which a share of Series H Convertible Preferred Stock is convertible (the
"Conversion Rate") shall be subject to adjustment from time to time as follows:
(i) In case the Corporation shall (1) pay a dividend or make a distribution on
its Common Stock that is paid or made (A) in other shares of stock of the
Corporation or (B) in rights to purchase stock or other securities if such
rights are not separable from the Common Stock except upon the occurrence of a
contingency, or (2) subdivide its outstanding shares of Common Stock into a
greater number of shares or (3) combine its outstanding shares of Common Stock
into a smaller number of shares, then in any such case the conversion rate in
effect immediately prior thereto shall be adjusted retroactively as provided
below so that the holder of any shares of Series H Convertible Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number of
shares of Common Stock of the Corporation and other shares and rights to
purchase stock or other securities (or, in the event of the redemption of any
such shares or rights, any cash, property or securities paid in respect of such
redemption) which such holder would have owned or have been entitled to receive
after the happening of any of the events described above had such shares of
Series H Convertible Preferred Stock been converted immediately prior to the
happening of such event. An adjustment made pursuant to this subparagraph (i)
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date of the subdivision or combination.
(ii) In case the Corporation shall issue rights or warrants to all holders of
its Common Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the current market price per share
(determined as provided below) of the Common Stock on the date fixed for the
determination of stockholders entitled to receive such rights or warrants, or
shall sell any shares of Common Stock at a price per share less than the current
market price per share, then the conversion rate in effect at the opening of
business on the day following the date fixed for such determination shall be
increased by multiplying such conversion rate by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination plus the number of shares
of Common Stock so offered for subscription or purchase and the denominator
shall be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of shares of
Common Stock which the aggregate of the offering price of the total number of
shares of Common Stock so offered for subscription or purchase would purchase at
such current market price, such increase to become effective immediately after
the opening of
-32-
business on the day following the date fixed for such determination: provided,
however, in the event that all the shares of Common Stock offered for
subscription or purchase are not delivered upon the exercise of such rights or
warrants, upon the expiration of such rights or warrants the conversion rate
shall be readjusted to the conversion rate which would have been in effect had
the numerator and the denominator of the foregoing fraction and the resulting
adjustment been made based upon the number of shares of Common Stock actually
delivered upon the exercise of such rights or warrants rather than upon the
number of shares of Common Stock offered for subscription or purchase. For the
purposes of this subparagraph (ii), the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the
Corporation.
(iii) In case the Corporation shall, by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its indebtedness, cash (excluding
ordinary cash dividends paid out of retained earnings of the Corporation), other
assets, securities or rights or warrants to subscribe for or purchase any
security (excluding those referred to in subparagraphs (i) and (ii) above), then
in each such case the conversion rate shall be adjusted retroactively so that
the same shall equal the rate determined by multiplying the conversion rate in
effect immediately prior to the close of business on the date fixed for the
determination of stockholders entitled to receive such distribution by a
fraction of which the numerator shall be the current market price per share
(determined as provided below) of the Common Stock on the date fixed for such
determination and the denominator shall be such current market price per share
of the Common Stock less the amount of cash and the then fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a resolution of the Board of Directors) of the portion of the
assets, rights, securities or evidences of indebtedness so distributed
applicable to one share of Common Stock, such adjustment to become effective
immediately prior to the opening of business on the day following the date fixed
for the determination of stockholders entitled to receive such distribution.
(iv) For the purpose of any computation under this Section 7, the current market
price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices for the 20 consecutive trading days commencing with the
1st trading day before the day in question. The closing price for each day shall
be the reported last sales price regular way or, in case no such reported sale
takes place on such day, the average of the reported closing bid and asked
prices regular way, in either case on the market on which the Common Stock
trades in the following order: the principal national securities exchange on
which the Common Stock is listed or admitted to trading (based on the aggregate
dollar value of all securities listed or admitted to trading) the NASDAQ System,
the Over-the-Counter Bulletin Board, and the over-the-counter market. If the
Common Stock does not trade on any such market for a period of five (5)
consecutive trading days during such period the current market price shall be
specified by the Board of Directors acting in good faith. "Trading day" shall
mean a day on which the market on which the market used to determine the closing
price is open for the transaction of business or the reporting of trades or, if
the closing price is not so determined, a day on which the New York Stock
Exchange is open for the transaction of business.
(v) No adjustment in the conversion rate shall be required unless such
adjustment would require an increase or decrease of at least 1% in such rate;
provided, however, that the Corporation may make any such adjustment its
election; and provided further, that any adjustments which by reason of this
subparagraph (vi) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
7 shall be made to the nearest cent or to the nearest one-hundredth of a share,
as the case may be.
(vi) Whenever the conversion rate is adjusted as provided in any provision of
this Section 7: (1) the Corporation shall compute the adjusted conversion rate
in accordance with this Section 7 and shall prepare a certificate signed by the
principal financial officer of the Corporation setting forth the adjusted
conversion rate and showing in reasonable detail the facts upon which such
adjustment is based, and such certificate shall forthwith be filed with the
transfer agent of the Series H Convertible Preferred Stock; and (2) a notice
stating that the conversion rate has been adjusted and setting forth the
adjusted conversion rate shall be mailed by the Corporation to all record
holders of Series H Convertible Preferred Stock at their then last addresses as
they shall appear in the stock transfer books of the Corporation.
(vii) In the event that at any time, as a result of any adjustment made pursuant
to this Section 7, the holder of any shares of Series H Convertible Preferred
Stock thereafter surrendered for conversion shall become entitled to receive any
shares of the Corporation other than shares of Common Stock or to receive any
other securities, the number of such other shares or securities so receivable
upon conversion of any share of Series H Convertible Preferred Stock shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions contained in this Section 7 with
respect to the Common Stock.
(d) No Fractional Shares. No fractional shares or scrip representing
----------------------
fractional shares of Common Stock shall be issued upon conversion of Series H
Convertible Preferred Stock. Any fractional shares that would otherwise be
issuable redeemed in cash at the current market price. If more than one
certificate representing shares of Series H Convertible Preferred Stock shall be
surrendered for conversion at one time by the same holder, the number of full
shares issuable upon conversion
-33-
thereof shall be computed on the basis of the aggregate number of shares of
Series H Convertible Preferred Stock so surrendered.
(e) Reclassification; Consolidation; Merger or Sale of Assets. In case of
---------------------------------------------------------
any reclassification of the Common Stock, any consolidation of the Corporation
with, or merger of the Corporation into, any other person, any merger of another
person into the Corporation (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock of the Corporation), any sale or transfer of all or substantially
all of the assets of the Corporation or any compulsory share exchange pursuant
to which the Common Stock is converted into other securities, cash or other
property, then lawful provision shall be made as part of the terms of such
transaction whereby the holder of each share of Series H Convertible Preferred
Stock then outstanding shall be entitled to receive the such securities, cash or
other property he would be entitled to receive if all of the Series H
Convertible Preferred Stock had been converted to shares of Common Stock of the
Corporation immediately prior to such reclassification, merger, sale, transfer
or share exchange.
(f) Reservation of Shares; Transfer Taxes; Etc. The Corporation shall at
------------------------------------------
all times reserve and keep available, out of its authorized and unissued stock,
solely for the purpose of effecting the conversion of the Series H Convertible
Preferred Stock, such number of shares of its Common Stock free of preemptive
rights as shall from time to time be sufficient to effect the conversion of all
shares of Series H Convertible Preferred Stock from time to time outstanding.
The Corporation shall from time to time, in accordance with the laws of the
State of its incorporation, increase the authorized number of shares of Common
Stock if at any time the number of shares of Common Stock not outstanding shall
not be sufficient to permit the conversion of all the then outstanding shares of
Series H Convertible Preferred Stock.
If any shares of Common Stock required to be reserved for purposes of conversion
of the Series H Convertible Preferred Stock hereunder require registration with
or approval of any governmental authority under any Federal or State law before
such shares may be issued upon conversion, the Corporation will in good faith
and as expeditiously as possible endeavor to cause such shares to be duly
registered or approved, as the case may be. If the Common Stock is listed on
the New York Stock Exchange or any other national securities exchange, the
Corporation will, if permitted by the rules of such exchange, list and keep
listed on such exchange, upon official notice of issuance, all shares of Common
Stock issuable upon conversion of the Series H Convertible Preferred Stock.
The Corporation will pay any and all issue or other taxes that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of the
Series H Convertible Preferred Stock. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of Common Stock (or other securities or assets) in a
name other than that which the shares of Series H Convertible Preferred Stock so
converted were registered, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the Corporation the
amount of such tax or has established, to the satisfaction of the Corporation,
that such tax has been paid.
8. Voting Rights. The holders of the Series H Convertible Preferred Stock
--------------
shall not be entitled to vote on any matters subject to the vote of the
stockholders of the Corporation except to the extent expressly provided by the
Nevada General Corporation Law.
9. Securities Not Registered Under the Securities Act of 1933. Neither the
----------------------------------------------------------
shares of Series H Convertible Preferred Stock nor the Common Stock issuable
upon conversion thereof has been registered under the Act or the laws of any
state of the United States and may not be transferred without such registration
or an exemption from registration.
(a) Restrictive Legends. Each share of Series H Convertible Preferred
--------------------
Stock and certificate for Common Stock issued upon the conversion of any shares
of Series H Convertible Preferred Stock, and each Series H Convertible Preferred
Stock certificate issued upon the transfer of any such shares of Series H
Convertible Preferred Stock or Common Stock shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT."
(b) Notice of Proposed Transfer: Opinions of Counsel. Except as provided
-------------------------------------------------
in paragraph (c) of this Section 9, prior to any transfer of any such shares of
Series H Convertible Preferred Stock the holder thereof will give written notice
to the Corporation of such holder's intention to effect such transfer and to
comply in all other respects with this Section 9. Each such notice (A) shall
describe the manner and circumstances of the proposed transfer in sufficient
detail to enable counsel to render the opinions referred to below, and (B) shall
designate counsel for the holder giving such notice (who may be house
-34-
counsel
for such holder). The holder giving such notice will submit a copy thereof to
the counsel designated in such notice and the Corporation will promptly submit a
copy thereof to its counsel, and the following provisions shall apply:
(i) If in the opinion of each such counsel the proposed transfer of such shares
of Series H Convertible Preferred Stock may be effected without registration
under the Act, the Corporation will promptly notify the holder thereof and such
holder shall thereupon be entitled to transfer such shares of Series H
Convertible Preferred Stock in accordance with the terms of the notice delivered
by such holder to the Corporation. Each share of Series H Convertible Preferred
Stock or certificate, if any, issued upon or in connection with such transfer
shall bear the appropriate restrictive legend set forth in paragraph (a) of this
Section 9, unless in the opinion of each such counsel such legend is no longer
required to insure compliance with the Act. If for any reason counsel for the
Corporation (after having been furnished with the information required to be
furnished by this paragraph (b)) shall fail to deliver an opinion of the
Corporation, or the Corporation shall fail to notify such holder thereof as
aforesaid, within 20 days after counsel for such holder shall have delivered its
opinion to such holder (with a copy to the Corporation), then for all purposes
of this Designation the opinion of counsel for the Corporation shall be deemed
to be the same as the opinion of counsel for such holder.
(ii) If in the opinion of either or both of such counsel the proposed transfer
of such shares of Series H Convertible Preferred Stock may not be effected
without registration under the Act, the Corporation will promptly so notify the
holder thereof and thereafter such holder shall not be entitled to transfer such
share of Series H Convertible Preferred Stock until receipt of a further notice
from the Corporation under subparagraph (i) above.
(c) Proposed Transfer to Institutions. Notwithstanding the foregoing, any
---------------------------------
holder of such share of Series H Convertible Preferred Stock shall be permitted
to transfer any such share of Series H Convertible Preferred Stock to a limited
number of institutional investors, provided that:
(i) Each such holder represents in writing that it is acquiring such shares of
Series H Convertible Preferred Stock for investment and not with a view to the
distribution thereof (subject, however, to any requirement of law that the
disposition thereof shall at all times be within the control of such
transferee);
(ii) Each such holder agrees in writing to be bound by all the restrictions on
transfer of such shares of Series H Convertible Preferred Stock contained in
this Section 9; and
(iii) Such holder delivers to the Corporation an opinion of counsel who shall be
satisfactory to counsel for the Corporation, stating that such transfer may be
effected without registration under the Act.
10. Status of Acquired Shares. Shares of Series H Convertible Preferred
---------------------------
Stock redeemed by the Corporation pursuant to Section 6, received upon
conversion pursuant to Section 6 or 7 otherwise acquired by the Corporation will
be restored to the status of authorized but unissued shares of Preferred Stock,
without designation as to class and may thereafter be issued, but not as shares
of Series H Convertible Preferred Stock.
11. Preemptive Rights. The Series H Convertible Preferred Stock is not
------------------
entitled to any preemptive or subscription rights in respect of any securities
of the Corporation.
12. Severability of Provisions. Whenever possible, each provision hereof
---------------------------
shall be interpreted in a manner as to be effective and valid under applicable
law, but if any provision hereof is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating or otherwise adversely affecting
the remaining provisions hereof. If a court of competent jurisdiction should
determine that a provision hereof would be valid or enforceable if a period of
time were extended or shortened or a particular percentage were increased or
decreased, then such court may make such change as shall be necessary to render
the provision in question effective and valid under applicable law.
-35-
APPENDIX
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING ON MAY 6, 2004
The undersigned stockholder of us at:
ATSI Communications, Inc.,
Attn: Secretary
3201 Cherry Ridge
Building C, Suite 300
San Antonio, Texas 78230
Tel: (210) 614-7240
Fax: (210) 614-7264
Any stockholder who would like to request a
Delaware corporation
(the "Company"), hereby appoints Arthur L. Smith and Kathleen Keller, and each
of them, as Proxies, each with the power to appoint his or her substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of the Company's common stock that the undersigned may be entitled to
vote at the Annual Meeting of Stockholders to be held on May 6, 2004, and any
adjournment thereof, with all powers that the undersigned would possess if
personally present.
THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS MARKED ON THE
REVERSE SIDE HEREOF. IF NO CHOICE IS MARKED, THE UNDERSIGNED GRANTS THE PROXIES
DISCRETIONARY AUTHORITY WITH RESPECT TO THE ELECTION OF DIRECTORS, PROPOSAL
NUMBER 2 AND PROPOSAL NUMBER 3. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF ALL NOMINEES LISTED ON THE REVERSE SIDE, FOR PROPOSAL
NUMBER 2, AND FOR PROPOSAL NUMBER 3.
Any proxy heretofore given by the undersigned with respect to such stock is
hereby revoked. Receipt of the Notice of the Annual Meeting, Proxy Statement
andseparate Annual Report to Stockholders,
is hereby acknowledged.
Please MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
[ ] NEW ADDRESS:
- -----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
[ ] CHECK HERE FOR ADDRESS CHANGE AND SEE REVERSE
-
[ ] CHECK HERE FOR CONSENT TO ELECTRONIC COMMUNICATIONS VIA THE INTERNET
-
By checkingProxy Materials, Information Statements or Notices of Internet Availability in the
box above, I consent to future
accessmay do so by written request delivered to the
address set forth above. If stockholders that share an address receive more than one copy of this Solicitation Statement (or Notice of Internet Availability of this Solicitation Statement), they may request that a single copy of any future our Annual Report
to Stockholders, Proxy
Materials, Information Statements
prospectuses and other communications electronically viaor Notices of Internet Availability be sent by written request delivered to us at the
Internet. I understand that the Company may no longer distribute printed
materials to me for any future stockholder meeting until such consent is
revoked. I understand that I may revoke my consent at any time by contacting
the Company's transfer agent, American Stock Transfer & Trust Company, New York,
New York and that costs normally associated with electronic access, such as
usage and telephone charges, will be my responsibility.
continued and to be signed on reverse side
1. ELECTIONsame address. IMPORTANT NOTICE REGARDING THE AVAILABILITY OF DIRECTORS
[ ] FOR all nominees listed below
-
[ ] WITHHOLD all nominees listed below
-
Nominees: Murray R. Nye
Richard C. Benkendorf
[ ] Place an "X" in this box to vote for all nominees listed above
- except the nominees written below.
--------------------------------------
2. PROPOSAL TO APPROVE THE APPOINTMENT OF MALONE AND BAILEY, PLLC AS AUDITORS
OF THE COMPANYSOLICITATION
MATERIALS FOR THE FISCAL YEAR ENDING JULY 31, 2004.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
- - -
3. PROPOSALACTION TO APPROVE THE RE-INCORPORATIONBE TAKEN IN LIEU OF THE COMPANY IN NEVADA BY MERGER
WITH AND INTO ITS WHOLLY OWNED SUBSIDIARY.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
- - -
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON ANY MATTER
THAT THE COMPANY DID NOT HAVE NOTICEA MEETING ON FEBRUARY 15, 2004, AND SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Signature Signature
----------------------- --------------------------------
Date
-----------------------------
Please sign exactly as name appears above.
When sharesOR
ABOUT MARCH 9, 2011
The Solicitation Statement and Consent Form are
held by joint tenants, both should sign.
When signing as attorney, as executor, administrator, trustee or guardian,
please give full title as such.
If a corporation, please sign in full corporate name by President or other
authorized officer.
If a partnership, please sign in partnership name by authorized person.
available online at http://www.atsi.net/proxyvote.pdf. By Order of the Board of Directors, |
|
|
Arthur L. Smith |
President |
Dated: San Antonio, Texas
January 28, 2011