Document Security Systems, Inc. and Lexington Technology Group, Inc. Sign
Definitive Merger Agreement
--Merger Expected to Enhance Technology Leadership and Portfolio of Intellectual
Property --Combined Company to be Led by Lexington CEO Will Rosellini
NEW YORK, Oct. 2, 2012 /PRNewswire via COMTEX/ -- Document Security Systems, Inc.
(nyse mkt:DSS), a leader in anti-counterfeit, authentication, and
mass-serialization technologies, and Lexington Technology Group, Inc., a
privately-owned company that owns and manages intellectual property assets, today
announced they have signed a definitive merger agreement. Upon receipt of
shareholder approval from each company, the combined company will continue to be
known as Document Security Systems, Inc. and will be led by current Lexington
Technology Group CEO Will Rosellini, who will replace Patrick White as CEO of
DSS.
The strategic combination with Lexington Technology Group will enable DSS to
substantially increase its intellectual property portfolio, add significant
talent with a proven record in technological innovation, and be positioned to
enhance its revenue through the monetization of the combined company's
intellectual property assets.
"The combination of DSS and Lexington will yield a company with both a wealth of
intellectual property and industrial assets that we believe can generate revenues
from commercial application of these and other technologies," says DSS Chairman
Robert Fagenson. "The broadened management team has the depth and experience
needed to capitalize on the patent portfolio and a balance sheet with
significantly increased working capital to operate the company. We trust our
shareholders will share our enthusiasm for the prospects for the combined company
going forward."
Lexington Technology Group owns patent assets acquired from Thomas L. Bascom,
president of LinkSpace, LLC. These patents are fundamental to important areas of
technology that are currently widely in use and growing at significant rates.
Lexington Technology Group and LinkSpace, LLC are collaborating through Lexington
Technology Group's wholly-owned, Virginia-based subsidiary Bascom Research, which
invests both expertise and capital in the development of RFID medical technology.
Bascom Research intends to integrate its technology with LinkSpace's
enterprise-level software framework and DSS's digital security and RFID
technology for electronic health records (EHR) in an effort to improve throughput
and patient safety in hospitals.
"We believe this merger will enhance the existing efforts of both entities to
broaden revenue generation through the pursuit of market opportunities, and the
licensing and protection of our combined intellectual property portfolio,"
Rosellini says. "We expect to file an IDE with the FDA to begin clinical trials
at Virginia-area hospitals with our integrated suite of next-generation
patient-centric software in 2013. We expect that this development will be
financed with the proceeds from a licensing campaign managed by the patent
monetization firm IPNav."
"We expect that licensing at fair and reasonable rates could provide steady base
revenue, while strategic litigation has the potential to produce significant
benefits for investors," Rosellini says. "Because our model is supported by
stable, ongoing licensing revenue, we won't have to make investment decisions
based on quarterly earnings--which we believe could be a tremendous advantage for
our investors."
Exceptional Experience on Post-Merger Management Team and Board
Following the completion of the merger, the combined company will be led by a
premier management team with a proven track record of technological innovation
and maximizing the value of intellectual property assets, including:
CEO Will Rosellini -- Before joining Lexington Technology Group, Rosellini was
CEO of MicroTransponder, Inc. a development stage medical device company, and
scientific advisor for the patent monetization firm IP Navigation Group (IPNav).
He was named a 2010 Entrepreneur of the Year, a 2011 Tech Titan and is a 2012
finalist for the O'Donnell Award given by the Academy of Medicine, Engineering
and Science. Previously, he played professional baseball for the Arizona
Diamondbacks.
CIO Peter Hardigan -- Currently Chief Operating Officer at Lexington Technology
Group, Hardigan will become DSS's chief investment officer. Previously, he served
as CFO and head of investment management at IPNav, where he was responsible for
financial assessment of all IPNav portfolio acquisitions, and aided activist
investors in the bid for control of AOL and in other high-value IP transactions.
Prior to IPNav, he was a principal in charge of IP transactions at Charles River
Associates in New York and Frankfurt, where he represented a range of Fortune 500
Companies and institutional investors involved in IP monetization, including the
management of a EUR 100 million EU patent investment fund.
CTO Tom Bascom -- The inventor of the pivotal LinkSpace technology, Bascom will
serve as chief technology officer of Bascom Research.
Following the merger, the DSS board of directors will possess expertise in
finance, technology and value extraction, and a particular focus on startups and
fast-growth companies. Members of the board will include CEO Will Rosellini, CIO
Peter Hardigan and:
Warren Hurwitz -- In 2005, Hurwitz co-founded Altitude Capital Partners, a
private investment fund focused on investing in, enforcing and protecting the
rights of intellectual property assets. He managed Altitude's key investment
portfolio companies, including: Visto, Saxon, DeepNines, MercExchange, Digitude
and Software Rights Archive. Prior to co-founding Altitude Capital Partners,
Hurwitz was a Sr. Vice President at HSBC Capital (USA), the U.S. Private Equity
arm of HSBC Group.
Jeff Ronaldi -- Ronaldi has 25 years of experience driving revenues, market
growth, and profitability for start-up and high-growth companies such as Turtle
Bay Technologies, SPX Corporation, XO Communications and Verizon. As CEO of
Turtle Bay, Jeff was responsible for defining overall strategy for the company
and managing the company's approximate $50 million investment in various patent
portfolios.
Robert Fagenson -- Fagenson, current Chairman of DSS, is also Chairman of
National Holdings, parent of broker-dealer national securities, with more than
700 registered representatives around the United States and overseas. Fagenson's
career at the New York Stock Exchange began in 1973. He served as a Governor on
the trading floor and served for eight years on the NYSE Board of Directors, and
as Vice Chairman in 1998 and 1999.
Robert Bzdick - President and chief operating officer of DSS, Bzdick joined the
company in 2010 following the company's acquisition of Premier Packaging Corp.,
where he served as CEO. As COO, Bob uses his 29 years of experience in
manufacturing operations management to integrate and strengthen DSS's three
production divisions to service DSS's growing worldwide, Fortune 1000
customer-base.
Ira Greenstein - An independent director of DSS since 2004, Greenstein is
president of IDT Corp., a provider of wholesale and retail telecommunication
services. He was previously a partner at the law firm Morrison & Foerster and
general counsel of Net2Phone Inc.
David Klein - Since 2009, Klein has served as senior vice president and treasurer
of Constellation Brands, Inc. From 2004 to 2009, he served in the capacities of
vice president, business development and chief financial officer of Constellation
Europe, for Constellation Brands. In his current role, Klein is responsible for
the quantitative management of risk, improving company-wide cash flow generation
and the management of capital structure. Before joining Constellation Brands, he
was chief financial officer at Montana Mills Bread Co.
Details on the Merger Agreement
Pursuant to the terms of the Merger Agreement, a wholly-owned subsidiary of DSS
will merge with and into Lexington Technology Group, with Lexington Technology
Group being the surviving corporation as a wholly-owned subsidiary of DSS through
an exchange of capital stock of Lexington Technology Group for capital stock and
warrants of DSS. Upon completion of the merger and subject to the Beneficial
Ownership Condition (as defined below), each share of then-issued and outstanding
Lexington Technology Group Common Stock and Series A Convertible Preferred Stock
will be automatically converted into (i) the right to receive shares of DSS
Common Stock, (ii) five-year warrants to purchase DSS Common Stock at an exercise
price of $4.80 per share, (iii) shares of DSS Common Stock to be held in escrow
and to be released upon the achievement of certain milestones and, as applicable,
shares of DSS's Series A Convertible Preferred Stock, determined by multiplying
each of (x) 17,250,000 plus (i) the number of additional shares of DSS Common
Stock calculated by dividing any cash held by Lexington Technology Group at
closing in excess of $7,500,000 (up to $1,500,000) by $3.00 and (ii) the number
of shares of DSS held by Lexington Technology Group prior to closing, (y)
4,859,894, and (z) 7,100,000 by a fraction, the numerator of which shall be one
and the denominator of which shall be the sum of (A) the number of shares of
Lexington Technology Group Common Stock plus (B) the number of Lexington
Technology Group Preferred Stock, in each case issued and outstanding immediately
prior to the effective time.
Upon the consummation of the merger, only the holders of Lexington Technology
Group Preferred Stock who would, after giving effect to the merger and receipt of
the merger consideration, beneficially own more than 9.99% of DSS Common Stock
(the "Beneficial Ownership Condition") shall receive for each share of Lexington
Technology Group Preferred Stock they hold the same merger consideration as
outlined above except that such holders shall receive a combination of DSS Common
Stock and DSS Preferred Stock that is convertible into (or if the proposal to
authorize DSS Preferred Stock is not approved, $.02 Warrants exercisable for)
that number of shares of DSS Common Stock they would have received if they had
been a holder of Lexington Technology Group Common Stock immediately prior to the
Effective Time in such amounts that would enable such holders, after giving
effect to the merger, to beneficially own no more than 9.99% of DSS Common Stock
upon consummation of the Merger. Each $.02 Warrant shall have an exercise price
of $.02 per share and will be exercisable at any time after the date of issuance
for a period of ten years. The DSS Preferred Stock will have the powers,
preferences and privileges and other rights as will be set forth in a Certificate
of Amendment to the Certificate of Incorporation of DSS to be filed immediately
following the closing of the merger.
Immediately following the completion of the merger, the former stockholders of
Lexington Technology Group are expected to own approximately 55% of the
outstanding common stock of the combined company (on a fully-diluted basis) and
the current stockholders of DSS are expected to own approximately 45% of the
outstanding common stock of the combined company (on a fully-diluted basis)
(without taking into account any shares of DSS Common Stock held by Lexington
Technology Group's stockholders prior to the completion of the merger).
Private Placement
Simultaneously with the execution of the Merger Agreement, on October 1, 2012,
DSS entered into subscription agreements with certain accredited investors,
pursuant to which DSS agreed to issue and sell to such investors in a private
placement an aggregate of 833,651 shares of its common stock, at a purchase price
of $3.30 per share, for an aggregate purchase price of $2,751,048. The Private
Placement was completed on October 1, 2012. Lexington Technology Group
participated in the private placement and purchased an aggregate of 218,675
shares of DSS common stock, at a purchase price of $3.30 per share, for an
aggregate purchase price of $721,628.
Dawson James Securities, Inc. acted as the sole placement agent in connection
with the Private Placement. Palladium Capital Advisors, LLC advised DSS on the
merger and the private placement.
The shares of DSS common stock being sold in the Private Placement have not been
registered under the Securities Act or any state securities laws and, until so
registered, may not be offered or sold in the United States or any state absent
registration or an applicable exemption from registration requirements.
Completion of the merger, which is expected to occur in the first quarter of
2013, will be subject to approval by the stockholders of DSS and Lexington
Technology Group and customary closing conditions.
Document Security Systems and Lexington Technology Group, Inc. will host a
conference call on Thursday, October 4 at 4:00 PM to discuss the merger.
Time: 4:00 p.m. Eastern Time
Date: Thursday, October 4th, 2012
Investor Dial In (Toll Free): 877-407-9205
Investor Dial In (International): 201-689-8054
Live Webcast URL: : investorcalendar.com
A replay of the teleconference will be available until October 24, 2012, which
can be accessed by dialing (877) 660-6853 if calling within the U.S. or (201)
612-7415 if calling internationally. Please enter account #286 and conference ID
# 4013037 to access the replay.
ABOUT DOCUMENT SECURITY SYSTEMS:
Document Security Systems, Inc. (nyse mkt:DSS) is a leader in anti-counterfeit,
authentication, and mass-serialization technologies, providing security solutions
to corporations, governments, and financial institutions. DSS security programs
are designed to protect against product diversion, counterfeit, theft, and other
costly and damaging occurrences. From risk analysis and vulnerability assessment,
to systems integration and monitoring, DSS offers the advanced tools and
knowledge base needed to protect the world's most valuable and at-risk brands.
More information can be found at their website, dsssecure.com .
ABOUT LEXINGTON TECHNOLOGY GROUP:
Lexington Technology Group invests both expertise and capital in the development
and monetization of pioneering technologies. Lexington's goal is to catalyze
technology development within its investments and to reward those who take on the
risks of innovation. The enterprise invests in companies that have developed
important innovations but have not been fairly rewarded by the marketplace, where
shareholder value depends on the company's ability to successfully monetize
patented technologies. Its efforts contribute to an intellectual property market
in which inventors are better able to profit from their inventions. More
information is available at lex-tg.com.
Important Additional Information Will Be Filed with the SEC
This communication does not constitute an offer to sell or the solicitation of an
offer to buy any securities of Document Security Systems, Inc. ("DSS") or
Lexington Technology Group, Inc. ("Lexington Technology Group") or the
solicitation of any vote or approval. In connection with the proposed
transaction, DSS will file with the U.S. Securities and Exchange Commission
("SEC") a Registration Statement on Form S-4 containing a proxy
statement/prospectus. The proxy statement/prospectus will contain important
information about DSS, Lexington Technology Group, the transaction and related
matters. DSS will mail or otherwise deliver the proxy statement/prospectus to its
stockholders and the stockholders of Lexington Technology Group when it becomes
available. Investors and security holders of DSS and Lexington Technology Group
are urged to read carefully the proxy statement/prospectus relating to the merger
(including any amendments or supplements thereto) in its entirety when it is
available, because it will contain important information about the proposed
transaction.
Investors and security holders of DSS will be able to obtain free copies of the
proxy statement/prospectus for the proposed merger (when it is available) and
other documents filed with the SEC by DSS through the website maintained by the
SEC at sec.gov. In addition, investors and security holders of DSS and
Lexington Technology Group will be able to obtain free copies of the proxy
statement/prospectus for the proposed merger (when it is available) by contacting
DSS, Inc., Attn.: Century Media Group, at 60 East 42nd Street, Suite 1701, or by
e-mail at info@centuryir.com. Investors and security holders of Lexington
Technology Group will also be able to obtain free copies of the proxy
statement/prospectus for the merger by contacting Lexington Technology Group,
Attn.: Investor Relations, 375 Park Avenue, New York, NY 10152, or by e-mail at
info@lex-tg.com.
DSS and Lexington Technology Group, and their respective directors and certain of
their executive officers, may be deemed to be participants in the solicitation of
proxies in respect of the transactions contemplated by the agreement between DSS
and Lexington Technology Group. Information regarding DSS's directors and
executive officers is contained in DSS's Annual Report on Form 10-K for the
fiscal year ended December 31, 2011, which was filed with the SEC on March 19,
2012, and in its proxy statement prepared in connection with its 2012 Annual
Meeting of Stockholders, which was filed with the SEC on April 18, 2012.
Information regarding Lexington Technology Group's directors and officers and a
more complete description of the interests of DSS's directors and officers in the
proposed transaction will be available in the proxy statement/prospectus that
will be filed by DSS with the SEC in connection with the proposed transaction.
Cautionary Note Regarding Forward-Looking Statements
Statements in this press release regarding the proposed transaction between DSS
and Lexington Technology Group; the expected timetable for completing the
transaction; the potential value created by the proposed Merger for DSS's and
Lexington Technology Group's stockholders; the potential of the combined
companies' technology platform; our respective or combined ability to raise
capital to fund our combined operations and business plan; the continued listing
of DSS's or the combined company's securities on the NYSE MKT; market acceptance
of DSS products and services; our collective ability to maintain or protect our
intellectual property rights through litigation or otherwise; Lexington
Technology Group's limited operating history, competition from other industry
competitors with greater market presence and financial resources than those of
DSS's; our ability to license and monetize the patents owned by Lexington
Technology Group; potential new legislation or regulation related to enforcing
patents; the complexity and costly nature of acquiring patent or other
intellectual property assets; the combined company's management and board of
directors; and any other statements about DSS' or Lexington Technology Group's
management teams' future expectations, beliefs, goals, plans or prospects
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Any statements that are not statements
of historical fact (including statements containing the words "believes,"
"plans," "could," "anticipates," "expects," "estimates," "plans," "should,"
"target," "will," "would" and similar expressions) should also be considered to
be forward-looking statements. There are a number of important factors that could
cause actual results or events to differ materially from those indicated by such
forward-looking statements, including: the risk that DSS and Lexington Technology
Group may not be able to complete the proposed transaction; the inability to
realize the potential value created by the proposed Merger for DSS's and
Lexington Technology Group's stockholders; our respective or combined inability
to raise capital to fund our combined operations and business plan; DSS's or the
combined company's inability to maintain the listing of our securities on the
NYSE MKT; the potential lack of market acceptance of DSS's products and services;
our collective inability to protect our intellectual property rights through
litigation or otherwise; competition from other industry competitors with greater
market presence and financial resources than those of DSS's; our inability to
license and monetize the patents owned by Lexington Technology Group; and other
risks and uncertainties more fully described in DSS's Annual Report on Form 10-K
for the year ended December 31, 2011 and its Quarterly Reports on Form 10-Q for
the quarters ended March 31, 2012 and June 30, 2012, each as filed with the SEC,
as well as the other filings that DSS makes with the SEC. Investors and
stockholders are also urged to read the risk factors set forth in the proxy
statement/prospectus carefully when they are available.
In addition, the statements in this press release reflect our expectations and
beliefs as of the date of this release. We anticipate that subsequent events and
developments will cause our expectations and beliefs to change. However, while we
may elect to update these forward-looking statements publicly at some point in
the future, we specifically disclaim any obligation to do so, whether as a result
of new information, future events or otherwise. These forward-looking statements
should not be relied upon as representing our views as of any date after the date
of this release.
Investor Relations for Document Security Systems:Century IR.com212-776-1030
Media Relations for Lexington Technology Group:Jamie DiaferiaInfinite
PR212-687-0935jdiaferia@infinitepr.com
SOURCE Document Security Systems, Inc. |
