SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [ ]
Filed by a party other than the registrant [ ]
[ ] Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use [X] Definitive
proxy statement of the Commission Only [ ] Definitive additional
materials (as permitted by Rule [ ] Soliciting material pursuant to
14a-6(e)(2))
Rule 14a-11(c) or Rule 14a-12
CYBER DIGITAL, INC.
Name of Registrant as Specified in Its Charter
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No Fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
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CYBER DIGITAL, INC.
400 OSER AVENUE
SUITE 1650
HAUPPAUGE, NEW YORK 11788
(516) 231-1200
February 14, 2000
To Our Shareholders:
You are cordially invited to attend the Year 2000 Annual Meeting of the
Shareholders of Cyber Digital, Inc. (the "Company"), which will be held at the
Holiday Inn, 3845 Veterans Memorial Highway, Ronkonkoma, New York, on
Monday, March 6, 2000 at 10:00 a.m. New York time.
The Notice of Annual Meeting of the Shareholders and Proxy Statement
covering the formal business to be conducted at the Annual Meeting follow this
letter.
We hope you will attend the Annual Meeting in person. Whether or not
you plan to attend, please complete, sign, date and return the enclosed proxy
promptly in the accompanying reply envelope to assure that your shares are
represented at the meeting.
Sincerely yours,
/s/ J.C. Chatpar
---------------------------------
J.C. Chatpar
Chairman of the Board, President
and Chief Executive Officer
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CYBER DIGITAL, INC.
400 OSER AVENUE
SUITE 1650
HAUPPAUGE, NEW YORK 11788
(516) 231-1200
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 6, 2000
The Annual Meeting of Shareholders of Cyber Digital, Inc. (the
"Company") will be held at the Holiday Inn, 3845 Veterans Memorial Highway,
Ronkonkoma, New York, at 10:00 A.M., New York time, on Monday March 6, 2000 for
the following purposes:
1. To approve the issuance of shares of the Company's Common
Stock, par value $0.01 per share (the "Securities"), to be issued on
conversion of shares of the Company's Series D1 Convertible Preferred
Stock and exercise of the related warrants (the "Convertible
Securities"), and payment of dividends on the Company's Series D1
Convertible Preferred Stock.
2. To approve an amendment to the Company's 1997 Stock
Incentive Plan (the "1997 Plan") to increase the number of shares
reserved for issuance thereunder by 2,000,000 from 850,999 shares to
2,850,999 of the Company's Common Stock, par value $0.01 per share.
3. To elect five directors, each to serve until the next
Annual Meeting of Shareholders and until their respective successors
have been duly elected and qualified.
4. To ratify the appointment of Albrecht, Viggiano, Zureck &
Company, P.C. ("AVZ") as the Company's independent public auditors for
the Company's fiscal year ending March 31, 1999 and to approve the
appointment of AVZ for the Company's fiscal year ending March 31, 2000.
5. To approve an amendment to the Company's Certificate of
Incorporation to increase the number of shares of the Company's Common
Stock, $0.01 par value per share, which the Company is authorized to
issue to 60,000,000. The text of Article Fourth of the Company's
Certificate of Incorporation, as amended by this proposed amendment, is
attached as Appendix I to the accompanying Proxy Statement.
6. To transact such other business as may be properly brought
before the meeting and any adjournment or postponement thereof.
The Board of Directors unanimously recommends that you vote FOR the
approval of the issuance of the Securities on conversion of the Convertible
Securities and payment of dividends on the Company's Series D1 Convertible
Preferred Stock, FOR the amendment to the Company's 1997 Plan to reserve of an
additional 2,000,000 shares of the Company's Common Stock for issuance pursuant
to the 1997 Plan, FOR the election of all five nominees as directors, FOR the
ratification and approval of the appointment of AVZ as independent public
auditors for the Company's fiscal year ending March 31, 1999 and to approve the
appointment of AVZ for the Company's fiscal year ending March 31, 2000 and FOR
the amendment to the Company's Certificate of Incorporation to increase the
number of shares of the Company's Common Stock $0.01 par value per share, which
the Company is authorized to issue to 60,000,000.
Shareholders of record at the close of business on February 4, 2000 are
entitled to notice of, and to vote at, the Annual Meeting and any adjournment or
postponement thereof.
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Whether or not you plan to attend the Annual Meeting in person, please
complete, sign, date and return the enclosed proxy in the reply envelope
provided which requires no postage if mailed in the United States. Shareholders
attending the Annual Meeting may vote in person even if they have returned a
proxy. By promptly returning your proxy, you will greatly assist us in preparing
for the Annual Meeting.
By Order of the Board of Directors
/s/ J.C. Chatpar
------------------------------
J.C. Chatpar
Chairman of the Board
Hauppauge, New York
February 14, 2000
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CYBER DIGITAL, INC.
400 OSER AVENUE
SUITE 1650
HAUPPAUGE, NEW YORK 11788
(516) 231-1200
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
To Be Held March 6, 2000
This Proxy Statement and the enclosed form of proxy are being
furnished, commencing on or about February 14, 2000, in connection with the
solicitation of proxies in the enclosed form by the Board of Directors of Cyber
Digital, Inc., a New York corporation (the "Company"), for use at the Annual
Meeting of Shareholders ("Shareholders") of the Company (the "Annual Meeting")
to be held at the Holiday Inn, 3845 Veterans Memorial Highway, Ronkonkoma, New
York, at 10:00 A.M., New York time, on Monday March 6, 2000, and at any
adjournment or postponement thereof, for the purposes set forth in the foregoing
Notice of Annual Meeting of Shareholders.
The Annual Report of the Company, containing financial statements of
the Company as of March 31, 1999, and for the year then ended, is included with
this proxy statement and the information contained therein is incorporated by
reference herein. The principal executive offices of the Company are located at
400 Oser Avenue, Suite 1650, Hauppauge, New York 11788.
A list of the Shareholders entitled to vote at the Annual Meeting will
be available for examination by Shareholders during ordinary business hours for
a period of ten days prior to the Annual Meeting at the offices of the Company,
400 Oser Avenue, Suite 1650, Hauppauge, New York 11788. A Shareholder list will
also be available for examination at the Annual Meeting.
If you are unable to attend the Annual Meeting, you may vote by proxy
on any matter to come before that meeting. The enclosed proxy is being solicited
by the Board of Directors. Any proxy given pursuant to such solicitation and
received in time for the Annual Meeting will be voted as specified in such
proxy. If no instructions are given, proxies will be voted (i) FOR the approval
of the issuance of the Securities on conversion of the Convertible Securities
and payment of dividends on the Company's Series D1 Convertible Preferred Stock;
(ii) FOR the amendment to the Company's 1997 Plan to reserve for an additional
2,000,000 shares of the Company's Common Stock for issuance pursuant to the 1997
Plan; (iii) FOR the election of the nominees named below under the caption
"Election of Directors," (iv) FOR the ratification of AVZ as independent public
auditors for the Company's fiscal year ending March 31, 1999 and to approve the
appointment of AVZ for the Company's fiscal year ending March 31, 2000 (v) FOR
the amendment to the Company's Certificate of Incorporation to increase the
number of shares of the Company's Common Stock, $0.01 par value per share, which
the Company is authorized to issue to 60,000,000, and (vi) in the discretion of
the proxies named on the proxy card with respect to any other matters properly
brought before the Annual Meeting. Attendance in person at the Annual Meeting
will not of itself revoke a proxy; any Shareholder who does attend the Annual
Meeting, however, may revoke a proxy orally and vote in person. Proxies may be
revoked at any time before they are voted by submitting a properly executed
proxy with a later date or by sending a written notice of revocation to the
Secretary of the Company at the Company's principal executive offices.
This Proxy Statement and the accompanying form of proxy are being
mailed to Shareholders of the Company on or about February 14, 2000.
Following the original mailing of proxy solicitation material,
executive and other employees of the Company and professional proxy solicitors
may solicit proxies by mail, telephone, telegraph and personal interview.
Arrangements may also be made with brokerage houses and other custodians,
nominees and fiduciaries which are
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record holders of the Company's Common Stock to forward proxy solicitation
material to the beneficial owners of such stock. Although it has entered into no
formal agreements to do so, the Company may reimburse such record holders for
their reasonable expenses incurred in such forwarding. The cost of soliciting
proxies in the enclosed form will be borne by the Company.
The Company's Board of Directors has unanimously voted to recommend (i)
the issuance of the Common Stock on the conversion of the Company's Series D1
Convertible Preferred Stock and related warrants ("Convertible Securities") and
payment of dividends on the Company's Series D1 Convertible Preferred Stock,
(ii) the amendment to the Company's 1997 Plan to increase the number of shares
reserved for issuance thereunder by 2,000,000, (iii) the nominees for election
to the Board of Directors listed below under the caption "Election of Directors"
(iv) the ratification of the appointment of AVZ as the Company's independent
public auditors for the fiscal year ending March 31, 1999 and the appointment of
AVZ as the independent public auditors for the Company for the fiscal year
ending March 31, 2000 and (v) the amendment to the Company's Certificate of
Incorporation to increase the number of shares of the Company's Common Stock
$0.01 par value per share, which the Company is authorized to issue to
60,000,000.
The holders of a majority of the outstanding shares entitled to vote,
present in person or represented by proxy, will constitute a quorum for the
transaction of business. Shares represented by proxies that are marked "abstain"
will be counted as shares present for purposes of determining the presence of a
quorum on all matters. Brokers holding shares for beneficial owners in "street
name" must vote those shares according to specific instructions they receive
from the owners of such shares. If instructions are not received, brokers may
vote the shares, in their discretion, depending on the type of proposals
involved. Broker non-votes result when brokers are precluded from exercising
their discretion on certain types of proposals. Brokers may have discretionary
authority to vote on the issuance of the Securities to HFTP Investment LLC, the
amendment to the Company's 1997 Stock Incentive Plan the election of directors,
the ratification of the appointment of AVZ and the amendment to the Company's
Certificate of Incorporation. Shares that are voted by brokers on some but not
all of the matters will be treated as shares present for purposes of determining
the presence of a quorum on all matters, but will not be treated as shares
entitled to vote at the Annual Meeting on those matters as to which authority to
vote is withheld from the broker.
The election of each nominee for Director requires a plurality of the
votes cast at the Annual Meeting (whether in person or by proxy) by the holder
of shares entitled to vote thereon. The affirmative vote of a majority of the
votes cast at an Annual Meeting (whether in person or by proxy) by the holders
of shares entitled to vote thereon is required for the approval of the remaining
proposals. Because broker non-votes and abstentions will not be treated as
shares that are voted with respect to a specific proposal, broker non-votes and
abstentions will have no effect on the outcome.
The Company will appoint an inspector to act at the Annual Meeting who
will: (1) ascertain the number of shares outstanding; (2) determine the shares
represented at the Annual Meeting and the validity of the proxies and ballots;
(3) count all votes and ballots; (4) determine and retain for a reasonable
period a record of the disposition of any challenges made to any determinations
by such inspector; and (5) certify his determination of the number of shares
represented at the Annual Meeting and his count of all votes and ballots.
Only Shareholders of record at the close of business on February 4,
2000 (the "Record Date") are entitled to notice of, and to vote at, the Annual
Meeting and any adjournment or postponement thereof. As of the close of business
on February 4, 2000, there were 18,735,590 shares of the Company's Common Stock,
par value $.01 per share (the "Common Stock"), outstanding. Each share of Common
Stock entitles the record holder thereof to one vote on all matters properly
brought before the Annual Meeting and any adjournment or postponement thereof,
with no cumulative voting.
As of the Record Date, J.C. Chatpar, along with all of the Directors,
held an aggregate of 7,663,524 shares of Common Stock, representing 37.1% of the
Company's issued and outstanding Common Stock. Each of Mr. Chatpar and the
Directors has agreed to vote in favor of each proposal discussed below.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than ten percent (10%) of a registered class of the
Company's equity securities, to file with the Securities and Exchange Commission
(the "Commission") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Reporting
persons are required by Commission regulations to furnish the Company with
copies of all forms they file pursuant to Section 16(a).
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company, the following persons failed to file, on
a timely basis, reports required by Section 16(a) of the Exchange Act:
J.C. Chatpar failed to timely file three Forms 4, in connection with
the receipt of certain stock options, during the fiscal years ended March 31,
1998 and 1999. Jatinder Wadhwa failed to timely file four Forms 4, in connection
with the receipt and exercise of certain stock options, during the fiscal years
ended March 31, 1998 and 1999. Jack Dorfman failed to timely file three Forms 4,
in connection with the receipt of certain stock options, during the fiscal years
ended March 31, 1998 and 1999. Terry Jones failed to timely file a form 3, and
in connection with the receipt of certain stock options, two Forms 4 during the
fiscal years ended March 31, 1998 and 1999. Khushi Nichani failed to timely file
a form 3, and in connection with the receipt of certain stock options, two Forms
4 during the fiscal years ended March 31, 1998 and 1999. Larry Shluger failed to
timely file a Form 3, and in connection with the receipt of certain stock
options, a Form 4 during the fiscal years ended March 31, 1998 and 1999. As of
the date of this proxy statement, all such forms have been filed.
PROPOSAL 1 -- APPROVAL OF THE ISSUANCE OF THE SECURITIES ON THE CONVERSION OF
THE CONVERTIBLE SECURITIES and payment of
dividends on the Company's Series D1 Convertible Preferred Stock
The Company entered into a securities purchase agreement, dated as of
September 30, 1999, with HFTP Investment LLC pursuant to which the Company
agreed to sell 3,000 shares of a new series of its Preferred Stock, par value
$0.05 per share, called the Series D1 Convertible Preferred Stock. The Series D1
Convertible Preferred Stock carries a cumulative annual dividend of 8% which is
payable quarterly in cash or in the Common Stock, at the election of the
Company. As set forth in the Company's Certificate of Amendment to its
Certificate of Incorporation, the Series D1 Convertible Preferred Stock is
convertible into shares of the Common Stock. No fractional shares of Common
Stock will be issued as a result of such conversion. Series D1 Convertible
Preferred Stock shall be convertible into the number of shares Common Stock
derived by multiplying the number of Series D1 Convertible Preferred Stock to be
converted by a fraction, the numerator of which is the sum of default interest
and accrued but unpaid dividends, if any, plus $1,000 per share of Series D1
Convertible Preferred Stock to be converted and the denominator of which shall
be the lesser of (x) $5.43, subject to adjustments for stock splits, stock
dividends, recapitalizations and the like, and (y) the amount obtained by
multiplying 80% by the lesser of (i) the average of the three lowest closing
sales prices of the Common Stock over the 20 days immediately preceding the
conversion and (ii) the closing bid price of the Common Stock on the date of
conversion. For the purposes of this formula default interest is the amount of
interest which accrues on any accrued and unpaid dividends which are not paid
within five business days of the date on which they are due which default
interest will be at a rate of 18.0% per annum from the day on which they were
due until the date on which such dividends are paid in full.
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Pursuant to the securities purchase agreement, HFTP Investment LLC has
purchased an aggregate of 3,000 shares of the Company's Series D1 Preferred
Stock, and a warrant to purchase 190,678 shares of Common Stock for an aggregate
purchase price of $3,000,000. The exercise price per share of the warrant is
$5.70, subject to adjustments for stock splits, stock dividends,
recapitalizations and the like.
The shares of the Series D1 Convertible Preferred Stock held by HFTP
Investment LLC are subject to redemption in the event that the conversion price
is equal or less than $3.00 per share. In addition, all or a portion of the
shares of the Series D1 Convertible Preferred Stock may be redeemed by the
Company at any time prior to October 5, 2000 provided that (i) the registration
statement registering the Common Stock into which the Series D1 Convertible
Preferred Stock is convertible shall be effective and cover all of the Common
Stock into which the Series D1 Convertible Preferred Stock may be converted,
(ii) trading of the Company's Common Stock has not been suspended, (iii) the
Company has not given the holders of the Series D1 Convertible Preferred Stock
more than three notices that the Company wishes to redeem Series D1 Convertible
Preferred Stock, (iv) all shares of Common Stock issued on the conversion of
Series D1 Convertible Preferred Stock and any warrants to purchase Common Stock
held by the holders of Series D1 Convertible Preferred Stock have been issued in
a timely manner and (v) the Company is not in default under the Certificate of
Amendment to its Certificate of Incorporation the warrants or any of the
transactional documents the Company has entered into with the holders of Series
D1 Convertible Preferred Stock. The holders of the Series D1 Convertible
Preferred Stock have no voting rights other than those required by law or as
expressly provided in the Certificate of Amendment of the Certificate of
Incorporation. The price at which the Company may redeem the Series D1
Convertible Preferred Stock depends on the date of such redemption. Prior to
April 4, 2000 such redemption price shall be $1,150 per share of Series D1
Convertible Preferred Stock that is redeemed by the Company. Between April 5,
2000 and October 4, 2000, such redemption price shall be $1,200 per share of
Series D1 Convertible Preferred Stock that is redeemed by the Company.
The following table sets forth the number of shares of Common Stock the
Company would be required to issue upon conversion of all 3,000 shares of Series
D1 Convertible Preferred Stock held by HFTP Investment LLC, at the applicable
conversion price of $3.35 per share of Common Stock as of February 1, 2000, and
the resulting percentage of the Company's total shares of Common Stock
outstanding after such conversion. The table also sets forth the results of such
calculations assuming (i) increases of 25%, 50% as well as the maximum
conversion price of $5.43 which represents a 62% increase in the applicable
conversion price and (ii) decreases of 25%, 50% and 75% in the applicable
conversion price. Notwithstanding the information contained in the table below,
the Company may redeem the Series D1 Convertible Preferred Stock when the
conversion price reaches $3.00 per share or less; provided that the Company has
sufficient cash reserves to effect such redemption.
- --------------------------------------------------------------------------------
Percentage of
Assumed Conversion Price % Number of Shares Outstanding Common
per Share of Common Stock change Issuable upon Stock After
Conversion (2) Conversion(3)
- --------------------------------------------------------------------------------
$3.35(1) 0% 895,522 4.6%
- --------------------------------------------------------------------------------
$4.19 +25% 715,990 3.7%
- --------------------------------------------------------------------------------
$5.03 +50% 596,421 3.1%
- --------------------------------------------------------------------------------
$5.43(4) +62% 552,486 2.9%
- --------------------------------------------------------------------------------
$2.51 -25% 1,195,219 6.0%
- --------------------------------------------------------------------------------
$1.68 -50% 1,785,714 8.7%
- --------------------------------------------------------------------------------
$0.84 -75% 3,571,428 16.0%
- --------------------------------------------------------------------------------
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(1) current applicable conversion price
(2) The foregoing table does not reflect (i) the potential exercise of
warrants to purchase 190,678 shares of Common Stock at an exercise price of
$5.70 per share by the Preferred Shareholders, and (ii) the potential exercise
of Warrants to purchase 75,000 shares of Common Stock at an exercise price of
$5.70 per share by the placement agent, Zanett Securities Corporation.
(3) Under the Certificate of Amendment to the Certificate of
Incorporation, no holder of the Series D1 Convertible Preferred Stock can
convert such stock to the extent that such conversion would cause such holder's
beneficial ownership of the Company's Common Stock (other than shares deemed
beneficially owned through ownership of unconverted shares of the Series D1
Convertible Preferred Stock or unexercised Warrants) to exceed 4.99% of the
outstanding shares of the Company's Common Stock.
(4) The Series D1 Convertible Preferred Stock will not convert at
higher than the maximum conversion price of $5.43 which is an increase of
approximately 62% over the price at which the Common Stock was trading as of the
date that this Proxy Statement was mailed to shareholders.
The Company used the services of Zannett Securities Corporation in
connection with the transaction described above and has paid them a fee of
$255,000 and a warrant to purchase 75,000 shares of Common Stock at an exercise
price of $5.70 per share.
Vote Required for Issuance of the Securities on the Conversion
of the Convertible Securities and payment of dividends on the
Company's Series D1 Convertible Preferred Stock
Approval of the issuance of shares of Common Stock, par value $0.01 per
share, on the conversion of the Convertible Securities and payment of dividends
on the Company's Series D1 Convertible Preferred Stock requires the affirmative
vote of a majority of the shares of Common Stock of the Company outstanding and
entitled to vote thereon.
The Board of Directors recommends a vote FOR the approval of the
issuance of shares of Common Stock on the conversion of the Series D1
Convertible Preferred Stock and payment of dividends on the Company's Series D1
Convertible Preferred Stock.
PROPOSAL 2 -- AMENDMENT TO THE COMPANY'S 1997 PLAN TO INCREASE
THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER BY
2,000,000 SHARES
The Board of Directors has approved an amendment to the Company's 1997
Plan which, if adopted, would increase the number of shares authorized for
issuance thereunder by 2,000,000 shares.
The 1997 Plan was approved by the Board of Directors on November 7,
1997 and adopted by the Company's stockholders on November 7, 1997. Currently
the 1997 Plan provides for the issuance of up to 850,999 authorized and unissued
shares of Common Stock, treasury shares and/or shares acquired by the Company
for purposes of the 1997 Plan. Such amounts may be increased by amendment to
1997 Plan with shareholder approval.
The Board of Directors has approved an amendment to the 1997 Plan that
would increase the number of shares authorized for issuance thereunder from
850,999 to 2,850,999 shares. As of the Record Date, the Company had issued under
the 1997 Plan options to purchase an aggregate of approximately 850,500 shares.
The Board of Directors believes that the Company will continue to expand the
Company's executive and employee base, and that the number of options remaining
available under the 1997 Plan will likely be insufficient for the Company's
needs over the next several years. The Board of Directors or the Company's Stock
Option Plan Committee, if created in the future (the "Committee"), will retain
the discretion to increase the number of shares issuable under the 1997 Plan in
the amounts and at the times as the Board of Directors or the Committee shall
determine. The Board of Directors
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believes that this amendment to the 1997 Plan is in the best interests of the
Company and its shareholders because the availability of an adequate stock
option program is an important factor in attracting and retaining qualified
directors, officers and employees essential to the success of the Company and in
aligning their long term interests with those of the shareholders. The increase
in the number of shares of Common Stock reserved for issuance under the 1997
Plan will permit the Company to continue the operation of the 1997 Plan for the
benefit of new participants, as well as to allow additional award to current
participants.
The major features of the 1997 Plan are summarized below, which summary
is qualified in its entirety by the actual text of the 1997 Plan. The Company
will furnish without charge a copy of the 1997 Plan to any stockholder of the
Company upon receipt from any such person of an oral or written request for the
1997 Plan. Such request should be sent to the Company at Cyber Digital, 400 Oser
Avenue, Suite 1650, Hauppauge, New York, 11788, or made by telephone at (516)
231-1200.
GENERAL
The purpose of the 1997 Plan is to provide certain directors, officers
and other key employees and consultants of the Company, as the Board of
Directors or the Committee shall, in its discretion select, with additional
incentives by providing them with the opportunity to increase their ownership
interests in the Company. The 1997 Plan, is designed to attract and retain
qualified persons as directors, officers and key employees of the Company so as
to maintain and enhance the Company's long-term performance.
The maximum number of shares of Common Stock subject to awards granted
under the 1997 Plan is currently 850,999 shares, which may be authorized but
unissued shares, treasury shares or shares acquired by the Company for purposes
of the 1997 Plan. In the event of a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock or the like, the
Board of Directors or the Committee will proportionately adjust the number of
shares covered by each outstanding award, the number of shares available under
the 1997 Plan and the exercise prices of outstanding awards. Awards under the
1997 Plan may be made in the form of (i) incentive stock options ("ISOs"), (ii)
nonqualified stock options (ISOs and nonqualified stock options are collectively
referred to as "options"), (iii)stock appreciation rights ("SARs"), (iv)
dividend equivalent rights, (v) restricted stock, (vi) restricted stock units
and (vii) other stock-based awards. Awards may be made to such directors,
officers and other employees of the Company, and to such consultants to the
Company, as the Company shall in its discretion select (collectively "key
persons"). The Board of Directors or the Committee may, without shareholder
approval, suspend, discontinue, revise or amend the 1997 Plan at any time or
from time to time; provided, however, that shareholder approval shall be
obtained for any amendment for which such approval is required by Section 422 of
the Code or under other applicable law. The Board of Directors or the Committee
may amend any outstanding award, including, without limitation, by amendment
which would accelerate the time or times at which the award becomes unrestricted
or may be exercised, or waive or amend any goals, restrictions or conditions on
the award. Any amendments that materially impair any rights or materially
increase any obligations of a grantee under an outstanding award shall be made
only with the consent of the grantee.
GRANTS UNDER THE 1997 PLAN
Stock Options. Each stock option granted under the 1997 Plan
will be exercisable during the period fixed by the Board of Directors or the
Committee; however, no ISO may be exercised more than ten years after the date
of grant. Unless the Board of Directors or the Committee expressly provides
otherwise, an option will become exercisable as to 25% of the shares subject
thereto on each of the first through fourth anniversaries of the date of grant.
The purchase price per share payable upon the exercise of an option (the "option
exercise price") will be established by the Board of Directors or the Committee,
provided that the option exercise price of an ISO shall be no less than 100% of
the fair market value of a share of Common Stock on the date of grant. The
option exercise price is payable in cash, or, with the consent of the Board of
Directors or the Committee, by surrender of shares of Common Stock acquired at
least six months prior to the option exercise date and having a fair market
value on the date of the exercise equal to part or all of the option exercise
price, or by such other payment method as the Board of Directors or the
Committee may prescribe. The Board of Directors or the Committee may provide
that, in the event an optionee pays the option exercise price by surrender of
shares held at least six months, an additional option will
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be granted for a number of shares equal to the number surrendered, with an
option exercise price equal to fair market value at the date of surrender and an
expiration date no later than the expiration date of the original option. Stock
Appreciation Rights. SARs may be granted in connection with all or any part of,
or independently of, any option granted under the 1997 Plan. The grantee of an
SAR has the right to surrender the SAR and to receive from the Company an amount
equal to the aggregate appreciation (since the date of the grant, or over the
option exercise price if the SAR is granted in connection with an option) in the
shares of Common Stock in respect of which such SAR is being exercised. Payment
due upon exercise of an SAR may be in cash, in Common Stock, or partly in each,
as determined by the Committee in its discretion.
Restricted Stock. The Board of Directors or the Committee may
grant restricted shares of Common Stock to such key persons, in such amounts,
and subject to such terms and conditions as the Board of Directors or the
Committee shall determine in its discretion. Certificates for the shares of
Common Stock covered by a restricted stock award will remain in the possession
of the Company until such shares are free of restrictions. Subject to the
applicable restrictions, the grantee has the rights of a Shareholder with
respect to the restricted stock.
Dividend Equivalent Rights. In connection with any award, the
Board of Directors or the Committee may, in its discretion, grant a dividend
equivalent right entitling the grantee to receive amounts equal to the ordinary
dividends that would be paid, during the time such award is outstanding and
unexercised, on the shares of Common Stock covered by such award if such shares
were then outstanding. The Board of Directors or the Committee shall determine
whether such payments are made in cash and/or in shares of Common Stock or in
another form, whether they shall be conditioned upon the exercise of the award
to which they relate, the time at which they will be made, and such other terms
and conditions as it deems appropriate.
Restricted Stock Units. The Board of Directors or the
Committee may grant awards of restricted stock units to such key persons, in
such amounts, and subject to such terms and conditions as the Board of Directors
or the Committee shall determine in its discretion. At the time of grant, the
Board of Directors or the Committee shall specify the date or dates on which the
restricted stock units shall become fully vested and nonforfeitable, and may
specify such conditions to vesting as it deems appropriate. The Board of
Directors or the Committee at any time may accelerate vesting dates and
otherwise waive or amend any conditions of an award of restricted stock units.
At the time of grant, the Board of Directors or the Committee shall specify the
maturity date applicable to each grant of restricted stock units, which may be
determined at the election of the grantee. On the maturity date, the Company
shall transfer to the grantee one unrestricted, fully transferable share of
Common Stock for each restricted stock unit scheduled to be paid out on such
date and not previously forfeited. The Board of Directors or the Committee shall
specify the purchase price, if any, to be paid by the grantee to the Company for
such shares of Common Stock.
Other Stock-Based Awards. The Board of Directors or the
Committee may authorize other types of stock-based awards (including the grant
of unrestricted shares), which the Board of Directors or the Committee may grant
to such key persons, and in such amounts and subject to such terms and
conditions, as the Board of Directors or the Committee shall in its discretion
determine.
TERMINATION OF EMPLOYMENT OR SERVICE
Options and SARs. Unless the Board of Directors otherwise
specifies: (i) all options and SARs not yet exercised shall terminate upon
termination of the grantee's employment or service by reason of discharge for
cause; (ii) if a grantee's employment or service terminates for reasons other
than cause, disability or death, the grantee's options and/or SARs generally
will remain exercisable for three months after termination to the extent that
they were exercisable at termination, but not after the scheduled expiration
date of the award; and (iii) if a grantee dies or becomes disabled while in the
Company's employ or service or during the aforementioned post-employment
exercise period, the grantee's options and/or SARs, to the extent exercisable
immediately prior to death or disability, generally will remain exercisable for
one year after the date of death or disability, but not after the scheduled
expiration date of the award.
7
<PAGE>
Restricted Stock. If a grantee's employment or service
terminates for any reason, during the 90 days following termination the Company
will have the right to require forfeiture of restricted shares in exchange for
any amount paid by the grantee for such shares.
Restricted Stock Units. In the event of the termination of a
grantee's employment or service for any reason, restricted stock units that have
not become nonforfeitable shall be forfeited and cancelled.
Right of Recapture. If at any time within one year after the
date on which a participant exercises an option or SAR, or on which restricted
stock vests, or which is the maturity date of restricted stock units, or on
which income is realized by a participant in connection with any other
stock-based award (each of which events is a "Realization Event"), the
participant (a) is terminated for cause or (b) engages in any activity
determined in the discretion of the Board of Directors or the Committee to be in
competition with any activity of the Company, or otherwise inimical, contrary or
harmful to the interests of the Company (including, but not limited to,
accepting employment with or serving as a consultant, adviser or in any other
capacity to an entity that is in competition with or acting against the
interests of the Company), then any gain realized by the participant from the
Realization Event shall be paid by the participant to the Company upon notice
from the Company. Such gain shall be determined as of the date of the
Realization Event, without regard to any subsequent change in the fair market
value of a share of Common Stock. The Company shall have the right to offset
such gain against any amounts otherwise owed to the participant by the Company
(whether as wages, vacation pay, or pursuant to any benefit plan or other
compensatory arrangement).
OTHER FEATURES OF THE STOCK INCENTIVE PLAN
Unless sooner terminated by the Board of Directors, the
provisions of the 1997 Plan respecting the grant of ISOs shall terminate on the
day before the tenth anniversary of the adoption of the 1997 Plan by the Board
of Directors and no ISO awards shall thereafter be made under the 1997 Plan. All
awards made under the 1997 Plan prior to its termination shall remain in effect
until they are satisfied or terminated. In the event of a change of control (as
defined in the 1997 Plan), (i) any option or SAR then outstanding whose date of
grant was at least one year prior to the date of the change of control shall
become fully vested and immediately exercisable upon the subsequent termination
of employment of the grantee by the Company or its successors without cause and
(ii) the Committee may amend any award in such manner as it deems appropriate,
including without limitation by amendments that advance the dates upon which
outstanding awards shall terminate.
FEDERAL INCOME TAX CONSEQUENCES
The description of Federal tax consequences set forth below is
necessarily general in nature and does not purport to be complete.
There are generally no Federal tax consequences either to the
optionee or to the Company upon the grant of an option. On exercise of an ISO,
the optionee will not recognize any income, and the Company will not be entitled
to a deduction for tax purposes, although such exercise may give rise to
liability for the optionee under the alternative minimum tax provisions of the
Code. However, if the optionee disposes of shares acquired upon exercise of an
ISO within two years of the date of grant or one year of the date of exercise,
the optionee will recognize compensation income, and the Company will be
entitled to a deduction for tax purposes in the same amount, equal to the excess
of the fair market value of the shares of Common Stock on the date of exercise
over the option exercise price (or the gain on sale, if less); the remainder of
any gain to the optionee will be treated as capital gain. Otherwise, the Company
will not be entitled to any deduction for tax purposes upon disposition of such
shares, and the entire gain for the optionee will be treated as a capital gain.
On exercise of a non-qualified stock option, the amount by which the fair market
value of the Common Stock on the date of exercise exceeds the option exercise
price will generally be taxable to the optionee as compensation income, and will
generally be deductible for tax purposes by the Company. The disposition of
shares of Common Stock acquired upon exercise of a non-qualified stock option
will generally result in a capital gain or loss for the optionee, but will have
no tax consequences for the Company.
8
<PAGE>
The grant of an SAR, a dividend equivalent right, restricted
stock or performance share award generally will not result in income for the
grantee or in a tax deduction for the Company. Upon the settlement of such a
right or award, and upon the vesting of restricted stock, the grantee will
recognize ordinary income equal to the fair market value of any shares of Common
Stock and/or any cash received, and the Company will be entitled to a tax
deduction in the same amount. An award of restricted shares of Common Stock will
not result in income for the grantee or in a tax deduction for the Company until
such time as the shares are no longer subject to forfeiture unless the grantee
elects otherwise. At that time, the grantee generally will recognize ordinary
income equal to the fair market value of the shares less any amount paid for
them, and the Company will be entitled to a tax deduction in the same amount.
Dividends paid on forfeitable restricted shares are treated as compensation for
Federal tax purposes. A grant of unrestricted shares of Common Stock will result
in income for the grantee, and a tax deduction for the Company, generally equal
to the fair market value of such shares less any amount paid for them.
Limitations on the Company's Compensation Deduction. Section
162(m) of the Code limits the deduction which the Company may take for otherwise
deductible compensation payable to certain executive officers to the extent that
compensation paid to such officers for a year exceeds $1 million, unless such
compensation meets certain criteria. Although the Company believes that
compensation realized from stock options and SARs granted under the 1997 Plan
generally will satisfy the requirements to be considered performance-based for
purposes of Section 162(m) of the Code, there is no assurance such awards will
satisfy such requirements. In addition, because other awards under the 1997 Plan
will generally not meet the requirements of Section 162(m) of the Code, the
deduction attributable to any compensation realized under any such awards to the
affected executive officers may be limited under Section 162(m) of the Code.
Tax Withholding. The Board of Directors or the Committee may
require payments from participants in the 1997 Plan, or withhold from payments
due to be made thereunder, in order to satisfy applicable withholding tax
requirements.
Vote Required for the Amendment to the Company's 1997 Plan
The amendment to the Company's 1997 Plan requires the affirmative vote
of a majority of the shares of Common Stock present at the Annual Meeting and
entitled to vote thereon.
The Board of Directors recommends a vote FOR the amendment to the
Company's 1997 Plan.
PROPOSAL 3 -- ELECTION OF DIRECTORS
Nominees for Election
The Board of Directors proposes the election of a Board of five
directors for the upcoming year and until their respective successors are duly
elected and qualified. All of the nominees set forth below are currently members
of the Board of Directors. Unless instructed otherwise, the enclosed proxy will
be voted FOR the election of the nominees named below. Voting is not cumulative.
While management has no reason to believe that any of the nominees will not be
available as a candidate, should such a situation arise, proxies may be voted
for the election of such other person as a director as the holders of the
proxies may, in their discretion, determine.
The following sets forth certain information with respect to each of
the five nominees to the Board of Directors:
Year First
Elected
Name Age Director Office
- ---- --- -------- ------
Nominees to the Board
Jawahar C. Chatpar 51 1983 Chairman of the Board,
President, and Chief
Executive Officer
Jack P. Dorfman 61 1993 Director and Secretary
Jatinder V. Wadhwa 64 1986 Director and Treasurer
9
<PAGE>
Terry L. Jones 51 1997 Director
Andrew Van Etten 38 Nominee
Jawahar C. Chatpar is a founder of the Company and has served as
Chairman of the Board, Chief Executive Officer and President since March 1991,
as Chairman of the Board, Chief Executive Officer and Secretary from November
1986 until March 1991, and as President and Chief Executive Officer since
inception until November 1986. Mr. Chatpar has also served as a director since
inception. Mr. Chatpar founded the Company in 1983 as a successor to a Canadian
corporation of the same name, which he founded in 1982. He holds an B.Tech
(honors) degree in Electrical Engineering from the Indian Institute of
Technology, Bombay, India and an M.S. degree in Electrical Engineering from the
University of Waterloo, Canada.
Jack P. Dorfman joined the Company as a Director in November 1993, and
has served as Secretary since October 1995. Mr. Dorfman has otherwise been
retired since June 1996. Prior thereto, since 1992, Mr. Dorfman served as
consultant and manager for a number of pharmacies. From 1990 to 1992, he served
as a management consultant for Clark Container, a division of Mark IV
Industries, a conglomerate. From 1988 to 1990, he served as Vice President and
Treasurer of US Distribution, a transportation company. Prior to 1988, he owned,
managed and operated an independent community pharmacy for over fifteen years.
Jatinder Wadhwa has served as a Director of the Company since 1986 and
as Treasurer of the Company since August 1997. He had been the Secretary of the
Company from 1993 to 1995. Since 1994, Mr. Wadhwa has served as the Chief
Executive Officer of Security First Financial Corp., a financial institution
dealing with first and second mortgages on residential and commercial
properties.
Terry L. Jones has served as a Director of the Company since November
1997. He has been the President of Syndicated Communications, Inc. ("Syncom"), a
communications venture capital investment company, since 1990. He joined Syncom
in 1978 as a Vice President. Mr. Jones serves in various capacities, including
director, president, general partner and vice president for various other
entities affiliated with Syncom. He also serves on the Board of Directors of
Radio One, Inc. Mr. Jones earned his B.S. degree from Trinity College, his M.S.
from George Washington University and his M.B.A. from Harvard Business School.
Andrew Van Etten, a nominee, is currently serving as Senior Director,
Strategic Business Development, Electronics and Information Business Division at
Mitsui & Company, (USA) Inc. He joined Mitsui & Company in 1988. Mitsui &
Company is one of the oldest and largest international trading companies
headquartered in Japan. Mr. Etten is Mitsui's representative as shareholder for
PageMart Wireless, Inc. and portfolio manager for America Online, Inc. and
America Online Japan. He also serves on the Board of Directors of Lana Film
Company. Mr. Etten holds an B.S. degree in Business Administration from Plymouth
State College of the University of New Hampshire.
There are no family relationships among the directors and officers of
the Company.
Each director is elected to hold office until the next succeeding
annual meeting of shareholders and until his successor is elected and qualified
or until his death, resignation or removal.
Information Concerning the Board of Directors and its Committees
During the fiscal year ended March 31, 1999, ("Fiscal 1999") there were
three meetings of the Board of Directors of the Company. During such fiscal
year, each incumbent director attended at least 75% of the meetings of the Board
of Directors. The Board of Directors does not have any committees.
Compensation of Directors
10
<PAGE>
The directors of the Company are paid $250 per Board meeting. In
addition, the Company currently reimburses each director for expenses incurred
in connection with his attendance at each meeting of the Board of Directors.
In August 31, 1998, the Company issued to J.C. Chatpar, Jack Dorfman,
Jatinder Wadhawa, Terry Jones and Khushi Nichani, directors of the Company,
non-qualified stock options to purchase 120,000, 20,000, 20,000, 10,000, and
10,000 shares of Common Stock, respectively, at an exercise price of $0.75 per
share.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the compensation
for services in all capacities for the fiscal years ended March 31, 1999, March
31, 1998 and March 31, 1997, of the Chief Executive Officer of the Company, who
is the only executive officer at the Company who earned over $100,000 (the
"Named Executive") for the fiscal year ended 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation
Awards
- ----------------------------------------------------------------------------------------------------------------
Securities
Name and Principal Position Fiscal Salary($) Bonus($) Underlying
Year Options(#)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
J.C. Chatpar, Chairman of the Board, President and 1999 $165,000 None 120,000(2)
Chief Executive Officer 1998 $150,000 None 140,000(3)
1997 $130,000 $100,000 None
(1)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) We have concluded that the aggregate amount of perquisites and other
personal benefits paid to the Named Officer named in the table did not exceed
the lesser of 10% of such officer's total annual salary and bonus for the 1999,
1998 and 1997 fiscal years or $50,000, thus, such amounts are not included in
the table.
(2) In the last fiscal year, Mr. Chatpar was granted 120,000 options each to
purchase one share of Common Stock exercisable at $0.75, which expire on
8/30/08.
(3) Mr. Chatpar was granted 110,000 options each to purchase one share of Common
Stock exercisable at $2.56 and 30,000 options each to purchase one share of
Common Stock exercisable at $2.43 in Fiscal 1998.
Aggregated Fiscal Year-End Option Values
The following table sets forth information concerning the number of
unexercised options and the fiscal 1999 year-end value of unexercised options on
an aggregated basis held by the Named Executive. The Company has not granted any
stock appreciation rights and no options were exercised in fiscal 1999.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Number of Securities Underlying Unexercised Value of Unexercised In-The-Money Options
Options at Fiscal Year-End (#) at Fiscal Year-End ($)(1)
------------------------------ -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
J.C. Chatpar 740,000 0 $792,400 $0
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
(1) Options are "in-the-money" if, on March 31, 1999, the market price of the
Common Stock exceeded the exercise price of such options. The value of such
options is calculated by determining the difference between the aggregate market
price of the Common Stock underlying the options on March 31, 1999 and the
aggregate exercise price of such options.
Employment Agreements and Insurance
The Company has entered into an Amended and Restated Employment
Agreement with Mr. J.C. Chatpar dated as of August 4, 1997 (the "Employment
Agreement") for a three-year term. Such three-year term shall be automatically
extended for successive three-year terms unless either party gives the other
party 120 days prior written notice of termination before the end of any such
three-year period. The Board, however, has the authority to terminate such
extension upon cause. "Cause" is defined as conviction of a felony or willful
misconduct. Mr. Chatpar is entitled to receive a salary of $150,000 per annum,
with an annual increase of 10%. In recognition of the complex scientific and
technical leadership which Mr. Chatpar brings to the Company. The Company has
also agreed that its Board of Directors may raise his salary during the term of
his employment as soon as the financial resources of the Company and other
business conditions permit. In such event, Mr. Chatpar's salary shall be at a
level comparable to that of chief executive officers of other comparable
technology-driven publicly held companies.
In addition to his base salary, Mr. Chatpar shall be entitled to
receive a bonus based upon the following formula: (a) 1% of gross revenues for
each fiscal year in excess of $3 million provided however, that the Company
shall be profitable, plus (b) 5% of net income after deduction of the bonus
provided for in (a) above, and plus (c) 10% of the increase in net income over
that of the prior fiscal year after deduction of the bonus provided for in (a)
above.
In the event of a termination of Mr. Chatpar's employment due to
disability, he shall receive royalty payments of 5% of the gross revenues earned
by the Company ("Royalties") for a period of 15 years following termination. In
the event of Mr. Chatpar's death, his wife, if any, or his estate, shall receive
a payment equal to six months of his base salary and Royalties for 15 years. In
the event of a termination of Mr. Chatpar's employment for any reason other than
pursuant to disability, death or for cause, or if there is a change of control
(as defined in the Employment Agreement) of the Company which results in an
actual or constructive termination of employment (as defined therein), he shall
receive a payment equal to three years of his base salary plus three times his
prior year's bonus, Royalties for 15 years, and all of his outstanding options
will be deemed immediately vested and exercisable for a period of one year from
the effective termination date.
The Company does not have employment contracts with any other officer
or director. The Company offers basic health, major medical and life insurance
to its employees. No retirement, pension or similar program has been adopted by
the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 4, 2000, the number of
shares of Common Stock (and the percentage of Common Stock) beneficially owned
by (i) each person known (based solely on Schedules 13D or 13G filed) to the
Company to be the beneficial owner of more than 5% of the Common Stock, (ii)
each director and nominee to the Board of Directors of the Company, (iii) the
Named Executive (as hereinafter defined) and (iv) all directors and executive
officers of the Company as a group (based upon information furnished by such
persons). Under the rules of the Commission, a person is deemed to be a
beneficial owner of a security if such person has or
12
<PAGE>
shares the power to vote or direct the voting of such security or the power to
dispose of or to direct the disposition of such security. In general, a person
is also deemed to be a beneficial owner of any securities of which that person
has the right to acquire beneficial ownership within 60 days. Accordingly, more
than one person may be deemed to be a beneficial owner of the same securities.
Number of Shares Percentage (%)
Name and Address Beneficially Owned of Common Stock(1)
- ---------------- ------------------ ------------------
J.C. Chatpar (2)
c/o Cyber Digital, Inc.
400 Oser Avenue
Hauppauge, NY 11788 7,205,712 34.9%
Jack Dorfman (3) 220,000 1.0%
Jatinder V. Wadhwa (4) 217,812 1.0%
Terry L. Jones (5) 20,000 *
Andrew Van Etten 0 *
All directors and officers as
a group (5 persons) 7,663,524 37.1%
- -----------------
* Indicates beneficial ownership of less than one (1%) percent.
(1) Assumes the exercise of the warrants to purchase 824,013 shares of
Common Stock issued in connection with the offering of the Company's
Series A Preferred stock.
(2) Does not include 476,000 shares owned by Sylvie Chatpar, his wife, and
175,000 shares owned by certain other relatives, to which shares Mr.
Chatpar disclaims beneficial ownership. Includes 1,620,000 shares as to
which Mr. Chatpar holds non-qualified stock options, which are
exercisable at any time.
(3) Includes 100,000 shares at to which Mr. Dorfman holds a non-qualified
stock option, which are exercisable at any time. Does not include
360,000 shares owned by his wife, Sandra Dorfman, to which shares Mr.
Dorfman disclaims beneficial ownership.
13
<PAGE>
(4) Includes 60,000 shares as to which Mr. Wadhwa holds non-qualified stock
options which are exercisable at any time.
(5) Terry Jones is a general partner of a limited partnership that is the
general partner of Syndicated Communications Venture Partners III, L.P.
("Syncom III"), a fund which on April 14, 1998, Syncom III converted
all of its outstanding Series B-1 Preferred Stock into 861,230 shares
of Common Stock at a conversion price of $2.89 per share. Includes
20,000 shares as to which Mr. Jones holds non-qualified stock options
which are exercisable at any time.
Certain Relationships and Related Transactions
On December 30, 1996, the Company consummated a private placement of
its Series B-1 Convertible Preferred Stock, par value $.05 per share, to Syncom
III. The Company issued 2,000 shares of its Series B-1 Stock to Syncom III in
return for $2,000,000. On April 14, 1998, Syncom III converted all of its
outstanding Series B-1 Preferred Stock into 861,230 shares of Common Stock at a
conversion price of $2.89 per share.
Terry Jones, a nominee, is the general partner of WJM Partners III,
L.P. ("WJM"), the general partner of Syncom III. Pursuant to the terms of the
Stock Purchase Agreement so long as Syncom III holds Common Stock, the Company's
Board of Directors shall consist of not less than five members and the Company
shall use its best efforts to cause Terry Jones (or another partner of WJM) to
be elected as a director.
Vote Required for Election of Directors
The election of each nominee for director requires a plurality of the
votes cast. Accordingly, abstentions and Broker non-votes will not affect the
outcome of the Election. Proxies solicited by the Board of Directors will be
voted for each of the nominees listed above, unless Shareholders specify
otherwise.
The Board of Directors unanimously recommends a vote FOR the election
of each of the nominees listed above.
PROPOSAL 4 -- TO RATIFY APPOINTMENT OF INDEPENDENT PUBLIC
AUDITORS FOR FISCAL YEAR ENDING MARCH 31, 1999 AND APPOINTMENT
FOR FISCAL YEAR ENDING MARCH 31, 2000
The Board of Directors has appointed AVZ as the Company's independent
public auditors for the fiscal years ending March 31, 1999 and March 31, 2000.
The Shareholders will be asked to ratify the appointment of AVZ as the
independent public auditors of the Company for the fiscal year ending March 31,
1999 and to appoint AVZ for the fiscal year ending March 31, 2000. This proposal
requires the affirmative vote of a majority of the votes cast at the Annual
Meeting by the holders of shares entitled to vote thereon. Representatives of
Albrecht, Viggiano, Zureck & Company, P.C. are expected to be present at the
Annual Meeting, with an opportunity to make a statement if they desire to do so,
and they are expected to be available to respond to appropriate questions.
AVZ has audited the Company's financial statements for the fiscal years
ended March 31, 1997 and March 31, 1998.
Vote Required for Ratification of AVZ for Fiscal Year ending March 31,
1999 and Appointment for Fiscal Year ending March 31, 2000
The ratification and appointment of AVZ requires the affirmative vote
of a majority of the shares of Common Stock present at the Annual Meeting and
entitled to vote thereon.
14
<PAGE>
The Board of Directors recommends a vote FOR both the ratification and
appointment of AVZ.
PROPOSAL 5--TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
The Board of Directors has recommended an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 30 million to 60 million. The Board of Directors believes such
action to be in the best interest of the Company so as to make additional shares
available for acquisitions, financing, present and future employee benefit
programs and other corporate purposes. Other than shares that may be issued upon
the exercise of options issued under the 1997 Plan, the Company has no current
plans or proposals to use the newly authorized shares for acquisitions,
financing, employee benefit plans or other corporate purposes.
As indicated above, the Company is currently authorized to issue 30
million shares of Common Stock. As of February 4, 2000, there were 18,735,590
shares of Common Stock issued and outstanding. In addition, as of such date,
there were 2,228,500 shares of Common Stock issuable upon the exercise of
outstanding options, 1,454,520 shares of Common Stock issuable upon the exercise
of outstanding warrants and 1,528,678 shares of Common Stock issuable upon
conversion of shares of the Company's Series C and D1 Preferred Stock.
The additional shares of Common Stock may be issued from time to time
as the Board of Directors may determine without further action of the
shareholders of the Company. Although the Board has no current plans to utilize
such shares to entrench present management, it may, in the future, be able to
utilize the additional shares, together with or apart from the Company's
authorized Preferred Stock, as a defensive tactic against hostile takeover
attempts. The authorization of such shares shall have no current anti-takeover
effect. No hostile takeover attempts are, to management's knowledge, threatened.
The relative rights and limitations of the Common Stock would remain
unchanged under the amendment. Shareholders of the Company do not currently
possess, nor upon the adoption of the proposed amendment will they acquire,
preemptive rights, which would entitle such persons, as a matter of right, to
subscribe for the purchase of any shares, rights, warrants or other securities
or obligations convertible into, or exchangeable for, securities of the Company.
Vote Required for Amendment to Company's Certificate of Incorporation
The amendment to the Company's Certificate of Incorporation requires
the affirmative vote of a majority of the shares of Common Stock present at the
Annual Meeting and entitled to vote thereon.
The Board of Directors recommends a vote FOR amendment to the Company's
Certificate of Incorporation.
STOCKHOLDER PROPOSALS
The deadline for submitting stockholder proposals for inclusion in the
Company's proxy statement and form of proxy for the Company's next annual
meeting is September 6, 2000. To be properly submitted, the proposal must be
received at the Company's principal executive offices, 400 Oser Avenue, Suite
1650, Hauppauge, New York 11788, no later than the deadline. In order to avoid
controversy, Stockholders should submit any proposals by means, including
electronic means, that permit them to prove the date of delivery.
The deadlines described above are calculated by reference to the date
the proxy materials for this year's Annual
15
<PAGE>
Meeting were first mailed to Stockholders. If the Board of Directors changes the
date of next year's annual meeting by more than 30 days, the Board will, in a
timely manner, inform the Stockholders of such a change and the effect of such a
change on the deadlines given above by including a notice under Item 5 in the
Company's earliest possible quarterly report on Form 10-QSB, or if that is
impracticable, then by any means reasonably calculated to inform the
Stockholders.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not
aware of any other matter that is to be presented to Shareholders for formal
action at the Annual Meeting. If, however, any other matter properly comes
before the meeting or any adjournment or postponement thereof, it is the
intention of the persons named in the enclosed form of proxy to vote such
proxies in accordance with their judgment on such matters.
OTHER INFORMATION
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, THE BOARD URGES YOU TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID
REPLY ENVELOPE. YOUR COOPERATION AS A SHAREHOLDER, REGARDLESS OF THE NUMBER OF
SHARES OF STOCK YOU OWN, WILL REDUCE THE EXPENSES INCIDENT TO A FOLLOW-UP
SOLICITATION OF PROXIES.
IF YOU HAVE ANY QUESTIONS ABOUT VOTING YOUR SHARES, PLEASE TELEPHONE
THE COMPANY TOLL FREE AT 1-800-935-2923.
Sincerely yours,
/s/ J.C. Chatpar
---------------------
J.C. Chatpar
Chairman of the Board
Hauppauge, New York
February 14, 2000
16
<PAGE>
APPENDIX I
PROPOSED ARTICLE FOURTH OF THE COMPANY'S CERTIFICATE OF INCORPORATION, AS
AMENDED
FOURTH: The total number of shares of capital stock which the
Corporation shall be authorized to issue is 70 million of which 10 million
shares shall be shares of Preferred Stock, having par value $0.05 per share, and
60 million shares shall be shares of Common Stock having a par value of $0.01
per share. Preferred Stock may be issued in one or more series with such rights
and designations, including without limitation, voting powers, preferences and
relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof, conversion rights, liquidations privileges,
dividend rights, redemption price or prices and terms of redemption, including
sinking funds provisions as may be determined by action of the Board of
Directors without any further vote or action by the stockholders. Authority is
hereby expressly granted to the Board of Directors to establish and designate
one or more series of Preferred Stock subject to the provisions of this Article.
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CYBER DIGITAL, INC.
Annual Meeting of Shareholders
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints J.C. Chatpar and Jack Dorfman, or if
only one is present, then that individual, with full power of substitution, to
vote all shares of CYBER DIGITAL, INC. (the "Company"), which the undersigned is
entitled to vote at the Annual Meeting of the Company's Shareholders to be held
at the Holiday Inn, 3845 Veteran's Memorial Highway, Ronkonkoma, New York, on
Monday the 6th day of March, 2000, at 10:00 a.m. New York time, and at any
adjournment or postponement thereof, hereby ratifying all that said proxies or
their substitutes may do by virtue hereof, and the undersigned authorizes and
instructs said proxies to vote as follows:
1. Issuance of the Securities: To approve the issuance of shares of the
Company's Common Stock, par value $0.01 per share, on conversion of the
Convertible Securities and payment of dividends on the Company's Series
D1 Convertible Preferred Stock:
FOR [ ] AGAINST [ ] ABSTAIN [ ]>
2. AMENDMENT TO 1997 PLAN: To approve an amendment to the Company's 1997
Stock Incentive Plan to increase the number of shares reserved for
issuance thereunder by 2,000,000 from 850,999 shares to 2,850,999 of
the Company's Common Stock, par value $0.01.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. ELECTION OF DIRECTORS: To elect the nominees for director below for a
term of one year;
FOR all nominees listed below [ ] WITHHOLD AUTHORITY [ ] (except as
marked to the contrary below) to vote for all nominees
listed below
(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name in the list below.)
Jawahar C. Chatpar
Jack P. Dorfman
Jatinder V. Wadhwa
Terry L. Jones
Andrew Van Etten
4. APPROVAL OF AUDITORS: To ratify the appointment of Albrecht, Viggiano,
Zureck & Company, P.C. as the Company's independent public auditors for
the Company's fiscal year ending March 31, 1999 and to appoint AVZ for
the fiscal year ending March 31, 2000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
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5. AMENDMENT TO COMPANY'S CERTIFICATE OF INCORPORATION: To approve an
amendment to the Company's Certificate of Incorporation to increase the
number of shares of the Company's Common Stock, $0.01 par value per
share, which the Company is authorized to issue to 60,000,000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
and in their discretion, upon any other matters that may properly come before
the meeting or any adjournment or postponement thereof.
(Continued and to be dated and signed on the other side.)
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDERS. IF NO OTHER DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSAL FOR ALL NOMINEES LISTED IN PROPOSAL 3 AND FOR
PROPOSALS 1, 3, 4 AND 5.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Receipt of the Notice of Annual Meeting of Shareholders and of the
Proxy Statement and Annual Report of the Company accompanying the same is hereby
acknowledged.
Dated: _________________________, 2000
--------------------------------------
(Signature of Stockholder)
--------------------------------------
(Signature of Stockholder)
Your signature should appear the same
as your name appears herein. If
signing as attorney, executor,
administrator, trustee or guardian,
please indicate the capacity in which
signing. When signing as joint
tenants, all parties to the joint
tenancy must sign. When the proxy is
given by a corporation, it should be
signed by an authorized officer.
