Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Spectrum Information Technologies, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(j)(4) and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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<PAGE>
5) Total fee paid:
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|_| 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.
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<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 14, 1999
To the Stockholders of
Spectrum Information Technologies, Inc.:
Notice is hereby given that the 1999 Annual Meeting of Stockholders (the
"Annual Meeting") of Spectrum Information Technologies, Inc., a Delaware
corporation, doing business as Siti-Sites.com (the "Company"), will be held at
5:00 p.m. on December 14, 1999, at the Company's offices located at 594
Broadway, Suite 1001, New York, New York, for the following purposes:
1. To elect one Class I Director to serve for the ensuing one
year and until his successor is duly elected and qualified,
(b) to elect one Class II Director to serve for the ensuing
two years and until his successor is duly elected and
qualified, and (b) to elect one Class III Director to serve
for the ensuing three years and until his successor is duly
elected and qualified.
2. To approve the Company's Amended and Restated Certificate of
Incorporation to, among other things, (a) change the name of
the Company to "Siti-Sites.com, Inc.", (b) increase the number
of authorized shares of Common Stock from 10,000,000 to
35,000,000, and the number of authorized shares of Preferred
Stock from 2,000,000 to 5,000,000, (c) delete the
authorization for and all references to Class A Stock, which
was automatically converted to Common Stock on March 31, 1999,
(d) delete certain limitations on transfers of Common Stock
which were originally designed to preserve net operating loss
carry forwards of the Company which were lost as a result of
the change of control transaction in December, 1998, and (e)
further indemnify the Company's directors, officers and
employees against costs and expenses relating to the
performance of their duties.
3. To approve a plan of financing to raise additional funds
through a private placement with Lawrence M. Powers, the
Chairman of the Board, Chief Executive Officer and a major
stockholder of the Company.
4. To ratify the Company's 1999 Stock Option Plan.
5. To ratify the appointment of Edward Isaacs & Company LLP as
the Company's independent public accountant for the Company's
fiscal year ending March 31, 2000.
6. To transact such other business that may properly come before
the Annual Meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on October 25,
1999, as the record date for the determination of stockholders entitled to
receive notice of and to vote at the Annual Meeting. Such stockholders may vote
in person or by proxy.
<PAGE>
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. HOWEVER, TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE
URGED TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. ANY
STOCKHOLDER ATTENDING THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF THE
STOCKHOLDER HAS PREVIOUSLY RETURNED A PROXY.
If your shares are held of record by a broker, bank, or other nominee and
you wish to vote your shares at the Annual Meeting, you must obtain and bring to
the Annual Meeting a letter from the broker, bank, or other nominee confirming
your beneficial ownership of the shares.
By Order of the Board of Directors
/s/ TONI ANN TANTILLO
Secretary/Treasurer
New York, New York
November 24, 1999
<PAGE>
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF STOCKHOLDERS
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors of Spectrum Information Technologies, Inc., a Delaware corporation,
doing business as Siti-Sites.com (the "Company"). All proxies in the
accompanying form, which are properly executed and duly returned, will be voted
at the Annual Meeting of Stockholders to be held on December 14, 1999 at 5:00
p.m. (the "Annual Meeting"), at the Company's offices located at 594 Broadway,
Suite 1001, New York, New York, for the purposes set forth in the accompanying
Notice of Annual Meeting.
This Proxy Statement and the enclosed form of proxy are being mailed to
stockholders entitled to vote at the Annual Meeting on or about November 24,
1999.
VOTING AND SOLICITATION OF PROXIES
Only holders of record of the Company's Common Stock, par value $.001 per
share ("Common Stock"), at the close of business on October 25, 1999 (the
"Record Date") will be entitled to notice of and to vote at the Annual Meeting.
On that date there were issued and outstanding 8,301,009 shares of Common Stock.
Each outstanding share of Common Stock is entitled to one vote on all matters to
come before the Annual Meeting.
IF PROXY CARDS IN THE ACCOMPANYING FORM ARE PROPERLY EXECUTED AND
RETURNED, THE SHARES OF COMMON STOCK REPRESENTED THEREBY WILL BE VOTED AS
INSTRUCTED ON THE PROXY. IF NO INSTRUCTIONS ARE GIVEN, SUCH SHARES WILL BE VOTED
(I) FOR THE ELECTION AS DIRECTORS OF THE NOMINEES FOR THE BOARD OF DIRECTORS
NAMED BELOW, (II) TO APPROVE THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION, (III) TO APPROVE THE COMPANY'S PLAN OF FINANCING, (IV) TO RATIFY
THE COMPANY'S 1999 STOCK OPTION PLAN, (V) TO RATIFY THE CHANGE OF INDEPENDENT
PUBLIC ACCOUNTANTS TO EDWARD ISAACS & COMPANY LLP, AND (VI) IN THE DISCRETION OF
THE PROXIES NAMED IN THE PROXY CARD ON ANY OTHER PROPOSALS TO PROPERLY COME
BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT THEREOF.
The Board of Directors unanimously recommends a vote "FOR" (i) the
election as directors of the nominees named in Proposal No. 1 hereof, (ii) the
Company's Amended and Restated Certificate of Incorporation described in
Proposal No. 2 hereof, (iii) the Company's Plan of Financing described in
Proposal No. 3 hereof, (iv) the Company's 1999 Stock Option Plan described in
Proposal No. 4 hereof, and (v) the appointment of Edward Isaacs & Company LLP as
the Company's independent public accountant for the Company's fiscal year ending
March 31, 2000, described in Proposal No. 5 hereof.
The cost of soliciting proxies will be borne by the Company. In addition
to the use of the mails, officers, directors and regular employees of the
Company may solicit proxies personally or by telephone, telegraph or facsimile
transmission. The Company also intends to request that brokerage houses, banks,
custodians, nominees, and fiduciaries forward soliciting material to the
beneficial owners of Common Stock held of record by such persons, and will
reimburse such persons for their reasonable expenses in forwarding such
material.
<PAGE>
The holders of a majority of the total shares of Common Stock issued and
outstanding, whether present in person or represented by proxy, will constitute
a quorum for the transaction of business at the Annual Meeting. Abstentions are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business.
Directors are elected by a plurality of the votes actually cast at the
Annual Meeting (Proposal No. 1 hereof). The affirmative vote of a majority of
the total shares of Common Stock issued and outstanding is required for approval
of the Amended and Restated Certificate of Incorporation (Proposal No. 2
hereof). The affirmative vote of a majority of the total shares of Common Stock
represented in person or by proxy at the Annual Meeting is required for approval
of a plan of financing (Proposal No. 3 hereof), approval of the 1999 Stock
Option Plan (Proposal No. 4 hereof) and ratification of the appointment of
independent public accountants (Proposal No. 5 hereof). Since only affirmative
votes are counted as votes in favor of these matters, abstentions and broker
non-votes have the same effect as votes against these matters, except as to the
election of directors as to which they will have no effect. Proxies and ballots
will be tabulated by the inspectors of election. The Company has been informed
by its nominees for director, Mr. Lawrence Powers, Mr. Barclay Powers, and Mr.
Robert Ingenito, and certain other stockholders, that they intend to vote "for"
each of the proposals set forth in this Proxy Statement. As of the Record Date
these stockholders collectively held more than 52% of the issued and outstanding
shares of Common Stock.
It is important that proxies be returned promptly. Therefore, whether or
not you plan to attend in person, you are urged to execute and return your proxy
in the enclosed envelope, to which no postage need be affixed if mailed in the
United States. The proxy may be revoked at any time before it is exercised by
filing with the Secretary of the Company an instrument revoking such proxy or a
duly executed proxy bearing a later date, or by attending the Annual Meeting and
voting in person.
SECURITY OWNERSHIP
The following table sets forth information, as of October 25, 1999, as to
the beneficial ownership of the Company's Common Stock (including shares which
may be acquired within sixty days pursuant to stock options) by (1) each person
or group of affiliated persons known by the Company to own beneficially more
than 5% of the outstanding shares of the Company's Common Stock, (2) the Named
Executive Officers (as defined in "Executive Compensation" below), (3) each of
the Company's directors, and (4) all current directors and executive officers of
the Company as a group. Unless otherwise noted, the Company believes that all
persons named in the table have sole voting and investment power with respect to
all shares of Common Stock beneficially owned.
Lawrence M. Powers and Barclay Powers had a verbal understanding that the
shares of Common Stock held by Barclay Powers may be voted, exercised and
disposed of by Lawrence M. Powers. Lawrence M. Powers had never exercised any of
these powers on behalf of Barclay Powers. Since Barclay Powers agreed to accept
his nomination and stand for election as a director of the Corporation (see
Proposal No. 1 hereof), among other reasons, on October 25, 1999, Lawrence M.
Powers and Barclay Powers decided to terminate this verbal understanding.
Shares of Common Stock Beneficially Owned
Name of Owner Number Percent of Class
Lawrence M. Powers 1,685,000 20.3%
Powers & Co.
47 Beech Road
Englewood, NJ 07631
-2-
<PAGE>
Shares of Common Stock Beneficially Owned
Name of Owner Number Percent of Class
Robert Ingenito 800,000(1) 9.3%
80 Ruland Road
Melville, NY 11747-6200
Barclay Powers (2) 1,685,000 20.3%
665 Walther Way
Los Angeles, CA 90048
Maurice W. Schonfeld 800,000(1) 9.3%
630 Fifth Avenue
Suite 3163
New York, NY 10111
- ---------------------
Donald J. Amoruso (3) 194,540(4) 2.3%
463 Old Sleepy Hollow Road
Pleasantville, NY 10570
Mikhail Drabkin (3) 100,219(5) 1.2%
415 East Middlefield Road
Mountain View, CA 94043
Richard duFosse (3) 120,943(6) 1.4%
15 John Edward Drive
Northboro, MA 01532
Current Directors and
Executive Officers as a
Group (2 persons): 2,485,000(7) 28.9%
- ---------------------
(1) Consists of 500,000 shares of Common Stock and an option to
purchase an additional 300,000 shares of Common Stock at an exercise price of
$0.15 per share.
(2) Barclay Powers is Co-President of Tropia, Inc., a wholly-owned
subsidiary of the Company.
(3) A member of former management who resigned as of December 11,
1998 in connection with the change of control transaction.
(4) Consists of 106,188 shares of Common Stock and various options
to purchase an additional 88,352 shares of Common Stock at exercise prices
ranging from $0.35 per share to $337.50 per share.
(5) Consists of 52,581 shares of Common Stock and an option to
purchase an additional 47,638 shares of Common Stock at an exercise of $0.35 per
share.
(6) Consists of 61,662 shares of Common Stock and an option to
purchase an additional 59,281 shares of Common Stock at an exercise price of
$0.35 per share.
(7) Includes 300,000 shares of Common Stock issuable upon the
exercise of an option held by Mr. Ingenito.
-3-
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's current Restated Certificate of Incorporation provides for
the division of the Company's Board of Directors into three classes with
overlapping three-year terms. A director serves in office until his or her
respective successor is duly elected and qualified unless the director resigns
or by reason of death or other cause is unable to serve in the capacity of
director. Any additional directorships resulting from an increase in the number
of directors will be distributed among the three classes so that, as nearly as
possible, each class will consist of an equal number of directors. Vacancies on
the Board of Directors are filled by the remaining directors.
In connection with the Company's change of control transaction on December
11, 1998, which is described in "Item 1. Business - Change of Control" of the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999,
the Company's then-current Board of Directors resigned and appointed Lawrence M.
Powers as Chairman of the Board and Chief Executive Officer. Mr. Powers then
appointed Mr. Jon Gerber and Mr. Maurice W. Schonfeld to the Board. The Board
subsequently appointed Mr. Robert Ingenito to fill a Board vacancy. In April,
1999, Mr. Schonfeld resigned to devote his attention to other commitments. In
September, 1999, Mr. Gerber also resigned to pursue other commitments.
The remaining members of the Board, Lawrence M. Powers and Robert
Ingenito, thereafter intended to appoint, and in September, 1999 announced the
appointment of, Barclay Powers, the Co-President of the Company's wholly-owned
subsidiary, Tropia, Inc. ("Tropia"), and a major stockholder of the Company, and
Jonathan Blank, the Co-President of Tropia, as additional directors. However,
the Board subsequently determined not to complete such appointment and did not
formally adopt the required resolutions. This determination was based in part on
the appointees' reluctance to join the Board at that time due to their other
responsibilities, although Barclay Powers has agreed to serve as a Board member
if elected at the Annual Meeting . It was also based on the Board's decision
that a Board with four members would not be in the best interest of the Company
at this point because of the potential to deadlock (two to two) or delay votes
on important matters of corporate policy. The Board ultimately concluded that it
is presently advisable to reserve Board seats beyond the three directors
submitted to stockholders in this Proposal No. 1 for other major financial
participants in the Company. The current Board of Directors therefore consists
of Mr. Lawrence M. Powers as Chairman and Mr. Ingenito.
The Board also decided to ask the Company's stockholders to vote on the
full slate of three directors at the Annual Meeting, since it will be the first
annual meeting of stockholders of the Company since the Company's reorganization
was completed in March, 1997, and since the subsequent change of control
transaction in December, 1998.
One Class I director is be elected at the Annual Meeting for a one-year
term ending in 2000. One Class II director is to be elected at the Annual
Meeting for a two-year term ending in 2001. One Class III director is to be
elected for a three-year term ending in 2002. The Board of Directors has
nominated Barclay Powers for election as the Class I director, Robert Ingenito
for election as the Class II director, and Lawrence M. Powers for election as
the Class III director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION AS
DIRECTORS OF EACH OF THE NOMINEES NAMED BELOW.
-4-
<PAGE>
Certain information regarding the nominees for election as directors at
the Annual Meeting is set forth below.
<TABLE>
<CAPTION>
Name Age Position(s) with the Company Class Reelection Year
<S> <C> <C> <C> <C>
Lawrence M. Powers 68 Chief Executive Officer and III 2002
Chairman of the Board.
Robert Ingenito 56 Director II 2001
Barclay Powers 36 Director I 2000
</TABLE>
Lawrence M. Powers, 68, has served as the Company's Chairman of the Board
and Chief Executive Officer since the change of control transaction in
December, 1998. Mr. Powers has been a private investor since 1992.
Beginning in 1978 and continuing to his retirement in 1992, as
Chairman/Chief Executive Officer he built Spartech Corporation (NYSE),
from a previously bankrupt corporation with few assets, into what has
become a $850 million plastics manufacturing group operating 41 plants. He
raised some $200 million during his tenure, and with Spartech's key
managers, built one of the largest plastic processing companies in the
U.S. by 1992 (12 plants at the time). The management team he assembled has
continued successfully. He remained on the board of Spartech until 1995
and is still a major securities holder. Mr. Powers, a securities lawyer in
New York from 1957 through 1981 and financial architect of several
companies, was educated at Yale Law School and senior executive programs
at Harvard Business School.
Robert Ingenito, 56, has served as a Director of the Company since the
change of control transaction in December, 1998. He has recently been put
in charge of all further operations of the Company's Tropia, Inc.
subsidiary. Mr. Ingenito was a founder and, since 1989, has served as
Chief Executive Officer of Access Communications and Access Direct, two
established data service companies ($32 million in sales). Access Direct
produces high volume, highly segmented mail correlated to its clients
segmented databases; Access Communications produces critical documents
from on-line transmissions from its clients. Prior to that, he was the
President and a principal of Axciom Corporation (NYSE) when it went public
in 1992. Axciom has become a $750 million database management firm and it
recently purchased Access Communications from Mr. Ingenito and his
partner. Mr. Ingenito has agreed to continue as a consultant to Axciom.
Barclay Powers, 36, has been the Co-President of Tropia since June 1,
1999. In 1993, Mr. Powers founded Red Hat Productions, Inc., an
award-winning N.Y. and L.A. based independent film company, with Jonathan
Blank, the Co-President of Tropia. Through Red Hat, Mr. Powers and
Jonathan Blank have jointly produced and marketed two documentary films
and a feature length theatrical film, all aimed at the college youth
market. The films, now in video release, were written and directed by
Jonathan Blank and produced by Mr. Powers. From 1987 to 1992, Mr. Powers
was an executive associate to the Chairman/Chief Executive Officer of
Spartech Corporation, specializing in marketing projects, acquisitions and
joint ventures. He is a graduate of Columbia University. Mr. Powers is the
son of Lawrence M. Powers.
-5-
<PAGE>
Compliance with Section 16 of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who beneficially own more than 10%
of the Company's Common Stock (collectively, "Reporting Persons"), to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC"). Reporting Persons are required by SEC regulations to furnish
the Company with copies of all such reports. To the Company's knowledge, based
on a review of such reports and certain representations of the Reporting
Persons, the Company believes that during the fiscal year ended March 31, 1999,
all Reporting Persons timely complied with all applicable Section 16(a) filing
requirements except as set forth below. Prior management member Richard duFosse
filed one late report covering his acquisition of an option and prior management
member Mikhail Drabkin filed one late report covering his acquisition of an
option. Lawrence M. Powers filed one late report covering his gifts of stock and
an option, and his exercise of his remaining option. Barclay Powers filed two
late reports covering his acquisition and exercise of an option. See "Item 5.
Market for Registrant's Common Equity and Related Stockholder Matters - Recent
Sales of Unregistered Securities" of the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1999.
EXECUTIVE COMPENSATION
Compensation of Executive Officers
The following table sets forth the total annual compensation paid or
accrued by the Company for services in all capacities for the two individuals
who served as Chief Executive Officer during the Company's 1999 fiscal year (Mr.
Amoruso, who managed the Company's prior discontinued operations, for
approximately nine months, and Mr. Lawrence M. Powers, for approximately three
months), and two individuals who managed the Company's prior discontinued
operations and who were among the highest paid employees for the 1999 fiscal
year but were not executive officers at the end of such fiscal year
(collectively, the "Named Executive Officers"). The Company had no executive
officers serving as such at the end of its 1999 fiscal year whose aggregate
compensation exceeded $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
Annual Compensation Grants & Awards Payout
------------------- --------------- ------
Other
----- Shares
Annual Restricted Underly-
Name and ------ Stock ing All other
Principal Position Year Salary Bonus Comp. Awards Options LIP Payout Comp.
- ------------------ ---- ------ ----- ----- ------ ------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lawrence M. Powers 1999 18,250(1) -0- -0- -0- -0- -0- -0-
Chairman and Chief
Executive Officer
- ----------------------
Donald J. Amoruso 1999 387,193 -0- 5,916(4) -0- 44,914 -0- 14,974(5)
Former Chairman, 1998 295,000 -0- -0- -0- 25,000 -0- 19,965(5)
Chief Executive 1997 295,000 132,686(3) 681,558(4) -0- -0- -0- 19,965(5)
Officer and
President (2)
Mikhail Drabkin 1999 239,297 -0- 400(4) -0- 47,638 -0- -0-
Former Chief 1998 195,000 -0- -0- -0- 22,719 -0- -0-
Technical 1997 195,000 72,500(6) 46,080(4) -0- -0- -0- -0-
Officer (2)
Richard duFosse 1999 233,754 -0- 400(4) -0- 59,281 -0- -0-
Former Vice 1998 167,083 -0- -0- -0- 22,719 -0- -0-
President, 1997 142,083 50,000(7) 46,080(4) -0- -0- -0- -0-
Engineering (2)
</TABLE>
-6-
<PAGE>
(1) This amount represents Mr. Powers' contribution of services charged
against earnings. No compensation was paid by the Company to Mr. Powers
with respect to these services or with respect to continuing operations.
- ---------------------
(2) Messrs. Amoruso, Drabkin and duFosse resigned as of December 11, 1998 in
connection with the change of control transaction.
(3) This amount, which relates to the Company's prior discontinued operations,
was awarded pursuant to the Company's Third Amended Consolidated Plan of
Reorganization (the "Plan") approved by the Bankruptcy Court, as part of a
success fee for effecting a confirmed Plan of Reorganization. The Plan is
described in greater detail at Note 1(b) to the Consolidated Financial
Statements as part of the Company's Annual Report on Form 10-K for the
fiscal year ended on March 31, 1999.
(4) Pursuant to the Plan, as part of a success fee for effecting a confirmed
Plan of Reorganization and as incentive compensation, 242,002 shares were
set aside to be awarded to officers, employees and non-executive directors
responsible for consummation of the Plan. Pursuant to the Plan, Messrs.
Amoruso, Drabkin and duFosse were awarded shares of Common Stock totaling
113,593, 7,680 and 7,680, respectively. The shares were distributed
pursuant to the Company's 1996 Incentive Deferral Plan, which provided for
distribution in three equal installments in August 1997, February 1998 and
August 1998. These shares were recorded at their fair value. Actual value
of the awards are determined on the date of distribution for each
installment in August 1997, February 1998 and August 1998.
(5) Represents premiums under a variable life insurance policy paid by the
Company pursuant to Mr. Amoruso's employment agreement, which terminated
upon Mr. Amoruso's resignation.
(6) Represents the final installment of starting bonus and performance bonus
paid pursuant to Mr. Drabkin's then-current employment agreement.
(7) Represents performance bonus paid pursuant to Mr. duFosse's then-current
employment agreement.
Option Grants in Last Year
The following table sets forth certain information concerning the grant of
stock options to each of the Named Executive Officers during the Company's
fiscal year ended March 31, 1999. This table does not include options purchased
by Lawrence M. Powers through Powers & Co. in December, 1998 in connection with
the change of control transaction.
Options Granted in 1999 Fiscal Year
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annualized
Rates of
Stock Price
% of Total Appreciation for
Options Option Term
Granted to Grant
Options Employees in Exercise or Expiration Date
Name Granted(1) Fiscal Year Base Price Date 5% 10% Value
---- ---------- ----------- ---------- ---- -- --- -----
<S> <C> <C> <C> <C> <C> <C>
Lawrence M. Powers -- -- -- -- -- -- --
- ------------------
Donald J. Amoruso 44,914 11.35% .350 Dec. 11, 2003 4,343 9,597 --
Mikhail Drabkin 47,638 12.04% .350 Dec. 11, 2003 4,607 10,179 --
Richard duFosse 59,281 14.98% .350 Dec. 11, 2003 5,732 12,667 --
</TABLE>
(1) All options were granted at or above fair market value.
-7-
<PAGE>
Option Exercises and Year-End Values
The following table sets forth certain information concerning options to
purchase the Company's Common Stock exercised by the Named Executive Officers
during the fiscal year ended March 31, 1999, and the number and value of
unexercised options held by each of the Named Executive Officers at March 31,
1999.
Aggregated Option Exercises in 1999 Fiscal Year
and Fiscal Year End Option Values
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options 3/31/99 Options 3/31/99
Shares
Acquired
on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence M. Powers -0- -0- -0- -0- -0- -0-
- -------------------
Donald J. Amoruso -0- -0- 69,914 -0- $51,651 -0-
Mikhail Drabkin 13,064 $28,087.60 47,638 -0- $54,784 -0-
Richard duFosse -0- -0- 59,281 -0- $68,173 -0-
</TABLE>
Compensation of Directors
At present, the Board does not award compensation to its directors.
Prior to the change of control transaction in December, 1998, each of the
Company's outside directors was paid $18,000 per year plus $1,000 per meeting
attended, and $500 per diem for any special assignments. The Board of Directors
had also adopted a plan during fiscal year 1998 pursuant to which the Company
paid one-half of the director's fixed annual compensation in Common Stock of the
Company. These arrangements related to the Company's prior discontinued
operations and were terminated in December, 1998.
Employment Agreements
At present, the Company does not maintain employment agreements or other
similar arrangements with its executive officers.
Prior to the change of control transaction, the Company had employment
agreements with Messrs. Amoruso, Drabkin, and duFosse, who were employed in the
positions noted in the Summary Compensation Table at annual salaries of
$387,193, $239,297 and $233,754, respectively. In addition to salary, the
above-described employment agreements provided for health and medical insurance,
life insurance benefits, certain other benefits and required indemnification in
certain circumstances. These agreements also provided that if the Company
discharged the individual without cause they were entitled to full compensation
and medical benefits for up to one year.
All of these employment agreements, which related to the Company's prior
discontinued operations, were terminated as of December 11, 1998 pursuant to
Settlement Agreements executed by Messrs. Amoruso, Drabkin, and duFosse in
connection with the change of control transaction. Pursuant to these Settlement
Agreements, Messrs. Amoruso, Drabkin, and duFosse received cash payments of
$178,235, $52,816 and $48,754, respectively, and options to acquire 44,914,
47,638 and 59,281 shares, respectively, of the Company's Common Stock at an
exercise price of $0.35 per share, exercisable through December 11, 2003.
-8-
<PAGE>
Committees of the Board of Directors
At present, the Company does not have a Compensation Committee, an Audit
Committee or a Nominating Committee.
Prior to the change of control transaction in December, 1998, the Company
had a Compensation Committee composed of two outside board members, Mr. Sheldon
A. Buckler and Mr. George Bugliarello, both of whom resigned as of December 11,
1998.
Directors' Meetings
The Board of Directors met 15 times during fiscal year 1999, one of which
was held after the change of control transaction in December, 1998. Each
Director attended more than 75% of the combined number of meetings of both the
Board of Directors and of any committees of the Board on which the Director
served.
Certain Relationships and Related Transactions
Tropia
As described in "Item 1. Business - Tropia" of the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1999, on June 23, 1999, the
Company consummated its acquisition of Tropia, which operates an MP3 music site
that promotes and distributes the music of independent artists through its
website located at www.tropia.com. The website targets a college/youth audience.
Tropia, which is now a wholly-owned subsidiary of the Company, was acquired for
an aggregate of 316,850 shares of the Company's Common Stock, half of which were
delivered at closing, and half of which are in escrow to be delivered after one
year, if certain goals are achieved. The Company agreed to provide $100,000 of
capital to Tropia initially and approximately $800,000 of additional capital
during the twelve-month period after the closing. The acquisition was effected
by merging SITI-II, Inc., a Delaware corporation and a wholly-owned subsidiary
of the Company, with and into Tropia. Tropia was partially owned (55%) by Red
Hat Productions, Inc., an award- winning independent film production company
which is owned by Barclay Powers (a nominee for director, a large stockholder of
the Company and the Co-President of Tropia), and Jonathan Blank (the
Co-President of Tropia). Lawrence M. Powers, the Chairman/Chief Executive
Officer and a large stockholder of the Company, has been a financial participant
and one-third owner of Red Hat Productions, Inc. since 1997. Tropia was also
owned (45%) by Ari Blank and Arjun Nayyar, the designers of the website who were
formerly officers of the Company (Treasurer and Secretary, respectively) and
officers and employees of Tropia.
The fully functioning Tropia website, and related business arrangements
with artists and marketing agents, has been under development since February
1999 and was valued at 500,000 shares of the Company's Common Stock. However,
Lawrence M. Powers and Barclay Powers (his son) have waived their rights to
participate in the shares otherwise receivable by Red Hat Productions, Inc. from
the acquisition. As a result of this waiver, the shares delivered to Red Hat
Productions, Inc. were reduced proportionately and all such shares were
distributed by Red Hat Productions, Inc. solely to Mr. Blank. The Company had
reserved 183,150 shares of its Common Stock (which equals the number of
additional shares that would otherwise have been issued but for the waiver) for
issuance in the future (in the form of stock and/or options to acquire stock)
for existing and new management personnel of Tropia.
On November 15, 1999, Tropia's Technical Director, Arjun Nayyar, and
Design Director, Ari Blank, the developers of the website, resigned to pursue
other interests. They have agreed, however, to continue in a part-time
consulting capacity with Tropia for an indefinite period to maintain the
website. Their resignations have necessitated a cutback in Tropia's expansion
and capital consumption. The Company has also recently reviewed its larger-scale
financing capabilities for development of its college/youth niche on the
Internet. The Company's Board has concluded that the growth in 1999 of several
competitors with very large equity bases
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available to market their operations and staff technology on a grand scale, as
well as the reduced time commitments from Messrs. Nayyar and Blank, will make it
difficult for Tropia's website to attain competitive status without an immediate
significant capital commitment from the Company. The Company's Board has
therefore decided to conserve its equity base for other opportunities on the
Internet. The Board has decided to explore strategic alternatives for Tropia to
enhance shareholder value, including potential strategic partners, or the sale,
licensing or other disposition of Tropia or its website and related software.
Robert Ingenito, a director and stockholder of the Company, has been put
in charge of the reduced workforce and all further operations of Tropia. Mr.
Ingenito has a long background of success managing information technology, both
in its development and its marketing.
On purchasing a control position in the Company in December, 1998 through
Powers & Co., a sole proprietorship owned by Lawrence M. Powers, Mr. Powers
promptly made assignments of portions of the shares and/or option he acquired to
Jon Gerber, Barclay Powers and certain other individuals. Mr. Powers assigned
200,000 shares (and an option to acquire an additional 80,000 shares) to Jon
Gerber, and 995,000 shares (and an option to acquire an additional 690,000
shares) to Barclay Powers. These gifts are further described in "Item 1.
Business - Management Background/Philosophy - Investors and Administration" and
"Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters - Recent Sales of Unregistered Securities" of the Company's Annual
Report for the year ended March 31, 1999.
Subsequent Financing
As described in Proposal No. 3 hereof, on July 26, 1999, the Company
entered into a private-placement agreement to raise $1,250,000 in equity capital
through a private placement with Lawrence M. Powers, the Chairman of the Board,
the Chief Executive Officer and a major stockholder of the Company. Under the
terms of the agreement, the Company will receive $1,250,000 in exchange for
issuing 1,000,000 shares of Common Stock, and an option to purchase an
additional 500,000 shares at $2.50 per share, exercisable for five years.
The terms of the agreement are subject to stockholder review and approval
at the Annual Meeting (see Proposal No. 3 hereof). The closing of the private
placement transaction is also subject to stockholder approval of a related
increase in the number of authorized shares of the Company's Common Stock (see
Proposal No. 2 hereof). The private placement is expected to close shortly after
stockholder approval is obtained.
Interim Loan
Although the private-placement with Mr. Powers described above is subject
to the approval of the Company's stockholders, pursuant to an agreement dated
October 5, 1999 (a copy of which is attached as Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1999),
Mr. Powers agreed to lend $1,250,000 to the Company pending the Annual Meeting.
The proceeds of the loan have been invested in short-term government securities.
Under the October 5, 1999 agreement, if the Company's stockholders approve
Proposal Nos. 2 and 3 hereof, the principal amount of the loan shall be applied
to the purchase price of the private-placement, the Company will retain all
interest thereon, and the Company's obligation to repay the loan shall be deemed
to be satisfied. Mr. Powers has agreed that the loan need not be repaid so long
as the Annual Meeting occurs by June 30, 1999.
Guarantee of Lease; Other Credit
On August 30, 1999, the Company entered into a three year lease for new
office space at 594 Broadway, Suite 1001, New York, New York 10012. The Company
moved its principal executive offices to this location in September, 1999. The
Company's payment obligations under this lease were guaranteed by Lawrence M.
Powers.
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From time to time, Lawrence M. Powers made his personal credit cards
available for use by the Company's and Tropia's employees and has advanced
nominal short-term credit to the Company and Tropia for equipment purchases. To
date, the aggregate amount of credit extended by Mr. Powers in these
transactions did not exceed $15,000.
Common Stock Performance Graph
The following line graph compares the cumulative total annual stockholder
return on the Company's Common Stock during the past five fiscal years, based on
the market price of the Common Stock and assuming reinvestment of dividends,
with the cumulative total monthly return of the S&P 500 Index and the Technology
Sector of the S&P 500 Index. The graph is based on the assumption that $100 was
invested on April 1, 1994 in the Company's Common Stock, the S&P 500 Index and
the Technology Sector of the S&P 500 Index.
However, as described at "Change of Corporate Name" below, after the
Company's change of control transaction in December, 1998, the Company's new
senior management and Board of Directors changed the direction and nature of the
Company's business, discontinued its prior business and began seeking to
establish websites for the marketing of products and services over the Internet.
Accordingly, the stockholder returns shown below should not be relied upon as an
indication of future performance.
[PERFORMANCE GRAPH APPEARS HERE]
Indexed Returns
YEARS ENDING
BASE
Company/Index Mar 94 Mar 95 Mar 96 Mar 97 Mar 98 Mar 99
- --------------------------------------------------------------------------------
Spectrum Information 100 16.65 8.00 4.95 0.85 0.76
Technologies, Inc.
S&P 500 Index 100 115.57 152.67 182.93 270.74 320.72
Technology - 500 100 126.54 170.85 230.96 349.06 559.93
- --------------------------------------------------------------------------------
Source: S&P Compustat Total Return Service
PROPOSAL NO. 2
TO APPROVE THE COMPANY'S AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION
The Company's current Restated Certificate of Incorporation (the "Current
Certificate") was adopted in connection with the Company's prior 1995 bankruptcy
proceeding and was approved pursuant to the Company's Third Amended Consolidated
Plan of Reorganization, which became effective March 31, 1997. See "Item 3.
Legal Proceedings - Past Bankruptcy Proceedings" of the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1999.
On September 24, 1999, the Board of Directors of the Company unanimously
adopted a resolution to amend and restate the Current Certificate as set forth
in the Amended and Restated Certificate of Incorporation in the form attached
hereto as Exhibit A (the "Amended Certificate"), subject to approval of the
stockholders. The Amended Certificate was recommended by the Board in light of
the change of control transaction in December, 1998, the subsequent change of
strategic direction of the Company (as described at "Change of Corporate Name"
below) and the automatic conversion of all of the Company's Class A Stock
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to Common Stock on March 31, 1999 (as described at "Changes Resulting from the
Conversion of the Class A Stock" below). The following is a description of the
most significant changes from the Current Certificate now in the Amended
Certificate.
If approved by the stockholders at the Annual Meeting, the Amended
Certificate will become effective upon its filing with the Secretary of State of
the State of Delaware. In addition, if the Amended Certificate is approved, the
Board of Directors intends to amend the Company's Bylaws immediately after the
Annual Meeting to make conforming changes to those made in the Amended
Certificate.
==============================================================
PLEASE REVIEW THIS DESCRIPTION AND THE ATTACHED COPY OF THE
AMENDED CERTIFICATE CAREFULLY, AS SEVERAL OF THE CHANGES WILL
AFFECT YOUR RIGHTS AS A STOCKHOLDER. THIS DESCRIPTION SHOULD
BE READ IN CONJUNCTION WITH, AND IS QUALIFIED BY REFERENCE TO,
THE AMENDED CERTIFICATE.
==============================================================
Change of Corporate Name.
After the change of control transaction in December, 1998, the Company's
new senior management and Board of Directors changed the direction and nature of
the Company's business, discontinued its prior business and began seeking to
establish websites for the marketing of products and services over the Internet.
As a result, the Company desires to change the Company's name to
"Siti-Sites.com, Inc.," a name that preserves its trading symbol, but is more
appropriate for its new Internet business. The Company has temporarily been
doing business under the name "Siti-Sites.com" since January, 1999.
The change in corporate name will not affect the validity or
transferability of stock certificates presently outstanding, and the Company's
stockholders will not be required to exchange stock certificates to reflect the
new name. Shareholders should keep the certificates they now hold, which will
continue to be valid, and should not send them to the Company or its transfer
agent. The Company will retain the trading symbol "SITI" if the Amended
Certificate is approved.
Increase Number of Authorized Shares of Common Stock.
The Current Certificate authorizes the Company to issue 10,000,000 shares
of Common Stock, par value $0.001 per share, 1,500,000 shares of Class A Stock,
par value $0.001 per share ("Class A Stock"), and 2,000,000,000 shares of
Preferred Stock, par value $0.001 per share ("Preferred Stock"). Section E of
Article IV of the Current Certificate grants the Board of Directors discretion
to issue and determine the rights, preferences, designations, qualifications and
limitations applicable to Preferred Stock.
As of October 25, 1999, (a) 8,301,009 shares of Common Stock were issued
and outstanding, 1,059,789 additional shares were issuable upon exercise of
outstanding options and 108,764 shares were reserved for future grants under the
Company's stock option plans, (b) no shares of Class A Stock were issued and
outstanding, and (c) no shares of Preferred Stock were issued and outstanding.
As described at "Changes Resulting from the Conversion of the Class A Stock"
below, on March 31, 1999, all issued and outstanding shares of Class A Stock
automatically converted to Common Stock.
The Company's principal purpose in seeking to increase the authorized
number of shares of Common Stock and Preferred Stock is to make additional
shares of stock available in the event that the Board of Directors determines
(1) to raise additional capital through the sale of securities, (2) to acquire
one or more additional businesses, (3) to establish a strategic relationship
with a corporate partner, and/or (4) to authorize additional stock dividends or
future stock splits. It will also enable the Company to issue stock
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and grant stock options to attract personnel as staffing requirements increase.
In the opinion of the Board, based upon recent developments in the growth of
other Internet companies, it is particularly important for the Company to have
the flexibility to offer securities to acquire other Internet operations, to
obtain related financing and to attract talented personnel. If the Amended
Certificate is adopted, 25,000,000 additional shares of Common Stock and
3,000,000 additional shares of Preferred Stock of the Company will be available
for issuance by the Board of Directors without any further stockholder approval,
unless such approval is required by applicable law or the rules of any stock
exchange on which stock may then be listed.
The Board of Directors believes that it is desirable that the Company have
the flexibility to issue the additional shares without further stockholder
approval. The holders of Common Stock have no preemptive rights to purchase any
stock of the Company. The additional shares could be issued at such times and
under such circumstances as to have a dilutive effect on earnings per share and
on the equity ownership of the present holders of Common Stock.
Furthermore, the increase in the authorized number of shares of Common
Stock is necessary to provide shares for the proposed plan of financing
described in Proposal No. 3 hereof and to increase the number of shares reserved
for issuance under the 1999 Stock Option Plan described in Proposal 4 hereof. In
addition, as a result of the waiver by Lawrence M. Powers and Barclay Powers of
their right to receive Common Stock in connection with the Company's acquisition
of Tropia (as discussed above in "Certain Relationships and Related Transactions
- - Tropia"), the Company had agreed to reserve 183,150 shares of Common Stock for
issuance to Tropia's existing and future management. However, as discussed above
in "Certain Relationships and Related Transactions - Tropia," the Company's
Board of Directors has determined to explore strategic alternatives for Tropia
to enhance shareholder value, including potential strategic partners, or the
sale, licensing or other disposition of Tropia or its website and related
software.
Granting the Board of Directors flexibility to issue additional shares of
Common Stock and Preferred Stock could enhance the Board's ability to negotiate
on behalf of the stockholders in a takeover situation. Although it is not the
purpose of the Amended Certificate, the Board could also use the authorized but
unissued shares of Common Stock and Preferred Stock to discourage, delay or make
more difficult a change in the control of the Company. For example, such shares
could be privately placed with purchasers who might align themselves with the
Board of Directors in opposing a hostile takeover bid. The issuance of
additional shares could serve to dilute the stock ownership of persons seeking
to obtain control and thereby increase the cost of acquiring a given percentage
of the outstanding stock. The Current Certificate contains certain other
measures (which will not be changed in the Amended Certificate) that may have
the effect of delaying or preventing an unsolicited takeover attempt, including
provisions authorizing the Board to issue the Preferred Stock with rights,
preferences, designations qualifications and limitations fixed by the Board and
provisions establishing a classified Board of Directors in which the Board of
Directors is divided into three classes. The Board of Directors is not aware of
any pending or proposed effort to acquire control of the Company.
Changes Resulting from the Conversion of the Class A Stock.
As discussed above, the Current Certificate was adopted pursuant to the
1997 Plan of Reorganization. In connection with the 1997 Plan of Reorganization,
the Company settled certain claims against it by delivering Class A Stock to the
holders of such claims. To protect the voting power of the persons receiving
Class A Stock, as required by Section 1123(a)(6) of Title 11 of the United
States Code, as amended (the "Bankruptcy Code"), among other reasons, the
Current Certificate provides that Class A Stock would have certain liquidation
preferences in the event the Company again sought bankruptcy protection prior to
March 31, 1999, as well as certain other rights (including, among others, the
right to vote separately as a class on certain matters such as the election of
directors, the merger of the Company and the sale of all or substantially all of
the business of the Company). In addition, the Current Certificate restricts the
ability of the Company to issue nonvoting securities, as required by 1123(a)(6)
of the Bankruptcy Code,
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and imposes certain restrictions or requirements which apply only so long as any
shares of Class A Stock are outstanding (e.g., Article X requires that
two-thirds of the members of the Board be present at a meeting to approve
certain transactions).
However, all issued and outstanding shares of Class A Stock automatically
converted to Common Stock on March 31, 1999 pursuant to Section D of Article IV
of the Current Certificate. The Board therefore believes that it is no longer
necessary for the Company's certificate of incorporation to authorize or refer
to the Class A Stock, or to prohibit the issuance of nonvoting securities.
Accordingly, except for certain provisions describing the method of converting
Class A Stock into Common Stock, the Amended Certificate removes all references
to Class A Stock and all provisions applicable only so long as shares of Class A
Stock are outstanding. It also removes the restriction on the issuance of
nonvoting securities by the Company.
Remove Limitations on Transfers to Five Percent Shareholders.
The Current Certificate limits until March 31, 2000 the transfer of shares
of Common Stock, and any other interests that would be treated as stock of the
Company under the Internal Revenue Code of 1986, as amended (the "Tax Code"),
that would cause any individual or entity to become an owner, directly or
indirectly, of five percent or more of the Common Stock, or that would increase
the percentage ownership interest in the Company of such a person. Shares of the
Company's stock were required to bear a legend reflecting this restriction,
which was intended to prevent transfers of the Company's stock from triggering
an "ownership change," as defined in section 382 of the Tax Code. Such an
ownership change would thereafter prevent the Company from using certain tax
benefits from net operating loss carry forwards ("NOLs") the Company believed it
had on the effective date of the 1997 Plan of Reorganization, and which may have
been used to offset income of the Company thereafter. The Current Certificate
provides that this restriction may be waived by the Board of Directors of the
Company.
The change of control transaction in December, 1998 (which prevented a
second bankruptcy filing by prior management) resulted in an "ownership change"
under Tax Code section 382, thus prohibiting the Company from using the tax
benefits from any then-existing NOLs. As discussed in "Item 1. Business Prior
Company History" of the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1999, shortly before the change of control transaction was
approved by the Company's prior Board of Directors, the Company had wound down
its overhead and operations and effectively discontinued it operations, and was
on the verge of filing for bankruptcy protection a second time. When evaluating
whether to proceed with the change of control transaction, the Company's prior
Board considered numerous factors including the Company's inability to raise
capital or locate an acquiror, its inability to operate as a going concern
without raising additional capital, the interests of its stockholders, employees
and creditors, and that the change of control transaction, the only viable
alternative to a second bankruptcy filing, would result in an "ownership
change," as defined in section 382 of the Tax Code.
Since an "ownership change" under Tax Code section 382 has already
occurred, the present Board believes that it is no longer necessary for the
Company's certificate of incorporation to limit transfers of Common Stock to
prevent such an occurrence. Accordingly, the Amended Certificate removes these
restrictions.
If the Amended Certificate is approved, certificates representing shares
of Common Stock will no longer bear any legend reflecting this restriction.
However, the Company's stockholders will not be required to exchange stock
certificates to remove this legend. Shareholders should keep the certificates
they now hold, which will continue to be valid, and should not send them to the
Company or its transfer agent.
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Further Indemnify Directors, Officers and Employees.
The ability of publicly held companies to recruit and retain high quality
officers and directors has been adversely impacted by the substantial increase
in directors' and officers' litigation costs and risks, and the costs and
periodic limitations on the availability and coverage of liability insurance. In
order to provide appropriate levels of protection for their officers and
directors, many publicly held corporations have been making use of the statutory
liability limitation/indemnification tools which have been adopted in many
states, including Delaware. The Current Certificate already provides most of
these protections. The Board of Directors has unanimously recommended that the
stockholders approve providing additional indemnification for the Company's
officers and directors to the fullest extent permitted by the Delaware General
Corporation law.
Among other protections provided to the Company's officers and directors
in the Current Certificate, the Company is required to indemnify to the fullest
extent provided by law any person made or threatened to be made a party or
witness to any action, suit or proceeding by reason of the fact that such person
is or was a director or officer of the Company or by reason of the fact that
such person is or was serving any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity at the request
of the Company.
The Amended Certificate adds that the Company shall also indemnify to the
fullest extent provided by law any person made or threatened to be made a party
or witness to any action, suit or proceeding (threatened, pending or completed)
by or in the right of the Company to procure a judgment in its favor by reason
of the fact that such person is or was a director or officer of the Company or
by reason of the fact that such person is or was serving any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise in
any capacity at the request of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
AMEND THE CORPORATION'S RESTATED CERTIFICATE OF INCORPORATION AS SET FORTH IN
THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.
PROPOSAL NO. 3
TO APPROVE THE COMPANY'S
PLAN OF FINANCING
On July, 26, 1999, the Board of Directors of the Company unanimously
adopted a resolution to enter into an agreement (the "Stock Purchase Agreement")
with Lawrence M. Powers, the Company's Chairman and Chief Executive Officer, and
a major stockholder of the Company, under which the Company will raise
$1,250,000 in equity capital through a private placement transaction, subject to
approval of the Company's stockholders. The following description of the Stock
Purchase Agreement and the Option (as defined below) should be read in
conjunction with, and is qualified by reference to, the Stock Purchase Agreement
and the Option, copies of which are attached hereto as Exhibits B and C,
respectively. The Stock Purchase Agreement and the form of the Option were
prepared based upon the same forms of stock purchase agreement and option
negotiated at arms-length with the prior Board in December, 1998 in connection
with the change of control transaction.
Overview of Offering Terms
Under the terms of the Stock Purchase Agreement, the Company will receive
$1,250,000, and in exchange will issue 1,000,000 shares of Common Stock and an
option (the "Option") to purchase an additional 500,000 shares of Common Stock
at $2.50 per share, exercisable for five years. If and when the
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Option is fully exercised, the Company will receive an additional $1,250,000.
The transaction will be a private placement. None of the shares, the Option or
the shares underlying the Option will initially be registered with the SEC for
future sale, and all will be taken for investment by Mr. Powers.
The Company intends to use the proceeds of the private placement to pursue
new opportunities to establish websites for the marketing of products and
services over the Internet, as well as to continue the development of the Tropia
website while the Company explores strategic alternatives for Tropia to enhance
shareholder value, as discussed above in "Certain Relationships and Related
Transactions - Tropia." The remaining portion of the Company's previous equity
financing of $1,000,000 in December 1998 will also be used for these purposes.
Conditions Precedent
As provided in the Stock Purchase Agreement, the terms thereof are subject
to stockholder approval at the Annual Meeting, as well as the approval of the
Amended Certificate pursuant to Proposal No. 2 hereof to increase the number of
authorized shares of Common Stock. If stockholder approval is obtained, the
private placement transaction is expected to close shortly thereafter.
Interim Loan
As discussed above in "Executive Compensation - Certain Relationships and
Related Transactions Interim Loan," Mr. Powers agreed to lend $1,250,000 to the
Company pending the satisfaction of the foregoing conditions precedent. The
proceeds of the loan have been invested in short-term government securities. If
of the foregoing conditions precedent are satisfied, the principal amount of the
loan shall be applied to the purchase price due under the Stock Purchase
Agreement, the Company will retain all interest thereon and the Company's
obligation to repay the loan shall be deemed to be satisfied. If such conditions
precedent are not met, the principal amount of the loan and all interest thereon
shall be paid to Mr. Powers on account of the loan.
Voting Rights
Any Common Stock to be issued under the Stock Purchase Agreement and the
Option would have the same voting rights as all other shares of Common Stock.
Anti-dilution Provision
The number of shares of Common Stock subject to the Option would be
subject to customary adjustment as the result of any subdivision, consolidation,
increase, decrease, change or exchange of shares or securities of the Company
through reorganization, merger, recapitalization, reclassification, capital
adjustment or otherwise, or if the Company issues Common Stock as a dividend or
upon a stock split. Any such adjustment shall be made without change in the
total exercise price applicable to the unexercised portion of the Option.
Reasons for the Offering
As indicated in the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1999 and Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1999, the Company's future success is highly
dependent near term on its ability to raise capital. As a result of the
Company's past emergence from bankruptcy protection in 1997, the December 1998
change in control and the subsequent discontinuance of the Company's historical
operations and new strategic direction, the Company's ability to raise
additional capital is severely restricted. Upon the closing of the private
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placement, the Company's capital base will be supplemented by the described
$1.25 million equity infusion provided by this second round of financing.
If the Company's stockholders do not approve this private placement
transaction, the Company will repay the loan made by Lawrence M. Powers and seek
additional financing from another source. However, the Company may not be able
to obtain additional financing in the near term on commercially reasonable
terms, if at all. Accordingly, if stockholder approval is not obtained, there
can be no assurance that the Company will have sufficient financial resources to
support the continuation or expansion of its business.
Increase in Beneficial Stock Ownership by Mr. Powers
As discussed above in "Security Ownership," as of October 25, 1999,
Lawrence M. Powers and Barclay Powers, who are the Company's largest
stockholders, each owned approximately 20.3% of the issued and outstanding
Common Stock of the Company. Upon the closing of this transaction, Lawrence M.
Powers's ownership of Common Stock will increase to approximately 28.9%. A
subsequent exercise of the Option by Mr. Powers could result in Mr. Power's
beneficially owning 32.5% of the issued and outstanding Common Stock of the
Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PLAN OF
FINANCING.
PROPOSAL NO. 4
TO RATIFY THE 1999
STOCK OPTION PLAN
The stockholders are being asked to approve the Company's 1999 Stock
Option Plan (the "Plan"). A copy of the Plan is attached hereto as Exhibit D. On
September 24, 1999, the Board of Directors of the Company unanimously adopted
the Plan, subject to stockholder approval. A total of 1,800,000 shares of Common
Stock have been reserved for issuance under the Plan.
The Board believes that the option grants under the Plan will play an
important role in the efforts of the Company and its present and future
affiliates to attract, employ, motivate and retain experienced employees,
officers, outside directors and consultants in the hypercompetitive market for
talented individuals. The Company and its affiliates must be able to offer
market competitive long-term compensation opportunities. Stock options, because
of their upside potential and vesting requirements, are a key component of such
compensation opportunities. The Company's prior stock option plans have either
terminated or have limited amounts of stock available for issuance. Should the
Company's stockholders fail to ratify the Plan, the Company and its present and
future affiliates would likely be severely constrained in their ability to
attract and retain key employees, officers, outside directors and consultants
who are necessary for their success.
The principal terms and provisions of the Plan are summarized below. The
summary, however, is not intended to be a complete description of all the terms
of the Plan. This summary should be read in conjunction with, and is qualified
by reference to, the Plan.
Administration
The Plan shall be administered by the Board of Directors or a committee of
directors appointed by the Board of Directors, each member of which must be a
"non-employee director" as defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended, and an "outside director" as
defined for purposes of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code").
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The Board (or a committee thereof that may act as Plan administrator) has
full authority under the Plan to determine who receives options under the Plan,
the number of shares covered by each granted option, the date or dates options
are granted, the maximum term during which the option will remain outstanding,
whether the granted option will be an Incentive Stock Option ("ISO") that
satisfies the requirements of Section 422 of the Code or a Non-Qualified Stock
Option ("NQSO") not intended to meet such requirements, and the remaining
provisions of the option grant.
Eligibility
Employees (including officers), consultants and outside directors who
render services to the Company or any affiliate of the Company are eligible to
receive option grants under the Plan. Employees, non-employee directors and
consultants are eligible for grants of NQSOs. Only employees are eligible for
the grant of ISOs. As of November 17, 1999, there were approximately 15
individuals who would have been eligible to receive option grants under the
Plan.
Securities Subject to Option Plan
A maximum of 1,800,000 shares of Common Stock may be issued under the
Plan. The last trading price of the Common Stock on November 17, 1999 was
$0.875. Generally, any option granted under the Plan which is forfeited, expires
or terminates prior to vesting or exercise will again be available for award
under the Plan.
Price and Exercisability
The option exercise price per share in the case of an ISO may not be less
than 100% of the fair market value of the Common Stock on the date of the grant.
However, in the case of an ISO granted to a holder of shares representing more
than 10% of the total combined voting power of all classes of stock of the
Company or any affiliate of the Company (a "10% Shareholder"), the per share
exercise price shall not be less than 110% of the fair market value of the
Common Stock on the date of the grant. In addition, the fair market value of
shares of Common Stock subject to ISOs (determined as of the date such ISOs are
granted) exercisable for the first time by any individual during any calendar
year may in no event exceed $100,000. The option exercise price per share in the
case of a NQSO will be the price determined by the Board (or a committee thereof
that may act as Plan administrator).
The Board (or a committee thereof that may act as Plan administrator)
shall also establish the form or forms in which payment of the option price with
respect to any option may be made or deemed to have been made. Options may be
exercised through a same-day sale program, pursuant to which a designated
brokerage firm is to effect the immediate sale of the shares purchased under the
option and pay over to the Company, out of the sale proceeds on the settlement
date, sufficient funds to cover the exercise price for the purchased shares plus
all applicable withholding taxes.
The Board (or a committee thereof that may act as Plan administrator) may
at any time offer to buy out an outstanding option or give an optionee the right
to surrender his or her option for cash, shares of Common Stock or another
option. No optionee is to have any stockholder rights with respect to the option
shares until the optionee has exercised the option, paid the exercise price and
become a holder of record of the shares. Options are not assignable or
transferable other than (a) by will or the laws of descent and distribution, or
(b) with respect to NQSOs, as otherwise determined by the Board (or a committee
thereof that may act as Plan administrator) and set forth in the option
agreement relating thereto. An option is exercisable only by the optionee (or,
in certain circumstances, by the optionee's guardian or legal representative, if
any) or one who receives the option pursuant to a permitted transfer. In no
event may any option held by an optionee be exercised after the specified
expiration date of the option term.
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<PAGE>
Vesting Conditions and Expiration
As noted above, the Board (or a committee thereof that may act as Plan
administrator) determines the number of options included in an award, as well as
the vesting and other conditions. The vesting conditions may be based on the
nature of the recipient's duties, the recipient's present and potential
contributions to the success of the Company and its affiliates and other
appropriate criteria.
Vesting may be accelerated in the event of the recipient's death or
disability, or in the event of the termination of his or her employment. An
option may be exercised after the termination of the optionee's employment with
the Company or its affiliate (other than by reason of death or disability) to
the extent exercisable on the date of such termination, for up to three months
(or such other period of time not less than 30 days nor more than three months,
in the case of an ISO, or not less than 30 days nor more than 12 months, in the
case of a NQSO, as determined by the Board (or a committee thereof that may act
as Plan administrator) following such termination, provided that such option has
not expired on the date of such exercise. In the event of death or permanent and
total disability while an optionee is employed by the Company or its affiliate,
options may be exercised, to the extent exercisable on the date of termination
of employment, by the optionee or the optionee's survivors or legal
representatives at any time prior to the earlier of the option's specified
expiration date or one year from the date of the optionee's termination of
employment (all as more specifically provided in the Plan).
In addition, vesting may be accelerated in the event of a change of
control with respect to the Company. For purposes of the Plan, a "change of
control" of the Company will be deemed to occur upon any of the following
events: (a) the consummation of a sale, transfer or other disposition of all or
substantially all of the Company's assets; (b) approval by the stockholders of
the Company of a merger or consolidation in which securities possessing more
than 50% of the total combined voting power of the Company's outstanding
securities are transferred to a person or persons different from the persons
holding those immediately prior to such transaction; (c) a change in the
composition of the Board over a period of 24 months or less such that a majority
of the Board members ceases to be comprised of individuals who have either been
Board members continuously since the beginning of such period or have been
elected or nominated for selection as Board members by a majority of the
continuing Board members; (d) approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company; or (e) the acquisition by
any person or related group of persons (other than the Company or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Company) of beneficial ownership of more than 50% of the Company's
outstanding voting stock without the Board's recommendation.
Stock options granted under the Plan expire not more than ten years from
the date of grant, or not more than five years from the date of grant in the
case of ISOs granted to a 10% Shareholder.
Amendment, Termination and Modification of the Plan
The Board of Directors may amend, terminate or modify the Plan at any time
and for any reason. Amendments require the approval of the Company's
stockholders only to the extent provided by applicable law, rules or
regulations. No amendment, termination or modification of the Plan shall alter
or amend any rights or obligations under any option theretofore granted without
the consent of the holder of such option.
Changes in Capitalization
In the event that any change is made to the Common Stock issuable under
the Plan by reason of any stock split, stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination of
shares, exchange of shares or other similar event, then appropriate adjustments
will be made to (a) the number and/or kind of shares issuable under the Plan,
(b) the number and/or kind of shares and
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<PAGE>
price per share in effect under each outstanding option under the Plan, and/or
(c) the exercise price of each option.
Federal Income Tax Consequences of Options
Neither the optionee nor the Company incurs any federal tax consequences
as a result of the grant of an option. The optionee has no taxable income upon
exercising an ISO (except that the alternative minimum tax may apply), and the
Company receives no deduction when an ISO is exercised. Upon exercising an NQSO,
the optionee generally must recognize ordinary income equal to the "spread"
between the exercise price and the fair market value of the Common Stock on the
date of exercise; the Company ordinarily will be entitled to a deduction for the
same amount. In the case of an employee, the option spread at the time an NQSO
is exercised is subject to income tax withholding, but, if permitted by the
Board (or a committee thereof that may act as Plan administrator), the optionee
generally may elect to satisfy the withholding tax obligation by having shares
of Common Stock withheld from those purchased under the NQSO. The tax treatment
of a disposition of option shares acquired under the Plan depends on how long
the shares have been held and on whether such shares were acquired by exercising
an ISO or by exercising an NQSO. The Company is not entitled to a deduction in
connection with a disposition of option shares, except in the case of a
disposition of shares acquired under an ISO before the applicable ISO holding
periods have been satisfied.
New Plan Benefits
Awards under the Plan are discretionary. Therefore, it is not possible to
determine the benefits that will be received in the future by participants in
the Plan or the benefits that would have been received by such participants if
the Plan had been in effect since the inception of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF
THE 1999 STOCK OPTION PLAN.
PROPOSAL NO. 5
TO RATIFY THE CHANGE
OF INDEPENDENT PUBLIC ACCOUNTANTS
Effective August 31, 1999, the Board of Directors of the Company engaged
the accounting firm of Edward Isaacs & Company LLP as independent auditors for
the Company. Edward Isaacs & Company LLP replaces the firm of BDO Seidman LLP,
whose engagement was terminated (upon the expiration of their engagement) by the
Company's Board of Directors effective as of August 31, 1999. BDO Seidman LLP
had previously been notified of the termination.
The Company has consulted with Edward Isaacs & Company LLP after the
change of control transaction in December, 1998 with respect to tax issues.
During the two most recent fiscal years ending March 31, 1999 and March 31,
1998, and through the period ending August 31, 1999, the Company has not
consulted with Edward Isaacs & Company LLP regarding (a) either the application
of accounting principles to a specified transaction, either completed or
proposed; or the type of audit opinion that might be rendered on the Company's
financial statements, and neither a written report was provided to the Company
or oral advice was provided that Edward Isaacs & Company LLP concluded was an
important factor considered by the Company in reaching a decision as to the
accounting, auditing or financial reporting issue; or (b) any matter that was
either the subject of a disagreement, as that term is defined in Item
304(a)(1)(iv) of Regulation S-K promulgated by the SEC and the related
instructions to Item 304 of Regulation S-K, or a "reportable event" as described
in Item 304(a)(1)(v) of Regulation S-K. Lawrence M. Powers, the Company's
Chairman and Chief Executive Officer, and a major stockholder of the Company,
has since
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<PAGE>
1962 employed Edward Isaacs & Company LLP and its predecessor firms to prepare
family tax returns and to provide personal tax advice, which in recent years
also included tax returns for Barclay Powers, a nominee for director and a major
stockholder of the Company.
In connection with the audits of the Company's financial statements for
the last two fiscal years ending March 31, 1999 and March 31, 1998, and through
the period ending August 31, 1999, there were no disagreements between the
Company and BDO Seidman LLP on any matters of accounting principles or
practices, financial statements disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of BDO Seidman LLP,
would have caused it to make a reference to the subject matter of the
disagreements in connection with its reports on financial statements. There were
no "reportable events" as described in Item 304(a)(1)(v) of Regulation S-K with
respect to the Company within the last two fiscal years ending March 31, 1998 or
March 31, 1999, and the subsequent period ending August 31, 1999. BDO Seidman
LLP's reports on the Company's financial statements as of March 31, 1999 and
1998 contained no adverse opinion or disclaimer of opinion, and were not
qualified or modified as to uncertainty, audit scope or accounting principle.
However, their report for the fiscal year ended March 31, 1999 contained an
explanatory paragraph which stated that the Company's significant recurring
losses, its change of control, the discontinuance of its prior business and its
new strategic direction, raised substantial doubt about its ability to continue
as a going concern. In addition, their report for the fiscal year ended March
31, 1998 contained an explanatory paragraph which stated that unless the Company
was able to successfully raise financing, there remained a substantial doubt
about the Company's ability to continue as a going concern. The Company has
provided a copy of this disclosure to BDO Seidman LLP in compliance with the
provisions of Item 304 (a)(3) of Regulation S-K and has requested a letter from
BDO Seidman LLP addressed to the SEC stating that BDO Seidman LLP agrees with
the statements as set forth above; a copy of such letter is attached as Exhibit
16.1 to the Company's Current Report on Form 8-K filed with the SEC on September
7, 1999.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF
THE APPOINTMENT OF EDWARD ISAACS & COMPANY LLP.
ANNUAL REPORT
The Company's Annual Report on Form 10-K, as well as Amendment No. 1 to
Form 10-K, for the fiscal year ended March 31, 1999 (collectively, the Form
10-K"), and the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1999 (the "Form 10-Q") are being furnished simultaneously
herewith. The Form 10-K and the Form 10-Q are not to be considered a part of
this Proxy Statement and are not deemed to be part of the proxy solicitation
material.
The Company will also furnish to any stockholder of the Company any
exhibit to the Form 10-K or the Form 10-Q as listed thereon, upon request and
upon payment of the Company's reasonable expenses of furnishing such exhibit.
Requests should be directed to Toni Ann Tantillo, Secretary/Treasurer, at 594
Broadway, Suite 1001, New York, New York 10012.
OTHER MATTERS
The Board of Directors is not aware of any matters to come before the
Annual Meeting which will require the vote of stockholders other than those
matters indicated in the Notice of Annual Meeting and this Proxy Statement.
However, if any other matter calling for stockholder action should properly come
before the Annual Meeting or any adjournments thereof, those persons named as
proxies in the enclosed proxy form will vote thereon according to their best
judgment.
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<PAGE>
ADVANCE NOTICE FOR DIRECTOR NOMINATIONS
In order for a stockholder to nominate a candidate for election as a
director at the Company's 1999 Annual Meeting of Stockholders, written notice
must be delivered (in person or by mail) to Toni Ann Tantillo,
Secretary/Treasurer, at 594 Broadway, Suite 1001, New York, New York 10012 by
5:00 p.m. on November 29, 1999. In order for a stockholder to nominate a
candidate for election as a director at the Company's 2000 annual meeting of
stockholders, written notice must be delivered to the Secretary of the Company
(in person or by mail) not less than 50 days nor more than 75 days prior to the
annual meeting. Based on the anticipated meeting date for the 2000 annual
meeting, in order for a stockholder to propose director nominations at the 2000
annual meeting, stockholders must deliver notice to the Secretary of the Company
at such address between June 30 and July 26, 2000. Specific requirements for
each such written notice are contained in the Company's Restated Bylaws, a copy
of which will be furnished by the Company, without cost, to any stockholder of
the Company upon request made to Toni Ann Tantillo, Secretary/Treasurer, at 594
Broadway, Suite 1001, New York, New York 10012.
STOCKHOLDER PROPOSALS FOR ANNUAL MEETING
In order for a stockholder to submit a proposal (other than those
regarding director nominations as described above) at the Company's 1999 Annual
Meeting of Stockholders, written notice must be delivered (in person or by mail)
to Toni Ann Tantillo, Secretary/Treasurer, at 594 Broadway, Suite 1001, New
York, New York 10012 by 5:00 p.m. on November 29, 1999. In order for a
stockholder to submit a proposal (other than those regarding director
nominations as described above) at the Company's 2000 annual meeting of
stockholders, written notice must be delivered to the Secretary of the Company
(in person or by mail) not less than 50 days nor more than 75 days prior to the
annual meeting. Based on the anticipated meeting date for the 2000 annual
meeting, in order for a stockholder to propose director nominations at the 2000
annual meeting, stockholders must deliver notice to the Secretary of the Company
at such address between June 30 and July 26, 2000. Specific requirements for
each such written notice are contained in the Company's Restated Bylaws, a copy
of which will be furnished by the Company, without cost, to any stockholder of
the Company upon request made to Toni Ann Tantillo, Secretary/Treasurer, at 594
Broadway, Suite 1001, New York, New York 10012.
By Order of the Board of Directors
/s/ TONI ANN TANTILLO
Secretary/Treasurer
New York, New York
November 24, 1999
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<PAGE>
SPECTRUM INFORMATION TECHNOLOGIES, INC.
PROXY
(SOLICITED BY THE BOARD OF DIRECTORS)
The undersigned appoints Lawrence M. Powers and Toni Ann Tantillo, or either of
them, proxies with full power of substitution, to represent and vote all shares
of Common Stock of Spectrum Information Technologies, Inc. held by the
undersigned, at the Annual Meeting of Stockholders to be held December 14, 1999,
or any adjournment thereof.
1. Election of four Directors.
Class I Nominee: BARCLAY POWERS
Class II Nominee: ROBERT INGENITO
Class III Nominee: LAWRENCE M. POWERS
Check only one of the following two boxes:
|_| VOTE FOR all nominees listed above, except vote withheld as to the
following nominees (if any):
---------------------------------------
|_| VOTE WITHHELD from all nominees
2. TO APPROVE THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO, AMONG OTHER THINGS, (A) CHANGE THE NAME OF THE
COMPANY TO "SITI-SITES.COM, INC.", (B) INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK FROM 10,000,000 TO 35,000,000, AND
THE NUMBER OF AUTHORIZED SHARES OF PREFERRED STOCK FROM 2,000,000 TO
5,000,000, (C) DELETE THE AUTHORIZATION FOR AND ALL REFERENCES TO
CLASS A STOCK, WHICH WAS AUTOMATICALLY CONVERTED TO COMMON STOCK ON
MARCH 31, 1999, (D) DELETE CERTAIN LIMITATIONS ON TRANSFERS OF
COMMON STOCK WHICH WERE ORIGINALLY DESIGNED TO PRESERVE NET
OPERATING LOSS CARRY FORWARDS WHICH HAVE BEEN LOST AS A RESULT OF
THE CHANGE OF CONTROL TRANSACTION IN DECEMBER, 1998, AND (E) FURTHER
INDEMNIFY THE COMPANY'S DIRECTORS, OFFICERS AND EMPLOYEES AGAINST
COSTS AND EXPENSES RELATING TO THE PERFORMANCE OF THEIR DUTIES.
|_| FOR |_| AGAINST |_| ABSTAIN
3. TO APPROVE A PLAN OF FINANCING TO RAISE ADDITIONAL FUNDS THROUGH A
PRIVATE PLACEMENT WITH LAWRENCE M. POWERS, THE CHAIRMAN OF THE
BOARD, CHIEF EXECUTIVE OFFICER AND A MAJOR STOCKHOLDER OF THE
COMPANY.
|_| FOR |_| AGAINST |_| ABSTAIN
4. TO RATIFY THE COMPANY'S 1999 STOCK OPTION PLAN.
|_| FOR |_| AGAINST |_| ABSTAIN
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<PAGE>
5. TO RATIFY THE APPOINTMENT OF EDWARD ISAACS & COMPANY LLP AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANT FOR THE COMPANY'S FISCAL
YEAR ENDING MARCH 31, 2000.
|_| FOR |_| AGAINST |_| ABSTAIN
6. TO TRANSACT SUCH OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE
ANNUAL MEETING.
This proxy, when properly executed, will be voted in the manner directed hereby
by the undersigned shareholder. Where no direction is made, this proxy will be
voted FOR Proposals 1, 2, 3, 4 and 5. The undersigned hereby revokes any proxy
previously given and acknowledges receipt of the Notice of, and Proxy Statement
for, the aforesaid Meeting.
Dated: ________________________, 1999
_____________________________________
Signature
_____________________________________
Signature
NOTE: Personal representatives, custodians, trustees, partners, corporate
officers, and attorneys-in-fact should add their titles as such.
PLEASE VOTE AND DATE THIS PROXY, SIGNING IT AS YOUR NAME APPEARS ON YOUR STOCK
CERTIFICATES AND RETURN THE PROXY IN THE ENVELOPE PROVIDED.
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<PAGE>
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SPECTRUM INFORMATION TECHNOLOGIES, INC.
The undersigned, Lawrence M. Powers, Chairman of the Board and Chief
Executive Officer of Siti-Sites.com, Inc., a Delaware corporation (the
"Corporation"), hereby certifies that:
1. The name of the Corporation is Spectrum Information Technologies,
Inc.
2. The original Certificate of Incorporation was filed with the
Secretary of State of Delaware on April 1, 1987, under the name
Spectrum Cellular Corporation.
3. This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with Section 245 of the General Corporation
Law of the State of Delaware (the "GCL") and, upon filing with
the Secretary of State in accordance with Section 103 of the GCL,
shall henceforth supersede the original Certificate of
Incorporation and shall, as it may thereafter be amended in
accordance with its terms and applicable law, be the Certificate
of Incorporation of the Corporation.
4. The text of the Certificate of Incorporation of the Corporation
is hereby amended and restated to read in its entirety as
follows:
ARTICLE I
Name
The name of the corporation (hereinafter referred to as the "Corporation")
is:
Siti-Sites.com, Inc.
ARTICLE II
Registered Agent
The name and address of the Corporation's registered agent in the State of
Delaware is:
Corporation Trust Company
1209 Orange Street
Wilmington, DE
<PAGE>
ARTICLE III
Purpose
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware (the "GCL").
ARTICLE IV
Capital Stock
A. Authorized Stock. The total number of shares of all classes of
stock with the Corporation shall have authority to issue is 40,000,000
shares, of which 35,000,000 shares, par value $.001 per share, shall
be of a class designed "Common Stock" and 5,000,000 shares, par value
$.001 per share, shall be of a class designed "Preferred Stock."
B. Preferred Stock. The Board of Directors is authorized, subject to
the limitations prescribed by law and the provisions of this Article
IV, to provide for the issuance from time to time in one or more
series of any number of shares of Preferred Stock and, by filing a
certificate pursuant to the GCL (the "Preferred Stock Designation"),
to establish the number of shares to be included in each series, and
to fix the designation, relative rights, preferences, qualifications
and limitations of the shares of each such series. The authority of
the Board of Directors with respect to each series shall include, but
not be limited to, determination of the following:
(1) The designation of the series, which may be by
distinguishing number, letter or title.
(2) The number of shares of the series. Unless otherwise
provided by the Preferred Stock Designation, the Board of
Directors may thereafter increase or decrease the number of
shares, but not below the number of shares then outstanding.
(3) The voting rights, if any, of the holders of shares of the
series.
(4) Whether dividends, if any, shall be c umulative or
noncumulative and the dividend rate of the series and the
preferences, if any, over any other series (or of any other
series over said series) with respect to dividends.
(5) Dates at which the dividends, if any, shall be payable.
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<PAGE>
(6) Whether dividends shall be payable in cash, securities of
the Corporation or another entity, or other property.
(7) The redemption rights and price or prices, if any, for
shares of the series.
(8) The amounts payable on, and the preferences, if any, of
shares of the series in the event of any voluntary or
involuntary liquidation, dissolution, distribution of assets
or winding up of the Corporation's affairs.
(9) The terms and amount of any purchase, retirement or sinking
fund provided for the purchase or redemption of the series.
(10) Whether the shares of the series shall be convertible into
or exchangeable for any shares of any other class or series,
or any other security of the Corporation or any other entity
and, if so, the specification of such other class or series
of such other security, the conversion or exchange price or
prices or rate or rates, any adjustments thereof, the date
or dates at which such shares shall be convertible or
exchangeable and all other terms and conditions upon which
such conversion or exchange may be made.
(11) Whether the issuance of additional shares of Preferred Stock
shall be subject to restrictions as to issuance, or as to
the powers, preferences, or other rights of any other
series.
(12) The right of the shares of such series to the benefit of
conditions and restrictions upon the creation of
indebtedness of the Corporation or any subsidiary of the
Corporation, upon the issue of any additional stock
(including any additional shares of such series or any other
series) and upon the payment of dividends or the making of
other distributions on, and the purchase, retention,
redemption or other acquisition by the Corporation or any
subsidiary of, any outstanding stock of the Corporation.
(13) Such other powers, preferences and relative, participating,
optional and other special rights, and the qualifications,
limitations and restrictions thereof as the Board of
Directors shall, determine.
The holders of Preferred Stock shall not have any preemptive rights except
to the extent such rights shall be specifically provided for in the resolution
or resolutions providing for the issuance thereof adopted by the Board of
Directors.
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<PAGE>
C. Common Stock. Common Stock shall be subject to the express terms of the
Preferred Stock, and any series thereof. Each share of Common Stock shall have
the right to cast one vote for the election of Directors and on all other
matters upon which stockholders are entitled to vote. Cumulative voting shall
not be permitted.
D. Record Holders. The Corporation shall be entitled to treat the person in
whose name any share of its stock is registered as the owner thereof for all
purposes and shall not be bound to recognize any equitable or other claim to, or
interest in, such share on the part of any other person, whether or not the
Corporation shall have notice thereof, except as expressly provided by
applicable law.
E. Quorum. The holders of a majority of all issued and outstanding shares
entitled to vote generally in the election of directors, present in person or
represented by proxy, will constitute a quorum for the transaction of any
business at any duly called meeting of stockholders.
F. Conversion of Class A Stock.
(i) On March 31, 1999, each outstanding share of the Corporation's Class A
Stock, par value $.001 per share (the "Class A Stock"), automatically
converted into one share of Common Stock. The Board of Directors shall have
the authority to make any determination of beneficial ownership and changes
thereof required to effectuate this Section F of Article IV.
(ii) The Corporation shall not be obligated to issue to any holder of Class
A Stock certificates evidencing shares of Common Stock issuable upon the
conversion of Class A Stock into Common Stock until certificates evidencing
the shares of Class A Stock are delivered to either the Corporation or any
transfer agent of the Corporation. As promptly as practicable thereafter
(and after surrender of the certificate or certificates representing shares
of Class A Stock to the Corporation or any transfer agent of the
Corporation), the Corporation shall issue and deliver to or upon the
written order of such holder a certificate or certificates for the number
of full shares of Common Stock to which such holder is entitled. The person
in whose name the certificate or certificates for Common Stock are to be
issued shall be deemed to have become a holder of record of such Common
Stock effective on March 31, 1999.
(iii) The Corporation shall pay all documentary, stamp, transfer or other
transactional taxes attributable to the issuance or delivery of shares of
Common Stock upon conversion of any shares of Class A Stock; provided, that
the Corporation shall not be required to pay any taxes which may be payable
in respect of any transfer involved in the issuance or delivery of any
certificate for such shares in a name other than that of the registered
holder of the Class A Stock in respect of which such shares are being
issued.
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<PAGE>
(iv) So long as there are any shares of Class A Stock outstanding, the
Corporation shall reserve at all times, free from preemptive rights, out of
its treasury stock or its authorized but unissued shares of Common Stock,
or both, solely for the purpose of effecting the conversion of the shares
of Class A Stock, sufficient shares of Common Stock to provide for the
conversion of all outstanding shares of Class A Stock.
G. Voting by Class Action Trustee.
(i) Certain shares of Class A Stock, which were automatically
converted to Common Stock on March 31, 1999(such stock being hereafter
referred to as "Class Action Stock") were issued to the trustee (the
"Class Action Trustee") for the class action plaintiffs (the "Class
Action Plaintiffs") in securities class action litigation (the "Class
Action Suits") against the Corporation and certain of its former
officers and directors which pending before Judge Frederic Block in
the Eastern District of New York under the consolidated caption In Re
Spectrum Information Technologies Litigation, No. 93 Civ. 2295 (FB).
The Class Action Trustee shall be entitled to vote Class Action Stock
that has not yet been distributed to a Class Action Plaintiff pursuant
to the settlement of the Class Action Suits and the Corporation's Plan
of Reorganization, filed with the Bankruptcy Court on February 9,
1996, as amended, and is held by the Class Action Trustee; however,
the Class Action Trustee shall be required to vote the Class Action
Stock in the same proportions and the same manner as the holders of
shares of Common Stock have voted.
ARTICLE V
Rights Agreements
The Board of Directors is hereby authorized to create and issue, whether or
not in connection with the issuance and sale of its stock or other securities or
property, rights entitling the holders thereof to purchase from the Corporation
shares of stock or other securities of the Corporation or any other entity,
recognizing that, under certain circumstances, the creation and issuance of such
rights could have the effect of discouraging third parties from seeking, or
impairing their ability to seek, to acquire a significant portion of the
outstanding securities of the Corporation, to engage in any transaction which
might result in a change of control of the Corporation or to enter into any
agreement, arrangement or understanding with another party to accomplish the
foregoing or for the purpose of acquiring, holding, voting or disposing of any
securities of the Corporation. The times at which and the specific terms upon
which such rights are to be issued will be determined by the Board of Directors
and set forth in the contracts or instruments that evidence such rights. The
authority of the Board of Directors with respect to such rights shall include,
but not be limited to, determination of the following:
A. The initial purchase price per share or other unit of stock or other
securities or property to be purchased upon the exercise of such rights.
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<PAGE>
B. Provisions relating to the times at which and the circumstances under
which such rights may be exercised or sold or otherwise transferred, either
together with or separately from, any other stock or other securities of the
Corporation.
C. Provisions which set forth the type and amount of stock for which such
rights are exercisable and provisions which adjust the number or exercise price
of such rights in the event of a combination, split or recapitalization of any
stock of the Corporation, a change in ownership of the Corporation's stock or
other securities or a reorganization, merger, consolidation, sale of assets or
other occurrence relating to the Corporation or any stock of the Corporation,
and provisions restricting the ability of the Corporation to enter into any
stock transaction absent an assumption by the other party or parties thereto of
the obligations of the Corporation under such rights.
D. Provisions which deny the holder of a specified percentage of
outstanding stock or other securities of the Corporation the right to exercise
such rights and/or cause the rights held by such holder to become void.
E. Provisions which permit the Corporation to redeem or exchange such
rights, which redemption or exchange may be within the sole discretion of the
Board of Directors, if the Board of Directors reserves such right to itself.
F. The appointment of a rights agent with respect to such rights.
ARTICLE VI
Board of Directors
A. The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors. Subject to the rights of the holders of
any series of Preferred Stock to elect additional directors under specific
circumstances, the Board of Directors shall consist of no more than 7 directors,
the exact number of directors to be determined from time to time by resolution
adopted by the affirmative vote of a majority of the entire Board of Directors.
The directors, other than those who may be elected by the holders of any series
of Preferred Stock, shall be divided into three classes, designated Class I,
Class II and Class III. Each class shall consist, as nearly as may be possible,
of one-third of the total number of directors constituting the entire Board of
Directors. Initially, Class I directors shall be elected for a one-year term,
Class II directors for a two-year term, and Class III directors for a three-year
term. At each succeeding annual meeting of the stockholders, successors to the
class of directors whose terms expire at the annual meeting shall be elected for
a three-year term.
B. Subject to the rights of any series of Preferred Stock to elect
additional directors under specific circumstances, if the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
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to maintain the number of directors in each class as nearly equal as possible,
and any additional director of any class elected to fill a vacancy resulting
from an increase in such class shall hold office for a term that shall coincide
with the remaining term of that class, but in no case will a decrease in the
number of directors shorten the term of any incumbent director. A director shall
hold office until the annual meeting for the year in which his term expires and
until his successor shall be elected, subject, however, to prior death,
resignation, retirement or removal from office. Any vacancy on the Board of
Directors that results from an increase in the number of directors may be filled
by a majority of the directors then in office, provided that a quorum is
present, and any other vacancy occurring in the Board of Directors may be filled
by a majority of the directors then in office, even if less than a quorum, or by
a sole remaining director. Any director elected to fill a vacancy not resulting
from an increase in the number of directors shall have the same remaining term
as that of his predecessor or, if such director has no predecessor, as that of
the class of directors to which such director has been elected.
ARTICLE VII
Transactions with Related Persons
A. In addition to any affirmative vote required by law or this Certificate
of Incorporation or the Bylaws of the Corporation, and except as otherwise
expressly provided in Section C of this Article VII, a Business Combination (as
hereinafter defined) with, or proposed by or on behalf of, any Interested
Stockholder (as hereinafter defined) or any Affiliate (as hereinafter defined)
or Associate (as hereinafter defined) of, any Interested Stockholder or any
person who thereafter would be an Affiliate or Associate of such Interested
Stockholder shall require the affirmative vote of at least 66 2/3 percent of the
votes entitled to be cast by the holders of all the then outstanding shares
entitled to vote generally in the election of directors ("Voting Stock"), voting
together as a single class, excluding Voting Stock Beneficially Owned (as
hereinafter defined) by such Interested Stockholder. Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that a
lesser percentage or separate class vote may be specified, by law or in any
agreement with any national securities exchange or otherwise.
B. The provisions of Section A of this Article VII shall not be applicable
to any particular Business Combination, and such Business Combination shall
require only such affirmative vote, if any, as is required by law or by any
other provision of this Certificate of Incorporation or the Bylaws of the
Corporation, or any agreement with any national securities exchange, if the
Business Combination shall have been approved, either specifically or as a
transaction which is within an approved category of transactions, by a majority
of the Board of Directors prior to the Acquisition Date (as hereinafter
defined).
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C. The following definitions shall apply with respect to this Article VII:
(i) The terms "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 promulgated under the
Exchange Act of 1934, as amended (the "Exchange Act") as in effect on the
date this Certificate of Incorporation became effective under the GCL (the
term "registrant" in said Rule 12b-2 meaning in this case the Corporation).
(ii) The term "Acquisition Date" shall mean t he date on which any
person becomes the Beneficial Owner of Voting Stock representing 10 percent
or more of the votes entitled to be cast by the holders of all the then
outstanding shares of Voting Stock.
(iii) A person shall be deemed the "Beneficial Owner"of, and shall be
deemed to "Beneficially Own", shares of Capital Stock (as hereinafter
defined):
(a) which such person or any of such person's Affiliates or
Associates, directly or indirectly, has the sole or shared right to
vote or dispose of or has "beneficial ownership" of (as determined
pursuant to Rule 13d-3 promulgated under the Exchange Act or pursuant
to any successor provision), pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, that a person
shall not be deemed the "Beneficial Owner" of, or to "Beneficially
Own", any security under this Subsection (a) as a result of an
agreement, arrangement or understanding to vote such security that
both (y) arises solely from a revocable proxy given in response to a
public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the rules and
regulations promulgated under the Exchange Act and (z) is not
reportable by such person on Schedule 13D promulgated under the
Exchange Act (or any comparable or successor report) without giving
effect to any applicable waiting period; or
(b) which are Beneficially Owned, directly or indirectly, by
any other person (or any Affiliate or Associate thereof) with which
such person (or any of such person's Affiliates or Associates) has any
agreement, arrangement or understanding, whether or not in writing,
for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to Subsection (a) above)
or disposing of any Capital Stock;
provided, that (y) no director or officer of the Corporation (nor any Affiliate
or Associate of any such director or officer) shall, solely by reason of any or
all of such officers acting in their capacities as such, be deemed the
"Beneficial Owner" of or to "Beneficially Own" any shares of Capital Stock that
are Beneficially Owned by any other such director or officer, and (z) no person
shall be deemed the "Beneficial Owner" of or to "Beneficially Own" any shares of
Voting Stock held in any voting trust, any employee stock ownership plan or any
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similar plan or trust if such person does not posses the right to vote, to
direct the voting of or to be consulted with respect to the voting of such
shares.
(iv) The term "Business Combination" shall mean:
(a) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (y) any Interested
Stockholder or (z) any other company (whether or not itself an
Interested Stockholder) which is or after such merger or consolidation
would be an Affiliate or Associate of an Interested Stockholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition or security arrangement, investment, loan, advance,
guarantee, agreement to purchase, agreement to pay, extension of
credit, joint venture participation or other arrangement (in one
transaction or a series of transactions) with or for the benefit of
any Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder involving the Corporation or any Subsidiary and
any assets, securities or commitments of the Corporation, any
Subsidiary or any Interested Stockholder or any Affiliate or Associate
of any Interested Stockholder which (except for any arrangement,
whether as employee, consultant or otherwise, other than as a
director, pursuant to which any Interested Stockholder or any
Affiliate or Associate thereof shall, directly or indirectly, have any
control over or responsibility for the management of any aspect of the
business or affairs of the Corporation, with respect to which
arrangements the value tests set forth below shall not apply),
together with all other such arrangements (including all contemplated
future events), has an aggregate Fair Market Value (as defined below)
and/or involves aggregate commitments of $5,000,000 or more or
constitutes more than 5 percent of the book value of the total assets
(in the case of transactions involving assets or commitments other
than Capital Stock) or 5 percent of the stockholders' equity (in the
case of transactions in Capital Stock) of the entity in question (a
"Substantial Part"), as reflected in the most recent fiscal year-end
consolidated balance sheet of such entity existing at the time the
stockholders of the Corporation would be required to approve or
authorize the Business Combination involving the assets, securities
and/or commitments constituting any Substantial Part; or
(c) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation; or
(d) any reclassification of securities of the Corporation
(including any reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the Corporation with
any of its Subsidiaries or any other transaction (whether or not with
or otherwise involving an Interested Stockholder) that has the effect,
directly or indirectly, of increasing the proportionate share of any
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directly or indirectly, of increasing the proportionate share of any
class or series of Capital Stock, or any securities convertible into
Capital Stock or into equity securities of any Subsidiary, that is
Beneficially Owned by any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder; or
(e) any agreement, contract or other arrangement providing
for any one or more of the actions specified in the foregoing clauses
(a) to (d).
(v) The term "Capital Stock" shall mean all capital stock of the
Corporation authorized to be issued from time to time under Article IV
of this Certificate of Incorporation.
(vi) The term "Fair Market Value" shall mean (y) in the case of
stock, the highest closing sale price during the 30-day period
immediately preceding the date in question of a share of such stock on
the Composite Tape for New York Stock Exchange listed stocks, or, if
such stock is not quoted on the Composite Tape, on the New York Stock
Exchange or, if such stock is not listed on such exchange, on the
principal United States securities exchange registered under the
Securities Exchange Act of 1934 on which such is listed, or, if such
stock is not listed on any such exchange, the highest closing bid
quotation with respect to a share of such stock during the 60-day
period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system
then in use in its stead, or if no such quotations are available, the
fair market value on the date in question of a share of such stock as
determined by the Board of Directors in accordance with Subsection (i)
of Section D of this Article VII, and (z) in the case of property
other than cash or stock, the fair market value of such property on
the date in question as determined by the Board of Directors in
accordance with Subsection (i) of Section D of this Article VII.
(vii) The term "Interested Stockholder" shall mean any person
(other than the Corporation or any Subsidiary and other than any
profit-sharing, employee stock ownership or other employee benefit
plan of the Corporation or any Subsidiary or any trustee of or
fiduciary with respect to any such plan when acting in such capacity),
who (a) is the Beneficial Owner of 10 percent or more of the then
outstanding Voting Stock; or (b) is an Affiliate or Associate of the
Corporation and at any time within the two- year period immediately
prior to the date in question was the Beneficial Owner of 10 percent
or more of the then outstanding Voting Stock.
(viii) The term "person" shall mean any individual, firm,
corporation, partnership or other entity and shall include any group
comprised of any person and any other person with whom such person or
any Affiliate or Associate of such person has any agreement,
arrangement or understanding, directly or indirectly, for the purpose
of acquiring, holding, voting or disposing of Capital Stock.
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(ix) The term "Subsidiary" means any company of which a majority
of any class of equity security is beneficially owned by the
Corporation; provided, however, for the purpose of the definition of
Interested Stockholder set forth in Subsection (vii) of this Section
C, the term "Subsidiary" shall mean only a company of which a majority
of each class of equity securities is Beneficially Owned by the
Corporation.
D. (i) A majority of the Board of Directors shall have the power to
determine for the purpose of this Article VII, all questions arising
under this Article VII, including, without limitation, (a) whether a
person is an Interested Stockholder, (b) the number of shares of
Capital Stock or other securities Beneficially Owned by any person,
(c) whether a person is an Affiliate or Associate of another, (d)
whether a Business Combination is with, or proposed by, or on behalf
of an Interested Stockholder or an Affiliate or Associate of an
Interested Stockholder, (e) whether the assets that are the subject of
any Business Combination have, or the consideration to be received for
the issuance or transfer of securities by the Corporation or any
Subsidiary in any Business Combination has, an aggregate Fair Market
Value of $5,000,000 or more or constitutes more than 5 percent of the
book value of the total assets or 5 percent of the stockholders'
equity of the entity in question, (f) whether the assets or securities
that are the subject of any Business Combination constitute a
Substantial Part, (g) the date on which an Interested Stockholder
became an Interested Stockholder, (h) the date on which an Acquisition
Date occurred, (i) the Fair Market Value of stock or other property in
accordance with Subsection (vi) of Section C of this Article VII, and
(j) any other matter relating to the applicability or effect of this
Article VII. Any such determination shall be binding and conclusive on
all parties.
(ii) The Board of Directors shall have the right to demand that
any person who it believes is or may be an Interested Stockholder (or
who holds of record shares of Capital Stock that are Beneficially
Owned by any person that the Board of Directors believes is or may be
an Interested Stockholder) supply the Corporation with complete
information as to: (a) the record holders of all shares of Capital
Stock that are Beneficially Owned by such person; (b) the number of
shares of each class or series of Capital Stock that are Beneficially
Owned by such person and held of record by each such record holder and
the numbers of the stock certificates evidencing such shares; and (c)
any other matter relating to the applicability or effect of this
Article VII as the Board of Directors may reasonably request. Each
such person shall furnish such information within 10 days after the
receipt of such demand.
E. Nothing contained in this Article VII shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law or to be in
derogation of any action, past or future, which has been or may be taken by the
Board of Directors or the stockholders with respect to the subject matter
contained herein.
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F. For the purposes of this Article VII, a Business Combination is presumed
to have been proposed by, or on behalf of, an Interested Stockholder or an
Affiliate or Associate of an Interested Stockholder or a person who thereafter
would become such if such Interested Stockholder, Affiliate, Associate or person
votes for or consents to the adoption of any such Business Combination, unless
as to such Interested Stockholder, Affiliate, Associate or person a majority of
the Board of Directors makes a determination that such Business Combination is
not proposed by or on behalf of such Interested Stockholder, Affiliate,
Associate or person.
ARTICLE VIII
Personal Liability of Directors
A. A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except that this Section A of Article VIII shall not
eliminate or limit a director's liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the GCL, or (iv) for any
transaction from which such director derived an improper personal benefit. If
the GCL is amended after the date this Amended and Restated Certificate of
Incorporation became effective under the GCL to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the GCL, as so amended from time to time.
Without limiting the generality or the effect of the foregoing, the
Corporation may enter into one or more agreements with any person, which may
provide for indemnification greater or different than that provided in this
Article VIII.
Any repeal or modification of this Section A of Article VIII shall not
increase the personal liability of any director of this Corporation for any act
or occurrence taking place prior to such repeal or modification, or otherwise
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
The provisions of this Section A of Article VIII shall not be deemed to
limit or preclude indemnification of a director by the Corporation for any
liability of a director which has not been eliminated by the provisions of this
Section A of Article VIII.
B. The Corporation shall indemnify to the full extent authorized or
permitted by law (as now or hereafter in effect) any person made, or threatened
to be made a party or witness to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, a administrative or investigative
(other than an action by or in the right of the Corporation), by reason of the
fact that such person is or was a director, officer, employee or agent of the
Corporation or by reason of the fact that such person is or was serving at the
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request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise. Nothing contained herein shall affect any rights to indemnification
to which employees other than directors and officers may be entitled by law. No
amendment or repeal of this Section B of Article VIII shall apply to or have any
effect on any right to indemnification provided hereunder with respect to any
acts or omissions occurring prior to such amendment or repeal.
C. The Corporation shall indemnify to the full extent authorized or
permitted by law (as now or hereafter in effect) any person made, or threatened
to be made a party or witness to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation or by reason of the fact that such person is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise. Nothing contained herein shall affect any
rights to indemnification to which employees other than directors and officers
may be entitled by law. No amendment or repeal of this Section C of Article VIII
shall apply to or have any effect on any right to indemnification provided
hereunder with respect to any acts or omissions occurring prior to such
amendment or repeal.
D. The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against any such expense, liability or loss, or against any
other expense, liability or loss, to the extent permitted under the GCL. The
Corporation may also create a trust fund, grant a security interest and/or use
other means (including but not limited to, letters of credit, surety bonds
and/or use other similar arrangements), as well as enter into contracts
providing indemnification to the full extent authorized or permitted by law and
including as part thereof provisions with respect to any or all of the
foregoing, to ensure the payment of such amounts as may become necessary to
effect indemnification as provided therein or elsewhere.
ARTICLE IX
Amendment to Bylaws
A. In furtherance and not in limitation of the powers conferred by
applicable law, the Board of Directors is expressly authorized and empowered to:
(1) adopt, alter, amend, change or repeal the Bylaws of the
Corporation; provided, however, that the Bylaws adopted by the Board of
Directors under the powers hereby conferred may be adopted, altered, amended,
changed or repealed by the Board of Directors subject to the provisions of this
Amended and Restated Certificate of Incorporation, or the stockholders having
voting power with respect thereto; provided, further, that, subject to the
provisions of Article VI of this Amended and Restated Certificate of
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Incorporation, in the case of amendments by stockholders, the affirmative vote
of the holders of at least 80 percent of the voting power of the then
outstanding Voting Stock, voting together as a single class, shall be required
to alter, amend or repeal the Bylaws; and
(2) from time to time determine whether and to what extent, and at
what times and places, and under what conditions and regulations, the accounts
and books of the Corporation, or any of them, shall be open to inspection of
stockholders; and, except as so determined, or as expressly provided in this
Amended and Restated Certificate of Incorporation or in any Preferred Stock
Designation, no stockholder shall have any right to inspect any account, book or
document of the Corporation other than such rights as may be conferred by law.
B. The Corporation may in its Bylaws confer powers upon the Board of
Directors in addition to the foregoing and in addition to the powers and
authorities expressly conferred upon the Board of Directors in this Amended and
Restated Certificate of Incorporation or by law; provided, however, that no
Bylaws hereafter adopted by the stockholders or otherwise shall invalidate any
prior act of the directors which would have been valid if such Bylaws had not
been adopted.
ARTICLE X
Shareholder Consent
Notwithstanding any other provision of this Certificate of Incorporation or
the Bylaws of the Corporation to the contrary, no action required to be taken or
which may be taken at any annual or special meeting of stockholders of the
Corporation may be taken by written consent without such a meeting except any
action taken upon the signing of a consent in writing by all stockholders of the
Corporation having voting power of the then outstanding Voting Stock setting
forth the action to be taken. Subject to the rights of the holders of any class
or series of Preferred Stock, special meetings of stockholders of the
Corporation may be called only by the Board of Directors, the Chairman of the
Board, the President of the Corporation.
ARTICLE XI
Other Constituencies
The Board of Directors, when evaluating any (a) tender offer or invitation
for tenders or proposal to make a tender offer or request or invitation for
tenders, by another party, for any equity security of the Corporation or (b)
proposal or offer by another party to (i) merge or consolidate the Corporation
or any subsidiary with another corporation, (ii) purchase or otherwise acquire
all or a substantial portion of the properties or assets of the Corporation or
any subsidiary, or sell or otherwise dispose of to the Corporation or any
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subsidiary all or a substantial portion of the properties or assets of such
other party or (iii) liquidate, dissolve, reclassify the securities of, declare
an extraordinary dividend or recapitalize or reorganize the Corporation, shall
be permitted (but not required) to take into account all factors which the Board
of Directors deems relevant, including, without limitation, to the extent so
deemed relevant the potential impact on employees, customers, suppliers,
partners, joint venturer and other constituents of the Corporation and the
communities in which the Corporation operates.
ARTICLE XII
Amendments to Certificate of Incorporation
Except as may be expressly provided in this Certificate of Incorporation,
the Corporation reserves the right at any time from time to time to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation, or a Preferred Stock Designation, and any other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted, in the manner now or hereafter prescribed herein or by law;
and all rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant to this
Certificate of Incorporation in its present form or as hereafter amended are
granted subject to the right reserved in this Article XII; provided, however,
that any amendment or repeal of Article IX of this Certificate of Incorporation
shall not adversely affect any right or protection existing hereunder in respect
of any act or omission occurring prior to such amendment or repeal; provided
further, that no Preferred Stock Designation shall be amended after the issuance
of any shares of the series of Preferred Stock created thereby, except in
accordance with the terms of such Preferred Stock Designation and the
requirements of applicable law.
IN WITNESS HEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be signed by its Chief Executive Officer and
Chairman of the Board and attested by its Secretary this _______ day of
_________, 1999.
SPECTRUM INFORMATION TECHNOLOGIES, INC.
By:___________________________________
Lawrence M. Powers,
Chief Executive Officer and
Chairman of the Board
Attest: ___________________
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EXHIBIT B
STOCK PURCHASE AGREEMENT
POWERS & CO.
47 Beech Road
Englewood, New Jersey 07631
July 26, 1999
Spectrum Information Technologies, Inc.
P.O. Box 1006
New York, New York 10268
Re: Stock Purchase Agreement
Gentlemen:
The following sets forth the terms and conditions of a purchase of
securities in Spectrum Information Technologies, Inc. (the "Company") by the
undersigned, to be completed upon the satisfaction of the condition precedent
set forth in Section 2(a) of this Agreement:
1. Stock Purchase. Subject to the satisfaction of the condition precedent
set forth in Section 2(a) hereof, at the Closing (as described in Section 2(b)
hereof) Powers & Company ("Powers") shall purchase 1,000,000 shares of common
stock par value $.001 of the Company (the "Common Stock"), and an option to
acquire 500,000 additional shares of such Common Stock (the "Option"), for a
total purchase price of $1,250,000 (the "Purchase Price"). The terms and
provisions of the Option are set forth in Exhibit A annexed hereto.
2. Condition Precedent; Closing.
(a) The obligations of each party to effect the purchase and sale of
the Shares and the Option shall be subject to the approval by the Company's
stockholders at the Company's next annual meeting of stockholders of (i) the
terms hereof, and (ii) an amendment to the Company's certificate of
incorporation increasing the number of authorized shares of Common Stock to a
number sufficient to permit the issuance of the Shares and the Option hereunder.
(b) The closing of the purchase and sale of the Shares and the Option
(the "Closing") shall occur as soon as practicable after the satisfaction of the
condition precedent set forth in Section 2(a) hereof, at such location as may be
agreed upon by the Company and Powers. At the Closing, (i) the Company shall
deliver to Powers one or more stock certificates for the Shares, issued in the
name of Powers, or in such name(s) as may be designated by Powers, (ii) the
Company shall deliver to Powers the executed Option, and (ii) Powers shall
deliver to the Company the Purchase Price, payable by bank or certified check.
3. Representations and Warranties of the Company. These representations and
warranties shall survive for twelve (12) months following the Closing. In
consideration of the purchase and sale described above and the remaining terms
hereof, the Company represents and warrants to its knowledge that as of the date
hereof and as of the date of the Closing, subject to the satisfaction of the
condition precedent set forth in Section 2(a) hereof:
<PAGE>
(a) Stock Ownership. Upon issuance, the Common Stock and the shares
underlying the Option will be duly authorized and validly issued, fully paid and
non-assessable. The Option shall be enforceable in accordance with its terms.
(b) Title. Following consummation of the transaction, the Company
warrants title to the Common Stock and Option and covenants and agrees at its
expense to defend Powers's right, title and ownership of the Common Stock
(whether issued on the date hereof or upon exercise of the Option) against the
claims and demands of all persons whomsoever.
(c) Company's Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all necessary powers to carry on its business as now operated
by it.
(d) Authorization to Convey Stock. (i) The Company has full power and
authority to enter into this Agreement and the Option and the Company has full
power and authority to sell, convey, assign and transfer the Common Stock and
the Option to Powers and otherwise consummate the transaction contemplated by
this Agreement; (ii) this Agreement constitutes the valid and binding obligation
of the Company, enforceable in accordance with its terms; (iii) neither the
execution and delivery of this Agreement and the Option, nor the consummation of
the transaction contemplated herein in the manner herein provided, will violate
any agreement to which the Company is a party or by which the Company is bound,
or any law, order, decree or judgment applicable to the Company; and (iv) no
authorization, approval or consent of any third party is required for the lawful
execution, delivery and performance of this Agreement and the Option by the
Company.
4. Representations and Warranties of Powers. In consideration of the
purchase and sale described above and the remaining terms hereof, Powers has
executed and delivered to the Company the Investor's Representation Letter
attached hereto as Exhibit B, pursuant to which it makes certain representations
and warranties to the Company as of the date hereof and as of the date of the
Closing.
5. Modification, Discharge, Termination. Neither this Agreement nor any
provisions hereof shall be modified, discharged, or terminated except by an
instrument in writing signed by the party against whom any waiver, change,
discharge, or termination is sought.
6. Notices. Any notice, demand, or other communication that any party
hereto may be required, or may elect, to give to anyone interested hereunder
shall be sufficiently given if (a) deposited, postage prepaid, registered or
certified, return receipt requested, addressed to such address as may be given
herein; or (b) delivered personally at such address.
7. Successors and Assigns. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the parties' benefit and the
benefit of the parties' successors, legal representatives, and assigns.
8. Entire Agreement. This Agreement and its Exhibits hereto contains the
entire agreement of the parties, and there are no representations, covenants, or
other agreements except as stated or referred to herein.
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<PAGE>
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, both substantive and
remedial.
10. Severability. If any provision of this Agreement shall be held to be
void or unenforceable under the laws of any place governing its construction or
enforcement, this Agreement shall not be voidable as a result thereof, but shall
be construed to be otherwise in force with the same effect as though such
provisions were omitted.
11. Section Headings. The section headings contained herein are for
reference purpose only and shall not in any way affect the meaning or
interpretation of this Agreement.
If the foregoing accurately reflects our agreement, please so indicate in
the appropriate space below.
SPECTRUM INFORMATION POWERS & CO.
TECHNOLOGIES, INC.
By:_______________________ By:________________________
Name: Jon Gerber Name: Lawrence M. Powers
Title: Vice President Its: Owner/Sole Proprietor
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<PAGE>
EXHIBIT C
OPTION
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT is made as of the _______ day of __________,
1999, by and between Spectrum Information Technologies, Inc. a Delaware
Corporation (the "Company") and Powers & Co. (the "Optionee").
WHEREAS, the Company and the Optionee have entered into a Stock Purchase
Agreement dated July 26, 1999, providing for the sale to the Optionee of shares
of common stock, par value $0.001 per share, of The Company (the "Common
Stock"), and the stock option described herein for an aggregate purchase price
of $1,250,000, subject to conditions precedent set forth therein; and
WHEREAS, the conditions precedent set forth in such Stock Purchase
Agreement have been satisfied;
NOW, THEREFORE, in consideration of the payment described, the mutual
covenants hereinafter set forth and for other good and valuable consideration,
the parties hereto agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right and
option (hereafter called this "Option"), to purchase all or any part of an
aggregate of 500,000 shares of Common Stock on the terms and conditions set
forth herein.
2. EXERCISE PRICE AND EXPIRATION. The exercise price and the expiration
dates as to the share underlying this Option shall be as follows:
Number of Share Exercise Price Expiration Date
- --------------- --------------- ----------------
500,000 $2.50 per share ______________, 2004
3. DURATION. This Option shall become exercisable upon issuance of this
Agreement and shall remain exercisable at the stated price through the
expiration date set forth above. To facilitate partial transfer, exercise or
sale, this Option may be subdivided into options in smaller denominations upon
the Optionee's request in writing from time to time.
4. LIMITATION ON DISPOSITION. This Option and shares of Common Stock
underlying this Option have not been registered under the Securities Act of 1933
(the "Act") or under applicable state securities laws and, therefore, cannot be
sold, assigned, or otherwise transferred unless subsequently registered under
the Act and under applicable state securities laws or an exemption from such
registration is then available. The Optionee hereby agrees that it will not
sell, assign, or transfer this Option or the shares of Common Stock underlying
this Option unless they are registered under the Act and under applicable state
securities laws or an exemption from such registration is then available,
according to a legal opinion reasonably acceptable to the Company.
5. MANNER OF EXERCISE OF OPTION. This Option may be exercised, subject to
the terms and conditions contained herein, by delivering written notice to the
Chief Executive Officer or Treasurer of the Company at its principal office no
less than three days in advance of the proposed exercise date. Such notice shall
specify the number of shares of Common Stock with respect to which this Option
is being exercised and the effective date of the proposed exercise and shall be
signed by the Optionee. The notice shall be accompanied by a certified check or
cash in the amount of the aggregate option exercise price for such number of
<PAGE>
shares. In no event shall stock be issued or certificates be delivered until
full payment shall have been received by the Company as to such exercise or
partial exercise, nor shall the Optionee have any right or status as a
shareholder of such underlying shares prior to such exercise. Certificates for
shares of Common Stock purchased upon the exercise of this Option shall be
delivered to the Optionee as soon as practicable following the effective date on
which this Option is exercised.
6. ADJUSTMENT ON RECAPITALIZATION, MERGER OR REORGANIZATION. If the
outstanding shares of the Common Stock of the Company are subdivided,
consolidated, increased, decreased, changed into or exchanged for a different
number or kind of shares or securities of the Company through reorganization,
merger, recapitalization, reclassification, capital adjustment or otherwise, or
if the Company shall issue Common Stock as a dividend or upon a stock split,
then the number of shares subject to the unexercised portion of this Option
shall be appropriately adjusted by the Board of Directors of the Company. Any
such adjustment shall be made without change in the total exercise price
applicable to the unexercised portion of this Option. If, in the event of a
merger or consolidation, the Company is not the surviving corporation, and the
event that the agreement of merger or consolidation does not provide for the
substitution of a new option for this Option, or for the assumption of this
Option by the surviving corporation, or in the event of the dissolution or
liquidation of the Company, the Optionee shall have the right immediately prior
to the effective date of such merger, consolidation, dissolution or liquidation,
to exercise this Option in whole or in part, provided, however, that this Option
shall not be exercisable in whole or in part later than the date noted in
paragraph 2 above. Any adjustments made pursuant to this paragraph shall be made
by the Board of Directors of the Company, whose good faith determination in
compliance with Delaware law, as to what adjustment shall be made and the extent
thereof, shall be final, binding and conclusive. In computing any adjustment
hereunder, any fractional share which might otherwise become subject to this
Option shall be eliminated.
SPECTRUM INFORMATION TECHNOLOGIES, INC
By:__________________________________________________
Jon Gerber, Vice-President, Secretary and Treasurer
OPTIONEE
POWERS & CO.
By:__________________________________________________
Lawrence M. Powers, Owner
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<PAGE>
EXHIBIT D
SITI-SITES.COM, INC.
1999 STOCK OPTION PLAN
1. Name and Effective Date
The name of this plan is the Siti-Sites.com, Inc. 1999 Stock Option Plan
(the "Plan"). The Plan shall be effective upon approval by the stockholders of
the Company.
2. Purpose
The purpose of the Plan is to permit the Company and its Affiliates (as
defined below) to attract and retain the best available personnel for positions
of substantial responsibility, to provide additional incentives to employees and
consultants of the Company and its Affiliates, and to promote the success of the
business of the Company and its Affiliates.
3. Definitions
As used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Administrator" shall have the meaning given such term in Section 5
below.
(b) "Affiliate" shall mean any entity that, directly or through one or
more intermediaries, is controlled by, controls or is under common control with
the Company.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Change of Control" shall mean (i) the consummation of a sale,
transfer or other disposition of all or substantially all of the Company's
assets; (ii) the consummation of a merger or consolidation in which securities
possessing more than 50% of the total combined voting power of the Company's
outstanding securities are transferred to a Person or Persons different from the
Persons holding those immediately prior to such transaction; (iii) a change in
the composition of the Board over a period of twenty-four (24) months or less
such that a majority of the Board members ceases to be comprised of individuals
who have either been Board members continuously since the beginning of such
period or have been elected or nominated for selection as Board members by a
majority of the continuing Board members; (iv) approval by the stockholders of
the Company of a complete liquidation or dissolution of the Company; or (v) the
acquisition by any Person or related group of Persons (other than the Company or
a Person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) of beneficial ownership of more than 50% of
the Company's outstanding voting stock without the Board's recommendation.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Company" shall mean Siti-Sites.com, Inc., a Delaware corporation.
<PAGE>
(g) "Consultant" shall mean any Person who contracts to provide
services to the Company or any Affiliate as an independent contractor.
(h) "Director" shall mean a member of the Board, or the board of
directors of any Affiliate.
(i) "Employee" shall mean any person, including officers, who is an
employee of the Company or any Affiliate .
(j) "Fair Market Value" shall mean, with respect to Shares or other
securities (i) the closing price per Share of the Shares on the principal
exchange on which the Shares are then trading, if any, on such date, or, if the
Shares were not traded on such date, then on the next preceding trading day
during which a sale occurred; or (ii) if the Shares are not traded on an
exchange but are quoted on NASDAQ or a successor quotation system, (A) the last
sales price (if the Shares are then listed as a National Market Issue under the
NASDAQ National Market System) or (B) the mean between the closing
representative bid and asked prices (in all other cases) for the Shares on such
date as reported by NASDAQ or such successor quotation system; or (iii) if the
Shares are not publicly traded on an exchange and not quoted on NASDAQ or a
successor quotation system, the mean between the closing bid and asked prices
for the Shares on such date as determined in good faith by the Administrator; or
(iv) if the provisions of clauses (i), (ii) and (iii) shall not be applicable,
the fair market value established by the Administrator acting in good faith.
(k) "ISO" shall mean an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code, as designated in the
option agreement relating thereto.
(l) "Non-Employee Director" shall mean each Director who is not an
Employee or Consultant and who otherwise is considered a "non-employee" director
for purposes of Rule 16b-3.
(m) "NQSO" shall mean an Option that is not intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code, as
designated in the option agreement relating thereto.
(n) "Option" means an ISO or a NQSO granted pursuant to the Plan.
(o) "Optionee" shall mean an Employee, Consultant or Non-Employee
Director who receives an Option.
(p) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, or
government or political subdivision thereof.
(q) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended,
or any successor rule or regulation thereto.
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<PAGE>
(r) "Shares" shall mean the common stock of the Company, par value
$0.001 per share, and such other securities or property as may become the
subject of Options pursuant to Subsection 7(j) below.
(s) "10% Shareholder" shall mean a Person, who together with his or her
spouse, children and trusts and custodial accounts for their benefit,
immediately at the time of the grant of an Option and assuming its immediate
exercise, would beneficially own, within the meaning of Section 424(d) of the
Code, Shares possessing more than ten percent (10%) of the total combined voting
power of all of the outstanding capital stock of the Company or any of its
Affiliates.
4. Shares Subject to the Plan
Subject to Subsection 7(j) below, the maximum aggregate number of
Shares which may be issued to Employees, Consultants and Non-Employee Directors
under the Plan is one million eight hundred thousand (1,800,000). The Shares
issued upon exercise of Options may be authorized and unissued shares, or Shares
held by the Company in its treasury. If any Option shall terminate or expire
without having been exercised in full, the unpurchased Shares that were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
5. Administration of the Plan
The Plan shall be administered by the Board, or, at the election of
such Board, by a committee thereof appointed by the Board (the Board or such
committee being hereafter referred to in such capacity as the "Administrator")
composed of not less than two directors, each of whom is a "non-employee
director" as defined in Rule 16b-3, and an "outside director" as defined for
purposes of Section 162(m) of the Code. If such a committee is appointed by the
Board, (a) such committee shall continue to serve in its designated capacity
until otherwise directed by the Board, and (b) from time to time the Board may
increase the size of such committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of such
committee and thereafter directly administer the Plan, all to the extent
permitted by the applicable law. The Administrator shall interpret the Plan,
prescribe, amend and rescind any rules and regulations necessary or appropriate
for the administration of the Plan, and make such other determinations and take
such other actions as it deems necessary or advisable to cause the Plan to
operate in an effective manner. Any interpretation, determination or other
action made or taken by the Administrator shall be final, binding and
conclusive.
The Administrator may employ attorneys, consultants, accountants or
other persons and the Administrator, the Company and its officers and directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. No member of the Administrator shall be personally liable for any
action, determination or interpretation taken or made in good faith with respect
to the Plan or any Option, and all members of the Administrator shall be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.
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<PAGE>
6. Eligibility; Grant of Options
Under the Plan, Options may be granted to Employees, Consultants and
Non-Employee Directors; provided, that ISOs may be granted only to Employees.
From time to time as it may determine, the Administrator shall designate those
Employees, Consultants and Non-Employee Directors to whom an Option is to be
granted and the number of Shares to be covered by such Option. In determining
the persons to whom Options shall be granted and the number of Shares to be
covered by each Option, the Administrator shall take into account the nature of
such person's duties, such person's present and potential contributions to the
success of the Company and the Affiliates and such other factors as it shall
deem relevant in connection with accomplishing the purposes of the Plan. A
person who has been granted an Option or Options under the Plan may, if he or
she is otherwise eligible, be granted an additional Option or Options.
7. Terms and Conditions of Options
Each Option granted under the Plan shall be evidenced by a written
agreement, in a form approved by the Administrator. Each Option shall be
designated in such written agreement as an ISO or a NQSO. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of Shares with respect to which Options designated as ISOs are exercisable
for the first time by any Optionee during any calendar year (under all plans of
the Company or any Affiliate) exceeds $100,000, such excess options shall be
treated as NQSOs. In addition, each Option shall be subject to the following
terms and conditions and to such other terms and conditions as the Administrator
shall deem appropriate:
(a) Option Term
The term of each NQSO shall be fixed by the Administrator. The term
of each ISO shall in no event be more than ten (10) years from the date of
grant, or, in the case of ISOs granted to 10% Percent Shareholders, five
years from the date of grant.
(b) Exercise Price
The purchase price per Share purchasable under each Option shall be
specified by the Administrator at the time such Option is granted. The
purchase price per Share purchasable under each NQSO shall be the price
determined by the Administrator. The purchase price per Share purchasable
under each ISO shall not be less than 100% of the Fair Market Value of a
Share on the date of grant, or, in the case of ISOs granted to 10% Percent
Shareholders, 110% of the Fair Market Value of a Share on the date of
grant.
(c) Time and Method of Exercise
The Administrator shall establish the time or times at which each
Option, or any part thereof, may be exercised; provided, that an Option
may not be exercised for a fraction of a Share. Such date may be
immediately upon the grant of such Option, or may be delayed until the
participant has remained in the employ of the Company or an Affiliate for
a continuous period after the date of grant as shall be determined by the
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<PAGE>
Administrator. The Administrator shall also establish the form or forms in
which, payment of the option price with respect thereto may be made or
deemed to have been made (including, (i) cash or Shares, or other
consideration, or any combination thereof, having a Fair Market Value on
the exercise date equal to the relevant option price and (ii) a
broker-assisted cashless exercise program established by the
Administrator), provided in each case that such methods avoid
"short-swing" profits to Plan participants under Section 16(b) of the
Securities Exchange Act of 1934, as amended. An Option shall be deemed to
be exercised when written notice of such exercise has been given to the
Company in accordance with the terms of the option agreement by the person
entitled to exercise the Option and the Company has received full payment
for the Shares with respect to which the Option is exercised.
(d) Termination of Directorship or Employment or Consulting Relationship
Subject to Subsection 7(e) below, in the event of termination of an
Optionee's status as a Director, Employee or Consultant, such Optionee
may, but only within three (3) months (or such other period of time not
less than thirty (30) days and not more than twelve (12) months as is
determined by the Administrator, with such determination in the case of an
ISO being made at the time of grant of the Option and not exceeding three
(3) months) after the date of such termination (but in no event later than
the expiration date of the term of his or her Option), exercise his or her
Option to the extent that such Optionee was entitled to exercise it at the
date of such termination. To the extent that such Optionee was not
entitled to exercise his or her Option at the date of such termination, or
if such Optionee does not exercise such Option to the extent so entitled
within the time specified herein, such Option shall terminate. No
termination shall be deemed to occur and this Subsection 7(d) shall not
apply if (i) the Optionee is a Non- Employee Director who becomes an
Employee or a Consultant, or (ii) the Optionee is an Employee who becomes
a Non-Employee Director or a Consultant, or (iii) the Optionee is a
Consultant who becomes a Non-Employee Director or an Employee.
(e) Exercise in the Event of Disability
Notwithstanding Subsection 7(d) above, in the event of termination
of an Optionee's status as a Director, Employee or Consultant as a result
of his or her total and permanent disability (within the meaning of
Section 22(e)(3) of the Code), such Optionee may, but only within twelve
(12) months from the date of such termination (but in no event later than
the expiration date of the term of such Optionee's Option), exercise his
or her Option to the extent that such Optionee was entitled to exercise it
at the date of such termination. To the extent that such Optionee was not
entitled to exercise such Option at the date of termination, or if such
Optionee does not exercise such Option to the extent so entitled within
the time specified herein, such Option shall terminate.
(f) Exercise in the Event of Death
In the event of the death of an Optionee while he or she was a
Director, Employee or Consultant, or within thirty (30) days following the
termination of such person's status as a Director, Employee or Consultant,
such Optionee's Option may be exercised, at any
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<PAGE>
time within twelve (12) months following the date of death (but in no
event later than the expiration date of the term of such Optionee's
Option) by such Optionee's estate or by a person who acquired the right to
exercise such Optionee's Option by bequest or inheritance, but only to the
extent such Optionee was entitled to exercise the option at the date of
death or, if earlier, the date of termination of such person's status as a
Director, Employee or Consultant. To the extent that such Optionee was not
entitled to exercise his or her Option at the date of death or
termination, as the case may be, or if such Optionee (or another person
referred to above) does not exercise such Option to the extent so entitled
within the time specified herein, such Option shall terminate.
(g) Buyout Provisions
The Administrator may at any time offer to buy out any previously
granted Option for a payment in cash, Shares, or other Options, based on
such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
(h) Nontransferability
Options may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws
of descent or distribution; provided, however, that the Administrator may
in its discretion grant transferable NQSOs pursuant to option agreements
specifying (i) the manner in which such NQSOs are transferable and (ii)
that any such transfer shall be subject to applicable law. Options may be
exercised, sold, pledged, assigned, hypothecated, transferred or disposed
of during the lifetime of the Optionee only by the Optionee or a
transferee permitted by this Subsection 7(h), or, with respect to NQSOs,
by the guardian or legal representative of such Optionee or transferee if
permitted by applicable law.
(i) Conditions Upon Issuance of Shares
Shares shall not be issued pursuant to the exercise of an Option
unless such exercise and the delivery of such Shares shall comply with all
applicable laws, including, without limitation, the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
Each Option may provide that, as a condition to the exercise of such
Option, the Optionee thereof shall deliver to the Administrator at the
time of such exercise (in whole or in part) a written representation that
the Shares being acquired upon such exercise are to be acquired for
investment and not for resale or with a view to the distribution thereof.
The Company may place legends on stock certificates issued under the Plan
as the Administrator deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to, legends
restricting the transfer of such stock.
(j) Adjustments
In the event of a change in the common stock of the Company by
reason of any stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off,
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<PAGE>
combination or exchange of shares or similar event, the number and kind of
Shares which shall be covered by the Plan, and the number and kind of
Shares subject to outstanding Options, along with the option price
attaching to such Shares, may be appropriately adjusted consistent with
such change in a manner to be determined by the Administrator to prevent
substantial dilution or enlargement of the rights granted or available
participants in the Plan; provided, however, in each case, that no
adjustment shall be made which would cause the Plan to violate Section
422(b)(1) of the Code with respect to ISOs or would adversely affect the
status of any Option as "performance-based compensation" under Section
162(m) of the Code.
(k) Change of Control
In the event of a Change of Control of the Company, each Option
granted under the Plan that is still outstanding and not yet vested or
exercisable shall immediately become 100% vested in the Optionee thereof,
as of the first date that the definition of Change of Control has been
fulfilled, and shall be exercisable for the remaining duration of such
Option. Each Option that is exercisable as of the effective date of the
Change of Control will remain exercisable for the remaining duration of
such Option.
8. No Rights as Stockholders; No Right to Continued Service; No Fractional
Shares
No Optionee shall have any rights as a stockholder with respect to any
Shares subject to an Option held by him or her prior to the date of issuance to
him or her of a certificate or certificates for such Shares. Neither the
existence of the Plan, nor any Option held under the Plan shall grant to any
person any right with respect to continued service with the Company or any
Affiliate, nor shall they interfere in any way with the right of the Company or
any Affiliate to terminate such service at any time. No fractional Shares shall
be delivered, nor shall any cash in lieu of fractional shares be paid under the
Plan.
9. Legal Compliance
The Plan and the grant of Options thereunder, and the obligation of the
Company to deliver shares upon exercise of Options, shall be subject to approval
of the Plan by the stockholders of the Company and to all applicable federal,
state or local laws, regulations and rules, and to such approvals of competent
government agencies as may, in the opinion of the Administrator, be required.
10. Amendment and Termination
The Board may amend, terminate or modify the Plan at any time and for any
reason. Amendments require the approval of the Company's stockholders only to
the extent provided by Section 422 of the Code, Rule 16b-3, or any other
applicable law, rule or regulation. No amendment, termination or modification of
the Plan shall alter or amend any rights or obligations under any Option
theretofore granted without the consent of the holder of such Option.
11. Term of Plan
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<PAGE>
Options may be granted pursuant to the Plan until the tenth anniversary of
the date that the Plan is approved by the stockholders of the Company.
12. Withholding
The Company and the Affiliates are authorized to withhold from any payment
relating to the exercise of an Option under the Plan, including from any payroll
or other payment to an Optionee, amounts of withholding and other taxes due in
connection with any transaction involving an Option, and to take such other
action as the Administrator may deem advisable to enable the Company and the
Optionees to satisfy obligations for the payment of withholding taxes and other
tax obligations relating to any Option. This authority shall include authority
to withhold or receive Shares or other property and to make cash payments in
respect thereof in satisfaction of an Optionee's tax obligations.
13. Governing Law
The provisions of the Plan shall be governed by and construed in
accordance with the laws of the State of New York and applicable Federal law.
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