<PAGE> 1
SEC-REG, FSLR 24,031, Reg. 240.14a-101, [REG. 240.14A-101.]
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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
.USTMAN TECHNOLOGIES, INC.
(Name of Registrant as Specified In Its Charter)
N.A.
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
<PAGE> 2
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 3
USTMAN TECHNOLOGIES, INC.
12265 w. Bayaud Avenue, Suite 110
Lakewood, Colorado 80228
-------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF USTMAN TECHNOLOGIES, INC.
Meeting Date: February 24, 1999
-------------
TO THE SHAREHOLDERS OF USTMAN TECHNOLOGIES, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of
USTMAN Technologies, Inc, a California corporation (the "Company"), will be held
at the _________ Hotel, ___________, Denver, Colorado, on February 24, 1999 at
9:00 A.M. local time for the following purposes:
1. To elect five directors to hold office until the next Annual
Meeting and their successors are elected.
2. To consider and vote upon a proposal to approve the Company's 1998
Stock Option Plan.
[3. To consider and vote upon a proposal to amend the Company's
Articles of Incorporation to effect a reverse stock split of all
outstanding shares of the Company's Common Stock.]
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The attached Proxy Statement, which is part of this notice, provides
you with more information.
The Board of Directors has fixed the close of business on January 28,
1999 as the record date for the determination of shareholders entitled to
receive notice of, and to vote at, the Annual Meeting and any adjournment(s) or
postponement(s) thereof. Only shareholders of record at the close of business on
that date will be entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof. WHETHER OR NOT YOU CAN ATTEND, PLEASE FILL IN, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE PROVIDED.
We look forward to seeing you.
By Order of the Board of Directors.
Dan R. Cook
President
February __, 1999
<PAGE> 4
USTMAN TECHNOLOGIES, INC.
12265 W. Bayaud Avenue, Suite 110
Lakewood, Colorado 80228
-----------------
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 24, 1999
-----------------
This Proxy Statement is furnished to the shareholders of USTMAN
Technologies, Inc., a California corporation (the "Company"), in connection with
the solicitation of proxies by and on behalf of the Board of Directors for the
Annual Meeting of Shareholders of the Company to be held on Wednesday, February
24, 1999, at 9:00 a.m. local time, and at any adjournment or postponement
thereof (the "Annual Meeting"). The cost of soliciting proxies will be borne by
the Company. Following the mailing of the proxy materials, solicitation of
proxies may be made by officers and employees of the company, or anyone acting
on their behalf, by mail, telephone, telegram or personal interview, but such
persons will not receive compensation for such services over and above their
regular salaries. This Proxy Statement and the accompanying Notice of Annual
Meeting and Proxy Card are first being mailed to shareholders on or about
February 1, 1999.
As more fully described in this Proxy Statement, the shareholders will
be asked to consider and vote upon (i) the election of five Directors; (ii) a
proposal to approve the Company's 1998 Stock Option Plan; [(iii) a proposal to
amend the Company's Articles of Incorporation to effect a reverse stock split of
all outstanding shares of the Company's Common Stock;] and (iv) such other
business as may properly come before the meeting or any adjournment thereof.
Shareholders of record at the close of business on January 28, 1999 are
entitled to notice of and to vote at the Annual Meeting. On such date, there
were 19,879,043 shares of the Company's Common Stock issued and outstanding. A
majority of the shares entitled to vote, represented in person or by proxy,
constitutes a quorum for the meeting. If a quorum is not present, the Annual
Meeting may be adjourned to a later date at which a quorum is present, and
shares represented by proxies may be voted for such adjournment.
Abstention and broker non-votes are each included in the number of
shares present at the Annual Meeting for purposes of establishing a quorum. The
affirmative vote of the holders of a plurality of the shares of Common Stock
present or represented at the Annual Meeting is required for the election of
Directors (Proposal 1). The vote of a majority of shares of Common Stock
represented and voting on the 1998 Stock Option Plan (assuming such affirmative
votes constitute a majority of the votes required for a quorum of the
shareholders) is required to approve the 1998 Stock Option Plan (Proposal 2).
[The vote of a majority of the outstanding shares entitled to vote is required
to approve the proposed reverse stock split (Proposal 3).] Abstentions and
broker non-
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votes in general will have no effect on the outcome of the voting
with respect to Proposal 2 [and will have the same effect as a vote against
Proposal 3.]
A shareholder may revoke a proxy given with respect to the Annual
Meeting at any time prior to the exercise thereof at the Annual Meeting by
filing with the Secretary of the Company a written revocation or a duly executed
proxy bearing a later date or, if such shareholder is present, indicating his or
her intention to vote in person at the Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of December 31, 1998 of persons (other
than officers or directors of the Company) known to the Company to own more than
5% of the Company's outstanding Common Stock. Unless otherwise indicated in the
footnotes following the table, the persons as to whom the information is given
have sole voting and investment power over the shares shown as beneficially
owned, subject to community property laws where applicable.
<TABLE>
<CAPTION>
Number of Shares Percent of
Name Beneficially Owned Outstanding Shares
<S> <C> <C>
Sagaponack Partners, L.P. 7,344,520(1) 36.9%
170 Columbus Ave., 5th Floor
San Francisco, CA 94133
</TABLE>
(1) Does not include warrants to purchase 2,625,432 shares of Common Stock which
are exercisable at the times and prices, and to the extent, that other options
and warrants of the Company are exercised after May 22, 1997 in order to
maintain Sagaponack Partners, L.P.'s percent ownership of the outstanding Common
Stock of the Company.
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of December 31, 1998 of (i) each
director during the fiscal year ended June 30, 1998, (ii) the chief executive
officer of the Company, and (iii) all directors and executive officers of the
Company as a group. Unless otherwise indicated in the footnotes following the
table, the persons as to whom the information is given have sole voting and
investment power over the shares shown as beneficially owned, subject to
community property laws where applicable.
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<PAGE> 6
<TABLE>
<CAPTION>
Number of Shares Percent of
Name Beneficially Owned Outstanding Shares
<S> <C> <C>
Dan R. Cook 150,000(1) 0.8%
12265 W. Bayaud Ave., #110
Lakewood, CO 80228
Ronald G. Crane 1,101,500(2) 5.6%
12265 W. Bayaud Ave, #110
Lakewood, CO 80228
Donald W. Phillips 0 0.0%
111 W. Jackson Blvd., Ste 1800
Chicago, IL 60604
Barry S. Rosenstein 7,337,853(3) 36.9%
170 Columbus Ave., 5th Floor
San Francisco, CA 94133
Marc A. Weisman 7,337,853(3) 36.9%
645 Fifth Ave., 8th Floor
New York, NY 10022
All officers and directors
as a group (8 persons) 9,401,214(4) 45.3%
</TABLE>
(1) Includes options granted by the Company to purchase up to 150,000 shares of
Common Stock which are exercisable within 60 days.
(2) Includes options granted by the Company to purchase up to 700,000 shares of
Common Stock which are exercisable within 60 days.
(3) Includes 7,344,520 shares of Common Stock owned by Sagaponack Partners,
L.P. which are indirectly beneficially owned by Messrs. Rosenstein and
Weisman as managing members of RSP Capital, L.L.C. which is the general
partner of Sagaponack Partners, L.P. Does not include 2,625,432 warrants to
purchase shares of Common Stock which are exercisable at the times and
prices, and to the extent, that other options and warrants of the Company
are exercised after May 22, 1997 in order to maintain Sagaponack Partners,
L.P.'s percent ownership of the outstanding Common Stock of the Company.
(4) Includes options granted by the Company to purchase an aggregate of 880,000
shares of Common Stock which are exercisable within 60 days. In addition,
see note (3) above.
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<PAGE> 7
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Board of Directors presently consists of five directors.
At the Annual Meeting, five directors will be elected, each to hold office until
the next Annual Meeting and until his successor is elected.
The California General Corporation Law, as applicable to the Company,
provides that a shareholder may cumulate votes if a shareholder gives notice,
prior to the voting, of an intention to cumulate votes. If such a notice is
given, every shareholder may cumulate votes. Under cumulative voting, a
shareholder is entitled to a number of votes for election of directors equal to
the number of his or her shares times the number of directors to be elected;
these votes could be cast all for one nominee, or spread among more than one, as
the shareholder wishes. If cumulative voting is elected, the enclosed form of
proxy gives the proxyholders discretion to cumulate votes so that they can elect
the maximum possible number of nominees identified below. Assuming the presence
of a quorum, the candidates receiving the highest number of affirmative votes of
the shares entitled to vote will be elected, and abstentions will have no legal
effect.
Any shareholder executing the enclosed form of proxy may withhold
authority to vote for any one or more nominees by so indicating in the manner
described in the form of proxy. The total number of votes which such shareholder
is entitled to cast will not be affected by such action. However, the
proxyholders, by cumulating the votes of other shareholders, could offset the
effect of the withheld authority.
It is intended that the proxies received by management will be voted
FOR the election of the nominees for directors described below, unless authority
to do so is withheld. The Board of Directors anticipates that each of the
nominees for director will serve as a director if elected. However, if any
person nominated by the Board of Directors is unable to accept election, the
proxies will be voted for the election of such other person or persons as the
Board of Directors may recommend.
NOMINEES FOR DIRECTOR
The following information as of January __, 1999 is provided about the
five nominees for election as directors of the Company.
DAN R. COOK has served as a Director of the Company since May 1997. Mr.
Cook was appointed President of the Company in May 1997. Mr. Cook served as
Chief Operating Officer of USTMAN Industries from 1992 until it was merged into
the Company in May 1997, and additionally served as its President from January
1994 until its merger into the Company. Mr. Cook is also a certified public
accountant. Mr. Cook is 48.
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<PAGE> 8
RONALD G. CRANE has served as a Director of the Company since 1973.
Since September 1997, Mr. Crane has acted as an independent consultant for
various companies. From January 1993 until May 1997, Mr. Crane served as
president of the Company. Mr. Crane was a Director of Toxguard Systems, Inc., a
subsidiary of the Company which filed for bankruptcy in 1997. Mr. Crane is 52.
DONALD W. PHILLIPS has served as a Director of the Company since May
1997. Mr. Phillips is the President and CEO of Forstmam-Leff International, Inc.
a Refco Group, Ltd. company. From 1990 to 1997, Mr. Phillips was Chairman of
Equity Institutional Investors. Mr. Phillips is a Director of several
manufacturing and investment companies. Mr. Phillips is 50.
BARRY S. ROSENSTEIN has served as a Director of the Company since May
1997. Mr. Rosenstein is a co-founder and Managing Partner of Sagaponack
Partners, L.P. and Sagaponack International Partners, L.P. Prior thereto, Mr.
Rosenstein founded and for the four years prior headed Genesis Merchant Group
Securities' Investment and Merchant Banking Group. Prior to his association with
Genesis, Mr. Rosenstein formed and acted as managing partner of Reatta Partners,
a transaction-specific investment partnership. Prior to Reatta, Mr. Rosenstein
was a principal in charge of corporate takeovers with Plaza Securities
Corporation. Mr. Rosenstein began his career as an investment banker primarily
specializing in mergers and acquisitions with Merrill Lynch in New York. He
received his M.B.A. from the University of Pennsylvania's Wharton School of
Business and his B.S. from Lehigh University. Mr. Rosenstein is also a certified
public accountant. Mr. Rosenstein also serves on the Board of Directors of
Waterworks; Tuneup Masters, Inc.; TestAmerica, Inc.; and Marisa Christina, Inc.
Mr. Rosenstein is 39.
MARC A. WEISMAN has served as a Director of the Company since May 1997.
Mr. Weisman is a co-founder and Managing Partner of Sagaponack Partners, L.P.
and Sagaponack International Partners, L.P. From January 1996 to August 1996,
Mr. Weisman served as Director in the Principal Transactions Group at CS First
Boston where he ran the High Yield Real Estate Finance Division. From 1988 to
1996, Mr. Weisman was Chief Financial Officer and Executive Vice President of
the Adco Group, a privately held real estate and financial services company. Mr.
Weisman is currently a director of Product Resources, Inc.; Tuneup Masters,
Inc.; TestAmerica, Inc.; and Superior Bank FSB. Mr. Weisman is 45.
ATTENDANCE AT BOARD MEETINGS
During the fiscal year ended June 30, 1998, the Company's Board of
Directors held seven meetings. Each current director attended at least 75% of
the Board meetings that he was eligible to attend. The Company has no separate
Audit, Compensation or Nominating Committee.
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<PAGE> 9
DIRECTORS' COMPENSATION
On May 22, 1997 the Company became obligated to pay $25,000 per quarter
to Sagaponack Partners, L.P. as compensation for the Board of Director fees of
Barry Rosenstein and Marc Weisman.
On May 22, 1997 the Company began to pay Donald W. Phillips, then a
Director of the Company, Board of Directors fees of $1,667, along with
reasonable expenses, for physical attendance per Board of Directors meeting,
plus $5,000 annually. In addition, the Company has represented that it will
issue to Mr. Phillips shares of common stock of the Company equal to one tenth
of one percent of the outstanding stock of the Company at the conclusion of each
year of service on the Board of Directors.
On May 22, 1997, the Company began to pay Ronald G. Crane Board of
Directors fees of $1,667, along with reasonable expenses, for physical
attendance per Board of Directors meeting, plus $5,000 annually. In addition,
the Company has represented that it will issue to Mr. Crane shares of common
stock of the Company equal to one tenth of one percent of the outstanding stock
of the Company at the conclusion of each year of service on the Board of
Directors.
OBLIGATION TO NOMINATE CERTAIN DIRECTORS
In connection with a $7,000,000 financing agreement in May 1997, the
Company entered into a Company Agreement with Sagaponack Partners, L.P.
("Sagaponack"), and its foreign affiliate, Sagaponack International Partners,
L.P. (collectively, the "Investors"), pursuant to which the Company agreed that
the Board of Directors will at all times consist of five members, and that the
Company will nominate to become members of the Board two persons designated by
the Investors and one person selected from a list of persons. The Company also
agreed to nominate Dan R. Cook as a member of the Board of Directors. In
addition, pursuant to a Shareholders Agreement entered into among the Investors
and certain shareholders of the Company, including Dan R. Cook and Ronald G.
Crane, those shareholders are obligated to vote their shares during any election
of directors of the Company for the two nominees of the Investors and for the
person nominated from the list of persons specified in the Company Agreement,
unless Investors have sufficient votes to cause the election of such persons.
Such obligation shall terminate at such time as the aggregate number of shares
of Common Stock owned by an Investor or under the direct or indirect control of
an Investor is less than 10% of the total outstanding number of shares of Common
Stock. The persons nominated pursuant to the above procedure are Barry
Rosenstein, Marc Weisman and Don Phillips.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers and directors, and persons who are
beneficial owners of more than 10% of a
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<PAGE> 10
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). Officers, directors and beneficial owners of greater than 10% are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company, and written representations
that no other reports were required during the fiscal year ended June 30, 1998,
all Section 16(a) filing requirements applicable to such persons were satisfied.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In consideration of the purchase by Sagaponack of senior subordinated
notes in May 1997, the Company issued to Sagaponack 7,304,520 shares of Common
Stock, which then represented 40% of the issued and outstanding shares of Common
Stock immediately after the issuance of such shares. In addition, Warrants were
issued to Sagaponack to purchase shares of Common Stock in an amount sufficient,
upon exercise of any outstanding options and warrants, for Sagaponack to
maintain its percentage ownership of the Common Stock. Such warrants are at the
same price and at the same terms as the options and warrants exercised by third
parties. As described previously, the Company also agreed nominate certain
persons designated by Sagaponack as directors of the Company and agreed to pay
$25,000 each quarter to Sagaponack as compensation for the services of Messrs.
Rosenstein and Weisman as directors of the Company.
Sagaponack has agreed to exchange approximately $7,475,000 of principal
and interest for Series A Preferred Stock of the Company with a face amount
equal to $7,475,000 but with an aggregate allocation amount (the "Allocation
Amount") for the purposes of liquidation priority and dividends initially equal
to $15,000,000. The Series A Preferred Stock will bear an annual 8% cumulative
dividend if and when declared by the Board of Directors. The Allocation Amount
will increase by the amount of any dividends not declared for payment by the
Company. The Series A Preferred Stock has no mandatory redemption or voting
rights and is not convertible into Common Stock. Pursuant to the Debt
Conversion, certain rights granted to Sagaponack in the original financing
agreement will be terminated, relating to the issuance of additional shares of
Common Stock and/or additional warrants to Sagaponack under certain
circumstances. Except as described above, the terms of the Series A Preferred
Stock will be substantially similar to Sagaponack's rights with respect to the
indebtedness being exchanged by Sagaponack.
PROPOSAL 2
APPROVAL OF 1998 STOCK OPTION PLAN
The Board of Directors of the Company has previously adopted, and has
recommended that the shareholders approve, the 1998 Stock Option Plan (the
"Plan"), pursuant to which officers, directors, employees and consultants of the
Company would be eligible to receive options to purchase Common Stock as
described below. The following is a description of the material features of the
Plan, a complete copy of which is attached hereto as Appendix I. The description
which follows is qualified in its entirety by reference to the exact language of
Plan.
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<PAGE> 11
GENERAL
The purpose of the Plan is to enable the Company to encourage its
employees, directors and consultants to remain employed by or associated with
the Company and to put forth maximum efforts for the success of the Company by
providing for or increasing the proprietary interests of such persons in the
Company. Every director, employee and consultant of the Company and its
subsidiaries is eligible to be considered for the grant of options under the
Plan.
The Plan will be administered by the Compensation Committee, if any, or
by the entire Board of Directors, which will have full and final authority to
select the individuals to receive options and to grant such options as well as a
wide degree of flexibility in determining the terms and conditions of options.
The Board of Directors of the Company may amend or terminate the Plan at any
time and in any manner, except that shareholder approval is required for any
amendment that would (a) materially increase the benefits accruing to
participants under the Plan, or (b) increase the aggregate number of shares of
Common Stock as to which options may be granted under the Plan, or (c)
materially modify the requirements as to eligibility for participation in the
Plan. However, no amendment, modification, suspension or termination may deprive
the offeree of an option previously granted under the Plan of any rights
thereunder without his or her consent.
Options under the Plan shall consist of options to purchase shares of
the Company's $0.00 par value per share common stock ("Common Stock"). The
options may constitute either "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code ("Incentive Stock Options") or "non
qualified stock options ("Non-Qualified Stock Options"). Each option shall be
evidenced by a written Option Agreement between the Company and the optionee,
which shall state the number of shares to which the Option relates. The Option
Agreement shall specifically identify the portion, if any, of the option that
constitutes an Incentive Stock Option and the portion, if any, of the option
that constitutes a Non-Qualified Stock Option.
The option price shall not be less than 100% of the fair market value
per share of Common Stock on the date of the grant of the option. An Incentive
Stock Option granted under the Plan to a person owning more than ten percent
(10%) of the total combined voting power of the Common Stock shall be
exercisable at a price of not less than one hundred ten percent (110%) of the
fair market value per share of Common Stock on the date of the grant of the
option. "Fair Market Value" as of a particular date shall mean the last sale
price of the Company's Common Stock as reported in a national securities
exchange or the NASDAQ National Market System or, if last sale reporting
quotation is not available for the Company's Common Stock , the average of the
bid and asked prices of the Company's Common Stock as reported by NASDAQ or on
the OTC Bulletin Board, or if none, National Quotation Bureau Inc.'s "Pink
Sheets" or, if such quotations are unavailable, the value determined by the
Compensation Committee or Board of Directors in accordance with their discretion
in making a bona fide, good faith determination of fair market value. Fair
Market Value shall be determined without regard to any restriction other than a
restriction which, by its terms, will never lapse.
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<PAGE> 12
The option price shall be paid in cash, in shares of Common Stock
having a Fair Market Value as determined by the Board of Directors equal to such
option price or in a combination of cash and shares of the Common Stock, and
(subject to approval of the Board of Directors) may be effected in whole or in
part (A) with monies received from the Company at the time of exercise as a
compensatory cash payment, or (B) with monies borrowed from the Company pursuant
to repayment terms and conditions as shall be determined from time to time by
the Compensation Committee, in its discretion, separately with respect to each
exercise of options and each optionee, provided, however, that each such method
and time for payment and each such borrowing and terms and conditions of
repayment shall be permitted by and be in compliance with applicable law. The
Board of Directors shall have the sole and absolute discretion to determine
whether or not property other than cash or shares of Common Stock may be used to
purchase the shares of Common Stock hereunder and, if so, to determine the value
of the property received.
An option granted under the Plan to an optionee will generally include
a provision conditioning or accelerating the receipt of benefits upon the
occurrence of specified events, such as a change of control of the Company or a
dissolution, liquidation, sale of substantially all of the property and assets
of the Company or other significant corporate transaction.
The maximum number of shares of Common Stock that may be issued
pursuant to the exercise of options granted under the Plan is 2,000,000. The
Plan also contains customary antidilution provisions; provided, however, that no
adjustment will be made pursuant to such provisions to the extent such
adjustment would cause incentive stock options (as discussed below under
"Certain Income Tax Consequences") issued or issuable under the Plan to be
treated as other than incentive stock options.
Options may not be granted under the Plan on or after the tenth
anniversary of the adoption of the Plan. Incentive Stock Options granted to a
person owning more than ten percent (10%) of the combined voting power of the
Common Stock shall be for no more than five years. Although any option that was
duly granted prior to such date may thereafter be exercised or settled in
accordance with its terms, no shares of Common Stock may be issued pursuant to
any option on or after the twentieth anniversary of the adoption of the Plan
SECTION 16(b) OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), directors, executive officers and 10% shareholders
of the Company are generally liable to the Company for repayment of any profits
realized from any non-exempt purchase and sale of Common Stock occurring within
a six-month period. Rule 16b-3 promulgated under the Exchange Act provides an
exemption from Section 16(b) liability for certain transactions by an officer or
director pursuant to an employee benefit plan that complies with such Rule. The
Plan is designed to comply with Rule 16b-3.
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<PAGE> 13
CERTAIN INCOME TAX CONSEQUENCES
The following is a brief description of the federal income tax
treatment that will generally apply to grants made under the Plan, based on
federal income tax laws in effect on the date hereof. The exact federal income
tax treatment of options will depend on the specific nature of any such option.
Pursuant to the Plan, participants that are employees may be granted
options that are intended to qualify as incentive stock options ("ISOs") under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
Generally, the optionee is not taxed, and the Company is not entitled to a
deduction, on the grant or exercise of an ISO. However, if the optionee sells
the shares acquired upon the exercise of an ISO ("ISO Shares") at any time
within (i) one year after the transfer of ISO Shares to the optionee pursuant to
the exercise of the ISO or (ii) two years from the date of grant of the ISO,
then the optionee will recognize ordinary income in an amount equal to the
excess, if any, of the lesser of the sale price or the fair market value of the
ISO Shares on the date of exercise, over the exercise price of the ISO. The
Company will generally be entitled to a deduction equal to the amount of
ordinary income recognized by the optionee. If the optionee sells the ISO Shares
at any time after the optionee has held the ISO Shares for at least (i) one year
after the date of transfer of the ISO Shares to the optionee pursuant to the
exercise of the ISO and (ii) two years from the date of grant of the ISO, then
the optionee will recognize capital gain or loss equal to the difference between
the sales price and the exercise price of such ISO, and the Company will not be
entitled to any deduction.
The amount by which the fair market value of the ISO Shares received
upon exercise of an ISO exceeds the exercise price will be included as a
positive adjustment in the calculation of an optionee's "alternative minimum
taxable income" ("AMTI") in the year of exercise. The "alternative minimum tax"
imposed on individual taxpayers is generally equal to the amount by which 28%
(26% of AMTI below certain amounts) of the individuals's AMTI (reduced by
certain exemption amounts) exceeds his or her regular income tax liability for
the year.
The grant of an option or other similar right to acquire stock that
does not qualify for treatment as an ISO (a "non-qualified stock option") is
generally not a taxable event for the optionee. Upon exercise of the option, the
optionee will generally recognize ordinary income in an amount equal to the
excess of the fair market value of the stock acquired upon exercise (determined
as of the date of exercise) over the exercise price of such option, and the
Company will be entitled to a deduction equal to such amount. Nonemployees may
only be awarded non-qualified stock options.
If an optionee is a director, officer or shareholder subject to Section
16 of the Exchange Act (an "Insider") and exercises an option within six months
of the date of grant, the timing of the recognition of any ordinary income
should be deferred until (and the amount of ordinary income should be determined
based on the fair market value (or sales price in the case of a disposition) of
the shares of Common Stock upon) the earlier of the following two dates (the
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<PAGE> 14
"16(b) Date"): (i) six months after the date of grant or (ii) a disposition of
the shares of Common Stock, unless the Insider makes an election under Section
83(b) of the Code (an "83(b) Election") within 30 days after exercise to
recognize ordinary income based on the value of the Common Stock on the date of
exercise. In addition, special rules apply to an Insider who exercises an option
having an exercise price greater than the fair market value of the underlying
shares on the date of exercise.
The Compensation Committee may require the optionee to pay to the
company or make arrangements satisfactory to the Compensation Committee
regarding the payment of any federal, state or local taxes of any kind required
by law to be withheld upon the exercise of the option. Furthermore, the Company
shall have the right, to the extent permitted or required by law, to deduct
federal, state and local taxes of any kind required by law to be withheld upon
the exercise of the option from any payment of any kind otherwise due to the
optionee.
Special rules will apply in cases where an optionee pays the exercise
price or applicable withholding tax obligations under the Plan by delivering
previously owned shares of Common Stock or by reducing the amount of shares
otherwise issuable pursuant to the award. The surrender or withholding of such
shares will in certain circumstances result in the recognition of income with
respect to such shares or a carryover basis in the shares acquired.
The terms of the option agreements pursuant to which specific grants
are made under the Plan may provide for accelerated exercise of an option in
connection with a change in ownership or control of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF
THE PLAN.
[PROPOSAL 3
APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT
The Board of Directors has unanimously adopted a resolution declaring
the advisability of, and submits to the shareholders for approval, a proposal
(the "Proposal") to authorize the Board of Directors to take such actions as the
Board may deem necessary or appropriate to effect a reverse stock split (the
"Reverse Split") of all outstanding shares of the Company's Common Stock at an
exchange rate of one share of new common stock ("New Common Stock") for three or
four shares of the existing Common Stock, as the Board may determine. The number
of authorized shares of Common Stock (40,000,000) would not be affected by the
Reverse Split. The Proposal may be abandoned by the Board of Directors at any
time before or after the Annual Meeting and prior to the date and time at which
the Reverse Split becomes effective (the "Effective Date") if for any reason the
Board of Directors deems it advisable to abandon the Proposal.
- 11 -
<PAGE> 15
If the proposed amendment to the Company's Articles of Incorporation is
approved by the shareholders at the Annual Meeting, such amendment will become
effective when a Certificate of Amendment of the Company's Articles of
Incorporation is filed of record with the Secretary of State of the State of
California. It is expected that such filing will take place promptly after the
Annual Meeting, provided that Nasdaq has been provided at least ten days'
advance written notice of the record date for the Reverse Split in accordance
with Rule 10b-17 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Without any further action on the part of the Company or the
shareholders, the shares of Common Stock held by shareholders of record will be
converted on the Effective Date into a number of whole shares of New Common
Stock equal to the number of shares owned immediately prior to the Reverse Split
divided by the Split Number and/or the right to receive cash for the Fair Value
of any fractional shares.
The effect of the Reverse Split on the holders of Common Stock will be
that the total number of shares held by each shareholder will be automatically
converted on the Effective Date into the number of whole shares of New Common
Stock equal to the number of shares owned immediately prior to the Reverse Split
divided by three or four, as determined by the Board of Directors (the "Split
Number"), and into cash based on the Fair Value, as defined below, in lieu of
any fractional shares.
If the Proposal is adopted and implemented, each shareholder's
percentage ownership interest in the Company and proportional voting power will
remain unchanged, except for minor differences resulting from the purchase of
fractional shares. The rights and privileges of the holders of the common Stock
will be substantially unaffected by the adoption and implementation of the
Proposal.
No fractional shares will be issued as a result of the Reverse Split.
In lieu of receiving fractional shares, shareholders who hold a number of shares
not evenly divisible by the Split Number immediately prior to the Reverse Split
will be entitled to receive an amount in cash equal to the "Fair Value" times
the number of shares of Common Stock in excess of the highest number of shares
held at such time which is evenly divisible by the Split Number (the "Remaining
Shares"). The "Fair Value" for each Remaining Share will be the average of the
daily closing bid prices per share of the Common Stock on the Nasdaq SmallCap
Market for the ten (10) business days preceding the Effective Date.
Any shareholder owning fewer shares of Common Stock than the Split
Number who desires to retain an equity interest in the Company after the
Effective Date may do so by purchasing sufficient additional shares of the
Company's outstanding Common Stock in the open market to increase his or her
record ownership to a number of shares equal to or greater than the Split number
prior to 5:00 p.m., Pacific Standard Time, on the Effective Date.
As soon as practicable after the Effective Date, the Company will
request all shareholders to return their stock certificates representing issued
shares of Common Stock outstanding on the Effective Date ("Old Certificates") in
exchange for certificates representing the number of whole
- 12 -
<PAGE> 16
shares of New Common Stock into which the shares of Common Stock have been
converted ("New Certificates") as a result of the Reverse Split and/or cash
payments in lieu of fractional shares. Each shareholder will receive a letter of
transmittal from the Company's transfer agent, U.S. Stock Transfer Corporation
(the "Transfer Agent"), containing instructions on how to exchange certificates.
Shareholders should not submit their Old Certificates to the Transfer Agent
until they receive these instructions. In order to receive New Certificates
and/or cash in lieu of fractional shares, shareholders must surrender their Old
Certificates pursuant to the Transfer Agent's instructions, together with the
properly executed and completed letter of transmittal and such evidence of
ownership of such shares as the Company may require. Shareholders will not have
to pay a transfer fee or other fee in connection with the exchange of
certificates or in connection with the payment of cash in lieu of fractional
shares. These costs will be borne by the Company.
There are no appraisal rights in connection with the Reverse Split.
After the Effective Date, each shareholder of record who owns a number
of shares of Common Stock not evenly divisible by the Split Number will have
only the right, with respect to any fractional share, to receive cash based upon
the Fair Value in lieu of receiving a fractional share. The interest in the
Company of any shareholder entitled only to a fractional share will thereby be
terminated, and a shareholder will have no right to vote or any other rights as
a shareholder with respect to any fractional share.
The Company has authorized capital stock of 71 million shares,
consisting of 40 million shares of Common Stock, 15 million shares of Class A
Voting Common Stock, 15 million shares of Class B Non-Voting Common Stock, and 1
million shares of Preferred Stock. The authorized capital stock will not be
affected as a result of this Proposal. As of December 31, 1998, the number of
issued and outstanding shares of Common Stock was 19,879,043, and there were no
other shares of capital stock of the Company outstanding. The Company estimates
that the aggregate number of shares of New Common Stock that will be issued and
outstanding following the Reverse Split will be approximately 4,969,000 in the
event of a one for four split and 6,626,000 in the event of a one for three
split. There will be an estimated 33,374,000 authorized but unissued shares of
New Common Stock following the Reverse Split in the event of a one for three
split or 35,031,000 authorized but unissued shares of New Common Stock in the
event of a one for four split.
The outstanding options and warrants to purchase shares of the
Company's Common Stock provide for a proportionate adjustment in the event of a
change in capitalization, such as a reverse split.
The purpose of the Reverse Split is to increase the price per share of
the Company's Common Stock so that the Company will satisfy a continued listing
requirement for the Nasdaq SmallCap Market. A delisting hearing will be held by
Nasdaq on February 19, 1999 to determine whether the Company's Common Stock
should be delisted for failure to comply with such
- 13 -
<PAGE> 17
standards. One continued listing requirement is that the price per share of the
listed security must be at least $1.00 per share. As of January __, 1999, the
closing bid price of the Company's Common Stock as reported on Nasdaq was $___
per share. There can, however, be no assurance that the foregoing effects will
occur, or that the market price of New Common Stock immediately after the
proposed Reverse Split will be maintained for any period of time. The Board will
not effect the Reverse Split if the Nasdaq hearing panel determines to delist
the Common Stock even if the Reverse Split is effected. As of January __, 1999,
the Company also did not satisfy Nasdaq's continued listing requirement that a
company satisfy at least one of Nasdaq's profit, market capitalization, and net
tangible assets tests. The Company is seeking to satisfy the $2 million net
tangible assets test, but there can be no assurance that such test will be
satisfied or that, if satisfied, the Nasdaq hearing panel will nonetheless
decide to delist the Company's Common Stock due to concerns as to the Company's
ongoing ability to satisfy Nasdaq's continued listing standards.
The Common Stock is currently registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as a
result, the Company is subject to the periodic reporting and other requirements
of the Exchange Act. The proposed Reverse Split will not affect the registration
of the Common Stock under the Exchange Act.
If approved, the Reverse Split will result in some shareholders owning
"odd lots" of less than 100 shares of New Common Stock. Brokerage commissions
and other costs of transactions in odd lots are generally higher than the costs
of transactions in "round lots" of even multiples of 100 shares.
The number of holders of record of Common Stock as of January __, 1999
was approximately 400. The Company believes that the proposed Reverse Split will
not affect a material reduction in the number of shareholders of the Company
since few shareholders own a number of shares fewer than the Split Number.
THERE CAN BE NO ASSURANCE THAT THE MARKET PRICE OF THE COMMON STOCK
AFTER THE PROPOSED REVERSE SPLIT WILL BE EQUAL TO THE MARKET PRICE BEFORE THE
PROPOSED REVERSE SPLIT MULTIPLIED BY THE SPLIT NUMBER, OR THAT THE PRICE
FOLLOWING THE REVERSE SPLIT WILL EITHER EXCEED OR REMAIN IN EXCESS OF THE
CURRENT MARKET PRICE.
The following description of federal income tax consequences is based
on the Internal Revenue Code of 1986, as amended (the "Code"), the applicable
Treasury Regulations promulgated thereunder, judicial authority and current
administrative rulings and practices as in effect on the date of this Proxy
Statement. This discussion is for general information only and does not discuss
consequences which may apply to special classes of taxpayers (e.g., non-resident
aliens, broker-dealers, or insurance companies). Shareholders are urged to
consult their own tax advisors to determine the particular consequences to them.
- 14 -
<PAGE> 18
The exchange of shares of Common Stock for shares of New Common Stock
will not result in recognition of gain or loss (except in the case of cash
received for fractional shares as described below). The holding period for the
shares of New Common Stock will include the shareholder's holding period for the
shares of Common Stock exchanged therefor, provided that the shares of Common
Stock were held as a capital asset. The adjusted basis of the shares of New
Common Stock will be the same as the adjusted basis of the shares of Common
Stock exchanged therefor, reduced by the basis allocable to the receipt of cash
in lieu of fractional shares described below.
A shareholder who receives cash in lieu of fractional shares will be
treated as if the Company had issued fractional shares to him or her and then
immediately redeemed such shares for cash. Such shareholder should generally
recognize gain or loss, as the case may be, measured by the difference between
the amount of cash received and the basis of such shareholder's Common Stock
allocable to the fractional shares, had they actually been issued. Such gain or
loss will generally be a capital gain or loss if such shareholder's Common Stock
was held as a capital asset, and any such capital gain or loss will generally be
a long-term capital gain or loss to the extent such shareholder's holding period
for this Common Stock exceeds twelve months.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE REVERSE
SPLIT.]
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning compensation
provided to each officer or employee whose total annual salary and bonus
exceeding $100,000.00.
<TABLE>
<CAPTION>
NAME AND FISCAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY COMPENSATION
<S> <C> <C> <C>
Dan R. Cook(1) 1998 $130,000
President and CEO 1997
1995
Ronald G. Crane(2) 1998 47,500
Former CEO 1997 59,319(3)
1996 75,000
</TABLE>
- 15 -
<PAGE> 19
(1) MR. COOK DID NOT BECOME AN OFFICER OR EMPLOYEE OF THE COMPANY UNTIL MAY
1997. MR. COOK DID NOT RECEIVE OR EXERCISE ANY OPTIONS TO PURCHASE COMMON STOCK
DURING THE FISCAL YEAR ENDED JUNE 30, 1998. MR. COOK DID NOT RECEIVE ANY
LONG-TERM INCENTIVE AWARD DURING THE FISCAL YEAR ENDED JUNE 30, 1998. MR. COOK
RECEIVED NO OTHER COMPENSATION DURING THE FISCAL YEAR ENDED JUNE 30, 1998.
(2) MR. CRANE RESIGNED AS CEO ON NOVEMBER 26, 1997. MR. CRANE DID NOT RECEIVE
ANY BONUS OR OTHER ANNUAL COMPENSATION BESIDES HIS SALARY DURING THE FISCAL YEAR
ENDED JUNE 30, 1998. MR. CRANE DID NOT RECEIVE OR EXERCISE ANY OPTIONS TO
PURCHASE COMMON STOCK DURING THE FISCAL YEAR ENDED JUNE 30, 1998. IN ADDITION,
MR. CRANE DID NOT RECEIVE ANY LONG-TERM INCENTIVE PLAN AWARD DURING THE FISCAL
YEAR ENDED JUNE 30, 1998.
(3) THE COMPANY CHANGED ITS FISCAL YEAR IN JULY 1997 TO END JUNE 30. THE AMOUNT
PRESENTED IS FOR THE NINE-MONTH PERIOD OCTOBER 1, 1996 TO JUNE 30, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information concerning grants of options by the Company
to the Named Executive Officers during the fiscal year ended June 30, 1998:
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE EXPIRATION DATE
NAME GRANTED FISCAL YEAR PRICE
<S> <C> <C> <C> <C>
Dan R. Cook 600,000 55% $1.00 4/30/01 -
4/30/04 (1)
</TABLE>
(1) The options vest as to 150,000 shares on each of April 30, 1998, 1999, 2000,
and 2001 and expire three years from vesting.
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR AND YEAR-END OPTION VALUE
There were no options exercised during the fiscal year ended June 30,
1998 and all options held by Named Executive Officers at June 30, 1998 had a
value of $____.
INDEPENDENT ACCOUNTANTS
Ernst and Young LLP has audited the Company's financial statements for
the fiscal year ended June 30, 1998. A representative of Ernst and Young LLP is
expected to be present at the Annual Meeting to make a statement if such person
so desires and to be available to respond to appropriate questions that may be
asked by shareholders. The selection of independent accountants to audit the
Company's financial statements for the current fiscal year will be made in the
second half of the fiscal year after an evaluation of the audit fee proposal.
- 16 -
<PAGE> 20
OTHER MATTERS
Management does not know of any other matters to be presented at the
Annual Meeting. However, if any other matters shall properly come before the
meeting, it is the intention of the persons named in the proxy to vote it in
accordance with their judgment.
PROPOSALS OF SHAREHOLDERS FOR 1999 ANNUAL MEETING
All proposals of shareholders intended to be presented at the
Company's 1999 Annual Meeting of Shareholders must be received by the Company at
its executive offices no later than September 30, 1999 in order to be considered
for inclusion in the proxy statement and form of proxy relating to that meeting.
REQUESTS FOR FORM 10-KSB
The Company will provide without charge, at the written request of any
beneficial owner of shares entitled to vote at the Annual Meeting of
Shareholders, a copy (without exhibits) of the Company's Annual Report on Form
10-KSB for the fiscal year ended June 30, 1998, as filed with the Securities and
Exchange Commission. Requests should be made to the President, USTMAN
Technologies, Inc., 12265 W. Bayaud Avenue, Suite 110, Lakewood, Colorado 80228.
BY ORDER OF THE BOARD OF DIRECTORS
/s/
-----------------------------------
DAN R. COOK, President and CEO
January __, 1999
- 17 -
<PAGE> 21
APPENDIX A
USTMAN TECHNOLOGIES, INC.
1998 STOCK OPTION PLAN
1. Purpose, Restrictions on Amount Available Under the Plan. The USTMAN
Technologies, Inc. 1998 Stock Option Plan ("the Plan") is intended to encourage
stock ownership by employees, consultants and directors of USTMAN Technologies,
Inc. (the "Corporation"), its divisions and Subsidiary Corporations, so that
they may acquire or increase their proprietary interest in the Corporation, and
to encourage such employees, directors, and consultants to remain in their
employ of or associated with the Corporation and to put forth maximum efforts
for the success of the Corporation and its business. It is further intended that
options granted by the Committee pursuant to Section 6 of this Plan shall
constitute "incentive stock options" ("Incentive Stock Options") within the
meaning of Section 422 of the Internal Revenue Code, and the regulations issued
thereunder, and options granted by the Committee pursuant to Section 7 of this
Plan shall constitute "non-qualified stock options" ("Non-qualified Stock
Options").
2. Definitions. As used in this Plan, the following words and phrases
shall have the meanings indicated.
(a) "Disability" shall mean an Optionee's inability to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or that
has lasted or can be expected to last for a continuous period of not less than
12 months.
(b) "Employer Corporation" is the entity which employs the
person granted options under this Plan.
(c) "Fair Market Value" per share as of a particular date
shall mean the last sale price of the Corporation's Common Stock as reported in
a national securities exchange or the NASDAQ National Market System or, if last
sale reporting quotation is not available for the Corporation's Common Stock ,
the average if the bid and asked prices of the Corporation's Common Stock as
reported by NASDAQ or on the OTC Bulletin Board, or if none, National Quotation
Bureau Inc.'s "Pink Sheets" or, if such quotations are unavailable, the value
determined by the Committee (as hereinafter defined) in accordance with their
discretion in making a bona fide, good faith determination of fair market value.
Fair Market Value shall be determined without regard to any restriction other
than a restriction which, by its terms, will never lapse.
(d) "Internal Revenue Code" shall mean the United States
Internal Revenue Code of 1986, as amended from time to time (codified at Title
26 of the United States Code), and any successor legislation.
(e) "Parent Corporation" shall mean any corporation (other
than the Employer Corporation) in an unbroken chain of corporations ending with
the Employer Corporation if, at the time of granting an Option, each of the
corporations other than the Employer Corporations own stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
(f) "Subsidiary Corporation" shall mean any corporation (other
than the Employer Corporation) in an unbroken chain beginning with the Employer
Corporation if, any the time of granting an Option, each of the corporations
other than the last corporation in the unbroken chain owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
3. Administration.
(a) The Plan shall be administered by the Compensation
Committee (the "Committee"), consisting of not less than two members of the
Board of Directors of the Corporation (the "Board" or alternatively, in the
absence of a designated and qualified committee, the entire Board shall serve as
the Committee.
- 18 -
<PAGE> 22
(b) The Committee shall have the authority in its discretion,
subject to and not inconsistent with the express provisions of the Plan, to
administer the Plan and to exercise all the powers and authorities either
specifically granted to it under the Plan or necessary or advisable in the
administration of the Plan, including (without limitation): the authority to
grant Options; to determine which Options shall constitute Incentive Stock
Options and which Options shall constitute Non-qualified Stock Options; to
determine the purchase price of the shares of Common Stock covered by each
Option (the "Option Price") to determine the persons to whom, and the time or
times at which, Options shall be granted, to determine the number of shares to
be covered by each Option; to determine Fair Market Value per share; to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, to determine the terms and provisions of the Option
Agreements (which need not be identical) entered into in connection with Options
granted under the Plan, and to make all other determinations deemed necessary or
advisable for the administration of the Plan. The Committee may delegate to one
or more of its members or to one or more agents such as administrative duties as
it may deem advisable, and the Committee or any person to whom it has delegated
duties as aforesaid may employ one or more persons to render advice with respect
to any responsibility the Committee or such person may have under the Plan.
(c) The Board shall fill all vacancies, however caused, in the
Committee. The Board may from time to time appoint additional members to the
Committee, and may at any time remove one or more Committee members and
substitute others. One member of the Committee shall be selected by the Board as
chairman. The Committee shall hold its meetings at such times and places as it
shall deem advisable. All determinations of the Committee shall be made by not
less than a majority of its members either present in person or participating by
conference telephone at a meeting or by written consent. The Committee may
appoint a secretary and make such rules and regulations for the conduct of its
business as it shall deem advisable, and shall keep minutes of its meetings. The
secretary need not be a member of the Committee or a member of the Board.
(d) No member of the Board or Committee shall be liable for
any action taken or determination made in good faith with respect to the Plan or
any Option granted hereunder.
4. Eligibility.
(a) Subject to certain limitations hereinafter set forth,
Options may be granted to employees of (including officers), and consultants to
and directors of (whether or not they are employees) the Corporation or its
present or future divisions and Subsidiary Corporations, provided such persons
meet minimum requirements, if any, as may be established by the Committee, in
its discretion. In determining the persons to whom Options shall be granted and
the number of shares to be covered by each Option, the Committee shall take into
account the duties of the respective persons, their present and potential
contributions to the success of the Corporation and such other factors as the
Committee shall deem relevant in connection with accomplishing the purpose of
the Plan. A person to whom an Option has been granted hereunder is sometimes
referred to herein as an "Optionee."
(b) An Optionee shall be eligible to receive more than one
grant of an Option during the term of the Plan, but only on the terms and
subject to the restrictions hereinafter set forth.
5. Stock.
(a) The stock subject to Options hereunder shall be shares of
the Corporation's common stock. $0.00 par value per share ("Common Stock"). Such
shares may, in whole or in part, be authorized but unissued shares or shares
that shall have been or that may be reacquired by the Corporation. The aggregate
number of shares of Common Stock as to which Options may be granted from time to
time under the Plan shall not exceed 2,000,000. The limitations established by
the preceding sentences shall be subject to adjustment as provided in Section
8(1)hereof
(b) In the event that any outstanding Option under the Plan
for any reason expires or is terminated without having been exercised in full
the shares of Common Stock allocable to the unexercised portion of such Option
(unless the Plan shall have been terminated) shall become available for
subsequent grants of options under the Plan.
- 19 -
<PAGE> 23
6. Incentive Stock Options
(a) Options granted pursuant to this Section 6 are intended to
constitute Incentive Stock Options and shall be subject to the following special
terms and conditions, in addition to the general terms and conditions specified
in Section 8 hereof. Consultants and directors who are not employees of the
Corporation shall not be entitled to receive Incentive Stock Options.
(b) The aggregate Fair Market Value (determined as of the date
the Incentive Stock Option is granted) of the shares of Common Stock with
respect to which Incentive Stock Options granted under this and any other plan
of the Corporation or any Parent Corporation or Subsidiary Corporation are
exercisable for the first time by an Optionee during any calendar year may not
exceed the amount set forth in Section 422 (d) of the Internal Revenue Code.
(c) Incentive Stock Options granted under this Plan are
intended to satisfy all requirements for incentive stock options under the
Internal Revenue Code and the Treasury Regulations thereunder and,
notwithstanding any other provision of this Plan, the Plan and all Incentive
Stock Options granted under it shall be so construed, and all contrary
provisions shall be so limited in scope and effect and, to the extent they
cannot be so limited, they shall be void.
7. Non-qualified Stock Options. Options granted pursuant to this
Section 7 are intended to constitute Nonqualified Stock Options and shall be
subject only to the general terms and conditions specified in Section 8 hereof.
8. Terms and Conditions at Options. Each Option granted pursuant to the
Plan shall be evidenced by a written Option Agreement between the Corporation
and the Optionee, which agreement shall comply with and be subject to the
following terms and conditions.
(a) Number of Shares. Each Option Agreement shall state the
number of shares of Common Stock to which the Option relates.
(b) Type of Option. Each Option Agreement shall specifically
identify the portion, if any, of the Option which constitutes an Incentive Stock
Option and the portion, if any, which constitutes a Non-qualified Stock Option.
(c) Option Price. (i) Each Option Agreement shall state the
Option Price, which (except as otherwise set forth in paragraphs 8 (c) (ii)
hereof) shall not be less than 100% of the Fair Market Value per share on the
date of grant of the Option.
(ii) Any Incentive Stock Option granted under the
Plan to a person owning more than ten percent of the total combined voting power
of the Common Stock shall be at a price of not less than 110 of the Fair Market
value per share on the date of grant of the Option.
(iii) The Option Price shall be subject to adjustment
as provided in Section 8(i) hereof
(iv) The date on which the Committee adopts a
resolution expressly granting an Option shall be considered the day on which
such Option is granted.
(d) Term of Options. Options shall be exercisable over the
exercise period as and at the times the Committee, in its sole discretion, may
determine, as reflected in the Option Agreement, provided, however.
(i) The exercise period shall not exceed ten years
from the date of grant of the Option.
(ii) Incentive Stock Options granted to a person
owning more than ten percent of the total combined voting power of the Common
Stock of the Corporation shall be for no more than five years.
- 20 -
<PAGE> 24
(iii) The Committee shall have the authority to
accelerate the exercisability of any outstanding Option at such time and under
such circumstances as it, in its sole discretion, deems appropriate.
(iv) The exercise period shall be subject to earlier
termination as provided in Sections 8(f) and 8(g) hereof, and furthermore shall
be terminated upon surrender of the option by the holder thereof if such
surrender has been authorized in advance by the Committee.
(e) Method of Exercise and Medium and Time of Payment
(i) An Option may be exercised, as to any or all
full shares of Common Stock as to which the Option has been exercisable,
provided, however, that an Option may not be exercised at any one time as to
fewer than 100 shares (or such number of shares as to which the Option is then
exercisable if such number of shares is less than 100)
(ii) Each exercise of an Option granted hereunder,
whether in whole or in part, shall be by written notice to the Secretary of the
Corporation designating the number of shares as to which the Option is
exercised, and shall be accompanied by payment in full of the Option Price (in
cash or shares) for the number of shares so designated, together with any
written statements or investment letter required by an applicable security laws.
(iii) The Option Price shall be paid in cash, in
shares of Common Stock having a Fair Market Value as determined by the Board of
Directors equal to such Option Price or in a combination of cash and shares of
the Common Stock, and (subject to approval of the Board of Directors) may be
effected in whole or in part (A) with monies received from the Corporation at
the time of exercise as a compensatory cash payment, or (B) with monies borrowed
from the Corporation pursuant to repayment terms and conditions as shall be
determined from time to time by the Committee, in its discretion, separately
with respect to each exercise of Options and each Optionee, provided, however,
that each such method and time for payment and each such borrowing and terms and
conditions of repayment shall be permitted by and be in compliance with
applicable law.
(iv) The Board of Directors shall have the sole and
absolute discretion to determine whether or not property other than cash or
shares of Common Stock may be used to purchase the shares of Common Stock
hereunder and, if so, to determine the value of the property received.
(f) Termination. Except as provided in this Section 8(f) and
in Section 8 (g) hereof, an Option may not be exercised unless the Optionee is
then an employee or director of or consultant to the Corporation or a division
or Subsidiary Corporation thereof (or a corporation or a Parent or Subsidiary
Corporation of such corporation issuing or assuming the option in a transaction
to which Section 424(a) of the Internal Revenue Code applies), and unless the
Optionee has remained continuously as an employee or director of or consultant
to the Corporation since the date of grant of the Option.
(i) If the Optionee ceases to be an employee or
director of or consultant to the Corporation (other than by reason of death,
Disability or retirement), all Options of such Optionee that are exercisable at
the time of such cessation may, unless earlier terminated in accordance with
their terms, be exercised within three months after such cessation, provided,
however, that if the employment or consulting relationship of an Optionee shall
terminate, or is a director shall be removed, for cause, all Options theretofore
granted to such Optionee shall, to the extent not theretofore exercised,
terminate immediately upon such termination or removal.
(ii) Nothing in the Plan or in any Option granted
pursuant hereto shall confer upon an individual any right to continue in the
employ of the Corporation or any of its divisions or Subsidiary Corporation or
interfere in any way with the right of the Corporation or its shareholders or
any such division or Subsidiary Corporation to terminate such employment or
other relationship between the individual and the Corporation or any of its
divisions and subsidiary corporations.
- 21 -
<PAGE> 25
(g) Death, Disability or Retirement of Optionee. If an
Optionee shall die while a director of, or employed by, or a consultant to, the
Corporation or a Subsidiary Corporation thereof., or within three months after
the termination of such Optionee's employment or directorship or consulting
relationship, other than termination for cause, or if the Optionee's employment
or directorship or consulting relationship, shall terminate by reason of
Disability or retirement, all Options theretofore granted to such Optionee
(whether or not otherwise exercisable) may, unless earlier terminated in
accordance with their terms, be exercised by the Optionee or by Optionee's
estate or by a person who acquired the right to exercise such Option by bequest
or inheritance or otherwise by reason of the death or Disability of the
Optionee, at any time within one year after the date of death, Disability or
retirement of the Optionee.
(h) Nontransferability. (i) Options granted under the Plan
shall not be transferable other than by will or by the laws of descent, and
Options may be exercised, during the lifetime of the Optionee, only by the
Optionee and thereafter only by his legal representative.
(ii) Any attempted sale, pledge, assignment,
hypothecation or other transfer of an option contrary to the provisions hereof
and, the levy of any execution, attachment or similar process upon an Option
shall be null and void and without force or effect and shall result in automatic
termination of the Option.
(iii) (A) As a condition to the transfer if any
shares of Common Stock issued upon exercise of an Option granted under this
Plan, the Corporation may require an opinion of counsel, satisfactory to the
Corporation, to the effect that such transfer will not be in violation of the
Securities Act of 1933 or any other applicable securities laws or that such
transfer has been registered under federal and all applicable state securities
laws. (B) Further, the Corporation shall be authorized to refrain from
delivering or transferring shares of Common Stock issued under this Plan until
the Board of Directors determines that such delivery or transfer will not
violate applicable securities laws and the Optionee has tendered to the
Corporation any federal, state or local tax owed by the Optionee as a result of
exercising the Option, or disposing of any Common Stock, when the Corporation
has a legal liability to satisfy such tax. (C) The Corporation shall not be
liable for damages due to delay in the delivery or issuance of any stock
certificate for any reason whatsoever, including, but not limited to, a delay
caused by listing requirements of any securities exchange or any registration
requirements under the Securities Act of 1933, the Securities Exchange Act of
1934, or under any other state or federal law, rule or regulation. (D) The
Corporation is under no obligation to take any action or incur any expense in
order to register or qualify the delivery or transfer of shares of Common Stock
under applicable securities laws or to perfect any exemption from such
registration or qualification. (E) Furthermore, the Corporation will have no
liability to any Optionee for refusing to deliver or transfer shares of Common
Stock if such refusal is based upon the foregoing provisions of this Paragraph.
(i) Effect of Certain Changes
(i) If there is any change in the number of shares of
Common Stock through the declaration of stock dividends, or through
recapitalization resulting in stock splits, or combinations or exchanges of such
shares, the number of shares of Common Stock available for Options, the number
of such shares covered by outstanding Options, and the price per share of such
Options, shall be proportionately adjusted by the Committee to reflect any
increase or decrease in the number of issued shares of Common Stock; provided,
however, that any fractional shares resulting from such adjustment shall be
eliminated.
(ii) In the event of the proposed dissolution or
liquidation of the Corporation, in the event of any corporate separation or
division, including, but not limited to, split-up, split-off or spin-off, or in
the event of a merger or consolidation of the Corporation with another
corporation, the Committee may (but is not obligated to) provide that the holder
of each Option then exercisable shall have the right to exercise such Option (at
its then Option Price) solely for the kind and amount of shares of stock and
other securities, property, cash or any combination thereof receivable upon such
dissolution, liquidation, or corporate separation or division, or merger or
consolidation by a holder of the number of shares of Common Stock for which such
Option might have been exercised immediately prior to such dissolution,
liquidation, or corporate separation or division, merger or consolidation; or
the Committee may provide in the alternative, that each Option granted under the
Plan shall terminate as of a date to be fixed by the Committee, provided,
however,
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<PAGE> 26
that not less than 30 days' written notice of the date so fixed shall be given
to each Optionee, who shall have the right, during the period of 30 days
preceding such termination, to exercise the Options as to all or any part of the
shares of Common Stock covered thereby. In such case the Committee may (but is
not obligated to) provide that Options not otherwise exercisable may be
exercised in such circumstances.
(iii) Paragraph (ii) of this Section 8(i) shall not
apply to a merger or consolidation in which the Corporation is the surviving
corporation and shares of Common Stock are not converted into or exchanged for
stock, securities of any other corporation, cash or any other thing of value.
Notwithstanding the preceding sentence, in case of any consolidation or merger
of another corporation into the Corporation in which the Corporation is the
surviving corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of the
shares of Common Stock (other than a change in par value, to no par value, or as
a result of a subdivision or combination, but including any change in such
shares into two or more classes or series of shares), the Committee may provide
the holder of each Option then exercisable shall have the right to exercise such
Option solely for the kind and amount of shares of stock and other securities
(including those of any new direct or indirect parent of the Corporation),
property, cash or any combination thereof receivable upon such reclassification,
change, consolidation or merger by the holder of the number of shares of Common
Stock for which such Option might have been exercised.
(iv) In the event of a change in the Common Stock of
the Corporation as presently constituted, which is limited to a change of all
its authorized shares with par value into the same number of shares with a
different par value or without par value, the shares resulting from any such
change shall be deemed to be the Common Stock within the meaning of the Plan.
(v) To the extent that the foregoing adjustments
relate to stock or securities of the Corporation, such adjustments shall be made
to the Committee, whose determination in that respect shall be final, binding
and conclusive, provided that each Incentive Stock Option granted pursuant to
this Plan shall not be adjusted in a manner that causes such option to fail to
continue to qualify as an Incentive Stock Option within the meaning of Section
422 of the Internal Revenue Code.
(vi) Except as hereinbefore expressly provided in
this Section 8(i), this Optionee shall have no rights by reason of any
subdivision or consolidation of shares of stock of any class or the payment of
any stock dividend or any other increase or decrease in the number of shares of
stock of any class or by reason of any dissolution, liquidation, merger, or
consolidation or spin-off of assets or stock of another corporation, and any
issue by Corporation of shares of stock of any class, or securities convertible
into shares of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of price of shares of Common
Stock subject to the Option. The grant of an Option pursuant to the Plan shall
not affect in any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structures or to merge or to consolidate or to dissolve, liquidate or sell, or
transfer all or part of its business or assets.
(j) Rights as Shareholder - Non-Distributive Intent
(i) Neither a person to whom an Option is granted,
not such person's legal representative, heir, legatee or distribute, shall be
deemed to be the holder of, or to have any rights of a holder with respect to,
any shares subject to such Option, until after the Option is exercised and the
shares are issued to the person exercising such Options.
(ii) Upon exercise of an Option at a time when there
is no registration statement in effect under the Securities Act of 1933 relating
to the shares issuable upon exercise and available for delivery of a prospectus
meeting the requirements of Section 10(a)(3) of said Act, shares may be issued
to the Optionee only if the Optionee represents and warrants in writing to the
Corporation that the shares purchased are being acquired for investment and not
with a view to the distribution thereof.
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<PAGE> 27
(iii) No shares shall be issued upon the exercise of
an Option unless and until there shall have been compliance with any then
applicable requirements of the Securities and Exchange Commission, or any other
regulatory agencies having jurisdiction over the Corporation.
(iv) No adjustment shall be made for dividends
(ordinary or extraordinary), whether in cash, securities or other property) or
distribution or other rights for which the record date is prior to the date such
stock certificate is issued, except as provided in Section 8(1) hereof.
(k) Other Provisions The Option Agreements authorized under
the Plan shall contain such other provisions, including, without limitation, (1)
the imposition of restrictions upon the exercise of an Option, and (11) in the
case of an Incentive Stock Option, the inclusion of any condition not
inconsistent with such Option qualifying as an Incentive Stock Option, as the
Committee shall deem advisable.
(l) Leave of Absence The Committee shall be entitled to make
such rules, regulations, and determinations as it deems appropriate under the
Plan in respect of any leave of absence taken by the recipient of any Option
awarded hereunder. Without limiting the generality of the foregoing, the
Committee shall be entitled to determine: (i) whether or not any such leave of
absence shall constitute a termination of employment within the meaning of the
Plan; and (ii) the impact, if any, of any such leave of absence on awards under
the Plan theretofore made to any recipient who takes such leave of absence.
(m) Leave of Absence The Committee shall be entitled to make
such rules, regulations, and determinations as it deems appropriate under the
Plan in respect of any leave of absence taken by the recipient of any Option
awarded hereunder. Without limiting the generality of the foregoing, the
Committee shall be entitled to determine: (i) whether or not any such leave of
absence shall constitute a termination of employment within the meaning of the
Plan; and (ii) the impact, if any, of any such leave of absence on awards under
the Plan and theretofore made to any recipient who takes such leave of absence.
9. Agreement by Optionee Regarding Withholding Taxes. If the Committee
shall so require, as a condition of exercise, each Optionee shall agree that:
(a) No later than the date of exercise of any Option granted
hereunder, the Optionee will pay to the Corporation or make arrangements
satisfactory to the Committee regarding payment of any federal, state or local
taxes of any kind required by law to be withheld upon the exercise of such
Option, and
(b) The Corporation shall, to the extent permitted or required
by law, have the right to deduct federal, state and local taxes of any kind
required by law to be withheld upon the exercise of such Option from any payment
of any kind otherwise due to the Optionee. For withholding tax purposes, the
shares of Common Stock shall be valued on the date the withholding obligations
is incurred.
(c) The Corporation shall not be obligated to advisee any
Optionee of the existence of any such tax or the amount which the Corporation
will be so required to withhold.
10. Agreement by Optionee With Respect to Section 16. If the Optionee
is subject to the reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934, as amended, the grant of this option shall not be
effective until such person complies with the reporting requirements of Section
16(a).
11. Term of Plan. Options may be granted pursuant to the Plan from time
to time within a period of ten years from the date the Plan is adopted by the
Board, or the date the Plan is approved by the shareholders of the Corporation,
whichever is earlier.
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<PAGE> 28
12. Amendment and Termination of the Plan.
(a) (i) The Board at any time and from time to time may
suspend, terminate, modify or amend the Plan;
(ii) provided, however, that any amendment that
would: (A) materially increase the benefits accruing to participants under the
Plan, or (B) increase the number of shares of Common Stock as to which Options
may be granted under the Plan or (CO materially modify the requirements as to
eligibility for participation in the Plan, shall be subject to the approval of
the holders of a majority of the shares of Common Stock of the Corporation
presented or represented, and entitled to vote at a duly constituted and held
meeting of shareholders,
(iii) provided further that any such increase or
modification that may result from adjustments authorized by Section 8(i) hereof
shall not require such approval.
(b) Except as provided in Section 8 hereof, no suspension,
termination, modification or amendment of the Plan may adversely affect any
Option previously granted, unless the written consent of the Optionee is
obtained.
13. Approval of Shareholders. The Plan shall take effect upon its
adoption by the Board but shall be subject to the approval of the holders of the
shares of Common Stock of the Corporation present or represented and entitled to
vote at a duly constituted and held meeting of shareholders, which approval must
occur within 12 months after the date the Plan is adopted by the Board.
14. Assumption. The terms and conditions of any outstanding Options
granted pursuant to this Plan shall be assumed by, be binding upon and inure to
the benefit of any successor corporation to the Corporation and shall continue
to be governed by, to the extent applicable, the terms and conditions of this
Plan. Such successor corporation shall not be otherwise be obligated to assume
this Plan.
15. Termination of Right of Action. Every right of action arising out
of or in connection with the Plan by or on behalf of the Corporation or of any
Subsidiary, or by any shareholder of the Corporation or of any Subsidiary
against any past, present or future member of the Board, or against any
employer, or by an employee (past, present or future) against the Corporation or
any Subsidiary, will irrespective of the place where an action may be brought
and irrespective of the place of residence of any such shareholder, director or
employee, cease and be barred by the expiration of three years from the date of
the act or omission in respect of which such right of action is alleged to have
risen.
16. Tax Litigation. The Corporation shall have the right, but not the
obligation, to contest, at its expense, any tax ruling or decision,
administrative or judicial, on any issue which is related to the Plan and which
the Board believes to be important to holders of Options issued under the Plan
and to conduct any such contest or any litigation arising therefrom to a final
decision.
17. Adoption.
(a) This Plan was approved by the Board of Directors of the
Corporation at a meeting on January 16, 1998.
(b) This Plan was approved by the shareholders of the
Corporation at a meeting on ______________, 199__.
USTMAN Technologies, Inc.
ATTEST: By:
-------------------------
President
- ----------------------
Secretary
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<PAGE> 29
PROXY USTMAN TECHNOLOGIES, INC.
PROXY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 24, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dan R. Cook and Marc A. Weisman, or
either of them, proxies and attorneys, each with full power of substitution, to
vote all the shares of Common Stock of USTMAN Technologies, Inc., a California
corporation, which the undersigned is entitled to vote at the Annual Meeting of
Shareholders to be held on February 24, 1999, at 9:00 a.m., local time, and at
any postponement or adjournment thereof with respect to Proposals set forth in
the Proxy Statement and upon any other matter that may properly come before the
meeting or any adjournment.
This Proxy (if properly executed) will be voted in the manner directed
herein by the undersigned stockholder. The Board of Directors recommends that
you vote for the election of the five director nominees in this proxy.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except as marked to the
contrary)
[ ] WITHOUT AUTHORITY to vote for all nominees listed below
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK A
LINE THROUGH THE NOMINEE'S NAME BELOW:
<TABLE>
<S> <C> <C> <C> <C>
Dan R. Cook Ronald G. Crane Donald W. Phillips Barry S. Rosenstein Marc A. Weisman
</TABLE>
(Continued and to be signed on reverse side)
(Continued from other side)
2. TO APPROVE THE COMPANY'S 1998 STOCK OPTION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
[3. TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION TO APPROVE A
REVERSE STOCK SPLIT OF THE OUTSTANDING SHARES OF THE COMPANY'S COMMON STOCK.
[ ] FOR [ ] AGAINST [ ] ABSTAIN]
4. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE ANNUAL MEETING OR ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR AND FOR THE PROPOSED AMENDMENTS TO
THE ARTICLES OF INCORPORATION OF THE COMPANY, AND IN THEIR DISCRETION ON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Date , 1999
-------------
-------------------------
Signature
-------------------------
Signature if held jointly
(Please mark, sign, date and return the proxy card promptly)
