<PAGE> 1
BITWISE DESIGNS, INC.
2165 TECHNOLOGY DRIVE
SCHENECTADY, NEW YORK 12308
PROXY STATEMENT
Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
BITWISE DESIGNS, INC.
- - --------------------------------------------------------------------------------
(Name of the Corporation as Specified in Charter)
Ira C. Whitman, Secretary
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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:
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
(5) Total Fee Paid
- - --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
- - --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or form or schedule and the date of filing.
(1) Amount previously paid:
- - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration no.:
- - --------------------------------------------------------------------------------
(3) Filing party:
- - --------------------------------------------------------------------------------
(4) Date filed:
- - --------------------------------------------------------------------------------
<PAGE> 2
BITWISE DESIGNS, INC.
2165 TECHNOLOGY DRIVE
SCHENECTADY, NY 12308
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on January 21, 2000
To the Stockholders of
BITWISE DESIGNS, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of BITWISE
DESIGNS, INC. (the "Corporation") will be held at The Desmond Hotel at 660
Albany Shaker-Road, Albany, New York 12205, on January 21, 2000 at 11:00 a.m.
New York time, for the purpose of electing six (6) members to the Corporation's
Board of Directors and to transact such other business as may properly be
brought before the meeting or any adjournment thereof.
The close of business on December 6, 1999 has been fixed as the Record Date
for the determination of Stockholders entitled to notice of, and to vote at, the
meeting and any adjournment thereof.
You are cordially invited to attend the meeting. Whether or not you
plan to attend, please complete, date and sign the accompanying proxy and return
it promptly in the enclosed envelope to assure that your shares are represented
at the meeting. If you do attend, you may revoke any prior proxy and vote your
shares in person if you wish to do so. Any prior proxy will automatically be
revoked if you execute the accompanying proxy or if you notify the Secretary of
the Corporation, in writing, prior to the Annual Meeting of Stockholders.
By Order of the Board of Directors,
Ira C. Whitman, Secretary
Dated: December 14, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES.
<PAGE> 3
BITWISE DESIGNS, INC.
2165 TECHNOLOGY DRIVE
SCHENECTADY, NY 12308
PROXY STATEMENT
FOR
Annual Meeting of Stockholders
To Be Held on January 21, 2000
This Proxy Statement and the accompanying form of proxy have been mailed on
or about December 15, 1999 to the Stockholders of record of shares of Common
Stock and Series A Preferred Stock as of December 6, 1999 of BITWISE DESIGNS,
INC., a Delaware corporation (the "Corporation") in connection with the
solicitation of proxies by the Board of Directors of the Corporation for use at
the Annual Meeting of Stockholders (the "Annual Meeting") to be held at 11:00
a.m. at the Desmond Hotel, 660 Albany Shaker Road, Albany, New York, on Friday,
January 21, 2000 and at any adjournment thereof.
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
On December 6, 1999 (the "Record Date"), there were 10,467,600 shares of
Common Stock, par value $.001 par value ("Common Stock") and 200 shares of
Series A Preferred Stock, $.10 par value, issued and outstanding. Only holders
of Common Stock and Series A Preferred Stock of record at the close of business
on the Record Date are entitled to receive notice of, and to vote at, the Annual
Meeting and any adjournment thereof. Each share of Common Stock and each share
of Series A Preferred Stock is entitled to one (1) vote on each matter submitted
to Stockholders. SHARES OF THE CORPORATION'S COMMON STOCK AND SERIES A PREFERRED
STOCK REPRESENTED BY AN EFFECTIVE PROXY IN THE ACCOMPANYING FORM WILL, UNLESS
CONTRARY INSTRUCTIONS ARE SPECIFIED IN THE PROXY, BE VOTED FOR THE ELECTION OF
THE SIX (6) PERSONS NOMINATED BY THE BOARD OF DIRECTORS.
Any proxy may be revoked at any time before it is voted. A Stockholder may
revoke a Proxy by notifying the Secretary of the Corporation either in writing
prior to the Annual Meeting or in person at the Annual Meeting, by submitting a
Proxy bearing a later date or by voting in person at the Annual Meeting.
Election of Directors is by plurality vote, with the six (6) nominees receiving
the highest vote totals to be elected as Directors of the Corporation.
Accordingly, abstentions and broker non-votes will not affect the outcome of the
Election of Directors.
The Corporation will bear the cost of the solicitation of proxies by the
Board of Directors. The Board of Directors may use the services of its executive
officers and certain directors to solicit proxies from stockholders in person
and by mail, telegram and telephone. Arrangements may also be made with brokers,
fiduciaries, custodians, and nominees to send proxies, proxy statements and
other material to the beneficial owners of the Corporation's Common Stock and
Series A Preferred Stock held of record by such persons, and the Corporation may
reimburse them for reasonable out-of-pocket expenses incurred by them in so
doing.
The Annual Report to Stockholders for the fiscal year ended June 30,
l999, including financial statements, accompanies this Proxy Statement.
The principal executive offices of the Corporation are located at 2165
Technology Road, Schenectady, New York 12308. The Corporation's telephone number
is (518) 346-7799.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Corporation has selected
PricewaterhouseCoopers, LLP Certified Public Accountants, as independent
accountants of the Corporation for the fiscal year ending June 30, 1999.
Stockholders are not being asked to approve such selection
<PAGE> 4
because such approval is not required. The audit services provided by
PricewaterhouseCoopers, LLP consisted of examination of financial statements,
services relative to filings with the Securities and Exchange Commission, and
consultation in regard to various accounting matters. Representatives of
PricewaterhouseCoopers, LLP are expected to be present at the meeting and will
have the opportunity to make a statement if they so desire and answer
appropriate questions.
VOTING SECURITIES AND SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The securities entitled to vote at the meeting are the Corporation's Common
Stock, $.001 par value and Series A Preferred Stock, $.10 par value per share.
Each share of Common Stock and Series A Preferred Stock entitles its holder to
one vote on each matter submitted to Stockholders, voting together as a single
class. As of the Record Date, there were 10,467,600 shares of Common Stock and
200 shares of Series A Preferred Stock issued and outstanding.
Under the terms of the Series A Preferred Stock, no shares of Series A
Preferred Stock may be issued to any persons other than John Botti and Ira
Whitman, currently President and Secretary, respectively of the Corporation.
Additionally, the holders of the Series A Preferred Stock, voting as a separate
class, have the sole right to elect a majority of the Board of Directors, and to
remove any such directors elected by the holders of the Series A Preferred
Stock. The Series A Preferred Stock are deemed automatically canceled upon the
occurrence of any of the following (i) the death of the holder; (ii) the
voluntary termination of employment by the holder; (iii) the voluntary
resignation by a holder from the Board of Directors; or (iv) the failure by such
holder to own, beneficially, as determined under Regulation 13d-3 of the
Exchange Act of 1934, at least 5% of the issued and outstanding Common Stock of
the Corporation.
The following table sets forth certain information as of December 6, 1999
with respect to (i) each director and each executive officer, (ii) and all
directors and officers as a group, and (iii) the persons (including any "group"
as that term is used in Section l3(d)(3) of the Securities Exchange Act of
l934), known by the Corporation to be the beneficial owner of more than five
(5%) percent of the Corporation's Common Stock and Series A Preferred Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENTAGE
TYPE OF CLASS BENEFICIAL HOLDER OWNERSHIP (1) OF CLASS
<S> <C> <C> <C>
Common John T. Botti 1,069,683 (2) 8.89%
c/o Bitwise Designs
2165 Technology Drive
Schenectady, NY 12308
Common Ira C. Whitman 667,239 (3) 5.55%
c/o Bitwise Designs
2165 Technology Drive
Schenectady, NY 12308
Common Steven Kriegsman 50,000 (4) 0.42%
c/o Bitwise Designs
2165 Technology Drive
Schenectady, NY 12308
Common Dennis Bunt 103,550 (5) 0.86%
c/o Bitwise Designs
2165 Technology Drive
Schenectady, NY 12308
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
Common J. Edward Sheridan 50,000 (4) 0.42%
c/o Bitwise Designs
2165 Technology Drive
Schenectady, NY 12308
Common Charles Johnston 50,000 (4) 0.42%
c/o Bitwise Designs
2165 Technology Drive
Schenectady, NY 12308
Common Nicholas Themelis 20,000 (8) 0.17%
14 Serenite Lane
Muttontown, NY 11791
Series A John T. Botti 100 (6) 50%
Preferred c/o Bitwise Designs
Stock 2165 Technology Drive
Schenectady, NY 12308
Series A Ira C. Whitman 100 (7) 50%
Preferred c/o Bitwise Designs
Stock 2165 Technology Drive
Schenectady, NY 12308
Directors/Officers as a group
(2)(3)(4)(5)(6)(7)(8) 2,010,672 16.72%
</TABLE>
(1) Unless otherwise indicated below, each director, officer and 5% shareholder
has sole voting and sole investment power with respect to all shares that
he beneficially owns.
(2) Includes vested stock options to purchase 835,185 shares of Common Stock.
(3) Includes vested stock options to purchase 435,185 shares of Common Stock.
(4) Includes vested options to purchase 50,000 shares of Common Stock.
(5) Includes vested options to purchase 100,667 shares of Common Stock and
excludes nonvested options to purchase 3,333 shares of Common Stock.
Includes 1,000 shares of Common Stock owned by Mr. Bunt's wife.
(6) See footnote (2). Each share of Series A Preferred Stock is entitled to ten
(10) votes per share.
(7) See footnote (3). Each share of Series A Preferred Stock is entitled to ten
(10) votes per share.
(8) Includes vested options to purchase 20,000 shares of Common Stock and
excludes Series B Common Stock Purchase Warrants to purchase 20,000 shares
of Common Stock.
*Percentage not significant.
3
<PAGE> 6
CERTAIN REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Corporation's directors and executive
officers, and persons who own more than 10% of a registered class of the
Corporation's equity securities, to file with the Securities and Exchange
Commission ("SEC") reports of ownership and reports of changes in ownership
of common stock and other equity securities of the Corporation. Officers,
directors and greater than 10% stockholders are required by SEC regulation
to furnish the Corporation with copies of all Section 16(a) forms they
file. Based solely on review of the copies of such reports received by the
Company, the Company believes that during the fiscal year ended June 30,
1999, all officers, Directors and greater than 10% beneficial owners
complied with the Section 16(a) filing requirements during the 1999 fiscal
year.
I. ELECTION OF DIRECTORS
The precise number of persons on the Board of Directors is determined
by the Board of Directors which has set the number at six (6) persons. The
Board of Directors currently consists of six (6) members elected for a term
of one year and until their successors are duly elected and qualified.
The affirmative vote of a plurality of the outstanding shares of
Common Stock and Series A Preferred Stock entitled to vote at the Annual
Meeting is required to elect the directors. All proxies received by the
Board of Directors will be voted for the election as directors of the
nominees listed below if no direction to the contrary is given. In the
event any nominee is unable to serve, the proxy solicited hereby may be
voted, in the discretion of the proxies, for the election of another person
in his stead. The Board of Directors knows of no reason to anticipate this
will occur.
The following table sets forth certain information as of December 6,
1999 with respect to the directors and executive officers of the
Corporation, including the six (6) nominees who will be selected at the
l999 Annual Meeting.
NAME AGE OFFICE
John T. Botti 36 President, Chief Executive Officer and
Chairman of the Board
Ira C. Whitman 36 Senior Vice-President--Research and
Development, Secretary and Director
Steven A. Kriegsman 56 Director
J. Edward Sheridan 62 Director
Charles C. Johnston 63 Director
Nicholas Themelis 36 Director
All directors hold office until the next Annual Meeting of Shareholders or
until their successors are elected and qualify. Officers are elected annually
by, and serve at the discretion of, the Board of Directors. There are no
familial relationships between or among any officers or directors of the
Corporation.
In connection with the Company's private placement through Whale Securities
Co., L.P. ("Whale"), completed in December
4
<PAGE> 7
1995, the Company granted Whale the right to nominate one person to the
Company's Board of Directors, or in the alternative, a person to attend meetings
of the Board of Directors for a period of three years from the date of the
closing of the private placement. In December, 1997, Whale selected Steven
Kriegsman as its representative on the Board and Mr. Kriegsman continues to
serve on the Board.
In connection with the Company's recent private placement which closed on
October 4, 1999, the Board of Directors appointed Nicholas Themelis to serve as
a director to fill a vacancy on the Board.
John T. Botti, a co-founder, has served as President, Chief Executive
Officer and Director since the incorporation of the Company in August 1985. Mr.
Botti graduated from Rensselaer Polytechnic Institute ("RPI") with a B.S. degree
in electrical engineering in 1994 with a concentration in computer systems
design and in 1996 earned a Master of Business Administration degree from RPI.
Ira C. Whitman, a co-founder, is Senior Vice-President of Research and
Development and a Director of the Company since the incorporation of the Company
in August 1985. Mr. Whitman graduated from RPI in 1984 with a B.S. in Computer
and Systems Engineering and in 1990 he earned a Masters in Engineering from RPI.
J. Edward Sheridan joined the Board of Directors in June, 1992. From 1985
to the present, Mr. Sheridan served as the President of Sheridan Management
Corp. From 1975 to 1985, Mr. Sheridan served as the Vice President of Finance
and Chief Financial Officer of AMF. From 1973 to 1975, he was Vice President and
Chief Financial Officer of Fairchild Industries. From 1970 to 1973 he was the
Vice President, Corporate Finance of F.S. Smithers. From 1967 to 1970 Mr.
Sheridan was the Director of Acquisitions of Westinghouse Electric. From 1964 to
1967 he was employed by Corporate Equities, Inc., a venture capital firm, Mr.
Sheridan holds an M.B.A. from Harvard University and a B.A. from Dartmouth
College.
Steven A. Kriegsman joined the Board of Directors in December, 1997. In
1989, Mr. Kriegsman founded The Kriegsman Group, a private financial consulting
services firm and has served as its President since such time. In 1981 Mr.
Kriegsman co-founded ANA Financial Services, Inc., a holding company engaged,
through its subsidiaries, in securities brokerage, financial planning and
investment advisory services and franchising of certified public accountants.
Mr. Kriegsman served as Chairman and Chief Executive Officer of ANA Financial
until 1989. Mr. Kriegsman is a former Certified Public Accountant. Mr. Kriegsman
holds a B.S. from New York University.
Charles C. Johnston joined the Board of Directors in December, 1997. Mr.
Johnston has been the Chairman of Ventex Technology, Inc., a privately-held neon
light transformer company since July 1993. Mr. Johnston has also served as
Chairman of AFD Technologies, a private corporation since 1994 and J&C Resources
a private corporation since 1987. Mr. Johnston serves as a Trustee of Worcester
Polytechnic Institute ("WPI") and earned his B.S. degree from WPI in 1957.
Nicholas Themelis joined the Board of Directors in October, 1999. Mr
Themelis has been a Senior Vice President of Lehman Brothers since 1991 and has
worked out of its New York, Hong Kong and Tokyo offices. He is currently
developing the firm's E-commerce technology group and is responsible for
developing technical strategy and system architecture. While working in Asia at
Lehman Brothers, he founded the firm's Internet committee in Asia. Mr. Themelis
also co-founded Nutrisserie, Inc in 1991, a retail health food store. Prior to
that, in 1986, Mr. Themelis was a co-founder of Bentley, Themelis and
Associates, a software consulting company.
5
<PAGE> 8
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has three (3) Committees: Audit, Compensation and
Executive Committee.
Audit Committee. The members of the Audit Committee are J. Edward Sheridan
and Charles Johnston. The Audit Committee acts to: (i) acquire a complete
understanding of the Corporation's audit functions; (ii) review with management
the finances, financial condition and interim financial statements of the
Corporation; (iii) review with the Corporation's independent accountants the
year-end financial statements; and (iv) review implementation with the
independent accountants and management any action recommended by the independent
accountants. During the fiscal year ended June 30, 1999, the Audit Committee met
on one occasion.
Executive Committee. The members of the Executive Committee are John Botti
and Ira C. Whitman. The Executive Committee has all of the powers of the Board
of Directors except it may not; (i) amend the Certificate of Incorporation or
Bylaws; (ii) enter into agreements to borrow money in excess of $250,000; (iii)
to grant security interests to secure obligations of more than $250,000; (iv)
authorize private placements or public offerings of the Company's securities;
(v) authorize the acquisition of any major assets or business or change the
business of the Corporation; or (vi) authorize any employment agreements in
excess of $75,000. The Executive Committee meets when actions must be approved
in an expedient manner and a meeting of the Board of Directors cannot be
convened. During Fiscal 1999, the Executive Committee did not deem it necessary
to meet.
Compensation Committee. The members of the Compensation Committee are
Steven Kriegsman and J. Edward Sheridan. The Compensation Committee functions
include administration of the Corporation's 1992 Employee Stock Option Plan and
Non-Executive Director Stock Option Plan and negotiation and review of all
employment agreements of executive officers of the Corporation. During the
fiscal year ended June 30, 1999, the Compensation Committee held one meeting.
MEETINGS OF THE BOARD OF DIRECTORS; COMMITTEES
During the fiscal year ended June 30, 1999, the Board of Directors of the
Company met on three occasions and voted by unanimous written consent on two
occasions. No member of the Board of Directors attended less than 75% of the
aggregate number of (i) the total number of meetings of the Board of Directors
or (ii) the total number of meetings held by all Committees of the Board of
Directors.
EXECUTIVE COMPENSATION
The following table provides certain information concerning all Plan and
Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded
to, earned by, paid by the Company during the years ended June 30, 1999, 1998
and 1997 to each of the named executive officers of the Company.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
NO. OF SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING OPTIONS/
NAME AND PRINCIPAL FISCAL COMPENSATION STOCK SARs
POSITION YEAR SALARY BONUS AWARD(S)
<S> <C> <C> <C> <C> <C> <C>
John Botti 1999 $132,794(1) 0(1) $1,702(2) 0(3) 0
Chairman, 1998 $121,000 0 $1,702 0 0
President and 1997 $110,000 0 $1,415 0 0
Chief Executive
Officer
</TABLE>
6
<PAGE> 9
(1) Pursuant to the terms of his employment agreement dated July 1, 1995, Mr.
Botti is to receive a cash bonus each year during the term of agreement
equal to 3% of the pre-tax profits of the Company, which criteria was not
met in 1999, 1998 or 1997, therefore, no bonuses were issued. Additionally,
Mr. Botti is entitled to receive approximately $132,000 in salary per year.
See "Employment Agreements."
(2) Includes: (i) for 1999, an automobile and expenses of $1,500 and the
payment of premiums on term life insurance policy of $202; (ii) for 1998,
an automobile and expenses of $1,500 and the payment of premiums on a term
life insurance policy of $202; and (iii) for 1997, an automobile and
expenses of $1,213 and the payment of premiums on a term life insurance
policy of $202.
(3) No restricted stock awards were granted to Mr. Botti in fiscal 1999. Mr.
Botti, however, owned 233,853 restricted shares of the Company's Common
Stock on June 30, 1999, the market value of which was approximately
$226,604 on such date (based upon the closing price of the common stock of
$.969), without giving effect to the diminution in value attributed to the
restriction on such shares.
7
<PAGE> 10
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value At Assumed
Annual Rates of Stock
Price Appreciation For Alternative to
Option (f) and (g)
Individual Grants Term Grant Date Value
Percent of
Number of Total Exercise of
Securities Option/ Base Price Grant Date
Underlying SARs Granted To (S/Sh) 5% ($) 10% ($) Present Value $
Option/SARs Employees (d) Expiration (f) (g) (h)
Name Granted (#) In Fiscal Year Date
(a) (b) (C) (c)
<S> <C> <C> <C> <C>
John Botti 0 0 0 0
</TABLE>
No Stock Appreciation Rights were granted to any of the named executive
officers during the last fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
The following table contains information with respect to the named
executive officers concerning options held as of the year ended June 30, 1999.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Value of Unexercised In-the-
Shares Number of Unexercised Money Options
Acquired Value Options as of June 30, 1999 at June 30, 1999(1)
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
John T. Botti 0 -- 835,185/0 6,406/0
</TABLE>
- - ------------------------
(1) Based upon the closing bid price ($.969 per share) of the Company's Common
Stock on June 30, 1999 less the exercise price for the aggregate number of
shares subject to the options.
EMPLOYMENT AGREEMENTS
Effective July 1, 1995, the Company entered into a new employment agreement
with Mr. Botti for a five year term ending June 30, 2000. The employment
agreement provides for (i) annual compensation of $100,000 for the first year of
the agreement, increasing by 10% in each year thereafter; (ii) a bonus of 3% of
the Company's pre-tax net income, with such additional bonuses as may be awarded
in the discretion of the Board of Directors; (iii) the award of non-qualified
stock options to purchase 600,000 shares of the Company's common stock at an
exercise price of $1.5625 per share of which 100,000 vested in on June 30, 1995,
125,000 vested on June 30, 1996 and 125,000 vest on each of June 30, 1997, 1998
and 1999; (iv) certain insurance and severance benefits and (v) automobile and
expenses.
8
<PAGE> 11
COMPENSATION OF DIRECTORS
Directors are compensated for their services during the each fiscal year in
the amount of $5,000 annually. The Directors receive options to purchase 10,000
shares for each year of service under the Non-Executive Director Stock Option
Plan ("Stock Options") and are reimbursed for expenses incurred in order to
attend meetings of the Board of Directors. Directors also receive 20,000 Stock
Options upon being elected to the Board.
STOCK OPTION PLANS
In April 1992, the Company adopted the 1992 Employees Stock Option Plan
(the "1992 Plan") which provided for the grant of options to purchase up to
600,000 shares of the Company's Common Stock. On January 26, 1995, the
stockholders of the Company approved an amendment to the 1992 Plan to increase
the number of shares of Common Stock available under the 1992 Plan to 3,000,000
shares. Under the terms of the 1992 Plan, options granted thereunder may be
designated as options which qualify for incentive stock option treatment
("ISOs") under Section 422A of the Code, or options which do not so qualify
("Non-ISOs"). As of October 15, 1999, there were outstanding 1,995,870 options
under the 1992 Plan with exercise prices ranging from $.34 to $7.125.
The 1992 Plan is administered by a Compensation Committee designated by the
Board of Directors. The Compensation Committee has the discretion to determine
the eligible employees to whom, and the times and the price at which, options
will be granted. Whether such options shall be ISOs or Non-ISOs; the periods
during which each option will be exercisable; and the number of shares subject
to each option, shall be determined by the Committee. The Board or Committee
shall have full authority to interpret the 1992 Plan and to establish and amend
rules and regulations relating thereto.
Under the 1992 Plan, the exercise price of an option designated as an ISO
shall not be less than the fair market value of the Common Stock on the date the
option is granted. However, in the event an option designated as an ISO is
granted to a ten percent stockholder (as defined in the 1992 Plan) such exercise
price shall be at least 110% of such fair market value. Exercise prices of
Non-ISOs options may be less than such fair market value. The aggregate fair
market value of shares subject to options granted to a participant which are
designated as ISOs which become exercisable in any calendar year shall not
exceed $100,000. The "fair market value" will be the closing NASDAQ bid price,
or if the Company's Common Stock is not quoted by NASDAQ, as reported by the
National Quotation Bureau, Inc., or a market maker of the Company's Common
Stock, or if the Common Stock is not quoted by any of the above, by the Board of
Directors acting in good faith.
The Compensation Committee may, in its sole discretion, grant bonuses or
authorize loans to or guarantee loans obtained by an optionee to enable such
optionee to pay any taxes that may arise in connection with the exercise or
cancellation of an option.
Unless sooner terminated, the 1992 Plan will expire in April, 2002.
In April, 1992, the Board of Directors adopted the Non-Executive Director
Stock Option Plan (the "Director Plan") which was approved by the Company's
stockholders in May, 1992. With the approval of the shareholders, the Director
Plan was amended in December, 1997. Options are granted under the Director Plan
until April, 2002 to (i) non-executive directors as defined and (ii) members of
any advisory board established by the Company who are not full-time employees of
the Company or any of its subsidiaries. The Director Plan provides that each
non-executive director will automatically be granted an option to purchase
20,000 shares, upon joining the Board of Directors, and 10,000 shares on each
September 1st thereafter, provided such person has served as a director for the
12 months immediately prior to such September 1st. Each eligible director of an
advisory board will receive, upon joining the advisory board, and on each
September 1st thereafter, an option to purchase 5,000 shares of the Company's
Common Stock, providing such person has served as a director of the advisory
board for the previous 12 month period.
As of October 15, 1999, there are outstanding 170,000 options under the
Director Plan with exercise prices from $.96875 to $5.125.
The exercise price for options granted under the Director Plan is 100% of
the fair market value of the Common Stock on the date of grant. The "fair market
value" is the closing NASDAQ bid price, or if the Company's Common Stock is not
9
<PAGE> 12
quoted by NASDAQ, as reported by the National Quotation Bureau, Inc., or a
market maker of the Company's Common Stock, or if the Common Stock is not quoted
by any of the above by the Board of Directors acting in good faith. Until
otherwise provided in the Stock Option Plan the exercise price of options
granted under the Director Plan must be paid at the time of exercise, either in
cash, by delivery of shares of common Stock of the Company or by a combination
of each. The term of each option commences on the date it is granted and unless
terminated sooner as provided in the Director Plan, expires five years from the
date of grant. The Director Plan is administered by a committee of the board of
directors composed of not fewer than three persons who are officers of the
Company (the "Committee"). The Committee has no discretion to determine which
non-executive director or advisory board member will receive options or the
number of shares subject to the option, the term of the option or the
exercisability of the option. However, the Committee will make all
determinations of the interpretation of the Director Plan. Options granted under
the Director Plan are not qualified for incentive stock option treatment.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The General Corporation Law of Delaware provides generally that a
corporation may indemnify any person who was or is a party to or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative in nature
to procure a judgment in its favor, by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) and, in a proceeding not by or in
the right of the corporation, judgments, fines and amounts paid in settlement,
actually and reasonably incurred by him in connection with such suit or
proceeding, if he acted in good faith and in a manner believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reason to believe his conduct was
unlawful. Delaware law further provides that a corporation will not indemnify
any person against expenses incurred in connection with an action by or in the
right of the corporation if such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his duty to the corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine that, despite the adjudication of liability but in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for the expenses which such court shall deem proper.
The By-Laws of the Corporation provide for indemnification of officers and
directors of the Corporation to the greatest extent permitted by Delaware law
for any and all fees, costs and expenses incurred in connection with any action
or proceeding, civil or criminal, commenced or threatened, arising out of
services by or on behalf of the Corporation, providing such officer's or
director's acts were not committed in bad faith. The By-Laws also provide for
advancing funds to pay for anticipated costs and authorizes the Board to enter
into an indemnification agreement with each officer or director.
In accordance with Delaware law, the Corporation's Certificate of
Incorporation contains provisions eliminating the personal liability of
directors, except for breach of a director's fiduciary duty of loyalty to the
Corporation or to its stockholders, acts or omission not in good faith or which
involve intentional misconduct or a knowing violation of the law, and in respect
of any transaction in which a director receives an improper personal benefit.
These provisions only pertain to breaches of duty by directors as such, and not
in any other corporate capacity, e.g., as an officer. As a result of the
inclusion of such provisions, neither the Corporation nor stockholders may be
able to recover monetary damages against directors for actions taken by them
which are ultimately found to have constituted negligence or gross negligence,
or which are ultimately found to have been in violation of their fiduciary
duties, although it may be possible to obtain injunctive or equitable relief
with respect to such actions. If equitable remedies are found not to be
available to stockholders in any particular case, stockholders may not have an
effective remedy against the challenged conduct.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Corporation
pursuant to the foregoing provisions, the Corporation has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and therefore is
unenforceable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as disclosed herein, the Company has not entered into any material
transactions or series of similar
10
<PAGE> 13
transactions with any director, executive officer or any security holder owning
5% or more of the Company's Common Stock.
Pursuant to an agreement dated October 1, 1999 with Bank of America, Mr.
Botti personally guaranteed the Company's repayment of its line of credit with
Bank of America.
Effective September 24, 1999, the Company entered into a consulting
agreement with Nicholas Themelis pursuant to which Mr. Themelis would provide
certain services to the Company with respect to marketing and sales of its
Authentidate business. Pursuant to the agreement, Mr. Themelis received
compensation equal to his verifiable expenses incurred while performing services
under the agreement and Series B Common Stock Purchase Warrants to purchase
20,000 shares of Common Stock at an exercise price of $1.375 per share.
For information concerning employment agreements with, and compensation of,
the Company's executive officers and directors, see "MANAGEMENT -- Executive
Compensation."
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the Corporation's
Year 2001 Annual Meeting of Stockholders must be received by the Corporation on
or prior to September 24, 2000 to be eligible for inclusion in the Corporation's
proxy statement and form of proxy to be used in connection with the Year 2001
Annual Meeting of Stockholders.
FINANCIAL INFORMATION
A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM l0-KSB FOR THE FISCAL
YEAR ENDED JUNE 30, 1999 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL
BE FURNISHED WITHOUT THE ACCOMPANYING EXHIBITS TO STOCKHOLDERS WITHOUT CHARGE
UPON WRITTEN REQUEST THEREFOR SENT TO IRA C. WHITMAN, SECRETARY, BITWISE
DESIGNS, INC., 2165 TECHNOLOGY DRIVE, SCHENECTADY, NY 12308. Each such request
must set forth a good faith representation that as of December 6, 1999 the
person making the request was the beneficial owner of Common Shares or Series A
Preferred Stock of the Corporation entitled to vote at the Annual Meeting of
Stockholders. You may also obtain a copy of the Company's Form 10-KSB over the
Internet from the Company's Web Site, "WWW.DOCSTAR.COM".
II. OTHER BUSINESS
As of the date of this Proxy Statement, the only business which the Board
of Directors intends to present, and knows that others will present, at the
Annual Meeting is that herein above set forth. If any other matter or matters
are properly brought before the Annual Meeting, or any adjournments thereof, it
is the intention of the persons named in the accompanying form of proxy to vote
the proxy on such matters in accordance with their judgment.
By Order of the Board of Directors
Ira C. Whitman, Secretary
December 14, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE AND RETURN
YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF IT IS
MAILED IN THE UNITED STATES OF AMERICA.
11
<PAGE> 14
BITWISE DESIGNS, INC.
ANNUAL MEETING OF STOCKHOLDERS - JANUARY 21, 1999
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints John T. Botti and Ira C. Whitman, and each
of them, proxies, with full power of substitution to each, to vote all shares of
Common Stock, and Series A Preferred Stock of BITWISE DESIGNS, INC. owned by the
undersigned at the Annual Meeting of Stockholders of BITWISE DESIGNS, INC. to be
held on January 21, 1999 and at any adjournments thereof, hereby revoking any
proxy heretofore given. The undersigned instructs such proxies to vote as
follows:
I. ELECTION OF DIRECTORS
FOR all nominees listed WITHHOLD AUTHORITY
below (except as marked to vote for all nominees
to the contrary below) [ ] listed below [ ]
(Instruction: To withhold authority for any individual nominee, strike a line
through the nominee's name in the list below)
John T. Botti Ira C. Whitman J. Edward Sheridan
Nicholas Themelis Charles C. Johnston Steven A. Kriegsman
and to vote upon any other business as may properly come before the meeting or
any adjournment thereof, all as described in the Proxy Statement dated December
7, 1998, receipt of which is hereby acknowledged.
(Continued and to be signed on the reverse side)
<PAGE> 15
Either of the proxies or their respective substitutes, who shall be present
and acting shall have and may exercise all the powers hereby granted.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE ELECTION OF
SEVEN DIRECTORS UNLESS CONTRARY INSTRUCTIONS ARE GIVEN.
Said proxies will use their discretion with respect to any other matters
which properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. PLEASE SIGN
AND RETURN THE PROXY IN THE ENCLOSED ENVELOPE.
Dated: , 1999
---------------------------
Signature(s)
--------------------------------------
--------------------------------------
(Please date and sign exactly as name appears at
left. For joint accounts, each joint owner should
sign, Executors, administrators, trustees, etc.,
should also so indicate when signing.)
