SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. 2)
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(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
U.S. Wireless Data, Inc.
................................................................................
(Name of Registrant as Specified In Its Charter)
................................................................................
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
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or the Form or Schedule and the date of its filing.
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4) Date Filed: ........................................................
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U.S. WIRELESS DATA, INC.
805 Third Avenue, 8th Floor
New York, New York 10022
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of U.S. Wireless Data, Inc.:
The Annual Meeting of Shareholders of U.S. Wireless Data, Inc. (the
"Company") will be held at 805 Third Avenue, 8th Floor, New York, New York 10022
at 2:00 p.m., Eastern time, on _____ __, 2000, for the following purposes:
1. To elect a Board of Directors for the ensuing year;
2. To consider and act upon a proposal to amend the Company's Articles of
Incorporation to increase the total number of authorized shares of
capital stock from 55,000,000 to 225,000,000, of which 200,000,000
shall be Common Stock, no par value per share ("Common Stock"), and
25,000,000 shall be Preferred Stock, no par value per share
("Preferred Stock");
3. To consider and act upon a proposal to authorize the Company to
reincorporate in the State of Delaware;
4. To consider and act upon a proposal to adopt the Company's 2000 Stock
Option Plan;
5. To consider and act upon a proposal to authorize the Board of
Directors to amend the Company's Articles of Incorporation to
effectuate a one-for-four reverse stock split of the Company's Common
Stock;
6. To ratify the appointment of M.R. Weiser & Co. LLP as the independent
auditors and public accountants for the Company for the fiscal year
ending June 30, 2000; and
7. To transact such other business as may properly come before the
meeting.
All shareholders are invited to attend the meeting. Shareholders of record
at the close of business on ________ __, 2000, the record date fixed by the
Board of Directors, are entitled to notice of and to vote at the meeting. A
complete list of shareholders entitled to notice of and to vote at the meeting
will be open to examination by shareholders beginning 10 days prior to the
meeting for any purpose germane to the meeting during normal business hours at
the Company's principal office at 805 Third Avenue, 8th Floor, New York, New
York 10022.
Whether or not you intend to be present at the meeting, please sign and
date the enclosed proxy and return it in the enclosed envelope.
By Order of the Board of Directors
Dean M. Leavitt
Chairman and Chief Executive Officer
New York, New York
____ __, 2000
<PAGE>
U.S. WIRELESS DATA, INC.
805 Third Avenue, 8th Floor
New York, New York 10022
(212) 750-7766
---------------
PROXY STATEMENT
---------------
Solicitation and Revocability of Proxy
This proxy statement ("Proxy Statement") and the accompanying proxy
("Proxy") is furnished in connection with the solicitation by the Board of
Directors (the "Board") of U.S. Wireless Data, Inc., a Colorado corporation (the
"Company"), for use at the Annual Meeting of Shareholders (the "Annual Meeting")
to be held at the principal executive office of the Company, 805 Third Avenue,
8th Floor, New York, New York 10022 on _____ __, 2000 at 2:00 p.m., Eastern
Time, and for any postponement or adjournment thereof, for the purposes set
forth in the accompanying Notice of Annual Meeting of Shareholders.
The Company will bear the cost of solicitation of proxies. In addition to
the solicitation of proxies by mail, certain officers, agents and employees of
the Company, without extra remuneration, may also solicit proxies personally by
telephone, telefax or other means of communication. In addition to mailing
copies of this material to shareholders, the Company may request persons, and
reimburse them for their expenses in connection therewith, who hold stock in
their names or custody or in the names of nominees for others, to forward such
material to those persons for whom they hold stock of the Company and to request
their authority for execution of the proxies.
A shareholder who has given a Proxy may revoke it at any time prior to its
exercise by giving written notice of such revocation to the Secretary of the
Company, executing and delivering to the Company a letter dated Proxy reflecting
contrary instructions or appearing at the Annual Meeting and voting in person.
The mailing address of the Company's principal executive office is 805
Third Avenue, 8th Floor, New York, New York 10022, and its telephone number at
this office is (212) 750-7766.
Shares Outstanding, Voting Rights and Proxies
Holders of shares of the Company's common stock, no par value per share
(the "Common Stock") and the Company's Series C Convertible Preferred Stock (the
"Series C Preferred Stock") of record at the close of business on ________ __,
2000 (the "Record Date") are entitled to vote at the Annual Meeting or any
postponement or adjournment thereof. On the Record Date there were issued and
outstanding ____ shares of Common Stock and ____ shares of Series C Preferred
Stock. Each outstanding share of Common Stock is entitled to one vote. Each
holder of Series C Preferred Stock is entitled to one vote for each share of
Common Stock issuable upon conversion of the Series C Preferred Stock and votes
together with the Common Stock as one class on all matters submitted to a vote
of the stockholders of the Company, except that holders of the Series C
Preferred Stock are entitled to elect two of the Company's directors (the
"Series C Directors") and are entitled to vote separately as a class on the
proposal to amend the Company's Articles of Incorporation to increase authorized
capital.
The holders of a majority of the outstanding shares of the Company entitled
to vote on the matters proposed herein, present in person or by Proxy, shall
constitute a quorum at the Annual Meeting. The approval of a plurality of the
shares present in person or represented by Proxy, assuming a quorum at the
Annual Meeting, is required for election of five of the seven nominees for
director. The holders of a plurality of the shares of Series C Preferred Stock
present in person or represented by Proxy, assuming a quorum of holders of
Series C Preferred Stock at the Annual Meeting, voting separately as a class,
have the right to elect two directors. The approval of a majority of outstanding
shares of each class of the Company's stock entitled to vote on the matter is
required to approve proposals 2, 3 and 5. In all other matters, the approval of
a majority of the shares present in person or represented by Proxy, assuming a
quorum at the Annual Meeting, is required for the adoption of such matters.
The form of Proxy solicited by the Board affords shareholders the ability
to specify a choice among approval of, disapproval of, or abstention with
respect to, each matter to be acted upon at the Annual Meeting. Shares of Common
Stock and Series C Preferred Stock represented by the Proxy will be voted,
except as to matters with respect to which authority to vote is specifically
withheld. Where the solicited shareholder indicates a choice on the form of
Proxy with respect to any matter to be acted upon, the shares will be voted as
specified. Abstentions and broker non-votes will not have the effect of votes in
opposition to a director or "against" any other proposal to be considered at the
Annual Meeting.
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The persons named as proxies are Dean M. Leavitt and Charles I. Leone. All
shares of Common Stock and Series C Preferred Stock represented by properly
executed proxies which are returned and not revoked will be voted in accordance
with the instructions, if any, given therein. If no instructions are provided in
a Proxy, the shares of Common Stock and Series C Preferred Stock represented by
such Proxy will be voted FOR the Board's nominees for director, FOR the nominees
for Series C Directors and FOR the approval of Proposals 2, 3, 4, 5 and 6 and in
accordance with the Proxy holder's best judgment as to any other matters raised
at the Annual Meeting.
Dissenter's Rights
Under Colorado law, shareholders are not entitled to dissenter's rights of
appraisal on any proposal referred to herein.
The approximate date on which this Proxy Statement and the accompanying
form of Proxy are first being mailed to shareholders is ________ __, 2000.
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INFORMATION RELATING TO VARIOUS PROPOSALS
Information Concerning Directors
At the time of the Annual Meeting, the Board will consist of seven
incumbent members who are seeking to be elected at the meeting to hold office
until the next annual or special meeting of shareholders at which a new Board is
elected and until their successors shall have been elected and qualified. The
Company's Articles of Incorporation and Bylaws presently provide for a Board of
no less than three (3) and no more than nine (9) directors. It is intended that
the accompanying Proxy will be voted in favor of the following persons to serve
as directors, unless the shareholder indicates to the contrary on the Proxy.
Each of the nominees is currently a director of the Company.
Dean M. Leavitt, Alvin C. Rice and Chester N. Winter, all of whom are
incumbent directors, have been nominated by the Board for election as directors
of the Company. Barry A. Kaplan and Edwin Cooperman, both of whom are incumbent
directors, have been nominated by or on behalf of the holders of the Company's
Series C Preferred Stock for election as directors of the Company. Amy L.
Newmark and Michael S. Falk, both of whom are incumbent directors, have been
nominated by the Board pursuant to an agreement which gives Commonwealth the
right to designate two individuals for election as directors of the Company. For
a further discussion of this right and other transactions with Commonwealth, see
"Certain Relationships and Related Transactions--Transactions with Commonwealth
and Dean M. Leavitt - Private Placement." All of the nominees have informed the
Company that they are willing to serve, if elected, and management has no reason
to believe that any of the nominees will be unavailable. In the event a nominee
for director should become unavailable for election, the persons named in the
Proxy will vote for the election of any other person who may be recommended and
nominated by the Board, the holders of Series C Preferred Stock or Commonwealth,
as applicable, for the office of director. The persons named in the accompanying
Proxy intend to vote for the election as director of the nominees listed herein.
Information regarding directors is set forth below.
The following table sets forth certain information with respect to each
person who is currently a director and/or executive officer of the Company and
the individuals nominated and recommended to be elected by the Board and is
based on the records of the Company and information furnished to it by such
persons. Reference is made to "Security Ownership of Certain Beneficial Owners
and Management" for information pertaining to stock ownership by each director
and executive officer of the Company and the nominees.
Directors and Executive Officers
The following table contains certain information with respect to the directors
and executive officers of the Company.
<TABLE>
<CAPTION>
Name Age Principal Occupation Director Since
---- --- -------------------- --------------
<S> <C> <C> <C>
Dean M. Leavitt 40 Chief Executive Officer and Chairman May 1999
of the Board of the Company
Edwin M. Cooperman 56 Chairman of the Board of Directors March 2000
of Tutor Time Learning Systems, Inc.
Michael S. Falk 38 Chief Executive Officer of March 2000
Commonwealth Associates, L.P.
Barry A. Kaplan 44 Managing Director March 2000
Goldman, Sachs & Co.
Amy L. Newmark 43 Private Investor March 2000
Alvin C. Rice 76 Vice Chairman of Merchant's Group June 1998
International, Inc.
Chester N. Winter 68 General Partner of Colorado February 1994
Incubator Fund, L.P.
</TABLE>
3
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Dean M. Leavitt. Mr. Leavitt became the Chief Executive Officer and
Chairman of the Board of the Company on May 3, 1999. Prior to joining the
Company, Mr. Leavitt was President of US Data Capture, Inc., which is
headquartered in Greenwich, Connecticut. US Data Capture is a "boutique" credit
card processing company which Mr. Leavitt founded in 1991. US Data Capture
specializes in formulating and implementing sophisticated credit card acceptance
applications for clients such as hospitals, universities, municipalities,
publishing houses, professional sports teams and sporting events, transportation
companies and other card-accepting organizations. Prior to founding US Data
Capture, Mr. Leavitt served as Senior Vice President and Director of Finance at
Rosenschein Properties, a real estate development company, Senior Vice President
of Finance at Kellogg Properties, a real estate acquisitions and development
firm, and as an associate in the Private Placements Department at Sybedon
Corporation, an investment banking firm that served the real estate community.
Mr. Leavitt holds a Bachelor of Arts degree in economics and psychology from
Emory University in Atlanta, Georgia.
Alvin C. Rice. Mr. Rice is a Vice Chairman of Merchant's Group
International, Inc., a private merchant bank located in San Francisco,
California, that he joined on June 1, 1999. Prior to June 1, 1999, and since
June 1, 1998, Mr. Rice was affiliated with entrenet Group, LLC, a management and
consulting limited liability company, as a senior associate. He became a
director of the Company on June 1, 1998. His career in banking, investment
banking and commercial business management has spanned over 40 years. He served
as Chairman of California Bancorp Systems, Inc. from January 1994 until December
1997 and as Chairman of the First National Bank of Marin from 1989 until
December 1993. Mr. Rice has also served as a Director of Memorex Corporation,
Fairchild Camera & Instrument Co., and the Montreal Trust Company. He is a cum
laude and Phi Beta Kappa graduate of Stanford University from which he received
a B.A. degree. He attended the Graduate School of Banking at the University of
Wisconsin and Harvard's Advanced Management Program.
Amy L. Newmark. Ms. Newmark is a private investor in the technology,
Internet and telecommunications fields. From 1995 to 1997, she was Executive
Vice President--Strategic Planning at Winstar Communications, Inc., a
telecommunications, Internet, and media company. From 1993 to 1995, Ms. Newmark
was the general partner of Information Age Partners, a hedge fund investing
primarily in technology and emerging growth companies. Prior to that she was a
securities analyst specializing in telecommunications and technology companies.
She is a director of Cereus Technology Partners, Inc., QueryObject Systems
Corp., and iQO.com. Ms. Newmark graduated magna cum laude from Harvard College
in 1979, and is a Chartered Financial Analyst.
Barry A. Kaplan. Mr. Kaplan is a Managing Director at Goldman, Sachs & Co.
in the Investment Research Department, where he co-heads the firm's U.S.
Communications, Media and Entertainment efforts, and covers the wireless
communications and cable television industries. Prior to joining Goldman, Sachs
in 1986, Mr. Kaplan was an analyst at Bear, Stearns & Co. and A.G. Becker Inc.
and, before that, worked in the broadcasting industry. He is a Chartered
Financial Analyst and a member of the New York Society of Security Analysts and
the Media and Entertainment Analysts Association of New York. He is also a
member of the Board of Overseers of the Brandeis University Graduate School of
International Economics and Finance. Mr. Kaplan graduated from Brandeis
University in 1977, and received his MBA from the Wharton School of the
University of Pennsylvania in 1980.
Chester N. Winter. Mr. Winter is a general partner of Colorado Incubator
Fund, L.P., a venture capital fund which invests in early stage high technology
enterprises, including software, materials, medical and bio-technology, a
position he has held since 1991. Since March 1993, he has also been Vice
President of Paradigm Partners, LLC, a consulting company. Mr. Winter became a
director of the Company in February 1994. From February 1994 until September
1995 he served as Chairman of Highland Energy, Inc., a subsidiary of Eastern
Utility Associates. He holds B.A. and M.S. degrees in Economics from the
University of Colorado and has completed the Owner/President Management Program
at Harvard University Graduate School of Business.
Edwin M. Cooperman. Mr. Cooperman is Chairman of the Board of Tutor Time
Learning Systems, Inc., a privately held company engaged in pre-school education
and childcare. He is also a principal of T.C. Solutions, a privately held
investment and financial services consulting firm. Previously, Mr. Cooperman was
Chairman of the Travelers Bank Group and Executive Vice President, Travelers
Group, where he was responsible for strategic marketing, the integration of
Travelers brands and products, joint and cross marketing efforts and corporate
identity strategies, as well as expanding the Travelers Bank Group's credit card
run in portfolios. After joining Travelers in 1991, Mr. Cooperman became
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Chairman and CEO of Primerica Financial Services Group, which comprises
Primerica Financial Services, Benefit Life Insurance Company and Primerica
Financial Services Canada. Previous to this, Mr. Cooperman had a distinguished
career at American Express. Starting there as an attorney in 1972, he ultimately
became Chairman and Co-Chief Executive of Travel Related Services, North America
responsible for the core North American businesses of that company, including
the American Express Card, American Express Travel Services, American Express
Corporate Card, card member investments, insurance, and lending products and
services. Mr. Cooperman graduated from Queens College in 1964, earned a J.D.
from Ohio State University Law School and an L.L.M. degree from NYU School of
Law. He went on to become an associate professor at the U.S. Military Academy at
West Point.
Michael S. Falk. Mr. Falk is the co-founder and currently the Chief
Executive Officer of Commonwealth Associates, L.P., a New York-based merchant
bank founded in 1988 that specializes in early-stage investments in Internet,
technology and telecommunications businesses. Mr. Falk has served as an officer
of Commonwealth since 1988 and as its Chief Executive Officer since 1995. Mr.
Falk has also served as a director of FutureLink Corporation, an Application
Service Provider ("ASP), since 1999, and as a director of Intelispan, Inc., a
managed network services provider, since 2000. Mr. Falk is also a director of
EB2B Commerce, Inc. Mr. Falk holds a B.A. degree with honors in Economics from
Queens College and attended the Stanford University Executive Program for
Smaller Companies. Committees of the Board--Board Meetings
Committees of the Board - Board Meetings
The audit committee of the Board was established in May 2000. The audit
committee recommends engagement of the Company's independent accountants,
approves services performed by such accountants, and reviews and evaluates the
Company's accounting system of internal controls. The members of the audit
committee are Messrs. Cooperman, Rice and Winter. The audit committee has not
yet met as of the date of this Proxy Statement.
During fiscal year 1999, the Board held 12 meetings and acted once by
consent without a meeting. During the nine months ended March 31, 2000, the
Board held 12 meetings and acted twice by consent. All directors in office at
that time attended more than 75% of the aggregate number of these meetings of
the Board.
Other Executive Officers
The other executive officers of the Company who are not also directors are:
<TABLE>
<CAPTION>
Name Age Position with the Company Officer Since
---- --- ------------------------- -------------
<S> <C> <C> <C>
Charles I. Leone 39 Chief Financial Officer, February 2000
Chief Operating Officer and
Secretary
John H. (Jack) Perveiler 49 Vice President/National Sales February 2000
Manager
Marc R. Shultz 45 Vice President of Business January 2000
Development
</TABLE>
Charles I. Leone. Mr. Leone joined the Company as Chief Financial Officer
and Chief Operating Officer in February 2000. Mr. Leone previously served as
Senior Vice President, Systems and Finance, Retail Division for Phoenix
Investment Partners, Ltd., a leading U.S. investment management company
("Phoenix"). Mr. Leone served as Chief Financial Officer and a First Vice
President of Zweig/Glaser Advisers and Zweig Securities Corp. and as an
executive officer and/or director of various affiliates of such entities. He
joined these entities at their formation in 1989 and served with them until
their acquisition by Phoenix on March 1, 1999. Prior to that, Mr. Leone was in
public accounting at Coopers & Lybrand (now PricewaterhouseCoopers LLP) and
McGladrey & Pullen. Mr. Leone is a Certified Public Accountant and received a
B.S. in Accounting from C. W. Post Center of Long Island University.
5
<PAGE>
John H. (Jack) Perveiler. Mr. Perveiler became the Company's Vice
President/National Sales Manager in February 2000. Prior to joining the Company,
Mr. Perveiler spent five years as Vice President Sales for the Central and
Western Regions for Hypercom Corporation. Hypercom Corporation is a world leader
in transaction processing providing POS terminals, software, networking and
services to the merchant acquiring industry. From 1991 to 1995, he was District
Sales Manager for Atalla Corporation, a wholly owned subsidiary of Tandem (now
Compaq Computer). While at Atalla he was responsible for the development and
sale of the Company's first POS terminal products which resulted in the sale of
the new POS terminal to Kmart Corporation. Previous to this, he spent 10 years
with Unisys Corporation where he developed and sold custom software applications
to the retail banking market. Mr. Perveiler received a B.S. in Psychology from
Chicago State University.
Marc R. Shultz. Mr. Shultz became the Company's Vice President of Business
Development in January 2000, after serving as a Senior Account Executive of the
Company since May 1999. From May 1997 through May 1999, he was the Director of
Sales for Intellect Electronics, the United States division of an international
manufacturer of wireless POS terminals. From May 1994 through May 1997, Mr.
Shultz designed and sold the iq Transaction Processing System ("iq TPS") for
Diebold, Incorporated, the leading manufacturer of ATM machines in the United
States. iq TPS combines university identification cards, ATM cards and Smart
Cards into a single instrument and was recognized by the Smithsonian Institute
with a 1999 Laureate Award as one of the six best innovations in the Finance,
Insurance and Real Estate industries worldwide. Mr. Shultz also has experience
with Buypass, Incorporated and McDonnell Douglas Payment Systems Company, two of
the leading processors in the credit card industry. Mr. Shultz holds a Bachelor
of Science degree in Business Administration and Marketing from California State
University, Northridge.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The transactions described under the heading "Transactions with
Commonwealth and Dean M. Leavitt" are particularly relevant to the proposal to
authorize additional Common Stock in light of the fact that there is currently
not sufficient authorized Common Stock to permit the conversion or exercise of
securities owned by them. The Board believes that the other transactions
described below are relevant to the election of directors because these
transactions occurred at a time when Messrs. Leavitt, Rice and Winter were
members of the Board. To the extent that such transactions relate to their
ability to act as directors, shareholders should consider them.
Transactions with Commonwealth and Dean M. Leavitt
Bridge Financing
On December 23, 1999, the Company entered into an agreement with
Commonwealth Associates, LP ("Commonwealth") in connection with the private
placement (the "Private Placement") of the Company's Series C Preferred Stock
and Common Stock Purchase Warrants. The securities issued in the Private
Placement and in the bridge financing described below have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), and may not
be offered or sold in the United States absent registration or an applicable
exemption from registration requirements.
In connection with the engagement of Commonwealth, the Company entered into
an agreement with ComVest Capital Management, LLC ("ComVest"), an affiliate of
Commonwealth, pursuant to which ComVest lent the Company $1,000,000 and Dean M.
Leavitt, the Company's Chairman and Chief Executive Officer lent the Company
$100,000 (the "Bridge Financing"). ComVest and Mr. Leavitt subsequently lent the
Company an additional $250,000 and $25,000, respectively. The loans were secured
by substantially all of the Company's assets pursuant to general security
agreements and bore interest at a rate of 8% per annum. The notes were due on
the earlier of (x) the date a change of control (as defined in the note) occurs,
(y) the date the Company concludes a debt or equity financing in which the
Company receives at least $5,000,000 of gross proceeds, or (z) December 30,
2000. The notes included certain negative covenants, including prohibitions on
the payment of certain dividends, redemptions and asset sales and limitations on
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<PAGE>
the incurrence of indebtedness, liens and the issuance, prior to March 31, 2000,
of securities not specifically exempted. The lenders had the option to convert
the outstanding principal amount of the notes into securities issued in
connection with any private placement transaction on the same terms as investors
in such placement. In addition, the Company agreed to appoint a designee of
Commonwealth to the Board and to allow an observer to be present at all meetings
of the Board. In addition to the Bridge Financing, the Company also borrowed
$125,000 from ComVest and $75,000 from Mr. Leavitt (the "Additional Notes"). The
Additional Notes were due on demand and were interest free. The Company repaid
the full outstanding amount of the Bridge Financing and the Additional Notes on
March 18, 2000, with a portion of the proceeds from the Private Placement
described below. The rights of ComVest under the Bridge Financing expired on
March 18, 2000, when the loans were repaid.
In connection with the Bridge Financing, the Company also issued ComVest
and Mr. Leavitt warrants to purchase 13,363,363 shares and 1,363,637 shares,
respectively, of Common Stock at an exercise price of $.01 per share. These
warrants are fully exercisable at any time, subject to certain conditions,
including the availability of a sufficient number of shares of Common Stock for
issuance upon exercise thereof. On March 10, 2000, Commonwealth and Mr. Leavitt
exercised their warrants with respect to 7,920,000 shares and 792,000 shares,
respectively. The remaining warrants expire on December 30, 2006. ComVest and
Mr. Leavitt have certain demand and "piggyback" registration rights, commencing
in June 2000, as to the shares of Common Stock underlying the warrants.
Currently, the Company does not have enough authorized Common Stock for
the remaining warrants to be fully exercised. For a further discussion regarding
the Company's need for additional share capital, see Proposal 2: "Approval of
Incorporation of Articles of Incorporation to Increase the Authorized Share
Capital." As a result, the Company entered into Economic Participation
Agreements with the bridge lenders which are intended to provide the bridge
lenders with the economic equivalent of ownership of the shares of Common Stock
underlying the warrants in the event that the Company is unable to amend its
Articles of Incorporation to increase the number of authorized shares of Common
Stock. The Economic Participation Agreements terminate at such time as a
sufficient number of shares of our Common Stock is authorized and reserved for
issuance upon the exercise of the warrants, unless the Company has failed to
amend its Articles of Incorporation by _________, 2000, in which case the bridge
lenders are entitled to liquidated damages which are calculated in accordance
with the agreement. If the agreements are not automatically terminated as
contemplated by the agreements by __________, 2000, then the Company shall pay
to the bridge lenders on such day a nonconversion fee of $550,000 and, in
addition, until such time as the agreements are terminated, the bridge lenders
may elect to receive in consideration for canceling the agreements, the greater
of (a) $2.5 million in cash or (B) the product of (i) the number of shares as
adjusted per the agreement and (ii) the remainder of (x) the closing asking
price of the Common Stock on the last trading date prior to the exercise by the
bridge lenders of their liquidation right and (y) $0.01. See Proposal 2:
"Approval of Amendment of Articles of Incorporation to Increase the Authorized
Share Capital." Private Placement.
Private Placement.
Commonwealth acted as placement agent in the Private Placement which closed
on May 31, 2000 pursuant to which 558.66 Units have been sold at $100,000 per
Unit for aggregate proceeds of $55,866,000. Each Unit consists of 10,000 shares
of the Company's Series C Preferred Stock (which is initially convertible into
66,667 shares of Common Stock) and warrants to purchase Common Stock equal to
25% of the number of shares into which the Series C Preferred Stock is
convertible.
The Series C Preferred Stock has a liquidation preference of $10 per share,
plus accrued and unpaid dividends. The holders of Series C Preferred Stock are
entitled to vote their shares of Series C Preferred Stock on an as converted
basis with the holders of Common Stock as a single class on all matters
submitted to a vote of the shareholders, except as otherwise required by
applicable law and except that the holders of Series C Preferred Stock voting
separately as a class have the right to elect two directors to the Board of
Directors.
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Each share of Series C Preferred Stock is convertible at any time, subject
to the approval by the shareholders of an amendment to the Company's Articles of
Incorporation to increase the number of authorized shares of Common Stock, at
the option of the holder, into a number of shares of Common Stock determined by
dividing the liquidation value by the conversion price, initially $1.50 per
share, which is subject to adjustment for stock splits, recapitalizations and
other similar events. If the Company issues shares of Common Stock at a price
per share less than the then current conversion price, then, subject to certain
exceptions, the conversion price will be automatically reduced to such lower
price and the number of shares issuable upon conversion of the Series C
Preferred Stock shall be increased proportionately. The Series C Preferred Stock
automatically converts into Common Stock (a) if, at any time after June 17,
2000, the average closing bid price of the Company's Common Stock exceeds 300%
of the conversion price for 20 consecutive trading days or (b) upon a public
offering of the Company's securities that raises gross proceeds in excess of
$30,000,000, provided the shareholders have approved an increase in authorized
capital to allow for the conversion of the Series C Preferred Stock.
The warrants issued in connection with the Private Placement (the "Unit
Warrants") are exercisable for a period of seven years for an aggregate number
of shares of Common Stock equal to 25% of the number of shares into which the
Series C Preferred Stock is convertible, at an exercise price equal to the then
conversion price. The initial exercise price is $1.50 per share, subject to
adjustment under the same circumstances as the Series C Preferred Stock. The
Unit Warrants are callable for a nominal price at the Company's option on 30
days' notice to the holders of the Unit Warrants if (a) the average closing bid
price of the Company's Common Stock for 20 consecutive trading days exceeds 300%
of the exercise price, as adjusted, (b) the Company's Common Stock is trading on
a national securities exchange or Nasdaq SmallCap or National Market Systems,
and (c) a registration statement covering the shares issuable upon exercise of
the Unit Warrants has been declared effective and the shares issuable upon
exercise of the Unit Warrants are not otherwise subject to any lock-up
restrictions.
The terms of the Series C Preferred Stock and the Unit Warrants may be
amended, modified or waived by an agreement among the Company, Commonwealth and
a committee to be designated by Commonwealth whose members hold in the aggregate
not less than 20% of the outstanding Series C Preferred Stock and not less than
20% of the outstanding Unit Warrants.
The Company has agreed to file a registration statement with respect to the
shares of Common Stock issuable upon conversion of the Series C Preferred Stock
and exercise of the Unit Warrants under the Securities Act by December 2000. The
investors also have certain "piggyback" registration rights with respect to the
shares of Common Stock issuable upon conversion of the Series C Preferred Stock
and the exercise of the Unit Warrants.
Each investor who purchased Units in the Private Placement agreed that it
will not sell, transfer or otherwise dispose of any of the securities sold in
the Private Placement. Thereafter, investors may not sell, transfer or dispose
of more than 25% of such securities during each of the following four 90-day
periods. The lock-up period may be extended by Commonwealth for up to an
additional six months from the closing of any public offering that is
consummated prior to the end of the initial lock-up period, in which event there
shall be no further lock-up at the end of such period. The Company's officers,
directors and certain other existing shareholders agreed to substantially the
same lock-up provisions as set forth above.
Several of the Company's officers and directors purchased Units in the
Private Placement. Dean M. Leavitt, the Company's Chief Executive Officer and
Chairman purchased 2.5 Units, Charles I. Leone, the Company's Chief Financial
Officer and Chief Operating Officer purchased 1 Unit and Robert E. Robichaud,
the Company's former Chief Financial and Accounting Officer, Treasurer and
Secretary purchased .75 of a Unit. Edwin Cooperman, a member of the Board,
8
<PAGE>
purchased 1 Unit and each of Michael S. Falk and Amy Newmark, both also members
of the Board, purchased 2.5 Units. Barry Kaplan, also a member of the Board,
purchased 25 Units. Mr. Kaplan also received from Commonwealth at no charge a
warrant to purchase 1.5 Units exercisable at $100,000 per Unit (from the
warrants Commonwealth received as compensation in the Private Placement).
As part of its compensation, Commonwealth received warrants to purchase
139.664 Units, exercisable at $100,000 per Unit, a commission equal to
$3,910,620, which is 7% of the gross proceeds raised in the Private Placement,
and a structuring fee equal to $1,675,980, which is 3% of the gross proceeds
raised in the Private Placement. Pursuant to a prior agreement with Peter J.
Solomon Securities Company Limited ("PJSC") relating to financing transactions
entered into by the Company, the Company issued to PJSC warrants to purchase
27.933 Units at $100,000 per Unit and paid PJSC a fee of $400,000. The warrants
are exercisable commencing on the date of issuance and for seven years
thereafter.
Commonwealth has the right under an Agency Agreement to designate two
directors to the Board and the following individuals gave proxies to
Commonwealth to vote for the election of such designees: Messrs. Leavitt and
Leone, John H. Perveiler, the Company's Vice President/National Sales Manager,
Marc R. Shultz, the Company's Vice President of Business Development, and Barry
Kaplan, Alvin Rice and Chester Winter, each members of the Board. On March 29,
2000, four new directors joined the Board, including Michael S. Falk, the
Chairman of Commonwealth, and Amy L. Newmark, both of whom were designated by
Commonwealth.
As a condition to the completion of the Private Placement, the Company
agreed that the exercise price of a warrant owned by Dean M. Leavitt, the
Company's Chairman and Chief Executive Officer, to purchase 2,687,500 shares of
Common Stock should be reduced from $3.00 per share to $1.465 per share, the
market price of the Common Stock on January 4, 2000. See "Executive Compensation
-- Current Employment Agreements and Change In Control Provisions Applicable to
Executive Officers and Directors."
Transactions with Cardservice International, Inc.
From August 1994 through the present, Caesar Berger, a director of the
Company until May 1999, was also an officer of the Company's largest customer,
Cardservice International, Inc. ("CSI"). Roger Peirce, another former officer
and director of the Company was a "nonvoting" director of CSI. Sales to CSI
approximated $564,000 and $178,000 in fiscal years 1999 and 1998, respectively.
On October 28, 1998, the Company borrowed the principal amount of $500,000
from the Chief Executive Officer and 50% owner of CSI, Charles Burtzloff. The
note bore interest at 8% per annum and was payable in full on the earlier of the
receipt by the Company of proceeds from the sale of Common Stock to Mr.
Burtzloff or January 1, 1999. In consideration for the loan, the Company also
agreed to issue to Mr. Burtzloff a warrant exercisable to purchase 25,000 shares
of Common Stock at $3.038 per share. The warrant expires on October 27, 2001. On
March 19, 1999, the Company and Mr. Burtzloff agreed to convert the principal
and accrued interest on the note into 589,213 shares of Common Stock. The shares
were issued on June 24, 1999.
During fiscal 1996, CSI purchased $162,500 of raw materials (point-of-sale
terminal components) on behalf of the Company in exchange for 142,544 shares of
Common Stock issued subsequent to June 30, 1996 at 150% of the then current fair
market value plus registration rights after one year on all stock owned by CSI.
This transaction increased CSI's ownership in the Company from 2% to 5%. At June
30, 1998, CSI had completely divested its stock interest in the Company.
Additionally, the Company provides sales rebates to CSI on POS-507 units
sold by CSI to end users of product built with the raw materials purchased using
the amounts advanced from CSI. Through June 30, 1999, a total of $93,000 had
been paid under the agreement.
9
<PAGE>
Transactions with Liviakis Financial Communications, Inc. ("LFC") and Certain
LFC Affiliates
In July 1997, the Company entered into a Consulting Agreement with Liviakis
Financial Communications, Inc. and its affiliates, Messrs. John Liviakis and
Robert B. Prag, pursuant to which LFC agreed to provide the Company with
financial and business consulting and public and investor relations services
(the "LFC Consulting Agreement"). The Company was obligated to pay LFC
consulting fees of $10,000 in cash and 300,000 shares of its Common Stock over
the one-year term of the LFC Consulting Agreement. Of the shares, 75% were
issued to LFC and 25% to Mr. Prag. Pursuant to the LFC Consulting Agreement, the
Company was also obligated to pay LFC cash equal to 2.5% of the gross proceeds
received in any direct financing located for the Company by LFC.
The Company also sold a total of 3,500,000 shares of Common Stock and
warrants to purchase up to an additional 1,600,000 shares of Common Stock
exercisable at $.01 per share to Mr. Liviakis (2,625,000 shares and 1,200,000
warrants) and Mr. Prag (825,000 shares and 400,000 warrants) in August 1997 for
$500,000 in cash. The warrants were exercised during fiscal 1998 and 1999.
Pursuant to this transaction, LFC and these affiliates became significant
shareholders of the Company. The Common Stock issued for cash, under the LFC
Consulting Agreement and upon exercise of the warrants to LFC and its
affiliates, has certain registration rights (which include the right to register
any other shares of the Company which they may possess at the time of any
registration in which they have a right to include shares), including one-time
demand rights and unlimited piggyback rights.
Pursuant to the LFC Consulting Agreement, Messrs. Liviakis and Prag were
granted the right to approve the appointment of certain officers and directors
of the Company. Messrs. Liviakis and Prag approved the appointment of Messrs.
Peirce and Russel to the Board during the first half of fiscal year 1999.
Messrs. Liviakis and Prag no longer have the right to approve the appointment of
officers and directors of the Company.
Since the LFC related financing transaction and the LFC Consulting
Agreement were entered into by the Company at approximately the same time, the
Company treated these transactions as one transaction for accounting purposes.
Based on the fair market value of the Common Stock as determined by an
independent valuation, the initial 3,500,000 shares of Common Stock and warrants
to purchase 1,600,000 shares of Common Stock issued in the transactions, net of
cash proceeds received, were valued at approximately $1,285,000 and recorded as
prepaid consulting services. The consulting services were amortized on a
straight-line basis over the term of the LFC Consulting Agreement commencing
with the July 25, 1997 effective date of the agreement. The 300,000 shares which
were issuable over the term of the LFC Consulting Agreement were valued as such
shares vested, and resulted in an additional $1,085,000 in consulting expenses
during fiscal year 1998. All of these shares were included in the registration
statement that became effective August 7, 1998. None of the shares were sold
under the registration statement prior to the shares being removed from
registration by a post-effective amendment filed as of June 24, 1999.
In December 1997, the Company paid LFC $76,500 in connection with the
closing of the sale of $3,060,000 of 8% Convertible Debentures which were due on
December 31, 1999 but converted to Series A Preferred Stock in February 1998.
The Company paid LFC $50,000 in conjunction with the July 1998 closing of the
sale of $2,000,000 of 6% Convertible Subordinated Debentures due July 21, 2000.
Between October 14 and November 30, 1997, the Company received several
bridge loans from LFC in the total amount of $475,000. The Company was obligated
to pay LFC interest on the amount borrowed at the rate of 9% per annum. The
Company paid LFC the amount due on these loans, with interest at the stated
rate, from the proceeds of the sale of the 8% Convertible Debentures sold in
December 1997.
10
<PAGE>
On June 30, 1998, the Company and LFC extended LFC's consulting
relationship with the Company through a new consulting agreement covering the
period from August 1, 1998 through March 15, 1999 (the "New LFC Agreement"). The
terms of the New LFC Agreement are substantially the same as the original LFC
Consulting Agreement. For services rendered under the New LFC Agreement, LFC
received 290,000 shares of Common Stock, (valued at $4.375 per share) as a
signing bonus upon execution of the New LFC Agreement. LFC received 75% of the
shares and 25% were issued to Mr. Prag. The Common Stock issued to LFC under the
New LFC Agreement has certain registration rights. In conjunction with the New
LFC Agreement, LFC agreed to a further lock-up of all shares owned by LFC and
its affiliates, pursuant to which they agreed not to sell such shares prior to
February 1, 1999, even though certain of those shares were included in the
registration statement which became effective August 7, 1998. Under the New LFC
Agreement, the Company also agreed to expand its Board of Directors to include
two additional outside directors acceptable to LFC. During the first half of
fiscal 1999, the appointment of Messrs. Peirce and Russell to the Board was
approved by LFC. Messrs. Peirce and Russell have since resigned from the Board.
On September 22, 1998, the Company borrowed $1,300,000 from LFC under a
note due April 1, 1999, with interest at 8% per year. The Company used $1
million of the proceeds to redeem $833,000 of its Series A Preferred Stock.
Substantially all available intangible assets of the Company were pledged to
secure the note. During the period from November 1998 through February 1999, the
Company received bridge loans from LFC totaling an additional $690,000 evidenced
by 8% notes payable due April 1, 1999. On March 19, 1999, the Company and LFC
agreed to the conversion of $1,990,000 of principal plus accrued interest on the
note to 2,344,458 shares of Common Stock at a price of $1.09375 per share. The
shares were issued on June 24, 1999.
On March 12, 1999, LFC guaranteed a $250,000 promissory note due June 12,
1999, bearing interest at 10% issued by the Company in favor of RBB Bank
Aktiengesellschaft ("RBB") in connection with a loan of $250,000 by RBB to the
Company. The note was repaid in March 2000. For a further discussion of this
loan and other transactions with RBB, see "-Transactions with RBB."
In conjunction with the May 6, 1999 Series B Preferred Stock financing, Mr.
Liviakis agreed to transfer a total of 443,077 shares of Common Stock owned by
him to the finder who located the cash purchaser of the Series B Preferred
Stock. The shares were transferred as "restricted securities" as defined in Rule
144 under the Securities Act and do not have any registration rights. In
December 1999, the Company issued 443,077 shares of restricted Common Stock to
Mr. Liviakis in replacement for the shares he transferred to the finder.
On July 1, 1999, the Company entered into an agreement with LFC to provide
the Company with public relations and investor relations services through March
15, 2000. The Company issued 690,000 shares of Common Stock (valued at $.60 per
share) to LFC for its services under this agreement. LFC was also entitled to
receive a 2.5% cash finder's fee for financing located by LFC and a 2% finder's
fee based on the "total consideration provided" through any acquisition located
by LFC.
LFC and its present and former affiliates previously agreed not to sell any
of the Common Stock acquired in these various transactions prior to March 15,
2000, which is the end of the most recent consulting agreement term.
In order to induce the lender to enter into the Bridge Financing, Mr.
Liviakis, who is the owner of 7,443,458 shares of Common Stock, has agreed to
vote in favor of Proposal 2. See Proposal 2: "Approval of Amendment of Articles
of Incorporation to Increase the Authorized Share Capital."
In order to induce Commonwealth to consummate the Private Placement, Mr.
Liviakis and LFC agreed that for a period beginning on March 15, 2000 and ending
on April 1, 2001 (the "Lock-up Period"), they will not sell, transfer or
otherwise dispose of any securities of the Company that were owned by either of
them as of March 14, 2000 or acquired during the Lock-up Period, except for up
to 1,139,000 shares which may be transferred or sold under certain conditions.
11
<PAGE>
Transactions with RBB Bank
RBB Bank was the record owner, as agent for various of its clients, of
1,600,000 shares of the Company's Series A Preferred Stock, which it purchased
in December 1997. RBB Bank originally purchased as agent for its clients,
$1,600,000 of 8% Convertible Subordinated Debentures Due December 31, 1999 (all
of which converted to 1,600,000 shares of Series A Preferred Stock as of
February 9, 1998) in an "arms-length" transaction, thereby making RBB Bank, as
agent for its clients, a significant shareholder of the Company. The Series A
Preferred Stock has all been redeemed or converted into Common Stock as
described below.
As of March 12, 1998, the Company and Richard P. Draper and his assignee,
Tillicombe International, LDC ("Tillicombe"), entered into an agreement by which
Mr. Draper and Tillicombe agreed to allow the Company to assign to third parties
the Company's rights in a call option which the Company had on 367,684 shares of
Common Stock owned by Tillicombe (the "Call Option") in return for payment to
Tillicombe of $25,000 and the release of the Company's voting and option rights
as to 30,000 shares which were also subject to the Call Option. The Company
originally acquired the Call Option in October 1995, in conjunction with the
dissolution of a subsidiary, Direct Data, Inc., which the Company acquired in
1994, in which Mr. Draper was a principal shareholder. Between March 15 and June
15, 1998, the Company sold and assigned the Call Option on 250,000 shares to RBB
Bank. RBB Bank purchased the Call Option in five increments of 50,000 share
options each, and paid the Company 85% of the average last sale price of the
underlying shares over the five days prior to the date of acquiring each Call
Option, less the Call Option exercise price of $.25 per share. In each
transaction, RBB Bank paid the acquisition price for the Call Option, as well as
the exercise price to Tillicombe prior to taking delivery of the shares. The
Company realized a total of approximately $997,000 from the sale of these Call
Options to RBB Bank.
Effective July 1, 1998, the Company borrowed $250,000 from RBB Bank and
issued a promissory note which was payable in full on or before September 9,
1998. The loan was intended as a short-term bridge loan and was repaid from the
proceeds of the Company's 6% Debentures issued on July 22, 1998. In conjunction
with this loan, the Company also issued a warrant to RBB Bank to purchase 20,000
shares of Common Stock at $4.375 per share, exercisable through September 9,
2001.
On July 22, 1998, RBB Bank purchased $1,000,000 of the Company's 6%
Convertible Subordinated Debentures due July 21, 2000, together with a warrant
to purchase 50,000 shares of Common Stock at $4.50 per share, exercisable
through July 21, 2001. The shares underlying the 6% Debentures and the warrants
are included in the registration statement filed by the Company with the
Securities and Exchange Commission ("SEC") as of June 30, 1999 (SEC File No.
333-81897) which is not yet effective as of the date of this Proxy Statement,
and which the Company is likely to withdraw prior to effectiveness, as described
below.
Effective September 17, 1998, the Company and RBB Bank agreed that the
Company would redeem 440,583 shares of Series A Preferred Stock held by RBB Bank
for $528,700. RBB Bank agreed to refrain from converting any additional shares
of Series A Preferred Stock until at least October 15, 1998 after which time
one-third of the shares of Series A Preferred Stock could be converted to Common
Stock on each of October 15, November 15, and December 15, 1998, respectively.
In conjunction with this transaction, the Company agreed to issue Common Stock
purchase warrants exercisable to purchase that number of shares of Common Stock
equal to five percent (5%) of the number of shares of Series A Preferred Stock
held by the participating investor at the end of each one month period,
exercisable at the current market price of the Common Stock at each issuance
date (the "Series A Redemption Warrants"). The Company issued RBB Bank Series A
Redemption Warrants to purchase: 46,485 shares exercisable at $2.40 per share
through October 15, 2001; 35,471 shares exercisable at $3.36 per share through
November 15, 2001; and 35,471 shares exercisable at $3.69 per share through
12
<PAGE>
December 15, 2001. The Company also agreed to increase the dividend rate from 4%
to 8% on the balance of the unconverted Series A Preferred Stock and to file a
new registration statement with the SEC by October 31, 1998, to register the
shares underlying the Series A Redemption Warrants as well as additional shares
issuable upon conversion of the Series A Preferred Stock beyond those included
in the SB-2 Registration Statement declared effective August 7, 1998. That
registration had included an insufficient number of shares to cover all
conversions of Series A Preferred Stock because of a decline in the market price
of the Common Stock subsequent to effectiveness of that registration statement.
The Company failed to file the required registration statement but included the
shares underlying the Series A Redemption Warrants in the registration statement
filed with the SEC as of June 30, 1999 (SEC File No. 333-81897). The remaining
shares of Series A Preferred Stock were converted into shares of Common Stock on
December 20, 1999. As a result of the redemption and conversion of all the
outstanding shares of Series A Preferred Stock and the ability of the holders of
the Series A Redemption Warrants to sell the shares of Common Stock issuable on
exercise under SEC Rule 144, the Company's management has recommended to the
Board that the registration statement (SEC File No. 333-81897) filed with the
SEC with respect to the Common Stock issuable on conversion of the Series A
Preferred Stock be withdrawn.
On March 12, 1999, the Company borrowed $250,000 from RBB Bank, entering
into a note and Common Stock purchase agreement. As part of the agreement,
50,000 shares of Common Stock and a $250,000 promissory note bearing interest at
10% and due June 12, 1999 were issued to RBB Bank. LFC agreed to guarantee the
note. In connection with the issuance of the note, the Company also granted RBB
Bank a right of first refusal to fund any additional bridge financing needed by
the Company, to be exercised within one day of RBB Bank being notified of the
terms of any such additional bridge financing. The shares issued under this
agreement are restricted securities, and the Company agreed to include the
shares in the registration statement filed for the 6% Convertible Debentures and
other share issuances. The shares are included in the registration statement
filed with the SEC as of June 30, 1999 (SEC File No. 333-81897), which was not
yet effective as of the date of filing of this Proxy Statement. The Company's
management has recommended to the Board that the registration statement (SEC
File No. 333-81897) filed with the SEC with respect to this Common Stock be
withdrawn insofar as the shares are now saleable under SEC Rule 144.
The March 12, 1999 loan from RBB Bank was intended as a short-term bridge
loan and was originally required to be repaid from the proceeds of any aggregate
equity placements done by the Company that amounted to at least $1,000,000 in
equity financing. In April 1999, in conjunction with the closing of the Series B
Preferred Stock placement, the gross proceeds of which amounted to $1,500,000,
RBB Bank agreed to waive the right to immediate repayment of the $250,000 owed
to it. RBB Bank agreed to forbear from initiating an action against the Company
to collect the amount due until the earlier of receipt by the Company of funding
in the aggregate of at least $2,500,000 or December 1, 1999. The loan was repaid
in January, 2000.
In May 1999, RBB Bank agreed to accept a total of 227,353 shares of the
Company's Series B Preferred Stock in lieu of penalties and interest owing
through June 30, 1999 on $1,000,000 of the Company's 6% Debentures held by RBB
Bank's clients, and to waive certain prior defaults on the 6% Debentures and the
related registration rights agreement. RBB Bank also agreed not to declare the
6% Debentures in default for failure to pay interest or register the underlying
shares of Common Stock unless and until the holders of the Series B Preferred
Stock had the right to require the Company to redeem the Series B Preferred
Stock (which occurred as of October 10, 1999).
On June 30, 1999, the Company filed a registration statement on Form SB-2
(SEC File No. 333-81897) in which RBB Bank is named as selling security holder
for shares of Common Stock underlying $1,000,000 of 6% Debentures, various
Common Stock purchase warrants (described above), 227,353 shares of Series B
13
<PAGE>
Preferred Stock and 50,000 shares of Common Stock, all held by RBB Bank's
clients. A total of 4,127,639 shares of Common Stock are included in that
registration statement for sale by RBB Bank's clients. As of the date of this
Proxy Statement, the registration statement has not yet been declared effective.
The Company's management has recommended to the Board that this registration
statement be withdrawn insofar as all registration rights intended to be
satisfied by that registration have terminated or the shares included in the
registration may be presently sold under SEC Rule 144.
On March 17, 2000, the Company redeemed the 227,353 shares of Series B
Preferred Stock and $1,000,000 of 6% Debenture from RBB Bank for a price equal
to 125% of the liquidation value or principal amount, as applicable, of the
Series B Preferred Stock and 6% Debentures and repaid the remaining principal
balance of $225,000 owing on the loan originally made by RBB in March. 1999. In
connection with the redemption, RBB Bank also waived certain accrued penalties.
Redemption of Series B Preferred Stock
On May 3, 2000, pursuant to purchase agreements reached with the holders,
the Company redeemed the remaining 227,352 outstanding shares of Series B
Preferred Stock for an aggregate purchase price of $350,000 and, as an
inducement for the redemptions, Common Stock purchase warrants to purchase an
aggregate of 25,000 shares of Common Stock at an exercise price of $1.50 per
share exercisable through April 30, 2004.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers, directors, and persons owning
more than ten percent of a registered class of the Company's equity securities
("ten percent shareholders") to file reports of ownership and changes of
ownership with the SEC. Officers, directors, and ten-percent shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) reports they file with the SEC.
To the Company's knowledge, based solely on its review of the copies of
such reports and amendments thereto furnished to the Company, and written
representations that no other reports were required, the Company believes that
during the Company's fiscal year ended June 30, 1999, all Section 16(a) filing
requirements applicable to the Company's officers, directors, and ten percent
shareholders were met, except as follows: the timely filing of Form 3 by Mr.
Leavitt, the Company's current Chief Executive Officer and Chairman of the
Board.
14
<PAGE>
EXECUTIVE COMPENSATION
The following table shows all the compensation paid by the Company to its Chief
Executive Officer (the "Named Executive Officer") and certain other officers
during the fiscal years ended June 30, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term Compensation
--------------------------------- ---------------------------
Other Securities
Annual Restricted Underlying
Name and Fiscal Compen- Stock Options and All Other
Principal Position Year Salary Bonus sation Awards Warrants (7) Compensation
------------------------- ------ ------ ----- ------- ---------- ----------- ------------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Rod L. Stambaugh, 1999 $ 130,000 -- (6) -- 700,000(8) --
President (1)(5) 1998 $ 113,333 $34,750 (6) -- -- --
1997 $ 79,881 -- (6) -- -- --
Evon A. Kelly, 1999 $ 150,000 -- (6) -- -- --
Chief Executive Officer(2) 1998 $ 131,250 -- (6) -- 600,000(9) --
1997 -- -- -- -- -- --
Roger L. Peirce 1999 $ 43,750 -- (6) -- 1,300,000(10) --
Chief Executive Officer(3) 1998 -- -- -- -- -- --
1997 -- -- -- -- -- --
Dean M. Leavitt 1999 $ 21,667 -- (6) -- 5,375,000 --
Chief Executive Officer(4) 1998 -- -- -- -- -- --
1997 -- -- -- -- -- --
Robert E. Robichaud, 1999 $ 125,000 -- (6) -- 250,000 (11) --
Chief Financial and 1998 $ 101,756 $10,417 (6) -- 50,000 (12) --
Accounting Officer(5) 1997 -- -- -- -- -- --
-----------------
</TABLE>
(1) Mr. Stambaugh served as President from October 1996 until August 1997 when
Mr. Kelly commenced service as President.
(2) Mr. Kelly commenced service to the Company as of August 1997 and resigned
as CEO and Chairman in August 1998. He served as an employee of the Company
under an employment agreement with the Company until August 20, 1999.
(3) Mr. Peirce served as the Company's CEO and Chairman from August 17, 1998
through March 19, 1999.
(4) Mr. Leavitt joined the Company in May 3, 1999 as CEO and Chairman of the
Board and presently serves in that capacity.
(5) Mr. Robichaud commenced service as of September 1997. The bonus amounts
include $25,000 for Mr. Stambaugh and $10,000 for Mr. Robichaud, which were
accrued but not paid as of June 30, 1999. Mr. Robichaud left the Company on
February 29, 2000, and was paid an aggregate bonus of $100,000 upon the
date of his termination of employment.
(6) No amounts are shown under "Other", as the aggregate incremental cost to
the Company of personal benefits provided to the executive officer did not
exceed the lesser of $50,000 or 10% of his annual salary and bonus during
the year.
(7) All options were granted outside the 1992 Stock Option Plan, except certain
options issued to Mr. Stambaugh (100,000 option shares) and Mr. Robichaud
(100,000 option shares).
15
<PAGE>
(8) As of December 6, 1999, the date of Mr. Stambaugh's termination, 474,940 of
the options had vested.
(9) Reflects options granted to Mr. Kelly during 1998; of that number 492,000
options had vested as of the date Mr. Kelly left the Company. All of these
options have expired unexercised.
(10) Reflects options granted to Mr. Peirce during 1999; of that number 189,583
options had vested as of the date Mr. Peirce left the Company. All of these
options have expired unexercised.
(11) Reflects options granted to Mr. Robichaud during 1999, of that number
218,713 options had vested as of the date Mr. Robichaud left the Company.
(12) All of the options have expired unexercised.
Option Grants in Fiscal Year Ended June 30, 1999
The following table reports information with respect to individual grants
of options to the Named Executive Officer and the other executive officers named
in the Summary Compensation Table above.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
(Individual Grants)
Number of Percent of Total
Securities Options/Warrants
Underlying Granted to Exercise Or
Options/ Employees in Base Price
Name Warrants Granted Fiscal Year (1) ($ Per Share) Expiration Date
------------------ ---------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
Rod L. Stambaugh 100,000(4) 1.1 2.563 3/6/00
600,000(5) 6.5 0.844 12/5/00
Evon A. Kelly -- -- -- --
Roger L. Peirce (2) 1,300,000 14.1 2.563 9/1/02
Dean M. Leavitt (3) 2,687,500 29.2 0.875 5/06/09
2,687,500 29.2 1.465 5/06/09
Robert E. Robichaud 50,000(6) 0.5 2.563 5/29/00
250,000(7) 2.7 0.844 3/1/01
----------------
</TABLE>
(1) A total of 9,215,000 options and warrants were granted to employees,
including executive officers, during fiscal year 1999.
(2) On August 21, 1998, the Company granted options to Mr. Peirce to purchase
1,000,000 shares of the Common Stock at $3.438 per share the estimated fair
market value at date of grant. In November 1998, the Company and Mr. Peirce
agreed to cancel the original 1,000,000 share option and the Company
granted Mr. Peirce an option to purchase 1,300,000 shares of Common Stock,
exercisable at $2.563 per share. As of March 19, 1999, the date Mr. Peirce
left the Company, a total of 189,583 of the options were fully vested. All
options granted to Mr. Peirce were outside the Company's Amended 1992 Stock
Option Plan (the "Plan").
(3) All warrants granted to Mr. Leavitt were outside the Plan.
(4) 100,000 options were granted to Mr. Stambaugh under the Plan. As of
December 6, 1999, 449,940 of the options had vested, which were exercised
as of March 6, 2000.
(5) 600,000 options were granted to Mr. Stambaugh outside the Plan. As of
December 6, 1999, 449,940 of the options had vested. The options will
expire on December 5, 2000.
(6) 50,000 options were granted to Mr. Robichaud under the Plan. All of the
options have expired unexercised.
(7) 250,000 options were granted to Mr. Robichaud outside of the Plan. As of
February 29, 2000, the date of Mr. Robichaud's termination, 218,713 of the
options had vested.
16
<PAGE>
As reflected in the following table, reported are the values for
"in-the-money" options, which represent the excess, if any, of the market price
of the Common Stock as of June 30, 1999 and the exercise price of any existing
stock options owned by the Named Executive Officer.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Number of Securities Value of
Underlying Unexercised Unexercised In-the-
Shares Options and Warrants at Money Options and Warrants
Acquired on Value FY-End(#) at FY-End($)
Name Exercise(#) Realized($)(1) Exercisable/Unexercisable Exercisable/Unexercisable(2)
----------------- ----------- ------------- ------------------------- ---------------------------
<S> <C> <C> <C> <C>
Rod L. Stambaugh -- -- 479,990/375,010(3) $22,352/$0
Evon A. Kelly -- -- 456,000/36,000(4) 0/0
Roger L. Peirce -- -- 189,583/0 0/0
Dean M. Leavitt -- -- 470,313/4,904,687 0/0
Robert E. Robichaud -- -- 171,913/178,088 0/0
-----------------
</TABLE>
(1) Calculated by subtracting the average traded price of the underlying shares
of the Common Stock on the date of exercise less the exercise price of the
option.
(2) Represents the difference between $0.66, the average traded price of the
Common Stock at June 30, 1999.
(3) Mr. Stambaugh left the Company as of December 6, 1999. At that date, a
total of 105,000 options were vested. Mr. Stambaugh exercised the option
with respect to 105,000 shares as of March 6, 2000, and has another 449,000
vested options which will expire on December 5, 2000.
(4) In accordance with Mr. Kelly's employment agreement, a maximum of 492,000
of the 600,000 shares granted may become exercisable through the end of his
one-year employment term.
Current Employment Agreements and Change In Control
Provisions Applicable To Executive Officers and Directors
Dean M. Leavitt. The Company has an employment agreement with Dean M.
Leavitt to act as the Company's Chief Executive Officer and Chairman of the
Board. The agreement became effective as of May 3, 1999 and has a term of two
years, subject to automatic renewal for one-year terms if not terminated by
either party at least one month prior to the end of each term. Mr. Leavitt was
originally entitled to receive salary at the rate of $130,000 per year during
the first 90 days of the agreement and $200,000 per year thereafter, plus
reimbursement of certain customary business expenses. On May 4, 2000, the Board
increased his salary to $250,000 per year. In addition, the Board approved the
payment of a bonus of $200,000 to Mr. Leavitt for the year ending May 3, 2000,
the first anniversary of the effective date of the agreement. If Mr. Leavitt is
terminated without "cause" or determines to leave for "good reason" (as these
terms are defined in the agreement), Mr. Leavitt is entitled to severance pay
for one year, payable at regular pay intervals, at a rate of his base salary at
the time of termination for any part of the severance period falling within the
initial two-year term or any extension term, and at a negotiated rate for any
payments due after such term, but no less than 50% of his base salary at the
time of termination. In connection with his employment, the Company also issued
warrants to Mr. Leavitt to purchase up to 5,375,000 shares of the Common Stock.
17
<PAGE>
Half of the warrants, or 2,687,500, are exercisable at $.875 per share, the
exercise price being the estimated fair market value of the underlying stock on
May 3, 1999, the date of grant, and vest 10% upon grant with the balance vesting
over the following 12 months. The second half of the warrants, or 2,687,500, had
an original exercise price of $3.00 per share and vest 50% one year following
the grant date with the remaining balance vesting over the following six months.
As a condition to the completion of the Private Placement, the Company agreed to
reduce the exercise price of the 2,687,500 warrants to $1.465, the market price
of the Common Stock on January 4, 2000. All warrants held by Mr. Leavitt
immediately prior to termination of employment within six months of a "change of
control" or upon a termination by the Company without "cause" or by Mr. Leavitt
for "good reason" become immediately vested and exercisable. A "change of
control" is defined as (") any consolidation or merger of the Company in which
the Company is not the continuing or surviving corporation or pursuant to which
shares of the Company's capital stock are converted into cash, securities or
(other property other than a consolidation or merger of the Company in which the
holders of the Company's voting stock immediately prior to the consolidation or
merger shall, upon consummation of the consolidation or merger, own at least 50%
of the voting stock of the surviving corporation), or any sale, lease, exchange
or other transfer (in one transaction or a series of transactions contemplated
or arranged by any party as a single plan) of all or substantially all of the
assets of the Company; or (b) more than 75% of the Board (including Mr. Leavitt)
is replaced with new directors, except that new directors shall not include
directors sponsored by Mr. Leavitt or voted in favor of by him in constituting a
slate of directors. In case the Company offers any shares of its Common Stock,
or any rights, options, or warrants to subscribe for or purchase Common Stock
(or securities convertible into or exchangeable for Common Stock), as part of a
financing of the Company (and not pursuant to an acquisition, merger, incentive
or compensatory arrangement approved by the Board), Mr. Leavitt shall be
entitled to subscribe for such Common Stock, or any rights, options, or warrants
to subscribe for or purchase Common Stock (or securities convertible into or
exchangeable for Common Stock), at such price as shall be so offered in
proportion to the holdings Mr. Leavitt would have had his warrant been exercised
immediately prior to the offerings in relationship to all of the issued and
outstanding equity securities of the Company. Mr. Leavitt has also entered into
an indemnification agreement with the Company pursuant to which the Company has
agreed to provide the broadest possible indemnification that is available under
applicable law.
Charles I. Leone. The Company has an employment agreement with Charles I.
Leone to act as the Company's Chief Financial Officer and Chief Operating
Officer. The agreement became effective as of February 11, 2000 and has a term
of two years, subject to automatic renewal for one-year terms if not terminated
by either party at least ninety days prior to the end of each term. Mr. Leone is
entitled to receive a base salary of $175,000 per year, plus reimbursement of
customary business expenses. In addition, Mr. Leone is also eligible to receive
a bonus of up to $75,000 at the discretion of the Company's Chief Executive
Officer. If Mr. Leone is terminated without "cause" or determines to leave for
"good reason" (as such terms are defined in the agreement), Mr. Leone is
entitled to severance pay for the 150-day period following the termination date,
payable at regular pay intervals, at the rate of his base salary at the time of
termination. Mr. Leone would also be entitled to receive a pro-rated portion of
his annual bonus. Mr. Leone was also granted an option to purchase 350,000
shares of Common Stock at $2.434 per share.
Proposed Executive Bonus Plan
Management of the Company is in the process of formulating a
performance-based bonus plan for the Company's executive officers and key
personnel, which may include provisions for cash bonus compensation as well as
stock based compensation under the Plan or otherwise. Other than certain
contingent bonus compensation that has been offered to certain executive
officers of the Company as described above, and which is subject to adoption of
criteria by the Board of Directors, the Board has not yet approved the
parameters of such a bonus plan.
18
<PAGE>
Amended 1992 Stock Option Plan
General. The Plan was adopted for the purpose of granting employees,
directors and consultants of the Company options to purchase Common Stock so
that they may have the opportunity to participate in the growth of the Company
and to provide these people with an increased incentive to promote the interests
of the Company.
Administration of the Plan. The Plan is administered by at least two
disinterested members of the Board or the Board itself. The Board may from time
to time adopt rules and regulations, as it deems advisable for the
administration of the Plan, and may alter, amend or rescind any such rules and
regulations in its discretion. The Board has the power to interpret, amend or
discontinue the Plan.
Grant of Options. Options may be granted under the Plan for a total of
2,680,000 shares of Common Stock. The Board increased the number of shares
underlying options available under the Plan to 2,680,000 from 880,000 on August
6, 1997. This amendment was approved by shareholders at the Annual Meeting of
Shareholders held February 6, 1998. Additional grants of options may be made
only to employees, directors and consultants of the Company and any parent or
subsidiary. The Board determines the terms of options granted under the Plan,
including the type of option (which can be an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or a non-qualified stock option), the exercise price, the number of
shares subject to the option, and the exercisability thereof. The Board also
determines, at the time of grant, the period during which the option will be
exercisable, subject to the limitations of the Plan. Unless otherwise provided
at the time of grant, options to employees vest 25% one year from date of grant
and 25% on each yearly anniversary thereafter. An option to purchase 20,000
shares at fair market value is automatically issued under the Plan to each
non-employee director as of the anniversary of the date such person became a
director. Options granted to non-employee directors vest 25% at each six-month
anniversary thereafter. Information regarding options presently outstanding
under the Plan is set forth below.
Terms and Conditions of Options. The Board may impose on an option any
additional terms and conditions which it deems advisable and which are not
inconsistent with the Plan. The exercise price of any stock option granted under
the Plan must not be less than 100% of the fair market value of a share of
Common Stock on the date of grant, except that as to an optionee who at the time
an incentive stock option is granted owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company, the exercise
price of such incentive stock option must be at least equal to 110% of the fair
market value of the shares as of the date prior to the date of the grant. In
addition, no incentive stock option can be granted to any employee where the
aggregate fair market value of the shares (determined at the date of such option
grant) for which such incentive stock options are exercisable for the first time
in any calendar year exceeds $100,000. In connection with a merger, sale of all
of the Company's assets, or other transaction which results in the replacement
of Common Stock with the stock of another corporation, all granted options
(including unvested options) become exercisable immediately prior to the
consummation of the transaction, unless other provisions are made with respect
to those options.
Exercise of Options. An optionee may exercise less than the entire vested
portion of an option, in which case such unexercised, vested portion shall
continue to remain exercisable, subject to the terms of the Plan, until the
option terminates. Vested options must be exercised within three months of an
optionee's termination of employment with the Company.
Federal Income Tax Consequences Applicable to Options Granted Under the Plan
Incentive Stock Options. The Company anticipates that all options granted
under the Plan and treated by the Company as "incentive stock options," that is,
19
<PAGE>
a stock option described in Section 422 of the Code, will have the following
anticipated (but not guaranteed) federal income tax consequences, among others:
the optionee will recognize no income at the time of grant; upon exercise of the
incentive stock option, no income will result to any party; if there is no
disposition of the shares until a date that is both (i) two years from the grant
of an incentive stock option and (ii) one year from its exercise, no amount will
be ordinary income and, upon disposition in a taxable transaction, the employee
will receive long-term capital gain or loss treatment equal to the difference
between the amount realized and the option price; any gain realized upon a
disposition other than as set forth above may result in ordinary income tax
treatment to the optionee; generally, the Company receives no deduction in
connection with the transaction; and, certain optionees may incur alternative
minimum tax treatment under the Code upon exercise of an incentive stock option.
Non-qualified Stock Options. The Company anticipates that all non-qualified
stock options granted under the Plan will have the following anticipated (but
not guaranteed) federal income tax consequences, among others: the optionee will
recognize no income at the time of grant; upon exercise of the non-qualified
stock option, the individual to whom the option is granted should be deemed to
receive ordinary income at the time of exercise equal to the excess, if any, of
the fair market value of the acquired shares at such time over the option price
for such shares; if the shares acquired upon the exercise of a non-qualified
stock option are disposed of in a taxable transaction, the individual disposing
of such shares will have a realized and recognized capital gain or loss equal to
the difference, if any, between the amount realized and the adjusted basis of
such shares to the holder; such gain or loss will be long-term or short-term
depending on whether or not such shares are held for longer than six months;
and, the adjusted basis usually (but not always) will include the option price
plus any ordinary income described above with respect to such shares.
Form S-8 Registration of Shares of Common Stock
Issuable Pursuant to Options Under the Plan or Otherwise
The Company registered 880,000 shares of Common Stock underlying options
issuable under the Plan with the SEC under a Form S-8 Registration Statement
that was effective as of September 1995. The Company intends to file another
registration statement on Form S-8 in the near future to register all shares
issuable pursuant to the exercise of options that have been or may be issued
under the Plan, and if Proposal 3 is adopted, the Option Plan.
In addition, the Company intends to register on Form S-8 the shares
underlying option grants issued outside the Plan covering 449,940 shares for Rod
L. Stambaugh and 218,713 shares for Robert E. Robichaud, to the extent the
options remain outstanding and exercisable at the time the Company files the
registration statement.
Options Presently Outstanding Under the Plan
<TABLE>
<CAPTION>
Options Exercisable
within sixty days
Options Outstanding of the Record Date
------------------- -------------------
<S> <C> <C>
Options held by directors 397,781 297,781
Options held by executive officers 200,000 18,056
Options held by former executive officers 48,500 48,500
Options held by employees or consultants 961,250 340,450
--------- -------
TOTAL 1,607,531 704,787
========= =======
</TABLE>
20
<PAGE>
The weighted average per share exercise price of all options under the Plan as
of May 31, 2000, was $2.459.
Options Presently Outstanding Outside the Plan
<TABLE>
<CAPTION>
Options Exercisable
within sixty days
Options Outstanding of the Record Date
------------------- ------------------
<S> <C> <C>
Options held by directors 1,000,000 --
Options held by executive officers 350,000 --
Options held by former executive officers 668,653 668,653
--------- -------
TOTAL 2,018,653 668,653
========= =======
</TABLE>
The weighted average per share price of all options outstanding outside the Plan
as of May 31, 2000, was $1.434.
Director's Compensation
Directors who are not employees of the Company receive an annual stock
option to purchase 20,000 shares of Common Stock. The grant is made pursuant to
the Plan as of the anniversary of the date such person joined the Board of
Directors, with an exercise price equal to the market value of the underlying
stock as of the date of grant. Options vest 25% on each six-month anniversary
following the date of grant. This is the only regular arrangement for
compensation of directors. A total of 80,000 stock options were granted to four
non-employee directors during the fiscal year ended June 30, 1999.
On November 23, 1998, the Company's non-employee directors were each
granted 50,000 non-qualified stock options exercisable at $2.563 per share for
services rendered to the Company. The options vest monthly over a period of 36
months, assuming the director remains a director of the Company through the
vesting period.
On August 5, 1999, the Company's non-employee directors (Messrs. Rice and
Winter) were each granted 45,000 non-qualified stock options exercisable at
$1.188 per share for services rendered to the Company. The options vested 100%
upon grant.
On March 29, 2000, the Board of Directors approved the grant of a
non-qualified stock option to purchase 250,000 shares of Common Stock to each of
Messrs. Cooperman, Falk and Kaplan and Ms. Newmark. These options vest one-third
per year on the anniversary date of the grant and are exercisable at $1.50 per
share.
Report On Repricing Of Stock Options
On November 23, 1998, the Board terminated options to purchase 1,000,000
shares of Common Stock at an exercise price of $3.438 per share granted on
August 21, 1998 to Roger L. Peirce, the Company's Chief Executive Officer at the
time, and replaced them with options to purchase 1,300,000 shares of Common
Stock, exercisable at $2.563 per share. The market price on November 23, 1998
was $2.563 per share. The original options were intended to promote continuity
of employment of Mr. Peirce as a key member of Company management, and to
increase incentive and personal interest in the welfare of the Company. The
repriced options were intended to accomplish the same objectives. All of the
options have expired unexercised.
21
<PAGE>
For a description of certain warrants owned by Mr. Leavitt which were
repriced please see "Executive Compensation - Current Employment Contracts."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the beneficial
ownership of the Company's Common Stock and Series C Preferred Stock as of May
31, 2000, by (i) each director, (ii) the current Chief Executive Officer, (iii)
the Chief Financial Officer, (iv) all persons, including groups, known to the
Company to own beneficially more than five percent (5%) of the outstanding
Common Stock of the Company, and (v) all executive officers and directors as a
group. A person (or group) is deemed to be a beneficial owner of Common Stock
that can be acquired by such person or group within 60 days from May 31, 2000
upon the exercise of warrants, options or other rights exercisable for, or
convertible into, Common Stock. Although shares of Common Stock underlying the
Series C Preferred Stock and certain warrants and options cannot be acquired
unless Proposal 2 is approved, such shares are, for purposes of this table,
included as beneficially owned as indicated by the footnotes. As of May 31,
2000, there were a total of 32,396,748 shares of Common Stock and 5,586,600
shares of Series C Preferred Stock outstanding.
Except as otherwise indicated, the address of each of the following persons
is c/o U.S. Wireless Data, Inc., 805 Third Avenue, 8th Floor, New York, NY
10022.
Certain Holders of Common Stock
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficially Owned as of
May 31, 2000(1)
----------------------------
Number of Percent of
Name of Beneficial Owner Shares Class
------------------------ --------- ----------
<S> <C> <C>
Dean M. Leavitt 6,050,960(2) 16%
Edwin M. Cooperman 83,334(3) *
Michael S. Falk 250,002(4) *
Barry A. Kaplan 2,369,967(5) 7%
Amy L. Newmark 208,335(6) *
Alvin C. Rice 105,000(7) *
Chester N. Winter 205,281(8) *
Charles I. Leone 83,334(9)
John H. Perveiler --
Marc R. Shultz --
ComVest Capital Management, LLC 25,275,113(10) 51%
830 Third Avenue
New York, New York 10022
John M. Liviakis 6,858,881(11) 21%
495 Miller Avenue, 3rd Floor
Mill Valley, California 94941
Robert B. Prag 547,500(12) 2%
2455 El Amigo Road
Del Mar, California 92014
Peter J. Solomon Securities Company Limited 2,327,750 7%
787 Fifth Avenue
New York, New York 10153
All directors and executive officers as a group (10 persons) 9,356,213(13) 29%
</TABLE>
------------------
* Represents less than 1% of outstanding shares.
22
<PAGE>
(1) Except as specifically indicated in the footnotes to this table, the
persons named in this table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable. Beneficial ownership
is determined in accordance with the rules of the SEC. In computing the
number of shares beneficially owned by a person and the percentage
ownership of that person, shares of Common Stock subject to options,
warrants or rights held by that person that are currently exercisable or
exercisable, convertible or issuable within 60 days of May 31, 2000, are
deemed outstanding. Such shares, however, are not deemed outstanding for
the purpose of computing the percentage ownership of any other person.
(2) Includes 4,478,988 shares which Mr. Leavitt has the right to acquire within
60 days of May 31, 2000, through the exercise of warrants to purchase
Common Stock, however, Mr. Leavitt has agreed that the Company is not
obligated to reserve the shares of Common Stock underlying these warrants
until the approval of Proposal 2 or some other Amendment to the Articles of
Incorporation to increase the number of authorized shares of Common Stock.
Also includes (i) 166,667 shares of Common Stock issuable upon conversion
of 25,000 shares of Series C Preferred Stock, (ii) 41,667 shares of Common
Stock issuable upon the exercise of a Unit Warrant and (iii) 571,636 shares
of Common Stock issuable upon the exercise of a warrant issued in
connection with the Bridge Financing. A portion of such securities are not
exercisable until the approval of Proposal 2 or some other Amendment to the
Articles of Incorporation to increase the number of authorized shares of
Common Stock. Does not include 896,012 shares underlying warrants, which
are not currently exercisable and 2,500,000 shares of Common Stock
underlying options which are subject to the approval of Proposal 4.
(3) Includes 66,667 shares of Common Stock issuable upon conversion of 10,000
shares of Series C Preferred Stock and 16,667 shares of Common Stock
issuable upon the exercise of a Unit Warrant.
(4) Includes 166,667 shares of Common Stock issuable upon conversion of 25,000
shares of Series C Preferred Stock and 41,667 shares of Common Stock
issuable upon the exercise of a Unit Warrant. Does not include 7,920,000
shares of Common Stock owned by ComVest Capital Management, LLC, an entity
in which Mr. Falk is a manager and principal member. Mr. Falk disclaims
beneficial interest in such shares.
(5) Includes 1,666,667 shares of Common Stock issuable upon conversion of
250,000 shares of Series C Preferred Stock and 416,667 shares of Common
Stock issuable upon exercise of a Unit Warrant. Also includes 125,000
shares of Common Stock issuable upon exercise of a warrant to purchase 1.5
Units and the conversion of the Series C Preferred Stock and exercise of
the Unit Warrant contained therein.
(6) Includes 166,667 shares of Common Stock issuable upon conversion of 25,000
shares of Series C Preferred Stock and 41,667 shares of Common Stock
issuable upon the exercise of a Unit Warrant.
(7) Represents 89,500 shares which Mr. Rice has the right to acquire within 60
days of May 31, 2000, through the exercise of stock options.
(8) Includes 186,781 shares which Mr. Winter has the right to acquire within 60
days of May 31, 2000, through the exercise of stock options.
(9) Includes 66,667 shares of Common Stock issuable upon conversion of 10,000
shares of Series C Preferred Stock and 16,667 shares of Common Stock
issuable upon the exercise of a Unit Warrant.
(10) The information shown is based on a Schedule 13D dated March 16, 2000,
filed on behalf of ComVest Capital Partners, LLC, the owner of ComVest
Capital Management, LLC, Michael S. Falk, Robert Priddy and Keith
Rosenblum.
(11) The information shown is based upon Schedule 13D (Amendment No. 6) dated
May 24, 1999, filed on behalf of Liviakis Financial Consulting, Inc.
("LFC"), John M. Liviakis and Renee A. Liviakis and information known to
the Company based on its consulting agreements with LFC and the number of
shares issued for the conversion of debt (in the form of notes payable due
LFC) to equity. John M. and Renee A. Liviakis are the owners of LFC. The
number of shares shown includes a total of 3,523,423 shares of common stock
owned by Mr. Liviakis as an individual, plus 1,132,500 shares of common
stock issued to LFC. See "- Certain Relationships and Related Transactions
- Transactions with Liviakis Financial Communications, Inc. ("LFC") and
Certain LFC Affiliates"
23
<PAGE>
(12) Mr. Prag is a former executive officer of LFC. The shares of common stock
are owned by Mr. Prag as an individual. See "- Certain Relationships and
Related Transactions - Transactions with Liviakis Financial Communications,
Inc. ("LFC") and Certain LFC Affiliates"
(13) Includes all shares underlying options, warrants and convertible securities
as described in footnotes (2) - (9) of this table.
Certain Holders of Series C Preferred Stock (1)
Series C Convertible Preferred
Stock Beneficially Owned
as of May 31, 2000
------------------------------
Number of Percent of
Name of Beneficial Owner Shares Class
------------------------ --------- ----------
Dean M. Leavitt 25,000 --
Edwin M. Cooperman 10,000 --
Michael S. Falk 25,000(2) --
Barry A. Kaplan 265,000(3) 5%
Amy L. Newmark 25,000 --
Alvin C. Rice - --
Chester N. Winter - --
Charles I. Leone 10,000 --
John H. Perveiler - --
Marc R. Shultz - --
ComVest Capital Management, LLC 1,396,643(4) 20%
830 Third Avenue
New York, New York 10022
Sandler Capital Partners 500,000 9%
767 Fifth Avenue
New York, New York
All directors and executive officers as a 360,000(2) 6%
group (10 persons)
------------------
* Represents less than 1% of outstanding shares.
(1) To the Company's knowledge, except as otherwise indicated in the footnotes
to this table, all persons named in this table have sole voting and
investment power with respect to all shares of Series C Preferred Stock
shown as beneficially owned by them, subject to community property laws
where applicable. Beneficial ownership is determined in accordance with the
rules of the SEC. The Series C Preferred Stock is not publicly traded or
registered under the Exchange Act.
(2) Does not include shares held by ComVest Capital Management, LLC, which is
an affiliate of Commonwealth Associates, LP, of which Mr. Falk is currently
the Chief Executive Officer.
(3) Includes 15,000 shares of Series C Preferred Stock issuable upon exercise
of a warrant to purchase 1.5 Units.
(4) Includes 1,396,643 shares of Series C Preferred Stock issuable upon
exercise of warrants to purchase 139.664 Units.
24
<PAGE>
PROPOSALS FOR VOTING
Proposal 1: ELECTION OF DIRECTORS
The Board of Directors has nominated Dean M. Leavitt, Alvin C. Rice and
Chester N. Winter for election as directors of the Company. Amy L. Newmark and
Michael S. Falk have been nominated for election as directors pursuant to an
agreement which gives Commonwealth the right to designate two individuals for
election as directors of the Company. The holders of the Company's Common Stock
will vote on the election of Ms. Newmark and Messrs. Leavitt, Rice, Winter and
Falk (collectively, the "Common Stock Nominees").
Barry A. Kaplan and Edwin M. Cooperman have been nominated for election as
directors of the Company on behalf of the holders of Series C Preferred Stock
(the "Series C Preferred Stock Nominees"). The holders of the Company's Series C
Preferred Stock will vote on the election of Messrs. Kaplan and Cooperman.
Vote Required
The approval of a plurality of the shares of Common Stock present in person
or represented by proxy, assuming a quorum of the holders of Common Stock at the
Annual Meeting, is required for election of the Common Stock Nominees as
directors. Cumulative voting in the election of Common Stock Nominees directors
is not allowed. The approval by the holders of a plurality of the shares present
in person or represented by proxy, assuming a quorum at the Annual Meeting, is
required for election of the Common Stock.
The approval of a plurality of the shares of Series C Preferred Stock
present in person or represented by proxy, assuming a quorum of the holders of
Series C Preferred Stock at the Annual Meeting, is required for the election of
the Series C Preferred Stock Nominees as directors. Cumulative voting in the
election of Series C Preferred Stock Nominees is not allowed. The approval by
the holders of a plurality of the shares of Series C Preferred Stock in person
or represented by proxy, assuming a quorum at the Annual Meeting, is required
for election of the Series C Preferred Stock Nominees.
The Board of Directors recommends a vote FOR election to the Board of
Directors of the Company for each of the Common Stock Nominees and the Series C
Preferred Stock Nominees.
Proposal 2: APPROVAL OF AMENDMENT OF ARTICLES OF INCORPORATION TO INCREASE
THE AUTHORIZED SHARE CAPITAL
The Board has determined that it would be advisable to amend Section A of
Article FOURTH of the Company's Articles of Incorporation to increase the
authorized share capital of the Company such that the aggregate number of shares
which the Company shall have the authority to issue shall be increased from
55,000,000 to 225,000,000, of which 200,000,000 shares shall be designated
"Common Stock" and 25,000,000 shares shall be designated "Preferred Stock" (the
"Amendment").
The Board has unanimously adopted and declared it advisable and unanimously
recommends to the Company's shareholders that Section A of Article FOURTH of the
Company's Articles of Incorporation be amended as described. A copy of Section A
of Article FOURTH of the Company's Articles of Incorporation, as proposed to be
amended by the resolution adopted by the Board is attached as Annex A.
25
<PAGE>
INCREASE IN NUMBER OF AUTHORIZED SHARES OF SHARE CAPITAL
General
The Board has approved, subject to shareholder approval at the Annual
Meeting, an increase in the number of authorized shares of Common Stock from
40,000,000 to 200,000,000 and an increase in the number of authorized shares of
Preferred Stock from 15,000,000 to 25,000,000, which may be issued in one or
more series and as to which the Board is authorized to determine the voting
powers, designations, preferences, and rights and the qualifications,
limitations, and restrictions thereof, of each such series, including dividend
rates, conversion prices, redemption prices, liquidation preferences and voting
and other rights; provided, however, the Board may not create any such series of
Preferred Stock that ranks senior to, or pari passu with, the Series C Preferred
Stock without the prior written consent of Commonwealth and a committee to be
designated by Commonwealth whose members hold in the aggregate not less than 20%
of the outstanding Series C Preferred Stock; provided, however, that no such
amendment, modification or waiver which would decrease the number of shares of
Common Stock issuable upon conversion of the Series C Preferred Stock or
increase the conversion price therefor (other than as a result of the waiver or
modification of any anti-dilution provisions) may be made without the approval
of the holders of at least 50% of the outstanding Series C Preferred Stock.
The Company requires additional shares of Common Stock and additional
shares of Preferred Stock to satisfy all of its current obligations under
presently convertible or exercisable securities and options. There are virtually
no authorized shares of Common Stock unissued and not reserved for future
issuance and the Company does not have adequate Common Stock authorized to
permit the conversion of the Series C Preferred Stock, the Unit Warrants, the
Warrants issued to Commonwealth and PJSC and shares underlying other outstanding
options and warrants.
Common Stock Required to be Reserved
Common Stock outstanding 32,415,959 shares
as of May 31, 2000
Common Stock reserved for issuance 15,000,000 shares
pursuant to the Company's 2000 Stock
Option Plan
Common Stock required to be reserved 6,288,000 shares
for issuance upon exercise of the
Bridge Warrants
Common Stock required to be reserved 37,244,000 shares
for issuance upon conversion of Series
C Preferred Stock
Common Stock required to be reserved 9,311,000 shares
for issuance upon exercise of Unit
Warrants
Common Stock required to be reserved 13,966,500 shares
for issuance upon exercise of warrants
held by Commonwealth and PJSC
Common Stock reserved for issuance 10,940,345 shares
pursuant to outstanding options and
warrants
Common Stock required to be reserved 397,684 shares
for lost stock certificates -----------
TOTAL 125,563,488 shares (1)
===========
--------------------------
(1) 31,390,872 shares if the reverse stock split is approved.
26
<PAGE>
In addition, as shown under the heading "Certain Holders of Series C
Preferred Stock," officers and directors of the Company beneficially own an
aggregate of 360,000 shares of Series C Preferred Stock which is not convertible
and an aggregate of 1.5 Unit Warrants which are not exercisable unless Proposal
2 is approved. The ten day trading average of the Common Stock for the ten days
prior to the Record Date was $____. The conversion price of the Series C
Preferred Stock as of the Record Date was $1.50.
Shareholders should note that if the reverse split contemplated by
Proposal 5 is approved, the reduction in shares outstanding and reserved for
issuance will have the effect of authorizing approximately 94,000,000 shares of
Common Stock for future issuance, regardless of whether this Proposal 2 is
adopted. If both Proposal 2 and Proposal 5 are adopted, the Company will have
more authorized Common Stock than it will likely need in the foreseeable future.
The Company considered tying the number of shares of authorized Common Stock for
which shareholder approval was sought to the adoption of Proposal 5 so that if
such Proposal was adopted this Proposal would automatically be adjusted to seek
approval for a smaller number of authorized shares of Common Stock. However, the
Company believed such approach would be unduly confusing.
The primary purpose of the Amendment is to provide the Company with enough
Common Stock to satisfy its obligations under instruments referred to above, as
well as shares for the Option Plan (if such plan is approved by the shareholders
at the Annual Meeting) and to provide the flexibility to raise additional
capital from the sale of shares of Common Stock and Preferred Stock (in a public
offering, private placement or otherwise) and to take advantage of possible
future opportunities for which the issuance of additional shares of Common Stock
or Preferred Stock may be deemed advisable without the delay and expense
incident to calling a special meeting. The Board considers the proposed
Amendment desirable because it would provide the Company with the ability to
take advantage of future opportunities for the issuance of equity in connection
with financings, possible future acquisitions, other programs to facilitate
expansion and growth and for other general corporate purposes, including stock
dividends, stock splits and employee benefit plans, without the delay and
expense incident to the holding of a special meeting of shareholders to consider
any specific issuance. Authorized but unissued shares may be issued at such time
or times, to such person or persons and for such consideration as the Board of
Directors determines to be in the best interests of the Company, without further
authorization from the shareholders except as may be required by the rules of
the NASDAQ or any stock exchange on which the Common Stock is then listed.
The authorization of additional shares of Common Stock will not, by itself,
have any effect on the rights of holders of existing shares except for possible
dilution caused by the exercise or conversion of the instruments referred to
above and any additional issuances. Any new shares of Common Stock, when issued,
would have the same rights and privileges as the shares of Common Stock
presently outstanding, and would be available for issuance at such time and on
such terms as the Board of Directors may consider appropriate. Depending on the
circumstances, issuance of additional shares of Common Stock could affect the
existing holders of shares by diluting the voting power of the outstanding
shares. The shareholders do not have pre-emptive rights to purchase additional
shares of Common Stock nor will they as a result of this proposal.
To the extent that any shares of Preferred Stock may be issued, such
Preferred Stock may (a) have priority over the Common Stock with respect to
dividends and the assets of the Company upon liquidation; (b) have significant
voting power; (c) provide for representation of the holders of the Preferred
Stock on the Company's Board upon the occurrence of certain events; and (d)
require the approval of the Preferred Stock for the taking of certain corporate
actions, such as mergers. There are currently 5,586,600 outstanding shares of
Series C Preferred Stock (which is the only class of Preferred Stock
outstanding), and currently, the Company is authorized to issue up to 2,863,400
additional shares of Preferred Stock.
Except for (a) the 37,244,000 shares underlying the Series C Preferred
Stock, and 9,311,000 shares underlying the Private Placement Warrants and the
5,716,363 shares underlying the warrant issued to ComVest and the 571,637 shares
underlying the warrant issued to Mr. Leavitt in the Bridge Financing entered
27
<PAGE>
into on December 23, 1999, (b) 5,375,000 shares underlying warrants that Mr.
Leavitt has agreed will not be exercised until additional shares of Common Stock
are authorized and (c) the 15,000,000 shares to be reserved for issuance if
Proposal 3 "Adoption of the Company's 2000 Stock Option Plan" is adopted, there
are no other current negotiations, plans, commitments, agreements or
understandings relating to the issuance of any additional shares of Common Stock
or Preferred Stock. The timing of the actual issuance of additional shares will
depend upon market conditions, the specific purpose for which the stock is to be
issued and other similar factors.
Possible Anti-Takeover Effects of Amendment
The issuance of additional shares of Common Stock or Preferred Stock may be
deemed to have an anti-takeover effect since such shares may be used, under
certain circumstances, to create voting impediments to frustrate persons seeking
to effect a takeover or otherwise gain control of the Company. The increase in
authorized Common Stock or Preferred Stock may also be viewed as having the
effect of discouraging an attempt by another person or entity, through the
acquisition of a substantial number of shares of the Common Stock, to acquire
control of the Company, since the issuance of additional shares may be used to
dilute such person's ownership of shares of the Company's voting stock.
Moreover, "blank check" preferred stock may be used for adoption of a
shareholder rights plan or "poison pill."
To the extent that any shares of Preferred Stock (including Preferred
Stock convertible into Common Stock) may be issued on other than a pro rata
basis to current shareholders, the present ownership position of current
shareholders may be diluted. Such shares also could be used to dilute the stock
ownership of persons seeking to obtain control of the Company, and thereby
defeat a possible takeover attempt which (if shareholders were offered a premium
over the market value of their shares) might be viewed as being beneficial to
shareholders of the Company. Management of the Company is not aware of any
possible takeover attempts at this time. Other than the possible issuance of
such Common or Preferred Stock, the accelerated vesting of certain warrants and
options upon a change of control, the severance provisions in the employment
contracts between the Company and each of Messrs. Leavitt and Leone, and
Commonwealth's right to designate two directors, the Company does not believe it
currently has any charter, by-law or contractual provisions having an
"anti-takeover" effect nor does the Company currently contemplate proposing any
such measures.
The Amendment has not been proposed as an anti-takeover measure nor is the
Board aware of any offers to acquire control of the Company. It should be noted
that any action taken by the Company to discourage an attempt to acquire control
of the Company may result in shareholders not being able to participate in any
possible premiums which may be obtained in the absence of anti-takeover
provisions. Any transaction which may be so discouraged or avoided could be a
transaction that the Company's shareholders might consider to be in their best
interests. However, the Board has a fiduciary duty to act in the best interests
of the Company's shareholders at all times.
Board of Directors Reservation of Rights
If the Amendment is approved by the shareholders, the Amendment will become
effective upon the filing of Articles of Amendment to the Articles of
Incorporation of the Company with the Colorado Secretary of State. The Board
reserves the right, notwithstanding shareholder approval and without further
action by the shareholders, to elect not to proceed with the Amendment, if at
any time prior to filing Articles of Amendment to the Articles of Incorporation
with the Secretary of State of the State of Colorado the Board in its sole
discretion, determines that the Amendment is no longer in the best interests of
the Company and its shareholders. In addition, the Board reserves the right to
delay filing the Articles of Amendment to the Articles of Incorporation for up
to 12 months following shareholder approval of the Amendment at the Annual
Meeting. However, at the present time, the Board intends to proceed with
implementation of the Amendment as presented herein without delay.
28
<PAGE>
Vote Required
The approval of a majority of the outstanding shares of the Company's
Common Stock and Series C Preferred Stock is required to amend the Articles of
Incorporation. Proxies solicited by the Board will be voted in favor of the
adoption of Proposal 2 to amend Paragraph A of Article FOURTH of the Articles of
Incorporation unless otherwise indicated thereon.
John M. Liviakis, owner of 7,443,458 shares of Common Stock has agreed to
vote in favor of this proposal. In addition, Dean M. Leavitt and ComVest, the
owners of an aggregate of 8,712,000 shares of Common Stock, have indicated they
will vote for the Proposal. It can also be expected that the holders of Series C
Preferred Stock, which is not convertible unless the Proposal is approved, will
vote in favor of the proposal. The Series C Preferred Stock represents in excess
of 50% of the Company's voting stock. In the event that prior to the Annual
Meeting Mr. Leavitt acquires any of the 2,082,813 shares of Common Stock
underlying the warrants owned by him, he has agreed to vote such shares in favor
of this proposal.
The Board recommends a vote FOR the approval of the amendment to the
Articles of Incorporation, which is designated as Proposal 2 on the enclosed
Proxy card.
Proposal 3: APPROVAL OF REINCORPORATION IN DELAWARE
The Board has recommended, and at the Annual Meeting the shareholders will
be asked to authorize the change of the Company's state of incorporation from
Colorado to Delaware. The transaction will not result in any change in the
business, management, assets, liabilities or net worth of the Company.
Reincorporation in Delaware will allow the Company to take advantage of certain
provisions of the corporate laws of Delaware. The purposes and effects of the
proposed change are summarized below.
In order to effect the Company's reincorporation in Delaware, the Company
will be merged into a newly formed, wholly-owned subsidiary incorporated in
Delaware. Prior to the merger, the Delaware subsidiary will not have engaged in
any activities except in connection with the proposed transaction. The mailing
address of the Delaware subsidiary's principal executive offices and its
telephone number are the same as those of the Company. As part of its approval
and recommendations of the Company's reincorporation in Delaware, the Board has
approved, and recommends to the shareholders for their adoption and approval, an
Agreement and Plan of Merger (the "Reincorporation Agreement") pursuant to which
the Company will be merged with and into the Delaware subsidiary. The full texts
of the Reincorporation Agreement and the Certificate of Incorporation and Bylaws
of the successor Delaware corporation under which the Company's business would
be conducted after the merger are set forth as Annex B, Annex C, and Annex D,
respectively, hereto. The discussion contained in this Proxy Statement is
qualified in its entirety by reference to such Annexes. The provisions of the
Certificate of Incorporation will be substantially identical to those of the
Company's current Articles of Incorporation, as amended, except that the
Certificate of Incorporation will (i) be governed by Delaware law, and (ii)
include additional provisions regarding the indemnification of directors,
officers and other agents. In addition, the form of Certificate of Incorporation
annexed hereto will be adjusted to give effect to the outcome of Proposal 2, the
proposal for an increase in the number of authorized shares of share capital and
all references to outstanding Common Stock shall be adjusted to give effect to
Proposal 5, the proposal for a reverse stock split.
The reincorporation of the Company in Delaware through the above-described
merger (hereinafter referred to as the "Reincorporation") requires approval of
the Company's shareholders by the affirmative vote of the holders of a majority
of the outstanding shares of Common Stock and Series C Preferred Stock voting as
one class.
29
<PAGE>
In the following discussion of the proposed Reincorporation, the term
"Wireless-COL" refers to the Company as currently organized as a Colorado
corporation; the term "Wireless-DEL" refers to the new wholly-owned Delaware
subsidiary of Wireless-COL that will be the surviving corporation after the
completion of the transaction; and the term "Company" includes either or both,
as the context may require, without regard to the state of incorporation.
Upon shareholder approval of the Reincorporation, and upon acceptance for
filing of appropriate certificates of merger by the Secretary of State of
Delaware and the Secretary of State of Colorado, Wireless-COL will be merged
with and into Wireless-DEL pursuant to the Reincorporation Agreement, resulting
in a change in the Company's state of incorporation. The Company will then be
subject to the Delaware General Corporation Law and the Certificate of
Incorporation and Bylaws set forth in Annex C and Annex D, respectively. Upon
the effective time of the Reincorporation, each outstanding share of each class
of stock of Wireless-COL automatically will be converted into one share of the
corresponding class of stock of Wireless-DEL or, if Proposal 5 is approved and
the reverse stock split is to be effected concurrently with the Reincorporation,
into 0.25 shares of the corresponding class of stock of Wireless-DEL.
Outstanding options and warrants to purchase shares of Common Stock of
Wireless-COL will be converted into options and warrants to purchase, subject to
the reverse split, the same number of shares of the corresponding class of stock
of Wireless-DEL.
IT WILL NOT BE NECESSARY FOR SHAREHOLDERS OF THE COMPANY TO EXCHANGE THEIR
EXISTING STOCK CERTIFICATES FOR CERTIFICATES OF WIRELESS-DEL. OUTSTANDING STOCK
CERTIFICATES OF WIRELESS-COL SHOULD NOT BE DESTROYED OR SENT TO THE COMPANY.
Principal Reasons for Changing the Company's State of Incorporation
The Board believes that the Reincorporation will provide flexibility for
both the management and business of the Company.
Delaware is a favorable legal and regulatory environment in which to
operate. For many years, Delaware has followed a policy of encouraging
incorporation in that state and, in furtherance of that policy, has adopted
comprehensive, modern and flexible corporate laws which are periodically updated
and revised to meet changing business needs. As a result, many major
corporations have initially chosen Delaware for their domicile or have
subsequently reincorporated in Delaware. The Delaware courts have developed
considerable expertise in dealing with corporate issues, and a substantial body
of case law has developed construing Delaware law and establishing public
policies with respect to Delaware corporations thereby providing greater
predictability with respect to corporate legal affairs.
Delaware is a favorable legal and regulatory environment in which to
operate. For many years, Delaware has followed a policy of encouraging
incorporation in that state and, in furtherance of that policy, has adopted
comprehensive, modern and flexible corporate laws which are periodically updated
and revised to meet changing business needs. As a result, many major
corporations have initially chosen Delaware for their domicile or have
subsequently reincorporated in Delaware. The Delaware courts have developed
considerable expertise in dealing with corporate issues, and a substantial body
of case law has developed construing Delaware law and establishing public
policies with respect to Delaware corporations thereby providing greater
predictability with respect to corporate legal affairs. In addition, many
investors and securities professionals are more familiar and comfortable with
Delaware corporations than corporations governed by the laws of other
jurisdictions, even where the laws are similar.
COMPARISON OF THE RIGHTS OF HOLDERS OF WIRELESS-CO COMMON STOCK AND WIRELESS-DE
COMMON STOCK
Wireless-CO is a Colorado corporation and the Colorado Business
Corporation Act and the Articles of Incorporation and Bylaws of Wireless-CO
govern the rights of its shareholders. Wireless-DE is a Delaware corporation and
the rights of it shareholders are governed by the Delaware General Corporation
Law and the Certificate of Incorporation and Bylaws of Wireless-DE.
30
<PAGE>
Significant Differences Between the Corporation Laws of Colorado and Delaware
The corporation laws of Colorado and Delaware differ in many respects.
Although all the differences are not described in this Proxy Statement, certain
provisions, which could materially impact the rights of shareholders of
Wireless-CO as compared to the rights of stockholder in Wireless-DE, are
discussed below.
Removal of Directors
Directors may generally be removed with or without cause under the laws of
both Colorado and Delaware, with the approval of a majority of the outstanding
shares entitled to vote in an election of directors. However, no director may be
removed if the number of votes cast against such removal would be sufficient to
elect the director.
<TABLE>
<CAPTION>
Colorado Delaware
<S> <C>
A director of a corporation that does not have a staggered A director of a corporation that does not have a
board of directors or cumulative voting may be removed classified board of directors or cumulative voting may be
with or without cause with the approval of a majority of removed with or without cause with the approval of a
the outstanding shares entitled to vote at an election of majority of the outstanding shares entitled to vote at an
directors. In the case of a Colorado corporation having election of directors. In the case of a Delaware
cumulative voting, if less than the entire board is to be corporation having cumulative voting, if less than the
removed, a director may not be removed without cause if entire board is to be removed, a director may not be
the number of shares voted against such removal would be removed without cause if the number of shares voted
sufficient to elect the director under cumulative voting. against such removal would be sufficient to elect the
The Articles of Incorporation of Wireless-CO do not director under cumulative voting. A director of a
provide for a classified board of directors or for corporation with a classified board of directors may be
cumulative voting. removed only for cause, unless the certificate of
incorporation otherwise provides. The Certificate of
Incorporation of Wireless-DE does not provide for a
classified board of directors or for cumulative voting.
</TABLE>
Classified Board of Directors
A classified or staggered (the term used in the CBCA) board is one on which
a certain number, but not all, of the directors are elected on a rotating basis
each year. This method of electing directors makes changes in the composition of
the board of directors more difficult, and thus a potential change in control of
a corporation a lengthier and more difficult process.
<TABLE>
<CAPTION>
Colorado Delaware
<S> <C>
The Wireless-CO Articles of Incorporation and Bylaws do Delaware law permits, but does not require, a classified
note provide for a staggered board. Colorado law permits, board of directors, pursuant to which the directors can be
but does not require, a staggered board of directors, divided into as many as three classes with staggered terms
pursuant to which the directors can be divided into as of office, with only one class of directors standing for
many as three classes with staggered terms of office, with election each year. The Wireless-DE Certificate of
only one class of directors standing for election each Incorporation and Bylaws do not provide for a classified
year. board and Wireless-DE presently does not intend to propose
establishment of a classified board.
</TABLE>
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<PAGE>
Indemnification and Limitation of Liability of Directors, Officers and Other
Agents
Delaware and Colorado have similar laws respecting indemnification by a
corporation of its officers, directors, employees and other agents. The laws of
both states also permit, with certain exceptions, a corporation to adopt
provisions in its articles or certificate of incorporation, as the case may be,
eliminating the liability of a director to the corporation or its shareholders
for monetary damages for breach of the director's fiduciary duty in certain
cases. There are nonetheless certain differences between the laws of the two
states respecting indemnification and limitation of liability of directors,
officers and other agents.
<TABLE>
<CAPTION>
Colorado Delaware
<S> <C>
The Articles of Incorporation of Wireless-CO eliminate the The Certificate of Incorporation of Wireless-DE also
liability of directors to the corporation to the fullest eliminates the liability of directors to the corporation
extent permissible under Colorado law. Colorado law does or its stockholders for monetary damages for breach of
not permit the elimination of monetary liability where fiduciary duty as a director to the fullest extent
such liability is based on: (a) intentional misconduct or permissible under Delaware law, as such law exists
knowing and culpable violations of law; (b) acts or currently or as it may be amended in the future. Under
omissions that a director believes to be contrary to the Delaware law, such provision may not eliminate or limit
best interests of the corporation or its shareholders, or director monetary liability for: (a) breaches of the
that involve the absence of good faith on the part of the director's duty of loyalty to the corporation or its
director; (c) receipt of an improper personal benefit; (d) stockholders; (b) acts or omissions not in good faith or
acts or omissions that show reckless disregard for the involving intentional misconduct or knowing violations of
director's duty to the corporation or its shareholders, law; (c) the payment of unlawful dividends or unlawful
where the director in the ordinary course of performing a stock repurchases or redemptions; or (d) transactions in
director's duties should be aware of a risk of serious which the director received an improper personal benefit.
injury to the corporation or its shareholders; (e) acts or Such limitation of liability provisions also may not limit
omissions that constitute an unexcused pattern of a director's liability for violation of or otherwise
inattention that amounts to an abdication of the relieve its directors from the necessity of complying with
director's duty to the corporation and its shareholders; federal or state securities laws, or affect the
(f) interested transactions between the corporation and a availability of non-monetary remedies such as injunctive
director in which a director has a material financial relief or rescission.
interest; and (g) liability for improper distributions,
loans or guarantees.
Colorado law generally permits indemnification of director Delaware law generally permits indemnification of
liability, including expenses actually and reasonably expenses, including attorney's fees, actually and
incurred in the defense or settlement of a derivative or reasonably incurred in the defense or settlement of a
third-party action, provided there is a determination by a derivative or third-party action, provided there is a
majority vote of a disinterested quorum of the directors, determination by a majority vote of a disinterested quorum
by independent legal counsel or by a majority vote of a of the directors, by independent legal counsel or by a
quorum of the shareholders that the person seeking majority vote of a quorum of the stockholders that the
indemnification acted in good faith and in the case of person seeking indemnification acted in good faith and in
conduct in an official capacity, in a manner he or she a manner reasonably believed to be in, or not opposed to,
reasonably believed was in the best interests of the the best interests of the corporation. Without court
corporation or a benefit plan (if acting in a capacity approval, however, no indemnification may be made in
with respect to such a plan). In other cases, the respect of any derivative action in which such person is
director is entitled to indemnification if his or her adjudged liable for negligence or misconduct in the
conduct was at least not opposed to the corporation's best performance of his or her duty to the corporation.
interests. In a criminal proceeding, the director is Delaware law requires indemnification of expenses when the
entitled to indemnification if he or she had no reasonable individual being indemnified has successfully defended any
cause to believe the conduct was unlawful. action, claim, issue, or matter therein, on the merits or
otherwise.
32
<PAGE>
<CAPTION>
Colorado Delaware
<S> <C>
Without court approval, however, no indemnification is Delaware law also permits a Delaware corporation to
available in any action by or on behalf of the corporation provide indemnification in excess of that provided by
(i.e., a derivative action) in which such person is statute. In contrast to Colorado law, Delaware law does
adjudged liable to the corporation or in any other not require authorizing provisions in the certificate of
proceeding where the director is adjudged liable on the incorporation and does not contain express prohibitions on
basis that he or she received an improper personal indemnification in certain circumstances. A court may
benefit. Colorado law requires indemnification of director impose limitations on indemnification, however, based on
expenses when the individual being indemnified has principles of public policy.
successfully defended any action, claim, issue, or matter
therein, on the merits or otherwise.
A director may also apply for and obtain indemnification Delaware law provides that the indemnification provided by
as ordered by a court under circumstances where the court statute shall not be deemed exclusive of any other rights
deems the director is entitled to mandatory under any bylaw, agreement, vote of stockholders or
indemnification under Colorado law or when, under all the disinterested directors or otherwise.
facts and circumstances, it deems it fair and reasonable
to award indemnification even though the director has not
strictly met the statutory standards. An officer is also
entitled to apply for and receive court awarded
indemnification to the same extent as a director.
A corporation cannot indemnify its directors by any means
(other than under a third party insurance contract) if to
do so would be inconsistent with the limitations on
indemnification set forth in the CBCA.
A Colorado corporation may indemnify officers, employees,
fiduciaries and agents to the same extent as directors, and
may indemnify those persons to a greater extent than is
available to directors if to do so does not violate public
policy and is provided for in a bylaw, a general or
specific action of the board of directors or shareholders
or in a contract.
</TABLE>
Both Colorado and Delaware law require indemnification when a director or
officer has successfully defended an action on the merits or otherwise.
Expenses incurred by an officer or director in defending an action may be
paid in advance under Colorado and Delaware law if the director or officer
undertakes to repay the advances if it is ultimately determined that he or she
is not entitled to indemnification. In addition, the laws of both states
authorize a corporation's purchase of indemnity insurance for the benefit of its
officers, directors, employees and agents whether or not the corporation would
have the power to indemnify against the liability covered by the policy.
Inspection of Shareholder List
Both Delaware and Colorado law allow any shareholder to inspect the
shareholder list for a purpose reasonably related to such person's interests as
a shareholder.
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<PAGE>
Consideration for Issuance of Shares
<TABLE>
<CAPTION>
Colorado Delaware
<S> <C>
Shares may be issued for consideration consisting of Shares may be issued for consideration consisting of
tangible or intangible property or benefit to the tangible or intangible property or benefit to the
corporation, including cash, promissory notes, services corporation, including cash, promissory notes, services
performed and other securities of the corporation. performed and other securities of the corporation.
Shares may not be issued for consideration consisting of a In the absence of "actual fraud," in the transaction, the
promissory note of the subscriber or an affiliate of the judgment of the board as to the value of the consideration
subscriber unless the note is negotiable and is secured by shall be conclusive.
collateral, other than the shares, having a fair market
value at least equal to the principal amount of the note.
The note must reflect a promise to pay independent of the
collateral and cannot be a "nonrecourse" note.
Shares with a par value may be issued for consideration No provisions restrict the ability of the board to
less than such par value. authorize the issuance of stock for a promissory note of
any type, including an unsecured or nonrecourse note or a
note secured only by the shares.
Shares with par value cannot be issued for consideration
with a value that is less than the par value. Shares
without par value can be issued for any consideration
determined to be valid by the board.
<CAPTION>
Dividends and Repurchases of Shares
Colorado Delaware
<S> <C>
Colorado law dispenses with the concepts of par value of The concepts of par value, capital and surplus are
shares as well as statutory definitions of capital, retained under Delaware law. Delaware law permits a
surplus and the like. Colorado law permits a corporation corporation to declare and pay dividends out of surplus
to declare and pay cash or in-kind property dividends or or, if there is no surplus, out of net profits for the
to repurchase shares unless, after giving effect to the fiscal year in which the dividend is declared and/or for
transaction: (a) the corporation would not be able to pay the preceding fiscal year as long as the amount of capital
its debts as they become due in the usual course of of the corporation following the declaration and payment
business; or (b) the corporation's total assets would be of the dividend is not less than the aggregate amount of
less than the sum of its total liabilities plus (unless the capital represented by the issued and outstanding
the articles of incorporation permit otherwise) the amount stock of all classes having a preference upon the
that would be needed, if the corporation were to be distribution of assets. In addition, Delaware law
dissolved at the time of the distribution, to satisfy the generally provides that a corporation may redeem or
preferential rights upon dissolution of shareholders whose repurchase its shares only if the capital of the
preferential rights are superior to those receiving the corporation is not impaired and such redemption or
distribution. repurchase would not impair the capital of the corporation.
</TABLE>
To date, Wireless-CO has not paid any cash dividends.
Shareholder Voting on Mergers and Certain Other Transactions
Both Delaware and Colorado law generally require that a majority of the
shareholders of both acquiring and target corporations approve statutory
mergers.
34
<PAGE>
<TABLE>
<CAPTION>
Colorado Delaware
<S> <C>
Colorado law does not require a stockholder vote of the Delaware law contains a similar exception to its voting
surviving corporation in a merger (unless the corporation requirements for reorganizations where shareholders of the
provides otherwise in its certificate of incorporation) if corporation itself, or both, immediately prior to the
(a) the merger agreement does not amend the existing reorganization will own immediately after the
certificate of incorporation, (b) each share of the stock reorganization equity securities constituting more than 80
of the surviving corporations outstanding immediately percent of the voting power of the surviving or acquiring
before the effective date of the merger is an identical corporation or its parent entity.
outstanding share after the merger, and (c) either no
shares of common stock of the surviving corporation and no
shares, securities or obligations convertible into such
stock are to be issued or delivered under the plan of
merger, or the authorized, unissued shares or the treasury
shares of common stock of the surviving corporation to be
issued or delivered under the plan of merger plus those
initially issuable upon conversion of any other shares,
securities or obligations to be issued or delivered under
such plan do not exceed twenty percent (20%) of the shares
of common stock of such constituent corporation
outstanding immediately prior to the effective date of the
merger.
Unless one of these exceptions are available, Colorado law
requires that a majority of the shareholders of both
acquiring and target corporations approve statutory
mergers.
</TABLE>
Both Delaware law and Colorado law also require that a sale of all or
substantially all of the assets of a corporation otherwise than in the ordinary
course of business be approved by a majority of the outstanding voting shares of
the corporation transferring such assets.
Both Colorado and Delaware law generally do not require class voting,
except in certain transactions involving an amendment to the certificate of
incorporation that adversely affects a specific class of shares or where the
designation of the class of securities includes such a right.
Stockholder Approval of Certain Business Combinations under Delaware Law
In recent years, a number of states have adopted special laws designed to
make certain kinds of "unfriendly" corporate takeovers, or other transactions
involving a corporation and one or more of its significant shareholders, more
difficult. Under Section 203, certain "business combinations" with "interested
stockholders" of Delaware corporations are subject to a three-year moratorium
unless specified conditions are met.
Section 203 prohibits a Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for three years following the date
that such person or entity becomes an interested stockholder. With certain
exceptions, an interested stockholder is a person or entity who or which owns,
individually or with or through certain other persons or entities, fifteen
percent (15%) or more of the corporation's outstanding voting stock (including
any rights to acquire stock pursuant to an option, warrant, agreement,
arrangement or understanding, or upon the exercise of conversion or exchange
rights, and stock with respect to which the person has voting rights only), or
is an affiliate or associate of the corporation and was the owner, individually
or with or through certain other persons or entities, of fifteen percent (15%)
or more of such voting stock at any time within the previous three years, or is
an affiliate or associate of any of the foregoing.
35
<PAGE>
For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested stockholder; sales
or other dispositions to the interested stockholder (except proportionately with
the corporation's other stockholders) of assets of the corporation of a direct
or indirect majority-owned subsidiary equal in aggregate market value of ten
percent (10%) or more of the aggregate market value of either the corporation's
consolidated assets or all of its outstanding stock; the issuance or transfer by
the corporation or a direct or indirect majority-owned subsidiary of stock of
the corporation or such subsidiary to the interested stockholder (except for
certain transfers in a conversion or exchange or a pro rata distribution or
certain other transactions, none of which increase the interested stockholder's
proportionate ownership of any class or series of the corporation's or such
subsidiary's stock or of the corporation's voting stock); or receipt by the
interested stockholder (except proportionately as a stockholder), directly or
indirectly, of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation or a subsidiary. The three-year
moratorium imposed on business combinations by Section 203 does not apply if:
(i) Prior to the date on which such stockholder becomes an interested
stockholder the board of directors approves either the business combination or
the transaction that resulted in the person or entity becoming an interested
stockholder;
(ii) Upon consummation of the transaction that made him or her an
interested stockholder, the interested stockholder owns at least eighty-five
percent of the corporation's voting stock outstanding at the time the
transaction commenced (excluding from the eighty-five percent calculation shares
owned by directors who are also officers of the target corporation and shares
held by employee stock plans that do not give employee participants the right to
decide confidentially whether to accept a tender or exchange offer); or
(iii) On or after the date such person or entity becomes an interested
stockholder, the board approves the business combination and it is also approved
at a stockholder meeting by sixty-six and two-thirds percent of the outstanding
voting stock not owned by the interested stockholder.
Section 203 only applies to certain publicly held corporations that have a class
of voting stock that is
(i) Listed on a national securities exchange,
(ii) Quoted on an interdealer quotation system of a registered national
securities association or
(iii) Held of record by more than 2,000 stockholders.
Although a Delaware corporation to which Section 203 applies may elect not
to be governed by Section 203, Wireless-DE does not intend to so elect.
Section 203 will encourage any potential acquirer to negotiate with the
Company's Board of Directors. Section 203 also might have the effect of limiting
the ability of a potential acquirer to make a two-tiered bid for Wireless-DE in
which all stockholders would not be treated equally. Shareholders should note,
however, that the application of Section 203 to Wireless-DE will confer upon the
Board the power to reject a proposed business combination in certain
circumstances, even though a potential acquirer may be offering a substantial
premium for Wireless-DE's shares over the then-current market price. Section 203
would also discourage certain potential acquirers unwilling to comply with its
provisions.
36
<PAGE>
Interested Director Transactions
Under both Delaware and Colorado law, contracts or transactions in which
one or more of a corporation's directors has an interest are generally not void
or voidable because of such interest provided that certain conditions, such as
obtaining the required approval and fulfilling the requirements of good faith
and full disclosure, are met. With certain exceptions, the conditions are
similar under Delaware and Colorado law. To authorize or ratify the transaction,
under Colorado law (a) either the shareholders or the disinterested members of
the board of directors must approve any such contract or transaction in good
faith after full disclosure of the material facts, or (b) the contract or
transaction must have been fair as to the corporation. The same requirements
apply under Delaware law, except that the fairness requirement is tested as of
the time the transaction is authorized, ratified or approved by the board, the
shareholders or a committee of the board. If board approval is sought, the
contract or transaction must be approved by a majority vote of the disinterested
directors (though less than a majority of a quorum), except that interested
directors may be counted for purposes of establishing a quorum.
Loans to Directors and Officers
<TABLE>
<CAPTION>
Colorado Delaware
<S> <C>
The board of directors cannot make a loan to a director or The board of directors may make loans to, or
officer (or any entity in which such person has an guaranties for, directors and officers on such terms as
interest), or guaranty any obligation of such person or they deem appropriate whenever, in the board's judgment,
entity, until at least ten days after notice has been the loan can be expected to reasonably benefit the
given to the shareholders who would be entitled to vote on corporation.
the transaction if it were being submitted for shareholder
approval.
</TABLE>
Shareholder Derivative Suits
Under both Delaware and Colorado law, a stockholder may bring a derivative
action on behalf of the corporation only if the stockholder was a stockholder of
the corporation at the time of the transaction in question or if his or her
stock thereafter devolved upon him or her by operation of law.
<TABLE>
<CAPTION>
Colorado Delaware
<S> <C>
Provides that the corporation or the defendant in a Delaware does not have a similar bonding requirement.
derivative suit may make a motion to the court for an
order requiring the plaintiff shareholder to furnish a
security bond.
</TABLE>
Appraisal/Dissenters' Rights
Under both Delaware and Colorado law, a shareholder of a corporation
participating in certain major corporate transactions may, under varying
circumstances, be entitled to appraisal/dissenters' rights pursuant to which
such shareholder may receive cash in the amount of the fair market value of his
or her shares in lieu of the consideration he or she would otherwise receive in
the transaction. Under both Delaware and Colorado law, such fair market value is
determined exclusive of any element of value arising from the accomplishment or
expectation of the merger or consolidation.
37
<PAGE>
<TABLE>
<CAPTION>
Colorado Delaware
<S> <C>
Dissenters' rights are not available to shareholders of a Appraisal rights are not available (a) with respect
corporation surviving a merger if no vote of the to the sale, lease or exchange of all or substantially all
stockholders of the surviving corporation is required to of the assets of a corporation, (b) with respect to a
approve the merger or share exchange under certain merger or consolidation by a corporation the shares of
provisions of Colorado law. which are either listed on a national securities exchange
or are held of record by more than 2,000 holders if such
stockholders receive only shares of the surviving
corporation or shares of any other corporation that are
either listed on a national securities exchange or held of
record by more than 2,000 holders, plus cash in lieu of
fractional shares of such corporations, or (c) to
stockholders of a corporation surviving a merger if no
vote of the stockholders of the surviving corporation is
required to approve the merger under certain provisions of
Delaware law.
<CAPTION>
Colorado Delaware
<S> <C>
Dissenters rights are not available to shareholders of a
Colorado corporation with respect to a merger or
consolidation by a corporation the shares of which are
either listed on a national securities exchange or are
held of record by more than 2,000 holders if such
stockholders receive only shares of the surviving
corporation or shares of any other corporation that are
either listed on a national securities exchange or held of
record by more than 2,000 holders, plus cash in lieu of
fractional shares of such corporations, or (c) to
stockholders of a corporation surviving a merger if no
vote of the stockholders of the surviving corporation is
required to approve the merger under certain provisions of
Colorado law.
Dissolution
<CAPTION>
Colorado Delaware
<S> <C>
If the board of directors initially approves the Unless the board of directors approves the proposal to
dissolution, it may be approved by a simple majority of dissolve, the dissolution must be approved by all the
the outstanding shares of the corporation's stock entitled stockholders entitled to vote thereon. Only if the board
to vote. In the event of such a board-initiated of directors initially approves the dissolution may it be
dissolution, Colorado law allows a Colorado corporation to approved by a simple majority of the outstanding shares of
include in its certificate of incorporation a the corporation's stock entitled to vote. In the event of
supermajority (greater than a simple majority) voting such a board initiated dissolution, Delaware law allows a
requirement in connection with dissolutions. Under Delaware corporation to include in its certificate of
Colorado law, shareholders may only initiate dissolution incorporation a supermajority (greater than a simple
by way of a judicial proceeding. majority) voting requirement in connection with
dissolutions. Wireless-DE's Certificate of Incorporation
contains no such supermajority requirement, however, and a
majority of the outstanding shares entitled to vote,
voting at a meeting at which a quorum is present, would be
sufficient to approve a dissolution of Wireless-DE that
had previously been approved by its Board of Directors.
</TABLE>
38
<PAGE>
Vote Required
The approval of a majority of the outstanding shares of the Company's
Common Stock and Series C Preferred Stock voting as a single class, is required
to reincorporate in Delaware. Each share of Series C Preferred Stock is entitled
to 6.667 votes. Proxies solicited by the Board will be voted in favor of the
adoption of Proposal 3 to reincorporate the Company in Delaware unless otherwise
indicated thereon.
The Board recommends a vote FOR the approval of the Company's
reincorporation in Delaware, which is designated as Proposal 3 on the enclosed
Proxy card.
Proposal 4: ADOPTION OF THE COMPANY's 2000 STOCK OPTION PLAN
The Board has recommended, and at the Annual Meeting the shareholders will
be asked to approve, the adoption of the Option Plan. A description of the
Option Plan, which Option Plan is attached hereto as Annex E, appears below.
Purpose of the Option Plan
The purpose of the Option Plan is to provide a means whereby selected
employees, officers, directors, agents, consultants and independent contractors
of the Company or of any parent or subsidiary (as defined in subsection 5.7 of
the Option Plan and referred to hereinafter as "related corporations") thereof,
may be granted incentive stock options and/or non-qualified stock options to
purchase Common Stock (as defined in Section 3 of the Option Plan), in order to
attract and retain the services or advice of such employees, officers,
directors, agents, consultants and independent contractors and to provide added
incentive to them by encouraging stock ownership in the Company.
The Option Plan
The Option Plan provides for the grant of options to purchase up to
15,000,000 shares of Common Stock (3,750,000 if the reverse split contemplated
by Proposal 5 is approved) to selected employees, officers, directors, agents,
consultants and independent contractors of the Company. Options may be either
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code (the "Code"), or non-qualified options. Incentive stock options may
be granted only to any individual who, at the time the option is granted, is an
employee of the Company or any related corporation, while non-qualified options
may be granted to any director, employee, officer, agent, consultant or
independent contractor of the Company or any related corporation, whether an
individual or an entity.
The Option Plan will be administered by the Board, except to the extent the
Board delegates its authority to a committee of the Board to administer the
Option Plan. The administrator of the Option Plan shall hereinafter be referred
to as the "Plan Administrator." Any party to whom an option is granted under the
Option Plan shall be referred to hereinafter as an "Optionee."
The maximum number of shares that may be purchased pursuant to the exercise
of each option and the price per share at which such option is exercisable (the
"Exercise Price") shall be established by the Plan Administrator, provided that
the Plan Administrator shall act in good faith to establish the exercise price
which shall be not less than the fair market value per share of the Common Stock
at the time the option is granted with respect to incentive stock options and
not less than par value per share of the Common Stock at the time the option is
granted with respect to nonqualified stock options and also provided that, with
respect to incentive stock options granted to greater than 10% shareholders, the
exercise price shall be as required by Section 6 of the Option Plan. In
addition, no individual may be granted options under the Option Plan to purchase
more than 5,000,000 shares (1,250,000 shares if the reverse split is approved)
of Common Stock during any one year, subject to adjustment as set forth in
Section 7 of the Option Plan.
39
<PAGE>
Options granted under the Option Plan and the rights and privileges
conferred hereby may not be transferred, assigned, pledged or hypothecated in
any manner (whether by operation of law or otherwise) other than (i) by will or
by the applicable laws of descent and distribution, (ii) pursuant to a qualified
domestic relations order as defined in Section 414(p) of the Code, or Title I of
the Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder or (iii) as otherwise determined by the Plan Administrator and set
forth in the applicable option agreement. Any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of any option under this Option Plan or
of any right or privilege conferred hereby, contrary to the Code or to the
provisions of this Option Plan, or the sale or levy or any attachment or similar
process upon the rights and privileges conferred hereby shall be null and void.
The designation by an Optionee of a beneficiary does not, in and of itself,
constitute an impermissible transfer.
If the Optionee's relationship with the Company or any related corporation
ceases for any reason other than termination for cause, death or total
disability, and unless by its terms the option sooner terminates or expires,
then the Optionee may exercise, for a three-month period, that portion of the
Optionee's option which is exercisable at the time of such cessation, but the
Optionee's option shall terminate at the end of the three-month period following
such cessation as to all shares for which it has not theretofore been exercised,
unless, in the case of a nonqualified stock option, such provision is waived in
the agreement evidencing the option or by resolution adopted by the Plan
Administrator within 90 days of such cessation. If, in the case of an incentive
stock option, an Optionee's relationship with the Company or related corporation
changes (i.e., from employee to non-employee, such as a consultant), such change
shall constitute a termination of an Optionee's employment with the Company or
related corporation and the Optionee's incentive stock option shall become a
non-qualified stock option.
Options under the Option Plan must be issued by January 4, 2010. Stock
options granted under the Option Plan cannot be exercised more than 10 years
from the date of grant. Stock options issued to a 10% Shareholder are limited to
five-year terms. Payment of the option price shall be made in full at the time
the notice of exercise of the option is delivered to the Company and shall be in
cash, bank certified or cashier's check or personal check (unless at the time of
exercise the Plan Administrator in a particular case determines not to accept a
personal check).
The Plan Administrator can determine at the time the option is granted for
incentive stock options, or at any time before exercise for nonqualified stock
options, that additional forms of payment will be permitted. To the extent
permitted by the Plan Administrator and applicable laws and regulations
(including, but not limited to, federal tax and securities laws and regulations
and state corporate law), an option may be exercised by delivery of shares of
stock of the Company held by an Optionee having a fair market value equal to the
exercise price, such fair market value to be determined in good faith by the
Plan Administrator; delivery of a properly executed exercise notice, together
with irrevocable instructions to a broker, all in accordance with the
regulations of the Federal Reserve Board, to promptly deliver to the Company the
amount of sale or loan proceeds necessary to pay the exercise price and any
federal, state or local withholding tax obligations that may arise in connection
with the exercise; or delivery of a properly executed exercise notice together
with instructions to the Company to withhold from the shares that would
otherwise be issued upon exercise that number of shares having a fair market
value equal to the option exercise price.
Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed by the Company become available again for issuance under
the Option Plan.
40
<PAGE>
Unless sooner terminated by the Board, this Option Plan shall terminate on
January 4, 2010. No option may be granted after such termination or during any
suspension of this Option Plan. The amendment or termination of this Option Plan
shall not, without the consent of the option holder, alter or impair any rights
or obligations under any option theretofore granted under this Option Plan.
The Board may at any time suspend, amend or terminate this Option Plan,
provided that except as set forth in Section 7 of the Option Plan, the approval
of the holders of a majority of the Company's outstanding shares of voting
capital stock present and entitled to vote at any meeting is necessary for the
adoption by the Board of any amendment which will: (a) increase the number of
shares which are to be reserved for the issuance of options under the Option
Plan; (b) permit the granting of stock options to a class of persons other than
those presently permitted to receive stock options under the Option Plan; or (c)
require shareholder approval under applicable law, including Section 16(b) of
the Exchange Act.
All of the Company's employees, officers and directors will be eligible to
participate in the Option Plan.
Registration of Shares Issued Under Option Plan
The Company intends that the shares to be reserved for and issued under the
Option Plan, for which approval is now sought, may be registered under the
Securities Act. Such registration, if completed, would in most cases permit the
unrestricted resale in the public market of shares issued pursuant to the Option
Plan.
New Plan Benefits - The Option Plan
Name and Position Dollar Value ($) Number of Shares
----------------- --------------- ----------------
Dean M. Leavitt - Chief Executive -- (1) 2,500,000 (2)
Officer and Chairman of the Board
Edwin M. Cooperman - Director -- --
Michael S. Falk - Director -- --
Barry A. Kaplan - Director -- --
Amy L. Newmark - Director -- --
Chester N. Winter - Director -- --
Charles I. Leone - Chief Financial -- --
Officer, and Chief Operating
Officer
John H. Perveiler - Vice President/ -- --
National Sales Manager
Marc R. Shultz - Vice President of -- --
Business Development
All current executive officers as a -- (1) 2,500,000 (2)(3)
group (consisting of 4 persons)
All current directors (including -- (1) 2,500,000 (2)(3)
nominees for director) who are
executive officers (1 person)
All employees (other than current -- (1) 881,000
executive officers and directors
who are not executive officers)
as a group (approximately 50 persons)
---------------------------
41
<PAGE>
(1) The exercise price of the option will be the fair market value at the close
of business on the date the shareholders approve the Plan.
(2) 625,000 shares if the reverse split is approved.
(3) Includes options to purchase 2,500,000 shares granted to Mr. Leavitt.
Except as disclosed above, the Company does not currently know and is unable to
determine the number of additional options that the Company will grant under the
Option Plan to any of the aforementioned persons. Certain Federal Income Tax
Consequences of the Option Plan Under Current Law
Certain Federal Income Tax Consequences of the Option Plan Under Current Law
An optionee will recognize no taxable income at the time an option is
granted.
An optionee will recognize no taxable income at the time of exercise of an
incentive stock option. If the optionee makes no disposition of the acquired
shares within two years after the date of grant of the incentive stock option,
or within one year after the exercise of such option, the employee will
recognize no taxable income and any gain or loss that is realized on a
subsequent disposition of such shares will be treated as long-term capital gain
or loss. As to options exercised, the excess, if any, of the fair market value
of the shares on the date of exercise over the option price will be an item of
tax preference for purposes of computing the alternative minimum tax.
If the foregoing holding period requirements are not satisfied, the
optionee will realize (i) ordinary income for federal income tax purposes in the
year of disposition in an amount equal to the lesser of (a) the excess, if any,
of the fair market value of the shares on the date of exercise over the option
price thereof, or (b) the excess, if any, of the selling price over the
optionee's adjusted basis of such shares (provided that the disposition is a
sale or exchange with respect to which a loss (if sustained) would be recognized
by such individual) and (ii) capital gain equal to the excess, if any, of the
amount realized upon the disposition of shares over the fair market value of
such shares on the date of exercise.
Employees, directors, officers, consultants, agents and independent
contractors of the Company will be required to include in their gross income in
the year of exercise of a non-qualified stock option the difference between the
fair market value on the exercise date of the shares transferred and the option
price.
The Company will be entitled (provided it complies with certain reporting
requirements with respect to the income received by the employee) to a deduction
for federal income tax purposes at the same time and in the same amount as the
optionee is considered to be in receipt of compensation income in connection
with the exercise of non-qualified stock options or, in the case of an incentive
stock option, a disqualifying disposition of shares received upon exercise
thereof. If the holding period requirements outlined above are met, no deduction
will be available to the Company in connection with an incentive stock option.
Under the Revenue Reconciliation Act of 1993, the Company may not be able to
deduct compensation to certain employees to the extent compensation exceeds one
million dollars per tax year. Covered employees include the chief executive
officer and the four other highest compensated officers of the Company for that
tax year. Certain performance-based compensation including stock options are
exempt provided that, among other things, the stock options are granted by a
compensation committee of the Board of Directors which is comprised solely of
two or more outside directors and the plan under which the options are granted
is approved by shareholders. The Option Plan will not qualify as
performance-based compensation.
42
<PAGE>
Vote Required
The approval of a majority of the shares present in person or represented
by Proxy, assuming a quorum at the Annual Meeting, is required for the adoption
of the Option Plan. Holders of Common Stock and Series C Preferred Stock will
vote as a single class. Each share of Series C Preferred Stock is entitled to
6.667 votes.
The Board of Directors recommends a vote FOR the adoption of the Company's
2000 Stock Option Plan, which is designated as Proposal 4 on the enclosed Proxy
card.
Proposal 5: APPROVAL OF AUTHORIZATION TO EFFECT A REVERSE STOCK SPLIT
General
The Board of Directors recommends for shareholder approval the proposal to
authorize the Board of Directors to amend the Company's Articles of
Incorporation to effect a one-for-four reverse stock split of the authorized and
outstanding Common Stock of the Company . The proposed reverse stock split will
reduce the number of outstanding shares of Common Stock of the Company as of the
Record Date from _______ to approximately _____ and will reduce the number of
shares of Common Stock into which each share of Series C Preferred Stock is
convertible and for which outstanding options and warrants are exercisable. In
addition, the effective conversion price of the Series C Preferred Stock would
be increased from $1.50 to $6.00 per share, and similar changes would occur to
the exercise prices of outstanding options and warrants.
Except for changes in the number of shares of stock outstanding and
issuable upon conversion of the Series C Preferred Stock, the rights and
privileges of holders of shares of Common Stock, and Series C Preferred Stock
will remain the same, both before and after the proposed reverse stock split.
However, as disclosed in Proposal 2, the reverse stock split would have the
effect, by reducing the number of shares of outstanding Common Stock and the
Company's commitments to reserve Common Stock issuable upon exercise and
conversion of outstanding options, warrants and convertible securities, of
authorizing approximately 94,000,000 additional shares of Common Stock for
issuance.
The proposed reverse stock split would become effective on the date (the
"Effective Date") of the filing of an amendment to the Company's Articles of
Incorporation. Commencing on the Effective Date, each currently outstanding
certificate will be deemed for all corporate purposes to evidence ownership of
the reduced number of shares resulting from the proposed reverse stock split.
New stock certificates reflecting the number of shares resulting from the stock
split will be issued only as currently outstanding certificates are transferred
or upon request.
The Company will not issue fractional shares upon consummation of the
reverse stock split. Instead, the Company will, within 30 days following the
consummation of the reverse stock split, send to each shareholder otherwise
entitled to receive a fractional share as of the record date of the stock split,
an amount in cash equal to the value of such fractional share, based on the then
current market price of the Common Stock following the reverse stock split, as
determined by the Board of Directors.
Reason for the Reverse Stock Split
The Company believes, after consultation with Commonwealth, that the
proposed reverse stock split is necessary to enable the Common Stock to trade at
an appropriate price per share for, among other reasons, NASDAQ or exchange
listing application purposes. However, there is no assurance that the reverse
stock split will be followed by a proportionate increase in the price per share
of the Common Stock, either in the short-term or long-term.
43
<PAGE>
Vote Required
The approval of a majority of the outstanding shares of the Company's
Common Stock and Series C Preferred Stock, voting together as a class, is
required to effect the reverse stock split. Each share of Series C Preferred
Stock is entitled to 6.667 votes. Proxies solicited by the Board will be voted
in favor of the adoption of Proposal 5 to effect the reverse stock split unless
otherwise indicated.
The Board of Directors recommends a vote FOR the approval of the
authorization of the Board of Directors to file an amendment to the Company's
Articles of Incorporation to effectuate the reverse stock split, which is
designated as Proposal 5 on the enclosed Proxy card.
Proposal 6: RATIFICATION OF INDEPENDENT ACCOUNTANTS
M.R. Weiser & Co. LLP has served as the Company's independent accountants
since August 5, 1999.
The Board of Directors of the Company has appointed M.R. Weiser & Co. LLP
("M.R. Weiser") as independent accountants for the fiscal year ended June 30,
2000 and to render other professional services as required.
The appointment of M.R. Weiser is being submitted to shareholders for
ratification.
Representatives of M.R. Weiser will be present at the Annual Meeting, where
they will have the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.
Change in Certifying Accountant
On August 5, 1999, the Company dismissed PricewaterhouseCoopers LLP ("PWC")
as its independent accountants. The reports of PWC on the Company's financial
statements for the two fiscal years ending June 30, 1998 and 1997 did not
contain any adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principles, except that
the reports of PWC included a reference to a substantial doubt about the
Company's ability to continue as a going concern. In connection with its audits
for the two most recent fiscal years and through August 5, 1999, there were no
disagreements with PWC on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of PWC would have caused them
to make reference thereto in their report on the financial statements for such
years.
The Company requested that PWC furnish it with a letter addressed to the
SEC stating whether or not it agreed with the above statements. PWC furnished
the Company with such a letter, dated August 20, 1999, a copy of which was filed
by the Company as Exhibit 16 to a Current Report on Form 8-K/A filed by the
Company as of August 20, 1999.
The Company engaged M.R. Weiser, as its new independent accountants as of
August 5, 1999. In connection with its audits for the fiscal year ended June 30,
1999, there have not been any disagreements with M.R. Weiser on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
M.R. Weiser would have caused them to make reference thereto in their report on
the financial statements for such year.
The Board recommended and approved the decision to change independent
accountants.
44
<PAGE>
Vote Required
The approval of a majority of the shares present in person or represented
by Proxy, assuming a quorum at the Annual Meeting, is required for ratification
of the appointment of independent auditors and public accountants. Common Stock
and Series C Preferred Stock vote as a single class on this Proposal. Each share
of Series C Preferred Stock is entitled to 6.667 votes.
The Board of Directors recommends a vote FOR the ratification of M. R.
Weiser & Co. LLP as independent auditors and public accountants of the Company,
which is designated as Proposal 6 on the enclosed Proxy card.
DEADLINE FOR SHAREHOLDER PROPOSALS FOR 2000
Shareholder proposals intended to be considered for inclusion in the Proxy
Statement for presentation at the Company's 2000 Annual Meeting of Shareholders
must be received at the Company's offices at 805 Third Avenue, 8th Floor, New
York, New York 10022, no later than October 6, 2000, for inclusion in the
Company's Proxy statement and form of Proxy relating to such meeting. All
proposals must comply with applicable SEC rules and regulations. If the Company
elects to move the date of the 2000 Annual Meeting more than 30 days from the
date of the 1999 Annual Meeting, such proposals must be received by a reasonable
time prior to such meeting.
OTHER MATTERS
The Board is not aware of any other matter other than those set forth in
this Proxy Statement that will be presented for action at the Annual Meeting. If
other matters properly come before the Annual Meeting, the persons named as
proxies intend to vote the shares they represent in accordance with their best
judgment in the interest of the Company.
DOCUMENTS INCLUDED WITH THIS PROXY STATEMENT
THE COMPANY IS PROVIDING HEREWITH, A COPY OF ITS ANNUAL REPORT ON FORM 10-KSB
FOR THE FISCAL YEAR ENDED JUNE 30, 1999, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES FILED THEREWITH. ALSO INCLUDED HEREWITH, IS A COPY OF THE COMPANY's
QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTERS ENDED SEPTEMBER 30, 1999,
DECEMBER 31, 1999 AND MARCH 31, 2000. IF ANY PERSON RECEIVES THIS PROXY WITHOUT
THE FOREGOING DOCUMENTS, THE COMPANY UNDERTAKES TO PROVIDE, WITHOUT CHARGE, UPON
A WRITTEN OR ORAL REQUEST OF SUCH PERSON AND BY FIRST CLASS MAIL OR OTHER
EQUALLY PROMPT MEANS WITHIN ONE BUSINESS DAY OF RECEIPT OF SUCH REQUEST, A COPY
OF THE COMPANY's ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED JUNE 30, 1999,
INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES FILED THEREWITH AND A COPY OF
THE COMPANY'S QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTERS ENDED SEPTEMBER
30, 1999, DECEMBER 31, 1999 AND MARCH 31, 2000. WRITTEN REQUESTS FOR SUCH
REPORTS SHOULD BE ADDRESSED TO THE OFFICE OF THE SECRETARY, U.S. WIRELESS DATA,
INC., AND THE COMPANY's TELEPHONE NUMBER AT SUCH OFFICE IS (212) 750-7766.
45
<PAGE>
ANNEX A
PROPOSED AMENDMENT TO SECTION (A) OF ARTICLE
FOURTH OF THE COMPANY'S ARTICLES OF INCORPORATION
(Amends Section (A) of Article Fourth by replacing it in its entirety with the
following section)
"A. The aggregate number of shares which the Corporation shall have
authority to issue is two hundred twenty-five million (225,000,000)
shares, consisting of two hundred million (200,000,000) shares of
common stock without par value per share (the "Common Stock") and
twenty-five million (25,000,000) shares of preferred stock without par
value per share (the "Preferred Stock").
A-1
<PAGE>
ANNEX B
AGREEMENT AND PLAN OF MERGER
OF
U.S. WIRELESS DATA, INC.
(A Colorado corporation)
INTO
U.S. WIRELESS DATA, INC.
(A Delaware corporation)
FIRST: U.S. Wireless Data, Inc., a corporation organized under the laws of
the State of Colorado (the "Merging Corporation"), shall merge with and into its
wholly-owned subsidiary, U.S. Wireless Data, Inc., a corporation organized under
the laws of the State of Delaware (the "Surviving Corporation"), and the
Surviving Corporation shall assume the liabilities and obligations of the
Merging Corporation.
SECOND: The presently issued and outstanding shares of capital stock of the
Merging Corporation shall be converted on a one-for-one basis into shares of the
capital stock, of the same class and series of the Surviving Corporation. [If
the reverse stock split is to be consummated upon the Reincorporation, change to
"one-for -.25 basis".] THIRD: The presently issued and outstanding shares of the
common stock, $0.01 par value, of the Surviving Corporation, issued to the
Merging Corporation, shall be cancelled. FOURTH: The authorized capital of the
Surviving Corporation shall remain unchanged following the merger.
THIRD: The presently issued and outstanding shares of the common stock,
$0.01 par value, of the Surviving Corporation, issued to the Merging
Corporation, shall be cancelled.
FOURTH: The authorized capital of the Surviving Corporation shall remain
unchanged following the merger.
FIFTH: The Certificate of Incorporation of the Surviving Corporation, shall
remain the Certificate of Incorporation of the Surviving Corporation.
SIXTH: The by-laws of the Surviving Corporation shall remain the by-laws of
the Surviving Corporation.
SEVENTH: The directors and officers of the Surviving Corporation shall
remain the directors and officers of the Surviving Corporation and shall serve
until their successors are elected and have qualified.
EIGHTH: The officers of each corporation party to the merger shall be and
hereby are authorized to do all acts and things necessary and proper to effect
the merger.
B-1
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and delivered this Plan
of Merger as of the _______ day of _______________, 2000.
U.S. WIRELESS DATA, INC. (a Colorado corporation)
By:
----------------------------------------------
Dean M. Leavitt
Chairman and Chief Executive Officer
Attest:
By:
----------------------------
U.S. WIRELESS DATA, INC. (a Colorado corporation)
By:
----------------------------------------------
Dean M. Leavitt
Chairman and Chief Executive Officer
Attest:
By:
----------------------------
B-2
<PAGE>
ANNEX C
CERTIFICATE OF INCORPORATION
OF
U.S. WIRELESS DATA, INC.
under Section 102 of the
Delaware General Corporation Law
C-1
<PAGE>
CERTIFICATE OF INCORPORATION
OF
U.S WIRELESS DATA, INC.
The undersigned, a natural person at least eighteen years of age, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware (the "DGCL"), does hereby certify as follows:
ARTICLE FIRST
The name of the corporation is U.S Wireless Data, Inc.
ARTICLE SECOND
The address, including street, number, city and county of the Corporation's
initial registered office in the State of Delaware is 9 East Loockerman Street,
in the City of Dover, County of Kent, Delaware 19901 and the name of the initial
registered agent therein and in charge thereof, upon whom process against the
Corporation may be served in National Corporate Research, Ltd.
ARTICLE THIRD
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the DGCL.
ARTICLE FOURTH
The aggregate number of shares which the Corporation shall have authority
to issue is _______ shares of which ________ [to be determined based upon the
outcome of Proposal 2] shares, par value of $.01 per share, shall be designated
"Common Stock" and ________ [to be determined based upon the outcome of Proposal
2] shares, par value of $.01 per share, shall be designated "Preferred Stock."
Authority is hereby expressly granted to the Board of Directors of the
Corporation (or a committee thereof designated by the Board of Directors
pursuant to the by-laws of the Corporation, as amended from time to time (the
"By-Laws")) to issue the Preferred Stock from time to time as Preferred Stock of
any series and to declare and pay dividends thereon in accordance with the terms
thereof and, in connection with the creation of each such series, to fix by the
resolution or resolutions providing for the issue of shares thereof, the number
of shares of such series, and the designations, powers, preferences, and rights
(including voting rights), and the qualifications, limitations, and restrictions
of such series, to the fullest extent now or hereafter permitted by the laws of
the State of Delaware.
C-2
<PAGE>
Of the Preferred Stock, Eight Million Four Hundred Fifty Thousand
(8,450,000) shares are hereby designated as Series C Convertible Preferred Stock
(hereinafter referred to as the "Series C Preferred Stock"). The Series C
Preferred Stock shall have the following designations, preferences and other
rights:
1. Voting Rights.
1.1 Except as otherwise provided below or as required by law, the holders
of Series C Preferred Stock will be entitled to notice of any meeting of
shareholders of the Corporation or any action to be taken by shareholders
without a meeting, and shall be entitled to one vote per share of Common Stock
issuable upon conversion of the Series C Preferred Stock as of the record date
for any such vote on all matters submitted to a vote of stockholders of the
Company, and the holders of Series C Preferred Stock will vote as a single class
with the holders of Common Stock on all matters, except as otherwise required
under applicable law.
1.2 Except as otherwise required by law or provided by the Articles of
Incorporation, a majority of the shares entitled to vote, represented in person
or by proxy, will constitute a quorum at a meeting of shareholders; provided,
that, for action upon any matter as to which holders of shares are entitled to
vote as a class, a majority of the shares of such class, represented in person
or by proxy, will constitute a quorum.
1.3 The holders of the Series C Preferred Stock will be entitled, voting as
a separate class, to elect two directors and the holders of Common Stock will be
entitled to elect the balance of the directors.
1.4 Any director elected solely by the holders of the Series C Preferred
Stock or of the Common Stock, as the case may be, may be removed, either with or
without cause, by, and only by, the affirmative vote of the holders of a
majority of a quorum of the shares of the Series C Preferred Stock or a majority
of a quorum of the shares of the Common Stock, as the case may be, either at a
special meeting of such shareholders duly called for that purpose or pursuant to
a written consent of shareholders, and any vacancy thereby created or otherwise
resulting may be filled by, and only by, the holders of the Series C Preferred
Stock or the Common Stock, as the case may be.
2. Dividends. If any dividend is declared on the Common Stock, the holders of
the Series C Preferred Stock will be entitled to receive dividends pari passu
out of legally available funds as if each such share of Series C Preferred Stock
had been converted to Common Stock. No dividend shall be paid on the Common
Stock at a rate greater than the rate at which dividends are paid on the Series
C Preferred Stock (based on the number of shares of Common Stock into which the
Series C Preferred Stock is convertible on the date the dividend is declared).
Dividends on the Series C Preferred Stock will be noncumulative.
3. Liquidation Preference.
3.1 In the event of the liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of the Series C
Preferred Stock will be entitled to receive out of the assets of the
Corporation, for each share of Series C Preferred Stock then held by them,
first, prior and in preference to any distribution to the holders of the Common
C-3
<PAGE>
Stock or any subsequently issued series of preferred stock, an amount equal to
$10.00 per share plus any accrued and unpaid dividends ("Liquidation Value," as
appropriately adjusted for stock splits and combinations). If upon the
occurrence of such event, the assets and funds available for distribution among
the holders of the Preferred Stock are insufficient to permit the payment to
such holders of the full preferential amount provided above, then the entire
assets and funds of the Corporation legally available for distribution to the
holders of Series C Preferred Stock will be distributed ratably among the
holders of Series C Preferred Stock in proportion to the shares of the Series C
Preferred Stock held by each such holder weighted by the respective Liquidation
Value. After payment has been made to the holders of the Series C Preferred
Stock of the full amounts to which they will be entitled as aforesaid, any
remaining assets will be distributed to the holders of the Corporation's other
equity securities.
3.2 A liquidation, dissolution or winding up for the purposes of this
Section 3 includes a (i) merger or consolidation of the Corporation with or into
any other corporation or corporations where the shareholders of the Corporation
immediately prior to such event do not retain more than a 50% voting power and
interest in the successor entity and (ii) sale of all or substantially all of
the assets of the Corporation (collectively, a "Merger or Sale").
3.3 No later than 20 days before the consummation of any Merger or Sale,
the Corporation shall deliver a notice to each holder of Series C Preferred
Stock setting forth the principal terms of such Merger or Sale. Such notice
shall include a description of the amounts that would be paid to holders of
Series C Preferred Stock under this Section 3 and of the consideration that such
holders would receive if they exercised their rights under Section 4 to have
shares of Series C Preferred Stock converted into Common Stock.
3.4 No later than ten days after delivery of the notice, each holder of
Series C Preferred Stock may deliver an election to the Corporation notifying
the Corporation that the holder desires that such holder's shares of Series C
Preferred Stock be converted into shares of Common Stock and, if no such notice
is delivered, such holder shall receive such amounts as are provided for under
this Section 3.
3.5 Each holder of an outstanding share of Series C Preferred Stock shall
be deemed to have consented to distributions made by the Corporation in
connection with the repurchase at cost (or such other price as may be agreed to
by the Corporation's Board of Directors) of shares of Common Stock issued to or
held by officers, directors or employees of, or consultants to, the Corporation
or its subsidiaries upon termination of their employment or services pursuant to
agreements (whether now existing or hereafter entered into) providing for the
right of said repurchase between the Corporation and such persons.
4. Conversion Rights.
4.1 Right to Convert. Notwithstanding any other term or provision contained
herein, no shares of Series C Preferred Stock shall become convertible into
Common Stock under any circumstances until the shareholders of the Corporation
shall have approved an amendment to the Corporation's Articles of Incorporation
C-4
<PAGE>
increasing the number of authorized shares of Common Stock to a number that is
sufficient (given all other Common Stock share reservations) to allow for due
and proper reservation of a sufficient number of shares of Common Stock to allow
for the conversion of the Series C Preferred Stock.
(a) Optional Conversion. Each share of Series C Preferred Stock will
be convertible, at the option of the holder thereof, at the office of the
Corporation or any transfer agent for the Series C Preferred Stock, into a
number of shares of Common Stock as determined in accordance with Section 4.3
hereof.
(b) Automatic Conversion of Series C Preferred Stock. Each share of
Series C Preferred Stock will automatically convert into a number of shares of
Common Stock as determined in accordance with Section 4.3 hereof:
(i) immediately upon the closing of the sale pursuant to a
registration statement under the Securities Act of 1933, as amended, for a
public offering (other than a registration on Form S-8, Form S-4 or comparable
forms) of the Corporation's securities which results in gross proceeds to the
Corporation of not less than $30,000,000; or
(ii) commencing three months after the Initial Closing of the
Series C Preferred Stock, if the average closing bid price of the Common Stock
exceeds 300% of the Conversion Price for 20 consecutive trading days.
4.2 Mechanics of Conversion. Upon conversion, the holder of Series C
Preferred Stock will surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Series C Preferred Stock, and such holder will give written notice to the
Corporation stating the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued; provided,
however, that the Corporation shall not be required to issue the shares of
Common Stock in a name other than that of the holder of the Series C Preferred
Stock being converted unless it can do so in conformance with applicable laws.
The Corporation, as soon as practicable thereafter, will issue and deliver at
such office to such holder of Series C Preferred Stock or to such holder's
nominee or nominees, a certificate or certificates for the number of shares of
Common Stock to which such holder will be entitled as aforesaid. Any conversion
will be deemed to have been made immediately prior to the close of business on
the date of the event of conversion, in the event of automatic conversion
hereunder, or, in the event of voluntary conversion, immediately prior to the
close of business on the date when the Corporation receives a holder's
certificate or certificates for Series C Preferred Stock and any other documents
or instruments required hereunder or by applicable law, and the person or
persons entitled to receive the shares of Common Stock issuable upon conversion
will be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date.
C-5
<PAGE>
4.3 Conversion Rate. Each share of Series C Preferred Stock will be
convertible into the number of shares of Common Stock determined by dividing (i)
the Liquidation Value of the Series C Preferred Stock by (ii) $1.50 (as such
conversion price may be adjusted, the "Conversion Price").
4.4 Adjustment for Reorganization, Reclassification, Consolidation, Merger
or Sale. If any capital reorganization or reclassification of the Corporation,
or any consolidation or merger of the Corporation with another person, or the
sale, transfer or lease of all or substantially all of its assets to another
person shall be effected in such a way that holders of shares of Common Stock
shall be entitled to receive stock, securities or assets with respect to or in
exchange for their shares, then provision shall be made, in accordance with this
Section 4.4, whereby the holder of Series C Preferred Stock shall thereafter
have the right to purchase and receive such securities or assets as would have
been issued and payable with respect to or in exchange for the aggregate shares
of Common Stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby if conversion of the Series C
Preferred Stock had occurred immediately prior to such reorganization,
reclassification, consolidation, merger or sale. The Corporation will not effect
any such consolidation, merger, sale, transfer or lease unless prior to the
consummation thereof the successor entity (if other than the Corporation)
resulting from such consolidation or merger or the entity purchasing or leasing
such assets shall assume by written instrument the obligation to deliver to such
holder of Series C Preferred Stock such securities or assets as, in accordance
with the foregoing provisions, such holder of Series C Preferred Stock may be
entitled to purchase. The provisions of this Section 4.4 shall similarly apply
to successive consolidations, mergers, exchanges, sales, transfers or leases.
4.5 Adjustment for Stock Dividends and Securities Distributions. If, at any
time or from time to time after March 10, 2000, the Corporation shall distribute
to the holders of shares of Common Stock (i) securities, (ii) property, other
than cash, or (iii) cash, without fair payment therefor, then, and in each such
case, the holder of Series C Preferred Stock, upon the conversion of Series C
Preferred Stock, shall be entitled to receive such securities, property and cash
which the holder of Series C Preferred Stock would hold on the date of such
conversion if, on the date thereof, the holder of Series C Preferred Stock had
been the holder of record of the shares of Common Stock issued upon such
conversion and, during the period from March 10, 2000 to and including the date
of such conversion, had retained such shares of Common Stock and the securities,
property and cash receivable by the holder of Series C Preferred Stock during
such period, subject, however, to the holder of Series C Preferred Stock
agreeing to any conditions to such distribution as were required of all other
holders of shares of Common Stock in connection with such distribution. If the
securities to be distributed by the Corporation involve rights, warrants,
options or any other form of convertible securities and the right to exercise or
convert such securities would expire in accordance with its terms prior to the
conversion of the Series C Preferred Stock, then the terms of such securities
shall provide that such exercise or convertibility right shall remain in effect
until thirty (30) days after the date the holder of Series C Preferred Stock
receives such securities pursuant to the exercise hereof.
C-6
<PAGE>
4.6 Other Adjustments. In addition to those adjustments set forth in
Sections 4.4 and 4.5, but without duplication of the adjustments to be made
under such Sections, if the Company:
(a) pays a dividend or makes a distribution on its Common Stock in shares
of its Common Stock;
(b) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(c) combines its outstanding shares of Common Stock into a smaller number
of shares;
(d) makes a distribution on its Common Stock in shares of its capital
stock other than Common Stock; and/or
(e) issues, by reclassification of its Common Stock, any shares of its
capital stock;
then the number and kind of shares of Common Stock issued upon conversion of the
Series C Preferred Stock shall be adjusted so that the holder of Series C
Preferred Stock upon conversion shall be entitled to receive the kind and number
of shares of Common Stock or other securities of the Corporation that the holder
of Series C Preferred Stock would have owned or have been entitled to receive
after the happening of any of the events described above had the Series C
Preferred Stock been converted immediately prior to the happening of such event
or any record date with respect thereto. An adjustment made pursuant to this
Section 4.6 shall become effective immediately after the record date in the case
of a dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or issuance. If, as a
result of an adjustment made pursuant to this Section 4.6, the holder of Series
C Preferred Stock thereafter surrendered for conversion shall become entitled to
receive shares of two or more classes of capital stock or shares of Common Stock
and any other class of capital stock of the Corporation, the Board of Directors
(whose determination shall be conclusive and shall be described in a written
notice to all holders of Series C Preferred Stock promptly after such
adjustment) shall determine the allocation of the adjusted Conversion Price
between or among shares of such classes of capital stock or shares of Common
Stock and such other class of capital stock. The adjustment to the number of
shares of Common Stock issuable upon the conversion of Series C Preferred Stock
described in this Section 4.6 shall be made each time any event listed in
paragraphs (") through (e) of this Section 4.6 occurs.
Simultaneously with all adjustments to the number and/or kind of
securities, property and cash to be issued in connection with the conversion of
the Series C Preferred Stock, the Conversion Price will also be appropriately
and proportionately adjusted.
4.7 Adjustment for Sale of Shares. In the event the Corporation at any time
issues additional Common Stock, preferred stock, options, warrants or
convertible securities after the Original Issue Date, other than securities
currently outstanding as of March 10, 2000 or issued upon the conversion or
exercise of any securities outstanding as of March 10, 2000, at a purchase price
less than the then applicable Conversion Price for the Series C Preferred Stock,
then and in each such case, the Conversion Price for the Series C Preferred
Stock will be automatically reduced to such lower purchase price and the number
of shares issuable upon conversion of the Preferred Shares shall be increased
C-7
<PAGE>
proportionately; provided, however, that no adjustment to the Conversion Price
or the number of shares shall be made pursuant to this Section 4.7 in the event
(i) the Company grants options to employees, consultants, officers or directors
of the Company pursuant to contracts or plans approved by the Board of Directors
of the Company, (ii) of the issuance of securities to a "strategic partner" as
determined by the Board of Directors of the Company, (iii) of the issuance of
securities pursuant to a strategic acquisition as determined by the Board of
Directors or (iv) of the issuance of up to an aggregate of 100,000 shares (as
appropriately adjusted for stock splits, stock dividends and similar adjustments
after the date hereof) of Common Stock (or convertible preferred stock, options,
warrants or other securities convertible into or exercisable for Common Stock)
at a purchase price less than the Conversion Price and not otherwise excepted
pursuant to (i), (ii) or (iii) above.
(a) For the purpose of making any adjustment in the Conversion Price
as provided in this Section 4.7, the consideration received by the Corporation
for any issue or sale of Common Stock will be computed:
(i) to the extent it consists of cash, as the amount of cash
received by the Corporation before deduction of any offering expenses payable by
the Corporation and any underwriting or similar commissions, compensation, or
concessions paid or allowed by the Corporation in connection with such issue or
sale;
(ii) to the extent it consists of property other than cash, at
the fair market value of that property as determined in good faith by the
Corporation's Board of Directors; and
(iii) if Common Stock is issued or sold together with other stock
or securities or other assets of the Corporation for a consideration which
covers both, as the portion of the consideration so received that may be
reasonably determined in good faith by the Corporation's Board of Directors to
be allocable to such Common Stock.
(b) If the Corporation (i) grants or sells any rights or options to
subscribe for, purchase, or otherwise acquire shares of Common Stock, or (ii)
issues or sells any security convertible into shares of Common Stock, then, in
each case, the price per share of Common Stock issuable on the exercise of the
rights or options or the conversion of the securities will be determined by
dividing (x) the total amount, if any, received or receivable by the Corporation
as consideration for the granting or sale of the rights or options or the issue
or sale of the convertible securities, plus the minimum aggregate amount of
additional consideration payable to the Corporation on exercise or conversion of
C-8
<PAGE>
the securities, by (y) the maximum number of shares of Common Stock issuable on
the exercise of conversion. Such granting or issue or sale will be considered to
be an issue or sale for cash of the maximum number of shares of Common Stock
issuable on exercise or conversion at the price per share determined under this
Section 4.7, and the Conversion Price for the Series C Preferred Stock will be
adjusted as above provided to reflect (on the basis of that determination) the
issue or sale. No further adjustment of the Conversion Price for the Series C
Preferred Stock will be made as a result of the actual issuance of shares of
Common Stock on the exercise of any such rights or options or the conversion of
any such convertible securities.
(c) Upon the redemption or repurchase of any such securities or the
expiration or termination of the right to convert into, exchange for, or
exercise with respect to, Common Stock, the Conversion Price for the Series C
Preferred Stock will be readjusted to such price as would have been obtained had
the adjustment made upon their issuance been made upon the basis of the issuance
of only the number of such securities as were actually converted into, exchanged
for, or exercised with respect to, Common Stock. If the purchase price or
conversion or exchange rate provided for in any such security changes at any
time, then, upon such change becoming effective, the Conversion Price for the
Series C Preferred Stock then in effect will be readjusted to such price as
would have been obtained had the adjustment made upon the issuance of such
securities been made upon the basis of (i) the issuance of only the number of
shares of Common Stock theretofore actually delivered upon the conversion,
exchange or exercise of such securities, and the total consideration received
therefor, and (ii) the granting or issuance, at the time of such change, of any
such securities then still outstanding for the consideration, if any, received
by the Company therefor and to be received on the basis of such changed price or
rate.
4.8 Other Action Affecting Shares. If the Corporation takes any action
affecting its share of Common Stock after March 10, 2000, that would be covered
in Sections 4.4, 4.5 or 4.6 but for the manner in which such action is taken or
structured, other than an action described in Sections 4.4, 4.5 or 4.6, which
would in any way diminish the value of the Series C Preferred Stock, then the
Conversion Price shall be adjusted in such manner as the Board of Directors of
the Corporation shall in good faith determine to be equitable under the
circumstances.
4.9 Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Conversion Rate pursuant to this Section 6, the
Corporation at its expense promptly will compute such adjustment or readjustment
in accordance with the terms hereof and prepare and furnish to each holder of
Series C Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation, upon the written request at any time of
any holder of Series C Preferred Stock, will furnish or cause to be furnished to
such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Rate for the Series C Preferred Stock at the
time in effect, and (iii) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received upon the
conversion of the Series C Preferred Stock held by such holder.
4.10 Fractional Shares Upon Conversion. No fractional shares of Common
Stock will be issued upon conversion of Series C Preferred Stock. If the
conversion would result in any fractional share, the Corporation shall, in lieu
of issuing any fractional share, pay the holder an amount in cash equal to such
fraction of the then effective Conversion Price as promptly as funds legally are
available therefor.
C-9
<PAGE>
5. Modifications and Waivers. The terms of the Series C Preferred Stock may be
amended, modified or waived by agreement of the Corporation, Commonwealth
Associates, L.P. ("Commonwealth") and a committee to be designated by
Commonwealth whose members hold in the aggregate not less than 20% of the
outstanding Series C Preferred Stock (the "Committee"); provided, however, that
no such amendment, modification or waiver which would decrease the number of
shares of Common Stock issuable upon the Conversion of the Series C Preferred
Stock, or increase the Conversion Price therefor (other than as a result of the
waiver or modification of any anti-dilution provisions) may be made without the
approval of the holders of at least 50% of the outstanding Series C Preferred
Stock.
6. Notices of Record Date. In the event of any taking by the Corporation of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, the Corporation will mail to each
holder of Series C Preferred Stock at least ten days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution or rights, and the amount and
character of such dividend, distribution or right, but failure to give such
notice shall not affect the validity of the action taken as to which the notice
should have been given.
7. Reservation of Stock Issuable Upon Conversion. From and after the date the
Company's shareholders approve the amendment to its Articles of Incorporation
increasing the number of authorized shares of Common Stock, the Corporation at
all times will reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of Series C Preferred Stock such number of its shares of Common Stock as
from time to time will be sufficient to effect the conversion of all then
outstanding shares of Series C Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock is not sufficient to effect the
conversion of all then outstanding shares of Series C Preferred Stock, in
addition to such other remedies as may be available to the holders of Series C
Preferred Stock for such failure, the Corporation will take such corporate
action as, in the opinion of its counsel, may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as will
be sufficient for such purpose.
8. Notices. Any notices required by this Certificate to be given to the holders
of shareholders or the Corporation must be in writing and will be deemed given
upon personal delivery, one day after deposit with a reputable overnight courier
service for overnight delivery or after transmission by facsimile telecopier
with confirmation of successful transmission, or five days after deposit in the
United States mail, by registered or certified mail postage prepaid, or upon
actual receipt if given by any other method, addressed to each holder of such
record at his address appearing on the books of the Corporation.
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9. Covenants. In addition to any other rights provided by law, so long as any
shares of Series C Preferred Stock are outstanding, the Corporation, without
first obtaining the written consent of Commonwealth and the Committee as set
forth in Section 5 above, will not:
(a) increase the authorized number of shares of Preferred Stock; or
(b) authorize or issue shares of any class or series of stock having any
preference or priority senior to the Series C Preferred Stock as to dividends,
rights on liquidation or redemption.
ARTICLE FIFTH
The name and mailing address of the incorporator are Dom F. Atteritano,
Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New York, New
York 10176. The powers of the incorporator are to terminate upon the filing of
this Certificate of Incorporation.
ARTICLE SIXTH
Election of directors need not be by written ballot.
ARTICLE SEVENTH
The Board of Directors is authorized to adopt, amend, or repeal By-Laws of
the Corporation except as and to the extent provided in the By-Laws. Any By-Law
made by the Board of Directors under the powers conferred hereby may be amended
or repealed by the Board of Directors or the stockholders in the manner provided
in the By-Laws.
ARTICLE EIGHTH
Any person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (whether or not by or in the right of
the Corporation) by reason of the fact that he is or was a director, officer,
incorporator, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, incorporator, employee,
partner, trustee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise (including an employee benefit plan), shall be
entitled to be indemnified by the Corporation to the full extent then permitted
by law against expenses (including counsel fees) and disbursements, judgments,
fines (including excise taxes assessed on a person with respect to an employee
benefit plan), and amounts paid in settlement incurred by him in connection with
such action, suit, or proceeding. Such right of indemnification shall inure
whether or not the claim asserted is based on matters which antedate the
adoption of this Article EIGHTH. Such right of indemnification shall continue as
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to a person who has ceased to be a director, officer, incorporator, employee,
partner, trustee, or agent and shall inure to the benefit of the heirs and
personal representatives of such a person. The indemnification provided by this
Article EIGHTH shall not be deemed exclusive of any other rights which may be
provided now or in the future under any provision currently in effect or
hereafter adopted of the By-Laws by any agreement, by vote of stockholders, by
resolution of disinterested directors, by provision of law, or otherwise.
ARTICLE NINTH
No director of the Corporation shall be liable to the Corporation or any of
its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that this provision does not eliminate the liability of the
director (i) for any breach of the director's duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of Title 8 of the Delaware Code, or (iv) for any transaction from
which the director derived an improper personal benefit. For purposes of the
prior sentence, the term "damages" shall, to the extent permitted by law,
include, without limitation, any judgment, fine, amount paid in settlement,
penalty, punitive damages, excise or other tax assessed with respect to an
employee benefit plan, or expense of any nature (including, without limitation,
counsel fees and disbursements). Each person who serves as a director of the
Corporation while this Article NINTH is in effect shall be deemed to be doing so
in reliance on the provisions of this Article NINTH, and neither the amendment
or repeal of this Article NINTH, nor the adoption of any provision of this
Certificate of Incorporation inconsistent with this Article NINTH, shall apply
to or have any effect on the liability or alleged liability of any director or
the Corporation for, arising out of, based upon, or in connection with any acts
or omissions of such director occurring prior to such amendment, repeal, or
adoption of an inconsistent provision. The provisions of this Article NINTH are
cumulative and shall be in addition to and independent of any and all other
limitations on or eliminations of the liabilities of directors of the
Corporation, as such, whether such limitations or eliminations arise under or
are created by any law, rule, regulation, by-law, agreement, vote of
stockholders or disinterested directors, or otherwise.
ARTICLE TENTH
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
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manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
IN WITNESS WHEREOF, I, being the sole incorporator hereinbefore named,
hereby sign this Certificate of Incorporation pursuant to the General
Corporation Law of the State of Delaware as of this ____ of _____, 2000.
------------------------------------
Dom F. Atteritano, Sole Incorporator
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ANNEX D
BY-LAWS
of
U.S. WIRELESS DATA, INC.
As adopted ______, 2000
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U.S. WIRELESS DATA, INC.
A Delaware Corporation
BY-LAWS
---------------------------
ARTICLE I
STOCKHOLDERS
Section 1.1 Annual Meeting.
An annual meeting of stockholders, for the election of directors to succeed
those whose terms expire and for the transaction of such other business as may
properly come before the meeting, shall be held on such date, which date shall
be within thirteen (13) months of the last annual meeting of stockholders, and
at such time as shall be designated from time to time by the Board of Directors
or the President, either within or without the State of Delaware, as may be
specified by the Board of Directors.
Section 1.2 Special Meetings; Notice.
Special meetings of stockholders, other than those required by statute, for
any purpose or purposes may be held at any time upon call of the Chairman of the
Board, if any, the President, the Secretary, or a majority of the Board of
Directors, at such time and place either within or without the State of Delaware
as may be stated in the notice. A special meeting of stockholders shall be
called by the President or the Secretary upon the written request, stating time,
place, and the purpose or purposes of the meeting, of stockholders who together
own of record 25% of the outstanding stock of all classes entitled to vote at
such meeting. Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. The Board of Directors may postpone or
reschedule any previously scheduled special meeting.
Section 1.3 Notice of Meetings.
Written notice of stockholders meetings, stating the place, date, and hour
thereof, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be given by the Chairman of the Board, if
any, the Chief Executive Office, if any, the President, or any Vice President,
the Secretary, or an Assistant Secretary, to each stockholder entitled to vote
thereat at least ten days but not more than sixty days before the date of the
meeting, unless a different period is prescribed by law.
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Section 1.4 Quorum.
Except as otherwise provided by law or in the Certificate of Incorporation
or these By-Laws, at any meeting of stockholders, the holders of a majority of
the outstanding shares of each class of stock entitled to vote at the meeting
shall be present or represented by proxy in order to constitute a quorum for the
transaction of any business. In the absence of a quorum, a majority in interest
of the stockholders present or the chairman of the meeting may adjourn the
meeting from time to time in the manner provided in Section 1.5 of these By-Laws
until a quorum shall attend.
Section 1.5 Adjournment.
Any meeting of stockholders, annual or special, may adjourn from time to
time to reconvene at the same or some other place, and notice need not be given
of any such adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting, the
Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
Section 1.6 Organization.
The Chairman of the Board, if any, or in his absence, the Chief Executive
Officer, if any, or in the absence of both such persons, the President, or in
the absence of all such persons, any Vice President, shall call to order
meetings of stockholders and shall act as chairman of such meetings. The Board
of Directors or, if the Board fails to act, the stockholders may appoint any
stockholder, director, or officer of the Corporation to act as chairman of any
meeting in the absence of the Chairman of the Board, the Chief Executive
Officer, the President, and all Vice Presidents. The Secretary of the
Corporation shall act as secretary of all meetings of stockholders, but, in the
absence of the Secretary, the chairman of the meeting may appoint any other
person to act as secretary of the meeting.
Section 1.7 Voting.
Except as otherwise provided by law or in the Certificate of Incorporation
or these By-Laws and except for the election of directors, at any meeting duly
called and held at which a quorum is present, a majority of the votes cast at
such meeting for and against a given question by the holders of outstanding
shares of stock of all classes of stock of the Corporation entitled to vote
thereon who are present in person or by proxy shall decide such question. At any
meeting duly called and held for the election of directors at which a quorum is
present, those directors receiving a plurality of the votes cast by the holders
(acting as such) of shares of any class or series entitled to elect directors as
a class shall be elected.
Section 1.8 Inspectors of Elections.
The Corporation may, and to the extent required by law, shall, in advance
of any meeting of stockholders, appoint one or more inspectors to act at the
meeting and make a written report thereof. The Corporation may designate one or
more persons as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate is able to act at a meeting of stockholders, the
person presiding at the meeting may, and to the extent required by law, shall,
appoint one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his ability. Every vote taken by ballots shall be
counted by a duly appointed inspector or inspectors.
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Section 1.9 Action Without a Meeting.
Unless otherwise prohibited by law or the Certificate of Incorporation, the
stockholders may take any action required or permitted to be taken by them
without a meeting if a consent or consents in writing, setting forth the action
so taken, shall be signed by stockholders having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all members having a right to vote thereon were present and
voted.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1 Number and Term of Office.
The business, property, and affairs of the Corporation shall be managed by
or under the direction of the board of directors. The exact number of directors
shall be established by the Board of Directors by resolution adopted by vote of
a majority of the then authorized numbers of directors, may increase or decrease
the number of directors. The directors will be elected by the holders of shares
entitled to vote thereon at the annual meeting of stockholders, and each shall
serve (subject to the provisions of Article IV) until the next succeeding annual
meeting of stockholders and until his respective successor is elected and
qualified.
Section 2.2 Chairman of the Board.
The directors may elect one of their members to be Chairman of the Board of
Directors. The Chairman shall be subject to the control of and may be removed by
the Board of Directors. He shall perform such duties as may from time to time be
assigned to him by the Board.
Section 2.3 Meetings of the Board of Directors.
Regular meetings of the Board of Directors may be held without notice at
such time and place as shall from time to time be determined by the Board.
Special meetings of the Board of Directors shall be held at such time and place
as shall be designated in the notice of the meeting whenever called by the
Chairman of the Board, if any, the Chief Executive Officer, if any, the
President, or by a majority of the directors then in office.
Section 2.4 Notice of Special Meetings.
The Secretary, or, in the absence thereof, any other officer of the
Corporation, shall give each director notice of the time and place of holding of
special meetings of the Board of Directors by mail at least five days before the
meeting, or by telex, telecopy, telegraph, cable or overnight courier at least
three days before the meeting. Unless otherwise stated in the notice thereof,
any and all business may be transacted at any meeting without specification of
such business in the notice.
Section 2.5 Quorum and Organization of Meetings.
A majority of the total number of members of the Board of Directors as
constituted from time to time shall constitute a quorum for the transaction of
business, but, if at any meeting of the Board of Directors (whether or not
adjourned from a previous meeting) there shall be less than a quorum present, a
majority of those present may adjourn the meeting to another time and place, and
the meeting may be held as adjourned without further notice or waiver. Except as
otherwise provided by law or in the Certificate of Incorporation or these
By-Laws, a majority of the directors present at any meeting at which a quorum is
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present may decide any question brought before such meeting. Meetings shall be
presided over by the Chairman of the Board, if any, or in his absence, the Chief
Executive Officer, if any, or in the absence of both such persons, by the
President, or in the absence of all such persons by such other person as the
directors may select. The Secretary of the Corporation shall act as secretary of
the meeting, but in his absence the chairman of the meeting may appoint any
person to act as secretary of the meeting.
Section 2.6 Committees.
The Board of Directors may, by resolution passed by a majority of the whole
Board, designate one or more committees, each committee to consist of one or
more of the directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the power and authority of
the Board of Directors in the management of the business, property, and affairs
of the Corporation, and may authorize the seal of the Corporation to be affixed
to all papers which may require it; but no such committee shall have power or
authority which is prohibited to such committee by the General Corporation Law
of the State of Delaware. Each committee which may be established by the Board
of Directors pursuant to these By-Laws may fix its own rules and procedures.
Notice of meetings of committees, other than of regular meetings provided for by
the rules, shall be given to committee members. All action taken by committees
shall be recorded in minutes of the meetings.
Section 2.7 Action Without Meeting.
The Board of Directors or any committee designated by the Board may take
any action required or permitted to be taken by them without a meeting if all of
the members of the Board of Directors or any such committee, as the case may be,
consent thereto in writing, and the writing or writings are filed within the
minutes of proceedings of the Board of Directors, or such committee, unless
otherwise prohibited by law or the Certificate of Incorporation.
Section 2.8 Participation in Meetings by Telephone Conference.
Nothing contained in these By-Laws shall be deemed to restrict the power of
members of the Board of Directors, or any committee designated by the Board, to
participate in a meeting of the Board, or committee, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other.
Section 2.9 Powers.
The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, including, without limiting the generality of the foregoing,
the unqualified power:
(a) To declare dividends from time to time in accordance with law;
(b) To purchase or otherwise acquire any property, rights or privileges on
such terms as it shall determine;
(c) To authorize the creation, making and issuance, in such form as it may
determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary
in connection therewith;
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(d) To remove any officer of the Corporation with or without cause, and
from time to time to devolve the powers and duties of any officer upon
any other person for the time being;
(e) To confer upon any officer of the Corporation the power to appoint,
remove and suspend subordinate officers, employees and agents;
(f) To adopt from time to time such stock option, stock purchase, bonus or
other compensation plans for directors, officers, employees and agents
of the Corporation and its subsidiaries as it may determine;
(g) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and,
(h) To adopt from time to time regulations, not inconsistent with these
By-Laws, for the management of the Corporation's business and affairs.
ARTICLE III
OFFICERS
Section 3.1 Executive Officers.
The executive officers of the Corporation shall be a President, one or more
Vice Presidents and/or Executive Vice Presidents, a Treasurer, and a Secretary,
each of whom shall be elected by the Board of Directors. The Board of Directors
may elect or appoint such other officers (including a Controller, a Chief
Executive Officer and one or more Assistant Secretaries) as it may deem
necessary or desirable. Each officer shall hold office for such term as may be
prescribed by the Board of Directors from time to time. Any person may hold at
one time two or more offices.
Section 3.2 Powers and Duties.
The Chairman of the Board, if any, or, in his absence, the Chief Executive
Officer, or in his absence, the President, shall preside at all meetings of the
stockholders and of the Board of Directors. The Chief Executive Officer shall be
the chief executive officer of the Corporation. In the absence of the Chief
Executive Officer, the President and, in the absence of the President, a Vice
President appointed by the President or, if the President fails to make such
appointment, by the Board, shall perform all the duties of the Chief Executive
Officer. The officers and agents of the Corporation shall each have such powers
and authority and shall perform such duties in the management of the business,
property and affairs of the Corporation as generally pertain to their respective
offices, as well as such powers and authorities and such duties as from time to
time may be prescribed by the Board of Directors.
ARTICLE IV
RESIGNATIONS, REMOVALS, AND VACANCIES
Section 4.1 Resignations.
Any director or officer of the Corporation, or any member of any committee,
may resign at any time by giving written notice to the Board of Directors, the
Chief Executive Officer, the President, or the Secretary of the Corporation. Any
such resignation shall take effect at the time specified therein or, if the time
be not specified therein, then upon receipt thereof. The acceptance of such
resignation shall not be necessary to make it effective.
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Section 4.2 Removals.
The Board of Directors, by a vote of not less than a majority of the entire
Board, at any meeting thereof, or by written consent thereof, at any time, may,
to the extent permitted by law, remove with or without cause, from office or
terminate the employment of any officer or member of any committee and may, with
or without cause, disband any committee.
Any director or the entire Board of Directors may be removed, with or
without cause, by the holders of a majority of the shares entitled at the time
to vote at an election of directors.
Section 4.3 Vacancies.
Any vacancy in the office of any director or officer through death,
resignation, removal, disqualification, or other cause, and any additional
directorship resulting from any increase in the number of directors, may be
filled at any time by a majority of the directors then in office (even though
less than a quorum remains) or, in the case of any vacancy in the office of any
director, by the stockholders, and, subject to the provisions of this Article
IV, the person so chosen shall hold office until his successor shall have been
elected and qualified; or, if the person so chosen is a director elected to fill
a vacancy, he shall (subject to the provisions of this Article IV) hold office
for the unexpired term of his predecessor.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
Section 5.1 Execution of Contracts.
The Board of Directors, except as otherwise provided in these By-Laws, may
authorize any officer or officers or agent or agents to enter into any contract
or execute any instrument in the name of and on behalf of the Corporation, and
such authority may be general or confined to specific instances.
Section 5.2 Checks, Drafts, Etc.
All checks, drafts or other orders for payment of money, notes or other
evidence of indebtedness, issued in the name of or payable to the Corporation,
shall be signed or endorsed by such person or persons and in such manner as,
from time to time, shall be determined by resolution of the Board. Each such
officer, assistant, agent or attorney shall give such bond, if any, as the Board
may require.
Section 5.3 Deposits.
All funds of the Corporation not otherwise employed shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies or
other depositories as the Board of Directors may select, or as may be selected
by any officer or officers, assistant or assistants, agent or agents, or
attorney or attorneys of the Corporation to whom such power shall have been
delegated by the Board. For the purpose of deposit and for the purpose of
collection for the account of the Corporation, the Chairman of the Board, if
any, the Chief Executive Officer, if any, the President, any Vice President or
the Chief Financial Officer (or any other officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation who
shall from time to time be determined by the Board) may endorse, assign and
deliver checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation.
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Section 5.4 General and Special Bank Accounts.
The Board may from time to time authorize the opening and keeping of
general and special bank accounts with such banks, trust companies or other
depositories as the Board may select or as may be selected by any officer or
officers, assistant or assistants, agent or agents, or attorney or attorneys of
the Corporation to whom such power shall have been delegated by the Board. The
Board may make such special rules and regulations with respect to such bank
accounts, not inconsistent with the provisions of these By-Laws, as it may deem
expedient.
ARTICLE VI
CAPITAL STOCK
Section 6.1 Stock Certificates.
The certificates for shares of the capital stock of the Corporation shall
be in such form as shall be prescribed by law and approved, from time to time,
by the Board of Directors.
Section 6.2 Transfer of Shares.
Shares of the capital stock of the Corporation may be transferred on the
books of the Corporation only by the holder of such shares or by his duly
authorized attorney, upon the surrender to the Corporation or its transfer agent
of the certificate representing such stock properly endorsed for transfer.
Section 6.3 Fixing Record Date.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion, or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which, unless
otherwise provided by law, shall not be more than sixty nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action.
Section 6.4 Lost, Stolen, Mutilated or Destroyed Certificates.
The Board of Directors or any transfer agent of the Corporation may direct
a new certificate or certificates representing stock of the Corporation to be
issued in place of any certificate or certificates theretofore issued by the
Corporation, alleged to have been lost, stolen, mutilated or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate to be
lost, stolen, or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors (or any transfer agent of the Corporation
authorized to do so by a resolution of the Board of Directors) may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen, or destroyed certificate or certificates, or his
legal representative, to give the Corporation a bond in such sum as the Board of
Directors (or any transfer agent so authorized) shall direct to indemnify the
Corporation against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed or
the issuance of such new certificates, and such requirement may be general or
confined to specific instances.
Section 6.5 Regulations.
The Board of Directors shall have power and authority to make all such
rules and regulations as it may deem expedient concerning the issue, transfer,
registration, cancellation, and replacement of certificates representing stock
of the Corporation.
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ARTICLE VII
MISCELLANEOUS
Section 7.1 Corporate Seal.
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its incorporation, and the words "Corporate Seal" and
"Delaware".
Section 7.2 Fiscal Year.
The fiscal year of the Corporation shall be determined by resolution of the
Board of Directors from time to time.
Section 7.3 Notices and Waivers Thereof.
Wherever any notice whatever is required by law, the Certificate of
Incorporation, or these By-Laws to be given to any stockholder, director, or
officer, such notice, except as otherwise provided by law, may be given
personally, or by mail, telex, telecopy, telegraph, cable or overnight courier
addressed to such address as appears on the books of the Corporation. Any notice
given by telex, telecopy, telegraph or cable shall be deemed to have been given
when it shall have been delivered for transmission, and any notice given by mail
or overnight courier shall be deemed to have been given when it shall have been
deposited in the United States mail with postage thereon prepaid or given to
such courier service, as applicable.
Whenever any notice is required to be given by law, the Certificate of
Incorporation, or these By-Laws, a written waiver thereof, signed by the person
entitled to such notice, whether before or after the meeting or the time stated
therein, shall be deemed equivalent in all respects to such notice to the full
extent permitted by law.
Section 7.4 Stock of Other Corporations or Other Interests.
Unless otherwise ordered by the Board of Directors, the Chief Executive
Officer, the President, the Secretary, and such attorneys or agents of the
Corporation as may be from time to time authorized by the Board of Directors,
the Chief Executive Officer, or the President, shall have full power and
authority on behalf of the Corporation to attend and to act and vote in person
or by proxy at any meeting of the holders of securities of any corporation or
other entity in which the Corporation owns or holds shares or other securities,
and at such meetings shall possess and may exercise all the rights and powers
incident to the ownership of such shares or other securities which the
Corporation, as the owner or holder thereof, might have possessed and exercised
if present. The Chief Executive Officer, the President, the Secretary, or such
attorneys or agents, may also execute and deliver on behalf of the Corporation
powers of attorney, proxies, consents, waivers, and other instruments relating
to the shares or securities owned or held by the Corporation.
Section 7.5 Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By- Laws, if any, facsimile signatures of any
officer or officers of the Corporation may be used whenever and as authorized by
the Board of Directors or a committee thereof.
Section 7.6 Time Periods.
In applying any provision of these By-Laws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
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ARTICLE VIII
AMENDMENTS
The holders of shares entitled at the time to vote for the election of
directors shall have power to adopt, amend, or repeal the By-Laws of the
Corporation by vote of not less than a majority of such shares, and except as
otherwise provided by law, the Board of Directors shall have power equal in all
respects to that of the stockholders to adopt, amend, or repeal the By-Laws by
vote of not less than a majority of the entire Board. However, any By- Law
adopted by the Board may be amended or repealed by vote of the holders of a
majority of the shares entitled at the time to vote for the election of
directors.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Indemnification Generally.
The Corporation shall indemnify each person who was or is made a party or
is threatened to be made a party to or is involved in any threatened, pending,
or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (hereinafter a "Proceeding"), by reason of the
fact that he or she, or a person of which he or she is the legal representative,
is or was a director or officer, or had agreed to serve as a director or
officer, of the Corporation or is or was serving or has agreed to serve at the
request of the Corporation as a director, officer, employee, or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, or by reason of any
act alleged to have been taken or omitted in such capacity, whether the basis of
such Proceeding is alleged action in an official capacity as a director,
officer, employee, or agent or alleged action in any other capacity while
serving as a director, officer, employee, or agent, to the maximum extent
authorized by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide prior
to such amendment), against all cost, expense, liability, and loss (including
attorneys= fees, judgements, fines, ERISA excise taxes or penalties, and amounts
paid or to be paid in settlement) reasonably incurred by such person or on his
or her behalf in connection with such Proceeding, and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of his or her heirs, executors and
administrators. The termination of any Proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendre or its equivalent,
shall not, of itself, create a presumption that the person did not meet any
standard of conduct for indemnification imposed by the General Corporation Law.
The Corporation shall be required to indemnify a person in connection with a
Proceeding (or part thereof) initiated by such person only if such Proceeding
(or part thereof) was authorized by the Board of Directors of the Corporation.
Section 9.2 Indemnification for Costs, Charges, and Expenses for Successful
Party.
Notwithstanding the other provisions of the Article Ninth, to the extent
that a director or officer of the Corporation has been successful on the merits
or otherwise, including, without limitation, the dismissal of an action without
prejudice, in defense of any Proceeding referred to in Section 9.1, or in the
defense of any claim, issue, or matter therein, he shall be indemnified against
all costs, charges, and expenses (including attorneys= fees) actually and
reasonably incurred by him or on his behalf in connection therewith.
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Section 9.3 Determination of Right to Indemnification.
Any indemnification under Section 9.1 or 9.2 (unless ordered by a court)
shall be paid by the Corporation unless a determination is made (") by the Board
of Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (b) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders, that indemnification of the director or officer is not proper in
the circumstances because he has not met the applicable standards of conduct set
forth in the General Corporation Law.
Section 9.4 Advance of Costs, Charges and Expenses.
Costs, charges, and expenses (including attorneys= fees) incurred by a
person referred to in Section 9.1 of this Article Ninth in defending a civil or
criminal Proceeding (including investigations by any government agency and all
costs, charges, and expenses incurred in preparing for any threatened
Proceeding) shall be paid by the Corporation in advance of the final disposition
of such Proceeding; provided, however, that the payment of such costs, charges,
and expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer) in advance of the final
disposition of such Proceeding shall be made only upon receipt of an undertaking
by or on behalf of the director or officer to repay all amounts so advanced if
it shall ultimately be determined that such director or officer is not entitled
to be indemnified by the Corporation as authorized in this Article Ninth and
provided that the Corporation shall not be required to advance expenses in
connection with a Proceeding (or part thereof) alleging liability under Section
16(b) of the Securities Exchange Act of 1934, as amended (a "16(b) Claim"). No
security shall be required for such undertaking and such undertaking shall be
accepted without reference to the recipient's financial ability to make
repayment. The Board of Directors may, in the manner set forth above, and
subject to the approval of such director or officer, authorize the Corporation's
counsel to represent such person in a Proceeding, whether or not the Corporation
is a party to such Proceeding.
Section 9.5 Procedure for Indemnification.
Any indemnification under Section 9.1 or advance of costs, charges, and
expenses under Section 9.4 shall be made promptly, and in any event within 60
days, upon the written request of the director or officer directed to the
Secretary of the Corporation. The right to indemnification or advances as
granted by this Article Ninth shall be enforceable by the director or officer in
any court of competent jurisdiction if the Corporation denies such request, in
whole or in part, or if no disposition thereof is made within 60 days. Such
person's costs and expenses incurred in connection with successfully
establishing his or her right to indemnification or advances, in whole or in
part, in any such action shall also be indemnified by the Corporation. It shall
be a defense to any such action (other than an action brought to enforce a claim
for the advance of costs, charges, and expenses under Section 9.4 where the
required undertaking, if any, has been received by the Corporation) that the
claimant has not met the standard of conduct, if any, set forth in the General
Corporation Law, but to the extent permitted by applicable law, the burden of
proving that such standard of conduct has not been met shall be on the
Corporation. To the extent permitted by applicable law, neither the failure of
the Corporation (including its Board of Directors, its independent legal
counsel, and its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct,
if any, set forth in the General Corporation Law, nor the fact that there has
been an actual determination by the Corporation (including its Board of
Directors, its independent legal counsel, and its stockholders) that the
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claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
Section 9.6 Other Rights; Continuation of Right Indemnification.
The indemnification provided by this Article Ninth shall not be deemed
exclusive of any other rights to which a person seeking indemnification may be
entitled under any law (common or statutory), agreement, vote of stockholders or
disinterested directors, or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding office, and shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the estate, heirs, executors, and administrators of such
person. All rights to indemnification under this Article Ninth shall be deemed
to be a contract between the Corporation and each director and officer of the
Corporation who serves or served in such capacity at any time while this Article
Ninth is in effect. No amendment or repeal of this Article Ninth or of any
relevant provisions of the General Corporation Law or any other applicable laws
shall adversely affect or deny to any director or officer any rights to
indemnification which such person may have, or change or release any obligations
of the Corporation under this Article Ninth with respect to any costs, charges,
expenses (including attorneys= fees), judgements, fines and amounts paid in
settlement which arise out of a Proceeding based in whole or substantial part on
any act, actual or alleged, which takes place before or while this Article Ninth
is in effect. The provisions of this Section 9.6 shall apply to any such
Proceeding whenever commenced, including any such Proceeding commenced after any
amendment or repeal of this Article Ninth. The right to indemnification and
advancement of expenses conferred on any person by this Article Ninth shall not
limit the Corporation from providing any other indemnifications permitted by
law.
Section 9.7 Definitions.
For the purposes of this Article Ninth:
"the Corporation" includes any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence continued, would have had power and authority to
indemnify its directors or officers, so that any person who is or was a director
or officer of such constituent corporation, or is or was serving at the request
of such constituent corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
shall stand in the same position under the provisions of this Article Ninth with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation it its separate existence had continued;
"Other enterprises" includes employee benefit plans, including, but not
limited to, any employee benefit plans of the Corporation;
"Serving at the request of the Corporation" includes, but is not limited
to, any service which imposes duties on, or involves services by, a director or
officer of the Corporation with respect to an employee benefit plan, its
participants, or beneficiaries, including acting as a fiduciary thereto;
"Fines" shall include any penalties and any excise or similar taxes
assessed on a person with respect to an employee benefit plan;
a person who acted in good faith and in a manner he reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in Section 9.1; and service as a
partner, trustee, or member of management or similar committee of a partnership
or joint venture, or as a director, officer, employee, or agent of corporation
which is a partner, trustee, or joint venturer, shall be considered service as a
director, officer, employee, or agent of the partnership, joint venture, trust,
or other enterprise.
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Section 9.8 Savings Clause.
If this Article Ninth or any portion hereof shall be invalidated on any
ground by a court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director and officer of the Corporation as to costs,
charges, expenses (including attorneys= fees), judgments, fines, and amount paid
in settlement with respect to any action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, including an action by or in the
right of the Corporation, to the full extent permitted by any applicable portion
of this Article Ninth that shall not have been invalidated and to the full
extent permitted by applicable law.
Section 9.9 Indemnification of Other Persons.
If authorized by the Board of Directors, the Corporation may indemnify and
advance expenses to any other person whom it has the power to indemnify under
the General Corporation Law to the fullest extent permitted by such statute.
Section 9.10 Insurance.
The Corporation may purchase and maintain insurance, at its expense, to
protect itself and any director, officer, employee, or agent of the Corporation
or another corporation, partnership, joint venture, trust, or other enterprises
against any expense, liability, or claim, whether or not the Corporation would
have the power to indemnify such person under the General Corporation Law.
ARTICLE X
PROVISIONS OF LAW
The By-Laws shall be subject to such provisions of the statutory and common
laws of the State of Delaware as may be applicable to corporations organized
under the laws of the State of Delaware. References herein to provisions of law
shall be deemed to be references to the aforesaid provisions of law unless
otherwise explicitly stated. All references in the By-Laws to such provisions of
law shall be construed to refer to such provisions as from time to time amended.
ARTICLE XI
CERTIFICATE OF INCORPORATION
These By-Laws shall be subject to the Certificate of Incorporation of the
Corporation. All references in the By-Laws to the Certificate of Incorporation
shall be construed to mean the Certificate of Incorporation of the Corporation
as from time to time amended.
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ANNEX E
U.S. WIRELESS DATA, INC.
2000 STOCK OPTION PLAN
Approved and Adopted by the Board of Directors on January 4, 2000
SECTION 1. Purpose. The purpose of the U.S. Wireless Data, Inc. 2000 Stock
Option Plan (this "Plan") is to provide a means whereby selected employees,
officers, directors, agents, consultants and independent contractors of U.S.
Wireless Data, Inc. (the "Company") or of any parent or subsidiary (as defined
in subsection 5.7 and referred to hereinafter as "related corporations")
thereof, may be granted incentive stock options and/or non-qualified stock
options to purchase the Common Stock (as defined in Section 3) of the Company,
in order to attract and retain the services or advice of such employees,
officers, directors, agents, consultants and independent contractors and to
provide added incentive to them by encouraging stock ownership in the Company.
SECTION 2. Administration.
(a) This Plan shall be administered by the Board of Directors of the
Company (the "Board"), except to the extent the Board delegates its authority to
a committee of the Board to administer this Plan. The administrator of this Plan
shall hereinafter be referred to as the "Plan Administrator."
(b) For so long as the Common Stock is registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), no Option
shall be granted to a director or officer (subject to Section 16 of the Exchange
Act) of the Company by the Board unless (i) approved in advance by the Board or
the Plan Administrator in accordance with the provisions of Rule 16b-3(d)(1)
under the Exchange Act (where the Plan Administrator, if not the entire Board,
is a committee of the Board composed solely of two or more non-employee
directors who satisfy the requirements of Rule 16b-3(b)(3) under the Exchange
Act), or (ii) approved in accordance with the provisions of Rule 16b-3(d)(2)
under the Exchange Act, except that an option may be granted absent such
approval if the option provides that no officer or director of the Company may
sell shares received upon the exercise of such option during the six-month
period immediately following the grant of such option.
2.1 Procedures. The Board shall designate one of the members of the
Plan Administrator as chairman. The Plan Administrator may hold meetings at such
times and places as it shall determine. The acts of a majority of the members of
the Plan Administrator present at meetings at which a quorum exists, or acts
reduced to or approved in writing by all Plan Administrator members, shall be
valid acts of the Plan Administrator.
2.2 Responsibilities. Except for the terms and conditions explicitly
set forth in this Plan, the Plan Administrator shall have the authority, in its
discretion, to determine all matters relating to the options to be granted under
this Plan, including selection of the individuals to be granted options, the
number of shares to be subject to each option, the exercise price, and all other
terms and conditions of the options, including the designation of such options
as an incentive stock option or non-qualified stock option. Grants under this
Plan need not be identical in any respect, even when made simultaneously. The
interpretation and construction by the Plan Administrator of any terms or
provisions of this Plan or any option issued hereunder, or of any rule or
regulation promulgated in connection herewith, shall be conclusive and binding
on all interested parties, so long as such interpretation and construction with
respect to incentive stock options corresponds to the requirements of Internal
Revenue Code (the "Code") Section 422, the regulations thereunder, and any
amendments thereto.
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2.3 Section 16(b) Compliance and Bifurcation of Plan. It is the
intention of the Company that this Plan comply in all respects with Section
16(b) and Rule 16b-3 under the Exchange Act, to the extent applicable, and, if
any Plan provision is later found not to be in compliance with such Section or
Rule, as the case may be, the provision shall be deemed null and void, and in
all events the Plan shall be construed in favor of its meeting the requirements
of Section 16(b) and Rule 16b-3 under the Exchange Act. Notwithstanding anything
in the Plan to the contrary, the Board, in its absolute discretion, may
bifurcate the Plan so as to restrict, limit or condition the use of any
provision of the Plan to participants who are officers and directors or other
persons subject to Section 16(b) of the Exchange Act without so restricting,
limiting or conditioning the Plan with respect to other participants.
SECTION 3. Stock Subject to This Plan. The stock subject to this Plan shall
be the Company's Common Stock, no par value per share (the "Common Stock"),
presently authorized but unissued or subsequently acquired by the Company.
Subject to adjustment as provided in Section 7 hereof, the aggregate amount of
Common Stock to be delivered upon the exercise of all options granted under this
Plan shall not exceed 15,000,000 shares as such Common Stock was constituted on
the effective date of this Plan. If any option granted under this Plan shall
expire, be surrendered, exchanged for another option, canceled or terminated for
any reason without having been exercised in full, the unpurchased shares subject
thereto shall thereupon again be available for purposes of this Plan, including
for replacement options which may be granted in exchange for such surrendered,
canceled or terminated options.
SECTION 4. Eligibility. An incentive stock option may be granted only to
any individual who, at the time the option is granted, is an employee of the
Company or any related corporation. A nonqualified stock option may be granted
to any director, employee, officer, agent, consultant or independent contractor
of the Company or any related corporation, whether an individual or an entity.
Any party to whom an option is granted under this Plan shall be referred to
hereinafter as an "Optionee".
SECTION 5. Terms and Conditions of Options. Options granted under this Plan
shall be evidenced by written agreements which shall contain such terms,
conditions, limitations and restrictions as the Plan Administrator shall deem
advisable and which are not inconsistent with this Plan (the AOption
Agreement"). Notwithstanding the foregoing, options shall include or incorporate
by reference the following terms and conditions:
5.1 Number of Shares and Price. The maximum number of shares that may
be purchased pursuant to the exercise of each option and the price per share at
which such option is exercisable (the "exercise price") shall be as established
by the Plan Administrator, provided that the Plan Administrator shall act in
good faith to establish the exercise price which shall be not less than the fair
market value per share of the Common Stock at the time the option is granted
with respect to incentive stock options and not less than par value per share of
the Common Stock at the time the option is granted with respect to nonqualified
stock options and also provided that, with respect to incentive stock options
granted to greater than 10% shareholders, the exercise price shall be as
required by Section 6. In addition, no individual may be granted options under
the Plan to purchase more than 5,000,000 shares of Common Stock during any one
year, subject to adjustment as set forth in Section 7.
5.2 Term and Maturity. Subject to the restrictions contained in
Section 6 with respect to granting incentive stock options to greater than 10%
shareholders, the term of each incentive stock option shall be as established by
the Plan Administrator and, if not so established, shall be 10 years from the
date it is granted but in no event shall the term of any incentive stock option
exceed 10 years. The term of each nonqualified stock option shall be as
established by the Plan Administrator and, if not so established, shall be 10
years from the date it is granted. To ensure that the Company or related
corporation will achieve the purpose and receive the benefits contemplated in
this Plan, any option granted to any Optionee hereunder shall, unless the
condition of this sentence is waived or modified in the agreement evidencing the
option or by resolution adopted by the Plan Administrator, be exercisable
according to the following schedule:
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Period of Optionee's
Continuous Relationship
With the Company or Related
Corporation From the Date Portion of Total Option
the Option is Granted Which is Exercisable
---------------------------- -----------------------
after 1 year 33.3%
after 2 years 66.6%
after 3 years 100 %
5.3 Exercise. Subject to any vesting schedule described in subsection
5.2 above, each option may be exercised in whole or in part; provided, however,
that no fewer than 100 shares (or the remaining shares then purchasable under
the option, if less than 100 shares) may be purchased upon any exercise of an
option hereunder and that only whole shares will be issued pursuant to the
exercise of any option. Options shall be exercised by delivery to the Company of
notice of the number of shares with respect to which the option is exercised,
together with payment of the exercise price.
5.4 Payment of Exercise Price. Payment of the option exercise price
shall be made in full at the time the notice of exercise of the option is
delivered to the Company and shall be in cash, bank certified or cashier's check
or personal check (unless at the time of exercise the Plan Administrator in a
particular case determines not to accept a personal check) for the Common Stock
being purchased.
The Plan Administrator can determine at the time the option is granted
for incentive stock options, or at any time before exercise for nonqualified
stock options, that additional forms of payment will be permitted. To the extent
permitted by the Plan Administrator and applicable laws and regulations
(including, but not limited to, federal tax and securities laws and regulations
and state corporate law), an option may be exercised by:
(a) delivery of shares of stock of the Company held by an Optionee
having a fair market value equal to the exercise price, such fair market value
to be determined in good faith by the Plan Administrator;
(b) delivery of a properly executed exercise notice, together with
irrevocable instructions to a broker, all in accordance with the regulations of
the Federal Reserve Board, to promptly deliver to the Company the amount of sale
or loan proceeds necessary to pay the exercise price and any federal, state or
local withholding tax obligations that may arise in connection with the
exercise; or
(c) delivery of a properly executed exercise notice together with
instructions to the Company to withhold from the shares that would otherwise be
issued upon exercise that number of shares having a fair market value equal to
the option exercise price.
5.5 Withholding Tax Requirement. The Company or any related
corporation shall have the right to retain and withhold from any payment of cash
or Common Stock under the Plan the amount of taxes required by any government to
be withheld or otherwise deducted and paid with respect to such payment. At its
discretion, the Company may require an Optionee receiving shares of Common Stock
to reimburse the Company for any such taxes required to be withheld by the
Company and withhold such shares in whole or in part until the Company is so
reimbursed. In lieu thereof, the Company, at its option in its sole discretion,
shall (") have the right to withhold from any other cash amounts due or to
become due from the Company to the Optionee an amount equal to such taxes or (b)
retain and withhold a number of shares having a market value not less than the
amount of such taxes required to be withheld by the Company to reimburse the
Company for any such taxes and cancel (in whole or in part) any such shares so
withheld. If required by Section 16(b) of the Exchange Act, the election to pay
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withholding taxes by delivery of shares held by any person who at the time of
exercise is subject to Section 16(b) of the Exchange Act, shall be made either
six months prior to the date the option exercise becomes taxable or at such
other times as the Company may determine as necessary to comply with Section
16(b) of the Exchange Act.
5.6 Assignability and Transferability of Option. Options granted under
this Plan and the rights and privileges conferred hereby may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law or
otherwise) other than (i) by will or by the applicable laws of descent and
distribution, (ii) pursuant to a qualified domestic relations order as defined
in Section 414(p) of the Code, or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder or (iii) as otherwise
determined by the Plan Administrator and set forth in the applicable Option
Agreement. Any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of any option under this Plan or of any right or privilege conferred
hereby, contrary to the Code or to the provisions of this Plan, or the sale or
levy or any attachment or similar process upon the rights and privileges
conferred hereby shall be null and void. The designation by an Optionee of a
beneficiary does not, in and of itself, constitute an impermissible transfer
under this Section.
5.7 Termination of Relationship. If the Optionee's relationship with
the Company or any related corporation ceases for any reason other than
termination for cause, death or total disability, and unless by its terms the
option sooner terminates or expires, then the Optionee may exercise, for a
three-month period, that portion of the Optionee's option which is exercisable
at the time of such cessation, but the Optionee's option shall terminate at the
end of the three-month period following such cessation as to all shares for
which it has not theretofore been exercised, unless, in the case of a
nonqualified stock option, such provision is waived in the agreement evidencing
the option or by resolution adopted by the Plan Administrator within 90 days of
such cessation. If, in the case of an incentive stock option, an Optionee's
relationship with the Company or related corporation changes (i.e., from
employee to non-employee, such as a consultant), such change shall constitute a
termination of an Optionee's employment with the Company or related corporation
and the Optionee's incentive stock option shall become a non-qualified stock
option.
If an Optionee is terminated for cause, any option granted hereunder
shall automatically terminate as of the first discovery by the Company of any
reason for termination for cause, and such Optionee shall thereupon have no
right to purchase any shares pursuant to such option. "Termination for cause"
shall mean dismissal for dishonesty, conviction or confession of a crime
punishable by law (except minor violations), fraud, misconduct or disclosure of
confidential information. If an Optionee's relationship with the Company or any
related corporation is suspended pending an investigation of whether or not the
Optionee shall be terminated for cause, all Optionee's rights under any option
granted hereunder likewise shall be suspended during the period of
investigation.
If an Optionee's relationship with the Company or any related
corporation ceases because of a total disability, the Optionee's option shall
not terminate or, in the case of an incentive stock option, cease to be treated
as an incentive stock option until the end of the 12-month period following such
cessation (unless by its terms it sooner terminates and expires). As used in
this Plan, the term "total disability" refers to a mental or physical impairment
of the Optionee which is expected to result in death or which has lasted or is
expected to last for a continuous period of 12 months or more and which causes
the Optionee to be unable, in the opinion of the Company and two (if more than
one is required by the Company in its sole discretion) independent physicians,
to perform his or her duties for the Company and to be engaged in any
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substantial gainful activity. Total disability shall be deemed to have occurred
on the first day after the Company and the two (if more than one is required by
the Company in its sole discretion) independent physicians have furnished their
opinion of total disability to the Plan Administrator.
For purposes of this subsection 5.7, a transfer of relationship
between or among the Company and/or any related corporation shall not be deemed
to constitute a cessation of relationship with the Company or any of its related
corporations. For purposes of this subsection 5.7, with respect to incentive
stock options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as determined by
the Plan Administrator). The foregoing notwithstanding, employment shall not be
deemed to continue beyond the first 90 days of such leave, unless the Optionee's
reemployment rights are guaranteed by statute or by contract.
As used herein, the term "related corporation", when referring to a
subsidiary corporation, shall mean any corporation (other than the Company) or
other entity in, at the time of the granting of the option, an unbroken chain of
corporations ending with the Company, if stock or other interests possessing 50%
or more of the total combined voting power of all classes of stock or other
interests of each of the corporations or other entities other than the Company
is owned by one of the other corporations or other entities in such chain. When
referring to a parent corporation or other entity, the term "related
corporation" shall mean any corporation or other entity in an unbroken chain of
corporations or other entities ending with the Company if, at the time of the
granting of the option, each of the corporations or other entities other than
the Company owns stock or other interests possessing 50% or more of the total
combined voting power of all classes of stock or other interests in one of the
other corporations or other entities in such chain.
5.8 Death of Optionee. If an Optionee dies while he or she has a
relationship with the Company or any related corporation or within the
three-month period (or 12-month period in the case of totally disabled
Optionees) following cessation of such relationship, any option held by such
Optionee to the extent that the Optionee would have been entitled to exercise
such option, may be exercised within one year after his or her death by the
personal representative of his or her estate or by the person or persons to whom
the Optionee's rights under the option shall pass by will or by the applicable
laws of descent and distribution.
5.9 Status of Shareholder. Neither the Optionee nor any party to which
the Optionee's rights and privileges under the option may pass shall be, or have
any of the rights or privileges of, a shareholder of the Company with respect to
any of the shares issuable upon the exercise of any option granted under this
Plan unless and until such option has been exercised.
5.10 Continuation of Employment. Nothing in this Plan or in any option
granted pursuant to this Plan shall confer upon any Optionee any right to
continue in the employ of the Company or of a related corporation, or to
interfere in any way with the right of the Company or of any such related
corporation to terminate his or her employment or other relationship with the
Company at any time.
5.11 Modification and Amendment of Option. Subject to the requirements
of Code Section 422 with respect to incentive stock options and to the terms and
conditions and within the limitations of this Plan, the Plan Administrator may
modify or amend outstanding options granted under this Plan. The modification or
amendment of an outstanding option shall not, without the consent of the
Optionee, impair or diminish any of his or her rights or any of the obligations
of the Company under such option. Except as otherwise provided in this Plan, no
outstanding option shall be terminated without the consent of the Optionee.
Unless the Optionee agrees otherwise, any changes or adjustments made to
outstanding incentive stock options granted under this Plan shall be made in
such a manner so as not to constitute a "modification" as defined in Code
Section 424(h) and so as not to cause any incentive stock option issued
hereunder to fail to continue to qualify as an incentive stock option as defined
in Code Section 422(b).
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<PAGE>
5.12 Limitation on Value for Incentive Stock Options. As to all
incentive stock options granted under the terms of this Plan, to the extent that
the aggregate fair market value (determined at the time the incentive stock
option is granted) of the stock with respect to which incentive stock options
are exercisable for the first time by the Optionee during any calendar year
(under this Plan and all other incentive stock option plans of the Company, a
related corporation or a predecessor corporation) exceeds $100,000, such options
shall be treated as nonqualified stock options. The previous sentence shall not
apply if the Code is amended or if the Internal Revenue Service publicly rules,
issues a private ruling to the Company, any Optionee, or any legatee, personal
representative or distributee of an Optionee or issues regulations, changing or
eliminating such annual limit, in which case the limitation shall be that
provided by the Code or the Internal Revenue Service, as the case may be.
5.13 Valuation of Common Stock Received Upon Exercise.
5.13.1 Exercise of Options Under Sections 5.4(") and (c). The
value of Common Stock received by the Optionee from an exercise under Sections
5.4(") and 5.4(c) hereof shall be the fair market value, which shall mean the
last reported sales price, regular way, of the Common Stock on the date of
receipt by the Company of the Optionee's delivery of shares under Section 5.4(")
hereof or delivery of the exercise notice under Section 5.4(c) hereof (or, if no
sale takes place on any such day, the closing bid price of the Common Stock on
such day), on the principal securities exchange (including the National
Association of Securities Dealers, Inc.'s (the "NASD") National Market System)
on which the Common Stock is admitted or listed for trading, or, if the Common
Stock is not listed on any such exchange on any such day, the highest reported
bid price for the Common Stock as furnished by the NASD through NASDAQ, or a
similar organization if NASDAQ is no longer reporting such information, or, if
the Common Stock is not listed for trading on an exchange and is not quoted on
NASDAQ or any similar organization on any such day, the fair value of a share of
Common Stock on such day as determined by the Plan Administrator of the Company
in good faith.
5.13.2 Exercise of Option Under Section 5.4(b). The value of
Common Stock received by the Optionee from an exercise under Section 5.4(b)
hereof (") in the case of the sale of the Common Stock received as a result of
the exercise by a broker on the date of receipt by the Company of the Optionee's
exercise notice, shall equal the sales price received for such shares; and (b)
in all other cases, shall be determined as provided in Section 5.13.1 hereof.
SECTION 6. Greater Than 10% Shareholders.
6.1 Exercise Price and Term of Incentive Stock Options. If incentive
stock options are granted under this Plan to employees who own more than 10% of
the total combined voting power of all classes of stock of the Company or any
related corporation, the term of such incentive stock options shall not exceed
five years and the exercise price shall be not less than 110% of the fair market
value of the Common Stock at the time the incentive stock option is granted.
This provision shall control notwithstanding any contrary terms contained in an
option agreement or any other document. The term and exercise price limitations
of this provision shall be amended to conform to any change required (or, in the
sole discretion of the Plan Administrator, permitted) by a change in the Code or
by a ruling or pronouncement of the Internal Revenue Service.
6.2 Attribution Rule. For purposes of subsection 6.1, in determining
stock ownership, an employee shall be deemed to own the stock owned, directly or
indirectly, by or for his or her brothers, sisters, spouse, ancestors and lineal
descendants. Stock owned, directly or indirectly, by or for a corporation,
partnership, estate or trust shall be deemed to be owned proportionately by or
for its shareholders, partners or beneficiaries. If an employee or a person
related to the employee owns an unexercised option or warrant to purchase stock
of the Company, the stock subject to that portion of the option or warrant which
is unexercised shall not be counted in determining stock ownership. For purposes
of this Section 6, stock owned by an employee shall include all stock owned by
him which is actually issued and outstanding immediately before the grant of the
incentive stock option to the employee.
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<PAGE>
SECTION 7. Adjustments Upon Changes in Capitalization. The aggregate number
and class of shares for which options may be granted under this Plan, the number
and class of shares covered by each outstanding option, and the exercise price
per share thereof (but not the total price), shall all be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock of the Company resulting from a split-up or consolidation of shares or any
like capital adjustment, or the payment of any stock dividend.
7.1. Effect of Liquidation, Reorganization or Change in Control.
7.1.1 Cash, Stock or Other Property for Stock. Except as provided
in subsection 7.1.2, upon a merger (other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation,
reorganization (other than a mere reincorporation or the creation of a holding
company) or liquidation of the Company, as a result of which the shareholders of
the Company receive cash or property other than capital stock in exchange for or
in connection with their shares of Common Stock, any option granted hereunder
shall terminate, but the Optionee shall have the right immediately prior to any
such merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation to exercise such Optionee's option in whole or in
part whether or not the vesting requirements set forth in the option agreement
have been satisfied.
7.1.2 Conversion of Options on Stock for Stock Exchange. If the
shareholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger (other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation
or reorganization (other than a mere reincorporation or the creation of a
holding company), all options granted hereunder shall be converted into options
to purchase shares of Exchange Stock unless the Company and corporation issuing
the Exchange Stock, in their sole discretion, determine that any or all such
options granted hereunder shall not be converted into options to purchase shares
of Exchange Stock but instead shall terminate in accordance with the provisions
of subsection 7.1.1. The amount and price of converted options shall be
determined by adjusting the amount and price of the options granted hereunder in
the same proportion as used for determining the number of shares of Exchange
Stock the holders of the Common Stock receive in such merger, consolidation,
acquisition of property or stock, separation or reorganization. Unless the Board
determines otherwise, the converted options shall be fully vested whether or not
the vesting requirements set forth in the option agreement have been satisfied.
7.2 Fractional Shares. In the event of any adjustment in the number of
shares covered by an option, any fractional shares resulting from such
adjustment shall be disregarded and each such option shall cover only the number
of full shares resulting from such adjustment.
7.3 Determination of Board to Be Final. All Section 7 adjustments
shall be made by the Board, and its determination as to what adjustments shall
be made, and the extent thereof, shall be final, binding and conclusive. Unless
an Optionee agrees otherwise, any change or adjustment to an incentive stock
option shall be made in such a manner so as not to constitute a "modification"
as defined in Code Section 425(h) and so as not to cause his or her incentive
stock option issued hereunder to fail to continue to qualify as an incentive
stock option as defined in Code Section 422(b).
SECTION 8. Securities Regulation. Shares shall not be issued with respect
to an option granted under this Plan unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, any applicable state
E-7
<PAGE>
securities laws, the Securities Act of 1933, as amended, the Exchange Act, the
rules and regulations promulgated thereunder, and the requirements of any stock
exchange or inter-dealer quotation system upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance, including the availability of an exemption from
registration for the issuance and sale of any shares hereunder. Inability of the
Company to obtain from any regulatory body having jurisdiction the authority
deemed by the Company's counsel to be necessary for the lawful issuance and sale
of any shares hereunder or the unavailability of an exemption from registration
for the issuance and sale of any shares hereunder shall relieve the Company of
any liability in respect of the nonissuance or sale of such shares as to which
such requisite authority shall not have been obtained.
As a condition to the exercise of an option, the Company may require the
Optionee to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present intention
to sell or distribute such shares if, in the opinion of counsel for the Company,
such representation is required by any relevant provision of the aforementioned
laws. At the option of the Company, a stop-transfer order against any shares of
stock may be placed on the official stock books and records of the Company, and
a legend indicating that the stock may not be pledged, sold or otherwise
transferred unless an opinion of counsel is provided (concurred in by counsel
for the Company) stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on stock certificates in order to
assure exemption from registration. The Company may also require such other
action or agreement by the Optionees as it may from time to time deem to be
necessary or advisable. THE COMPANY SHALL NOT BE OBLIGATED, BY REASON OF THIS
PROVISION OR OTHERWISE, TO UNDERTAKE REGISTRATION OF THE OPTIONS OR STOCK
HEREUNDER.
Should any of the Company's capital stock of the same class as the stock
subject to options granted hereunder be listed on a national securities exchange
or inter-dealer quotation system, all stock issued hereunder if not previously
listed on such exchange or inter-dealer quotation system shall be authorized by
that exchange or system for listing thereon prior to the issuance thereof.
SECTION 9. Amendment and Termination.
9.1 Board Action. The Board may at any time suspend, amend or
terminate this Plan, provided that except as set forth in Section 7, the
approval of the holders of a majority of the Company's outstanding shares of
voting capital stock present and entitled to vote at any meeting is necessary
for the adoption by the Board of any amendment which will:
(a) increase the number of shares which are to be reserved for
the issuance of options under this Plan;
(b) permit the granting of stock options to a class of persons
other than those presently permitted to receive stock options under this Plan;
or
(c) require shareholder approval under applicable law, including
Section 16(b) of the Exchange Act.
9.2 Automatic Termination. Unless sooner terminated by the Board, this
Plan shall terminate ten years from the earlier of (") the date on which this
Plan is adopted by the Board or (b) the date on which this Plan is approved by
the shareholders of the Company. No option may be granted after such termination
or during any suspension of this Plan. The amendment or termination of this Plan
shall not, without the consent of the option holder, alter or impair any rights
or obligations under any option theretofore granted under this Plan.
SECTION 10. Effectiveness Of This Plan. This Plan shall become effective
upon adoption by the Board so long as it is approved by the holders of a
majority of the Company's outstanding shares of voting capital stock present and
entitled to vote at any meeting at any time within 12 months before or after the
adoption of this Plan.
Adopted by the Board of Directors on January 4, 2000 and approved by the
shareholders on _________ __, 2000.
E-8
<PAGE>
Option Number: OP2000-
-------
U.S. WIRELESS DATA, INC.
NONQUALIFIED STOCK OPTION LETTER AGREEMENT
Date:_______________
YOUR PARTICULAR ATTENTION IS DIRECTED TO SECTION 8 OF THE PLAN WHICH DESCRIBES
CERTAIN IMPORTANT CONDITIONS RELATING TO FEDERAL AND STATE SECURITIES LAWS THAT
MUST BE SATISFIED BEFORE THE OPTION CAN BE EXERCISED AND BEFORE THE COMPANY CAN
ISSUE ANY SHARES TO YOU. THE COMPANY HAS NO OBLIGATION TO REGISTER THE SHARES
THAT WOULD BE ISSUED UPON THE EXERCISE OF YOUR OPTION, AND IF IT NEVER REGISTERS
THE SHARES, YOU WILL NOT BE ABLE TO EXERCISE THE OPTION UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE. AT THE PRESENT TIME, EXEMPTIONS FROM REGISTRATION
UNDER FEDERAL AND STATE SECURITIES LAWS ARE VERY LIMITED AND MIGHT BE
UNAVAILABLE TO YOU PRIOR TO THE EXPIRATION OF THE OPTION. CONSEQUENTLY, YOU
MIGHT HAVE NO OPPORTUNITY TO EXERCISE THE OPTION TO RECEIVE SHARES. IN ADDITION,
YOU SHOULD CONSULT WITH YOUR TAX ADVISOR IN ADVANCE CONCERNING THE RAMIFICATIONS
TO YOU OF HOLDING OR EXERCISING YOUR OPTIONS OR HOLDING OR SELLING THE SHARES
UNDERLYING SUCH OPTIONS.
TO: ______________________
We are pleased to inform you that you have been selected by the Plan
Administrator of U.S. Wireless Data, Inc. (the "Company") 2000 Stock Option Plan
(the "Plan"). The Plan was adopted by the Board of Directors and approved by the
shareholders. When you sign and return to the Company the Acceptance and
Acknowledgment attached to this Stock Option Agreement you will be entitled to
receive a nonqualified option for the purchase of ________ shares of the
Company's Common Stock, no par value ("Common Stock"), at an exercise price of
$____ per share, subject to the vesting provisions set forth herein. A copy of
the Plan is attached and the provisions thereof, including, without limitation,
those relating to withholding taxes, are incorporated into this Agreement by
reference. It is understood that this Option is not intended to constitute an
incentive stock option as that term is defined in Section 422A of the Internal
Revenue Code of 1986, as amended.
The terms of the option are as set forth in the Plan and in this Agreement.
The most important of the terms set forth in the Plan are summarized as follows:
Number of Shares: The option granted to you covers an aggregate of ______
shares of Common Stock.
Exercise Price: The exercise price per share of Common Stock subject to
your option is $_____ per share (the "Exercise Price").
Adjustments. The number of shares of Common Stock subject to your option
and the Exercise Price may be subject to adjustment under certain circumstances
as described in the Plan.
Date of Grant: The date of grant of the option is _______________.
Term: The term of the option is ten years from date of grant, unless sooner
terminated.
Vesting: Your option shall vest according to the following schedule,
provided you continue your relationship with the Company or a related
corporation:
<PAGE>
Period of Your Continuous
Relationship With the
Company or a Related
Corporation From the Portion of Total Option
Date Option is Granted Which is Exercisable
------------------------- -----------------------
after 1 year 33.3%
after 2 years 66.6%
after 3 years 100 %
Exercise: The vested portion of the option may be exercised, in whole or in
part, but not as to any fractional shares, during the term of the option. You
should use a Notice of Exercise of Nonqualified Stock Option in the form
attached to this Agreement when you exercise the option. During your lifetime
only you can exercise the option. The Plan also provides for exercise of the
option by the personal representative of your estate or the beneficiary thereof
following your death.
Payment for Shares: The vested portion of this option may be exercised by
the delivery of:
(a) Cash, personal check (unless, at the time of exercise, the Plan
Administrator determines otherwise), certified or bank cashier's checks in an
amount equal to the aggregate Exercise Price for the number of shares as to
which the option is being exercised together with a properly executed Notice of
Exercise;
(b) Unless the Plan Administrator in its sole discretion determines
otherwise, shares of the capital stock of the Company held by you having a fair
market value at the time of exercise, as determined by the Plan Administrator in
accordance with the Plan, equal to the aggregate Exercise Price for the number
of shares as to which the option is being exercised;
(c) Unless the Plan Administrator in its sole discretion determines
otherwise, a properly executed Notice of Exercise together with instructions to
the Company to withhold from the shares that would otherwise be issued upon
exercise that number of shares having a fair market value equal to the aggregate
Exercise Price for the number of shares as to which the option is being
exercised; or
(d) A properly executed Notice of Exercise together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds to pay the aggregate Exercise Price for the number of shares as
to which the option is being exercised.
Upon receipt of written Notice of Exercise and payment and delivery of any
other required documentation, the Company shall deliver to the person exercising
the option a certificate or certificates for the appropriate number of shares of
Common Stock. It shall be a condition to the performance of the Company's
obligation to issue or transfer Common Stock upon exercise of this option that
you pay, or make provision satisfactory to the Company for the payment of, any
taxes which the Company is obligated to collect with respect to the issue or
transfer of Common Stock upon exercise.
Termination: Your option will terminate immediately upon termination for
cause, as defined in the Plan, or three months after cessation of your
relationship with the Company or a related corporation, unless cessation is due
to death or total disability, in which case the portion of this option which is
vested at the time of such termination shall terminate one year after cessation
of such relationship. All unvested options will terminate immediately upon the
cessation of your relationship with the Company or a related corporation for any
reason, including, without limitation, termination for cause, resignation, death
or disability.
2
<PAGE>
Transfer of Option: The option is not transferable except by will or by the
applicable laws of descent and distribution or pursuant to a qualified domestic
relations order.
Hold back: In connection with any underwritten public offering by the
Company of its equity securities pursuant to an effective registration statement
filed under the Securities Act, including the Company's initial public offering,
Grantee shall not directly or indirectly sell, make any short sale of, loan,
hypothecate, pledge, offer, grant or sell any option or other contract for the
purchase of, purchase any option or other contract for the sale of, or otherwise
dispose of or transfer, or agree to engage in any of the foregoing transactions
with respect to, any option shares acquired under this Agreement without the
prior written consent of the Company or its underwriters. The period of such
restriction (the "Blackout Period") shall be in effect for such period of time
following the date of the final prospectus for the offering as may be requested
by the Company or such underwriters. In no event, however, shall such period
exceed 180 days. In the event of the declaration of a stock dividend, a
spin-off, a stock split, an adjustment in conversion ratio, a recapitalization
or a similar transaction affecting the Company's outstanding shares of Common
Stock without receipt of consideration, any new, substituted or additional
securities which are by reason of such transaction distributed with respect to
any option shares subject to the Blackout Period, or into which such option
shares thereby become convertible, shall immediately be subject to the
restrictions set forth herein. In order to enforce such restriction, the Company
may impose stop-transfer instructions with respect to the option shares acquired
under this Agreement until the end of the applicable stand-off period. The
Company's underwriters shall be beneficiaries of the agreement set forth in this
subsection. This subsection shall not apply to option shares registered in the
public offering under the Securities Act, and Grantee shall be subject to this
subsection only if the directors and officers of the Company are subject to
similar arrangements.
Notice: All notices sent in connection with this option shall be in writing
and, if to the Company, shall be delivered personally to the President of the
Company or mailed to its principal office, addressed to the attention of the
President, and, if to you, shall be delivered personally or mailed to you at the
address noted on the attached Acceptance and Acknowledgment. Such addresses may
be changed at any time by notice from one party to the other.
It is the intention of the Company that this Plan comply in all respects
with Section 16(b) and Rule 16b-3 under the Securities Exchange Act of 1934 (the
"Exchange Act"), to the extent applicable, and, if any Plan provision is later
found not to be in compliance with such Section or Rule, as the case may be, the
provision shall be deemed null and void, and in all events the Plan shall be
construed in favor of its meeting the requirements of Section 16(b) and Rule
16b-3 under the Exchange Act. Notwithstanding anything in the Plan to the
contrary, the Board, in its absolute discretion, may bifurcate the Plan so as to
restrict, limit or condition the use of any provision of the Plan to
participants who are officers and directors or other persons subject to Section
16(b) of the Exchange Act without so restricting, limiting or conditioning the
Plan with respect to other participants.
All decisions or interpretations made by the Plan Administrator with regard
to any question arising hereunder or under the Plan shall be binding and
conclusive on the Company and you.
This Agreement shall bind and inure to the benefit of the parties hereto
and the successors and assigns of the Company and, to the extent provided in the
Plan, your executors, administrators, legatees and heirs.
3
<PAGE>
Please execute the Acceptance and Acknowledgment set forth below on the
enclosed copy of this Agreement and return it to the undersigned.
Very truly yours,
U.S. WIRELESS DATA, INC.
By:
--------------------------
4
<PAGE>
ACCEPTANCE AND ACKNOWLEDGMENT
I, a resident of the State of ______________, accept the nonqualified stock
option described above and in the U.S. Wireless Data, Inc. 2000 Stock Option
Plan, and acknowledge receipt of a copy of this Agreement, including a copy of
the Plan. I have read and understand this Agreement and the Plan, including the
provisions of Section 8 thereof. I further understand and acknowledge that the
exercise of the nonqualified stock option described above implicates certain tax
considerations and the Company has given no tax advice with respect to the
nonqualified stock option described above. I have given the opportunity to
discuss the option with my tax advisors and I understand the implications of
exercising the option and holding or disposing of the shares underlying the
option.
Dated:
----------------------
--------------------------------------- -----------------------------------
Taxpayer I.D. Number
By his or her signature below, the spouse of the Optionee, if such Optionee
is legally married as of the date of his or her execution of this Agreement,
acknowledges that he or she has read this Agreement and the Plan and is familiar
with the terms and provisions thereof, and agrees to be bound by all the terms
and conditions of this Agreement and the Plan.
Dated:
----------------------
------------------------------
Spouse's Signature
------------------------------
Printed Name
<PAGE>
NOTICE OF EXERCISE
U.S. Wireless Data, Inc.
805 Third Avenue, 8th Floor
New York, New York 10022
Gentlemen:
I hereby exercise my right to purchase ______ shares of Common Stock (the
"Shares") of U.S. Wireless Data, Inc., a Colorado corporation, pursuant to, and
in accordance with, the U.S. Wireless Data, Inc. 2000 Nonqualified Stock Option
Agreement ("Agreement") dated ________. As provided in that Agreement, I deliver
herewith a certified or bank cashier's check in the amount of the aggregate
option price (unless alternative payment methods have been approved by the Plan
Administrator). Please deliver to me stock certificates representing the subject
shares registered as follows:
Name:
---------------------------------------
Address:
------------------------------------
------------------------------------
Social Security Number:
---------------------
The aggregate exercise price is $___________ (total number of shares to be
purchased x $____ per share).
1. If the sale of the Shares and the resale thereof has not, prior to the
date hereof, been registered pursuant to a registration statement filed and
declared effective under the Securities Act of 1933, as amended (the "Act"), the
undersigned hereby agrees, represents, and warrants that:
(a) the undersigned is acquiring the Shares for his or her own account
(and not for the account of others), for investment and not with a view to the
distribution or resale thereof;
(b) by virtue of his or her position, the undersigned has access to
the same kind of information which would be available in a registration
statement filed under the Act;
(c) the undersigned is a sophisticated investor;
(d) the undersigned understands that he or she may not sell or
otherwise dispose of the Shares in the absence of either (i) a registration
statement filed under the Act or (ii) an exemption from the registration
provisions thereof; and
(e) the certificates representing the Shares may contain a legend to
the effect of subsection (d) of this Section 1.
2. If the sale of the Shares and the resale thereof has been registered
pursuant to a registration statement filed and declared effective under the Act,
the undersigned hereby represents and warrants that he or she has received the
applicable prospectus and a copy of the most recent annual report, as well as
all other material sent to shareholders generally.
3. The undersigned acknowledges that the number of shares of Common Stock
subject to the Agreement is hereafter reduced by the number of shares of Common
Stock represented by the Shares.
<PAGE>
4. The undersigned understands that there are certain tax implications to
his or her exercise of his or her right to purchase shares of Common Stock under
the Agreement. The undersigned further understands that it is his or her
obligation to confer with his or her own tax advisor with respect to such tax
implications.
Very truly yours,
------------------------------------
(signature)
------------------------------------
(please type or print name)
<PAGE>
Option Number OP2000-
-------
U.S. WIRELESS DATA, INC.
INCENTIVE STOCK OPTION LETTER AGREEMENT
YOUR PARTICULAR ATTENTION IS DIRECTED TO SECTION 8 OF THE PLAN WHICH DESCRIBES
CERTAIN IMPORTANT CONDITIONS RELATING TO FEDERAL AND STATE SECURITIES LAWS THAT
MUST BE SATISFIED BEFORE THE OPTION CAN BE EXERCISED AND BEFORE THE COMPANY CAN
ISSUE ANY SHARES TO YOU. THE COMPANY HAS NO OBLIGATION TO REGISTER THE SHARES
THAT WOULD BE ISSUED UPON THE EXERCISE OF YOUR OPTION, AND IF IT NEVER REGISTERS
THE SHARES, YOU WILL NOT BE ABLE TO EXERCISE THE OPTION UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE. AT THE PRESENT TIME, EXEMPTIONS FROM REGISTRATION
UNDER FEDERAL AND STATE SECURITIES LAWS ARE VERY LIMITED AND MIGHT BE
UNAVAILABLE TO YOU PRIOR TO THE EXPIRATION OF THE OPTION. CONSEQUENTLY, YOU
MIGHT HAVE NO OPPORTUNITY TO EXERCISE THE OPTION TO RECEIVE SHARES. IN ADDITION,
YOU SHOULD CONSULT WITH YOUR TAX ADVISOR IN ADVANCE CONCERNING THE RAMIFICATIONS
TO YOU OF HOLDING OR EXERCISING YOUR OPTIONS OR HOLDING OR SELLING THE SHARES
UNDERLYING SUCH OPTIONS.
Date:_________________
TO: _____________________
We are pleased to inform you that you have been selected by the Plan
Administrator of the U.S. Wireless Data, Inc. (the "Company") 2000 Stock Option
Plan (the "Plan"). The Plan was adopted by the Board of Directors, and approved
by the shareholders. When you sign and return to the Company the Acceptance and
Acknowledgment attached to this Stock Option Agreement you will be entitled to
receive an incentive option for the purchase of ________ shares of the Company's
Common Stock, no par value ("Common Stock"), at an exercise price of $_____ per
share subject to the vesting provisions set forth herein. A copy of the Plan is
attached and the provisions thereof, including, without limitation, those
relating to withholding taxes, are incorporated into this Agreement by
reference.
The terms of the option are as set forth in the Plan and in this Agreement.
The most important of the terms set forth in the Plan are summarized as follows:
Number of Shares: The option granted to you covers an aggregate of ______
shares of Common Stock.
Exercise Price: The exercise price per share of Common Stock subject to
your option is $_____ per share (the "Exercise Price").
Adjustments. The number of shares of Common Stock subject to your option
and the Exercise Price may be subject to adjustment under certain circumstances
as described in the Plan.
Date of Grant: The date of grant of the option is _______________.
Term. The term of the option is ten years from date of grant, unless sooner
terminated.
Vesting: Your option shall vest according to the following schedule,
provided you continue your relationship with the Company or a related
corporation:
<PAGE>
Period of Your Continuous
Relationship With the
Company or a Related
Corporation From the Portion of Total Option
Date Option is Granted Which is Exercisable
------------------------- -----------------------
after 1 year 33.3%
after 2 years 66.6%
after 3 years 100 %
Exercise. The vested portion of the option may be exercised, in whole
or in part, but not as to any fractional shares, during the term of the option.
You should use a Notice of Exercise of Incentive Stock Option in the form
attached to this Agreement when you exercise the option. During your lifetime
only you can exercise the option. The Plan also provides for exercise of the
option by the personal representative of your estate or the beneficiary thereof
following your death.
Payment for Shares. The vested portion of this option may be exercised by
the delivery of:
(a) Cash, personal check (unless at the time of exercise the Plan
Administrator determines otherwise), or certified or bank cashier's checks in an
amount equal to the aggregate Exercise Price for the number of shares as to
which the option is being exercised together with a properly executed Notice of
Exercise;
(b) Unless the Plan Administrator in its sole discretion determines
otherwise, a properly executed Notice of Exercise, together with shares of the
capital stock of the Company held by you having a fair market value at the time
of exercise, as determined by the Plan Administrator in accordance with the
Plan, equal to the aggregate Exercise Price for the number of shares as to which
the option is being exercised;
(c) Unless the Plan Administrator in its sole discretion determines
otherwise, a properly executed Notice of Exercise together with instructions to
the Company to withhold from the shares that would otherwise be issued upon
exercise that number of shares having a fair market value equal to the aggregate
Exercise Price for the number of shares as to which the option is being
exercised; or
(d) A properly executed Notice of Exercise together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds to pay the aggregate Exercise Price for the number of shares as
to which the option is being exercised.
Upon receipt of written Notice of Exercise and payment and delivery of any
other required documentation, the Company shall deliver to the person exercising
the option a certificate or certificates for the appropriate number of shares of
Common Stock. It shall be a condition to the performance of the Company's
obligation to issue or transfer Common Stock upon exercise of this option that
you pay, or make provision satisfactory to the Company for the payment of, any
taxes which the Company is obligated to collect with respect to the issue or
transfer of Common Stock upon exercise.
Termination. Your option will terminate immediately upon termination for
cause, as defined in the Plan, or three months after cessation of your
relationship with the Company or a related corporation thereof, unless cessation
is due to death or total disability, in which case the portion of this option
which is vested at the time of such termination shall terminate one year after
cessation of such relationship. All unvested options will terminate immediately
upon the cessation of your relationship with the Company or a related
corporation for any reason, including, without limitation, termination for
cause, resignation, death or disability.
2
<PAGE>
Transfer of Option. The option is not transferable except by will or by the
applicable laws of descent and distribution or pursuant to a qualified domestic
relations order.
Hold back: In connection with any underwritten public offering by the
Company of its equity securities pursuant to an effective registration statement
filed under the Securities Act, including the Company's initial public offering,
Grantee shall not directly or indirectly sell, make any short sale of, loan,
hypothecate, pledge, offer, grant or sell any option or other contract for the
purchase of, purchase any option or other contract for the sale of, or otherwise
dispose of or transfer, or agree to engage in any of the foregoing transactions
with respect to, any option shares acquired under this Agreement without the
prior written consent of the Company or its underwriters. The period of such
restriction (the "Blackout Period") shall be in effect for such period of time
following the date of the final prospectus for the offering as may be requested
by the Company or such underwriters. In no event, however, shall such period
exceed 180 days. In the event of the declaration of a stock dividend, a
spin-off, a stock split, an adjustment in conversion ratio, a recapitalization
or a similar transaction affecting the Company's outstanding shares of Common
Stock without receipt of consideration, any new, substituted or additional
securities which are by reason of such transaction distributed with respect to
any option shares subject to the Blackout Period, or into which such option
shares thereby become convertible, shall immediately be subject to the
restrictions set forth herein. In order to enforce such restriction, the Company
may impose stop-transfer instructions with respect to the option shares acquired
under this Agreement until the end of the applicable stand-off period. The
Company's underwriters shall be beneficiaries of the agreement set forth in this
subsection. This subsection shall not apply to option shares registered in the
public offering under the Securities Act, and Grantee shall be subject to this
subsection only if the directors and officers of the Company are subject to
similar arrangements.
Notice: All notices sent in connection with this option shall be in writing
and, if to the Company, shall be delivered personally to the President of the
Company or mailed to its principal office, addressed to the attention of the
President, and, if to you, shall be delivered personally or mailed to you at the
address noted on the attached Acceptance and Acknowledgment. Such addresses may
be changed at any time by notice from one party to the other.
It is the intention of the Company that this Plan comply in all respects
with Section 16(b) and Rule 16b-3 under the Securities Exchange Act of 1934 (the
"Exchange Act"), to the extent applicable, and, if any Plan provision is later
found not to be in compliance with such Section or Rule, as the case may be, the
provision shall be deemed null and void, and in all events the Plan shall be
construed in favor of its meeting the requirements of Section 16(b) and Rule
16b-3 under the Exchange Act. Notwithstanding anything in the Plan to the
contrary, the Board, in its absolute discretion, may bifurcate the Plan so as to
restrict, limit or condition the use of any provision of the Plan to
participants who are officers and directors or other persons subject to Section
16(b) of the Exchange Act without so restricting, limiting or conditioning the
Plan with respect to other participants.
All decisions or interpretations made by the Plan Administrator with regard
to any question arising hereunder or under the Plan shall be binding and
conclusive on the Company and you.
This Agreement shall bind and inure to the benefit of the parties hereto
and the successors and assigns of the Company and, to the extent provided in the
Plan, your executors, administrators, legatees and heirs.
3
<PAGE>
Please execute the Acceptance and Acknowledgment set forth below on the
enclosed copy of this Agreement and return it to the undersigned.
Very truly yours,
U.S. WIRELESS DATA, INC.
By:
--------------------------
4
<PAGE>
ACCEPTANCE AND ACKNOWLEDGMENT
I, a resident of the State of __________, accept the stock option described
above granted under the U.S. Wireless Data, Inc. 2000 Stock Option Plan, and
acknowledge receipt of a copy of this Agreement, including a copy of the Plan. I
have read and understand this Agreement and the Plan, including the provisions
of Section 8 thereof. I further understand and acknowledge that the exercise of
the nonqualified stock option described above implicates certain tax
considerations and the Company has given no tax advice with respect to the
nonqualified stock option described above. I have been given the opportunity to
discuss the option with my tax advisors and I understand the implications of
exercising the option and holding or disposing of the shares underlying the
option.
Dated:
---------------------
--------------------------------------- -----------------------------------
Taxpayer I.D. Number Signature
By his or her signature below, the spouse of the Optionee, if such Optionee
is legally married as of the date of such Optionee's execution of this
Agreement, acknowledges that he or she has read this Agreement and the Plan and
is familiar with the terms and provisions thereof, and agrees to be bound by all
the terms and conditions of this Agreement and the Plan.
Dated:
---------------------
-------------------------------------
Spouse's Signature
-------------------------------------
Printed Name
5
<PAGE>
NOTICE OF EXERCISE
U.S. Wireless Data, Inc.
805 Third Avenue, 8th Floor
New York, New York 10022
Gentlemen:
I hereby exercise my right to purchase ______ shares of Common Stock (the
"Shares") of U.S. Wireless Data, Inc., a Colorado corporation, pursuant to, and
in accordance with, the U.S. Wireless Data, Inc. 2000 Incentive Stock Option
Agreement ("Agreement") dated __________. As provided in that Agreement, I
deliver herewith a certified or bank cashier's check in the amount of the
aggregate option price (unless alternative payment methods have been approved by
the Plan Administrator). Please deliver to me stock certificates representing
the subject shares registered as follows:
Name:
---------------------------------------
Address:
------------------------------------
------------------------------------
Social Security Number:
---------------------
The aggregate exercise price is $___________ (total number of shares to be
purchased x $____ per share).
1. If the sale of the Shares and the resale thereof has not, prior to the
date hereof, been registered pursuant to a registration statement filed and
declared effective under the Securities Act of 1933, as amended (the "Act"), the
undersigned hereby agrees, represents, and warrants that:
(a) the undersigned is acquiring the Shares for his or her own account
(and not for the account of others), for investment and not with a view to the
distribution or resale thereof;
(b) by virtue of his or her position, the undersigned has access to
the same kind of information which would be available in a registration
statement filed under the Act;
(c) the undersigned is a sophisticated investor;
(d) the undersigned understands that he or she may not sell or
otherwise dispose of the Shares in the absence of either (i) a registration
statement filed under the Act or (ii) an exemption from the registration
provisions thereof; and
(e) the certificates representing the Shares may contain a legend to
the effect of subsection (d) of this Section 1.
2. If the sale of the Shares and the resale thereof has been registered
pursuant to a registration statement filed and declared effective under the Act,
the undersigned hereby represents and warrants that he or she has received the
applicable prospectus and a copy of the most recent annual report, as well as
all other material sent to shareholders generally.
3. The undersigned acknowledges that the number of shares of Common Stock
subject to the Agreement is hereafter reduced by the number of shares of Common
Stock represented by the Shares.
<PAGE>
4. The undersigned understands that there are certain tax implications to
his or her exercise of his or her right to purchase shares of Common Stock under
the Agreement. The undersigned further understands that it is his or her
obligation to confer with his or her own tax advisor with respect to such tax
implications.
Very truly yours,
------------------------------------
(signature)
------------------------------------
(please type or print name)
By:
---------------------------------
By:
---------------------------------
Name:
Title:
<PAGE>
U.S. WIRELESS DATA, INC.
Annual Meeting of Shareholders ______ __, 2000
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder in U.S. Wireless Data, Inc. ("Company") hereby
constitutes and appoints Dean M. Leavitt and Charles I. Leone, and each of them,
his true and lawful attorneys and proxies, with full power of substitution in
and for each of them, to vote all shares of the Company which the undersigned is
entitled to vote at the Annual Meeting of Shareholders to be held at 805 Third
Avenue, 8th Floor, New York, New York 10022, on _____ __, 2000, at 2:00 p.m.,
New York Time, or at any postponement or adjournment thereof, on any and all of
the proposals contained in the Notice of the Annual Meeting of Shareholders,
with all the powers the undersigned would possess if present personally at said
meeting, or at any postponement or adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE NOMINEES LISTED ON THE REVERSE SIDE and FOR THE APPROVAL OF PROPOSALS 2,
3, 4, 5 and 6
(Continued and to be signed and dated on the other side)
<PAGE>
The Board recommends a vote FOR all Proposals. [X] Please mark
your votes
as this
example
1(a). Election of Directors by holders of GRANT WITHHOLD
Common Stock [ ] [ ]
AUTHORITY AUTHORITY
to vote for all to vote for all
nominees listed nominees
(except as listed at left
marked in the
contrary, see
instruction below)
Michael S. Falk, Amy L. Newmark,
Alvin C. Rice and Chester N. Winter
1(b). Election of Directors by holders of GRANT WITHHOLD
Series C Preferred Stock [ ] [ ]
AUTHORITY AUTHORITY
to vote for all to vote for all
nominees listed nominees
(except as listed at left
marked in the
contrary, see
instruction below)
Edwin M. Cooperman and
Barry A. Kaplan
INSTRUCTION: To withhold authority to vote for any individual nominee,
line through the name of the nominee above.
2. Proposal to approve an amendment to FOR AGAINST ABSTAIN
the Company's Articles of [ ] [ ] [ ]
Incorporation, to increase the
authorized capital stock of the
Company to 225,000,000 of which
200,000,000 shares shall be
designated "Common Stock" and
25,000,000 shares of which shall be
designated "Preferred Stock."
<PAGE>
3. Proposal to reincorporate in the State FOR AGAINST ABSTAIN
of Delaware. [ ] [ ] [ ]
4. Proposal to approve the FOR AGAINST ABSTAIN
U.S. Wireless Data, Inc. [ ] [ ] [ ]
2000 Stock Option Plan.
5. Proposal to approve an FOR AGAINST ABSTAIN
amendment of the [ ] [ ] [ ]
Company's Article of
Incorporation to effectuate
a one-for-four reverse
stock split of the
Company's Common
Stock.
6. Proposal to ratify M.R. FOR AGAINST ABSTAIN
Weiser & Co. LLP as [ ] [ ] [ ]
independent auditors and
public accountants.
The above named proxies are granted the
authority, in their discretion, to act upon
such other matters as may properly come
before the meeting or any postponement or
adjournment thereof.
Dated, 2000
Class of Stock
----------------------------------------
Signature(s)
----------------------------------------
Signature
Please sign exactly as your name appears
and return this Proxy immediately in the
enclosed stamped self-addressed
envelope.
