<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
U.S. WIRELESS DATA, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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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.
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0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
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3) Filing Party:
___________________________________________________________________________
4) Date Filed:
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[GRAPHIC OMITTED]
New York, NY
To My Fellow Shareholders:
As I complete my first 18 months as your Chief Executive Officer, I am
delighted to report that U.S. Wireless Data has been revitalized. We are, in
nearly every important respect, a new and far stronger company. We are
extremely excited about our future, as we are now well positioned financially
and have made great strides in building the infrastructure necessary to move
ahead aggressively with our new business plan.
A number of the items that are important to the growth of U.S. Wireless Data
require your approval. These matters are explained in detail in the attached
Proxy Statement. You will also find a number of historical financial statements
included in this mailing. While some of these older financial statements are
included as required by the SEC, they no longer accurately reflect U.S.
Wireless Data's business since the repositioning of the company and the
completion of our financing. Within the next few months, you will be receiving
our annual report for the fiscal year ended June 30, 2000. In the interim, your
Board of Directors respectfully requests your affirmative vote on the many
items of business to be resolved at the meeting of shareholders on September 7,
2000.
I would also like to take this opportunity to welcome our new shareholders. We
appreciate the confidence that you have placed in our new management team and
in the enormous potential of our technology. Our recently completed private
placement, initially intended to raise $25 million, was heavily oversubscribed
and ultimately raised more than $55 million. This financing has recapitalized
U.S. Wireless Data, and marks a major milestone in the revitalization of the
company.
This renewed confidence in U.S. Wireless Data is also being shared by our
current and prospective business partners. As a result, we have been rapidly
signing new sales channel agreements and we now have more than 60 such
agreements in place.
Behind the scenes, we have built both the management and physical
infrastructure needed to achieve our goals. Starting at the top of the
corporation, we have attracted four excellent new Directors to the Board. We
have also hired a core executive team with the skills and experience to drive
growth. This team is significantly reorganizing USWD's operations. We have
refocused our efforts on Synapse(SM) (formerly called WEPS), our proprietary,
neutral gateway that enables wireless transaction processing. The Synapse
facility in Colorado is state-of-the-art and is now capable of handling the
increased transactional volume that we anticipate. We also continue to enhance
our proprietary technology platform with focused research and development. Over
the past year, our technical staff alone has increased from three to more than
thirty trained specialists.
In summary, U.S. Wireless Data has been reborn. With new leadership, we have
revised our business plan, restructured the company's operations, and
established new key relationships. We have completed a very successful
financing that will provide the means to execute our plan. We are well on our
way to achieving our vision, which is to establish Synapse as the standard for
wireless transaction processing. I look forward to reporting our progress to
you on a regular basis in the future.
/s/ Dean M. Leavitt
------------------------------------
Dean M. Leavitt
Chairman and Chief Executive Officer
August 7, 2000
<PAGE>
[GRAPHIC OMITTED]
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 the New York Marriott East Side, 525 Lexington
Avenue, New York, New York 10017 at 2:00 p.m., Eastern time, on September 7,
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 July 14, 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
/s/ Dean M. Leavitt
------------------------------------
Dean M. Leavitt
Chairman and Chief Executive Officer
New York, New York
August 7, 2000
<PAGE>
U.S. WIRELESS DATA, INC.
805 Third Avenue, 8th Floor
New York, New York 10022
(212) 750-7766
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PROXY STATEMENT
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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 New York Marriott East Side, 525 Lexington Avenue,
New York, New York 10017 on September 7, 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 later 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 July 14,
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 32,396,748 shares of Common Stock and 5,586,600 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.
<PAGE>
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.
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 August 7, 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 of the Board of May 1999
the Company
Edwin M. Cooperman 56 Chairman of the Board of Directors of Tutor Time March 2000
Learning Systems, Inc.
Michael S. Falk 38 Chief Executive Officer of Commonwealth Associates, March 2000
L.P.
Barry A. Kaplan 44 Managing Director at Goldman, Sachs & Co. March 2000
Amy L. Newmark 43 Private Investor March 2000
Alvin C. Rice 76 Vice Chairman of Merchant's Group International, Inc. June 1998
Chester N. Winter 68 General Partner of Colorado Incubator Fund, L.P. February 1994
</TABLE>
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
3
<PAGE>
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 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.
4
<PAGE>
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
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.
The Company reconstituted its compensation committee as of May 4, 2000,
which had theretofore been inactive. The Compensation Committee consists of
Messrs. Kaplan and Winter and Ms. Newmark. This Committee approves salaries and
other compensation arrangements for the executive officers of the Company. This
Committee is also authorized to approve option grants to eligible employees
under the Company's stock option plans. The Compensation Committee has met
three times since its formation and through August 4, 2000.
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, Chief Operating Officer and February 2000
Secretary
John H. (Jack) Perveiler 49 Vice President/National Sales Manager February 2000
Marc R. Shultz 45 Vice President of Business Development January 2000
</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.
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.
5
<PAGE>
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 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
6
<PAGE>
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 September 15, 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 September 15, 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
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.
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.
7
<PAGE>
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 for a period of one year following the closing of the
transaction. 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,
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."
8
<PAGE>
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-50 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.
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
9
<PAGE>
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.
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 a 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.
10
<PAGE>
In order to induce the lender to enter into the Bridge Financing, Mr.
Liviakis, who is the owner of 7,301,958 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.
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
11
<PAGE>
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 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
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.
12
<PAGE>
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 $1.50 per
share exercisable through April 30, 2004.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers, directors, and persons owning
more than ten percent of a registered class of the Company's equity securities
("ten percent shareholders") to file reports of ownership and changes of
ownership with the SEC. Officers, directors, and ten-percent shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) reports they file with the SEC.
To the Company's knowledge, based solely on its review of the copies of
such reports and amendments thereto furnished to the Company, and written
representations that no other reports were required, the Company believes that
during the Company's fiscal year ended June 30, 1999, all Section 16(a) filing
requirements applicable to the Company's officers, directors, and ten percent
shareholders were met, except as follows: the timely filing of Form 3 by Mr.
Leavitt, the Company's current Chief Executive Officer and Chairman of the
Board.
13
<PAGE>
EXECUTIVE COMPENSATION
The following table shows all the compensation paid by the Company to its
Chief Executive Officer (the "Named Executive Officer") and certain other
officers during the fiscal years ended June 30, 1999, 1998 and 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------------
Name and Fiscal Other Annual
Principal Position Year Salary Bonus Compensation
----------------------------- -------- ----------- ---------- --------------
($) ($) ($)
<S> <C> <C> <C> <C>
Rod L. Stambaugh ............ 1999 $130,000 -- (6)
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)
1997 -- -- --
Roger L. Peirce ............. 1999 $ 43,750 -- (6)
Chief Executive Officer (3) 1998 -- -- --
1997 -- -- --
Dean M. Leavitt ............. 1999 $ 21,667 -- (6)
Chief Executive Officer (4) 1998 -- -- --
1997 -- -- --
Robert E. Robichaud ......... 1999 $125,000 -- (6)
Chief Financial and 1998 $101,756 $10,417 (6)
Accounting Officer (5) 1997 -- -- --
<CAPTION>
Long Term Compensation
----------------------------------
Restricted Securities
Name and Stock Underlying Options All Other
Principal Position Awards and Warrants (7) Compensation
----------------------------- ------------ -------------------- -------------
($) ($)
<S> <C> <C> <C>
Rod L. Stambaugh ............ -- 700,000 (8) --
President (1)(5) -- -- --
-- -- --
Evon A. Kelly ............... -- -- --
Chief Executive Officer (2) -- 600,000 (9) --
-- -- --
Roger L. Peirce ............. -- 1,300,000 (10) --
Chief Executive Officer (3) -- -- --
-- -- --
Dean M. Leavitt ............. -- 5,375,000 --
Chief Executive Officer (4) -- -- --
-- -- --
Robert E. Robichaud ......... -- 250,000 (11) --
Chief Financial and -- 50,000 (12) --
Accounting Officer (5) -- -- --
</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 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 Annual Compensation", as the aggregate
incremental cost to the Company of personal benefits provided to the
executive officer did not exceed the lesser of $50,000 or 10% of his
annual salary and bonus during the year.
<PAGE>
(7) All options were granted outside the 1992 Stock Option Plan, except
certain options issued to Mr. Stambaugh (100,000 option shares) and Mr.
Robichaud (100,000 option shares).
(8) As of December 6, 1999, the date of Mr. Stambaugh's termination, 474,940
of the options had vested.
(9) Reflects options granted to Mr. Kelly during 1998; of that number 492,000
options had vested as of the date Mr. Kelly left the Company. All of these
options have expired unexercised.
14
<PAGE>
(10) Reflects options granted to Mr. Peirce during 1999; of that number 189,583
options had vested as of the date Mr. Peirce left the Company. All of
these options have expired unexercised.
(11) Reflects options granted to Mr. Robichaud during 1999, of that number
218,713 options had vested as of the date Mr. Robichaud left the Company.
(12) All of the options have expired unexercised.
Option Grants in Fiscal Year Ended June 30, 1999
The following table reports information with respect to individual grants
of options to the Named Executive Officer and the other executive officers
named in the Summary Compensation Table above.
Option Grants in Last Fiscal Year
(Individual Grants)
<TABLE>
<CAPTION>
Percent of Total
Number of Options/Warrants
Securities Granted to Exercise Or
Underlying Options/ Employees in Base Price
Name Warrants Granted Fiscal Year (1) ($ Per Share) Expiration Date
----------------------------- --------------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C>
Rod L. Stambaugh ............ 100,000 (4) 1.1 2.653 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 5/6/09
2,687,500 29.2 1.465 5/6/09
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 $2.563 per share. As of March 19, 1999, the
date Mr. Peirce left the Company, a total of 189,583 of the options were
fully vested. All options granted to Mr. Peirce were outside the Company's
Amended 1992 Stock Option Plan (the "Plan"). All of the options have
expired unexercised.
(3) All warrants granted to Mr. Leavitt were outside the Plan.
(4) 100,000 options were granted to Mr. Stambaugh under the Plan. As of
December 6, 1999, the date of Mr. Stambaugh's termination, 25,000 of the
options had vested, which were exercised as of March 6, 2000.
(5) 600,000 option were granted to Mr. Stambaugh outside the Plan. As of
December 6, 1999, the date of Mr. Stambaugh's termination, 449,940 of the
options had vested. The options will expire on December 5, 2000.
(6) 50,000 options were granted to Mr. Robichaud under the Plan. All of the
options have expired unexercised.
(7) 250,000 options were granted to Mr. Robichaud outside of the Plan. As of
February 29, 2000, the date of Mr. Robichaud's termination, 218,713 of the
options had vested.
As reflected in the following table, reported are the values for
"in-the-money" options, which represent the excess, if any, of the market price
of the Common Stock as of June 30, 1999 and the exercise price of any existing
stock options owned by the Named Executive Officer.
15
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised Unexercised In-the-Money
Shares Options and Warrants at Options and Warrants
Acquired on Value FY-End (#) at FY-End ($)
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 554,940 options were vested. Mr. Stambaugh exercised options with
respect to 105,000 shares as of March 6, 2000, and has another 449,940
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. All of the options have expired unexercised.
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.
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
16
<PAGE>
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. The option held by Mr.
Leone vests one-third per yearly anniversary and becomes immediately vested and
exercisable upon a termination of employment by the Company without "cause" or
by Mr. Leone for "good reason" or upon a "change of control" of the Company.
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.
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
17
<PAGE>
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, 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.
18
<PAGE>
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 of
Options Outstanding 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>
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 of
Options Outstanding 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,
19
<PAGE>
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.
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
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 .................................... 7,301,958 (11) 23%
495 Miller Avenue, 3rd Floor
Mill Valley, California 94941
Robert B. Prag ...................................... 547,500 (12) 2%
2455 El Amigo Road
Del Mar, California 92014
Sandler Capital Partners ............................ 4,166,700 (14) 11%
767 Fifth Avenue
New York, New York 10022
Peter J. Solomon Securities Company Limited ......... 2,327,750 (15) 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>
20
<PAGE>
------------
* Represents less than 1% of outstanding shares.
(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.
21
<PAGE>
Liviakis are the owners of LFC. The number of shares shown includes a total
of 443,077 shares of common stock owned by Mr. Liviakis as an individual,
plus 6,858,881 shares of common stock held by LFC. See "Certain
Relationships and Related Transactions-Transactions with Liviakis Financial
Communications, Inc. ("LFC") and Certain LFC Affiliates".
(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.
(14) Includes 3,333,350 shares of Common Stock issuable upon conversion of
500,000 shares of Series C Preferred Stock and 833,350 shares of Common
Stock issuable upon the exercise of a Unit Warrant.
(15) Issuable upon full conversion of all warrants to purchase 27.933 Units.
Certain Holders of Series C Preferred Stock
<TABLE>
<CAPTION>
Series C Convertible Preferred
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 ................................... 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%(4)
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 group (10
persons) ......................................... 360,000 (2) 6%
</TABLE>
------------
* 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.
22
<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.
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
23
<PAGE>
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
<TABLE>
<S> <C>
Common Stock outstanding as of May 31, 2000 32,396,748 shares
Common Stock reserved for issuance pursuant to the Company's 2000 Stock
Option Plan 15,000,000 shares
Common Stock required to be reserved for issuance upon exercise of the Bridge
Warrants 6,288,000 shares
Common Stock required to be reserved for issuance upon conversion of Series C
Preferred Stock 37,244,000 shares
Common Stock required to be reserved for issuance upon exercise of Unit Warrants 9,311,000 shares
Common Stock required to be reserved for issuance upon exercise of warrants held by
Commonwealth and PJSC 13,966,500 shares
Common Stock reserved for issuance pursuant to outstanding options and warrants 10,940,345 shares
Common Stock required to be reserved for lost stock certificates 397,684 shares
TOTAL 125,544,277 shares(1)
</TABLE>
------------
(1) 31,386,069 shares if the reverse stock split is approved.
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 $2.1156. 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
Com-
24
<PAGE>
mon 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 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
25
<PAGE>
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.
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
26
<PAGE>
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.
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. 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.
27
<PAGE>
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.
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 stockholders 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.
Colorado
A director of a corporation that does not have a staggered board of directors
or cumulative voting may be removed with or without cause with the approval of
a majority of the outstanding shares entitled to vote at an election of
directors. In the case of a Colorado corporation having cumulative voting, if
less than the entire board is to be removed, a director may not be removed
without cause if the number of shares voted against such removal would be
sufficient to elect the director under cumulative voting. The Articles of
Incorporation of Wireless-CO do not provide for a classified board of directors
or for cumulative voting.
Delaware
A director of a corporation that does not have a classified board of directors
or cumulative voting may be removed with or without cause with the approval of
a majority of the outstanding shares entitled to vote at an election of
directors. In the case of a Delaware corporation having cumulative voting, if
less than the entire board is to be removed, a director may not be removed
without cause if the number of shares voted against such removal would be
sufficient to elect the director under cumulative voting. A director of a
corporation with a classified board of directors may be 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.
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.
Colorado
The Wireless-CO Articles of Incorporation and Bylaws do note provide for a
staggered board. Colorado law permits, but does not require, a staggered board
of directors, pursuant to which the directors can be divided into as many as
three classes with staggered terms of office, with only one class of directors
standing for election each year.
Delaware
Delaware law permits, but does not require, a classified board of directors,
pursuant to which the directors can be divided into as many as three classes
with staggered terms of office, with only one class of directors standing for
election each year. The Wireless-DE Certificate of Incorporation and Bylaws do
not provide for a classified board and Wireless-DE presently does not intend to
propose establishment of a classified board.
28
<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.
Colorado
The Articles of Incorporation of Wireless-CO eliminate the liability of
directors to the corporation to the fullest extent permissible under Colorado
law. Colorado law does not permit the elimination of monetary liability where
such liability is based on: (a) intentional misconduct or knowing and culpable
violations of law; (b) acts or omissions that a director believes to be
contrary to the best interests of the corporation or its shareholders, or that
involve the absence of good faith on the part of the director; (c) receipt of
an improper personal benefit; (d) acts or omissions that show reckless
disregard for the director's duty to the corporation or its shareholders, where
the director in the ordinary course of performing a director's duties should be
aware of a risk of serious injury to the corporation or its shareholders; (e)
acts or omissions that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the corporation and its
shareholders; (f) interested transactions between the corporation and a
director in which a director has a material financial interest; and (g)
liability for improper distributions, loans or guarantees.
Colorado law generally permits indemnification of director liability, including
expenses actually and reasonably incurred in the defense or settlement of a
derivative or third-party action, provided there is a determination by a
majority vote of a disinterested quorum of the directors, by independent legal
counsel or by a majority vote of a quorum of the shareholders that the person
seeking indemnification acted in good faith and in the case of conduct in an
official capacity, in a manner he or she reasonably believed was in the best
interests of the corporation or a benefit plan (if acting in a capacity with
respect to such a plan). In other cases, the director is entitled to
indemnification if his or her conduct was at least not opposed to the
corporation's best interests. In a criminal proceeding, the director is
entitled to indemnification if he or she had no reasonable cause to believe the
conduct was unlawful.
Delaware
The Certificate of Incorporation of Wireless-DE also eliminates the liability
of directors to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director to the fullest extent permissible under
Delaware law, as such law exists currently or as it may be amended in the
future. Under Delaware law, such provision may not eliminate or limit director
monetary liability for: (a) breaches of the director's duty of loyalty to the
corporation or its stockholders; (b) acts or omissions not in good faith or
involving intentional misconduct or knowing violations of law; (c) the payment
of unlawful dividends or unlawful stock repurchases or redemptions; or (d)
transactions in which the director received an improper personal benefit. Such
limitation of liability provisions also may not limit a director's liability
for violation of or otherwise relieve its directors from the necessity of
complying with federal or state securities laws, or affect the availability of
non-monetary remedies such as injunctive relief or rescission.
Delaware law generally permits indemnification of expenses, including
attorney's fees, actually and reasonably incurred in the defense or settlement
of a derivative or third-party action, provided there is a determination by a
majority vote of a disinterested quorum of the directors, by independent legal
counsel or by a majority vote of a quorum of the stockholders that the person
seeking indemnification acted in good faith and in a manner reasonably believed
to be in, or not opposed to, the best interests of the corporation. Without
court approval, however, no indemnification may be made in respect of any
derivative action in which such person is adjudged liable for negligence or
misconduct in the performance of his or her duty to the corporation. Delaware
law requires indemnification of expenses when the individual being indemnified
has successfully defended any action, claim, issue, or matter therein, on the
merits or otherwise.
29
<PAGE>
Colorado
Without court approval, however, no indemnification is available in any action
by or on behalf of the corporation (i.e., a derivative action) in which such
person is adjudged liable to the corporation or in any other proceeding where
the director is adjudged liable on the basis that he or she received an
improper personal benefit. Colorado law requires indemnification of director
expenses when the individual being indemnified has successfully defended any
action, claim, issue, or matter therein, on the merits or otherwise.
A director may also apply for and obtain indemnification as ordered by a court
under circumstances where the court deems the director is entitled to mandatory
indemnification under Colorado law or when, under all the 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.
Delaware
Delaware law also permits a Delaware corporation to provide indemnification in
excess of that provided by statute. In contrast to Colorado law, Delaware law
does not require authorizing provisions in the certificate of incorporation and
does not contain express prohibitions on indemnification in certain
circumstances. A court may impose limitations on indemnification, however,
based on principles of public policy.
Delaware law provides that the indemnification provided by statute shall not be
deemed exclusive of any other rights under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
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.
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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.
Consideration for Issuance of Shares
Colorado
Shares may be issued for consideration consisting of tangible or intangible
property or benefit to the corporation, including cash, promissory notes,
services performed and other securities of the corporation.
Shares may not be issued for consideration consisting of a promissory note of
the subscriber or an affiliate of the subscriber unless the note is negotiable
and is secured by 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 less than such par
value.
Delaware
Shares may be issued for consideration consisting of tangible or intangible
property or benefit to the corporation, including cash, promissory notes,
services performed and other securities of the corporation.
In the absence of "actual fraud," in the transaction, the judgment of the board
as to the value of the consideration shall be conclusive.
No provisions restrict the ability of the board to 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.
Dividends and Repurchases of Shares
Colorado
Colorado law dispenses with the concepts of par value of shares as well
as statutory definitions of capital, surplus and the like. Colorado law permits
a corporation to declare and pay cash or in-kind property dividends or to
repurchase shares unless, after giving effect to the transaction: (a) the
corporation would not be able to pay its debts as they become due in the usual
course of business; or (b) the corporation's total assets would be less than
the sum of its total liabilities plus (unless the articles of incorporation
permit otherwise) the amount that would be needed, if the corporation were to
be dissolved at the time of the distribution, to satisfy the preferential
rights upon dissolution of shareholders whose preferential rights are superior
to those receiving the distribution.
Delaware
The concepts of par value, capital and surplus are retained under
Delaware law. Delaware law permits a corporation to declare and pay dividends
out of surplus or, if there is no surplus, out of net profits for the fiscal
year in which the dividend is declared and/or for the preceding fiscal year as
long as the amount of capital of the corporation following the declaration and
payment of the dividend is not less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. In addition, Delaware law generally
provides that a corporation may redeem or repurchase its shares only if the
capital of the corporation is not impaired and such redemption or repurchase
would not impair the capital of the corporation.
To date, Wireless-CO has not paid any cash dividends.
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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.
Colorado
Colorado law does not require a stockholder vote of the surviving corporation
in a merger (unless the corporation provides otherwise in its certificate of
incorporation) if (a) the merger agreement does not amend the existing
certificate of incorporation, (b) each share of the stock of the surviving
corporations outstanding immediately before the effective date of the merger is
an identical 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.
Delaware
Delaware law contains a similar exception to its voting requirements for
reorganizations where shareholders of the corporation itself, or both,
immediately prior to the reorganization will own immediately after the
reorganization equity securities constituting more than 80 percent of the
voting power of the surviving or acquiring corporation or its parent entity.
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.
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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.
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
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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
Colorado
The board of directors cannot make a loan to a director or officer (or any
entity in which such person has an interest), or guaranty any obligation of
such person or entity, until at least ten days after notice has been given to
the shareholders who would be entitled to vote on the transaction if it were
being submitted for shareholder approval.
Delaware
The board of directors may make loans to, or guaranties for, directors and
officers on such terms as they deem appropriate whenever, in the board's
judgment, the loan can be expected to reasonably benefit the corporation.
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.
Colorado
Provides that the corporation or the defendant in a derivative suit may make a
motion to the court for an order requiring the plaintiff shareholder to furnish
a security bond.
Delaware
Delaware does not have a similar bonding requirement.
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.
Colorado
Dissenters' rights are not available to shareholders of a corporation surviving
a merger if no vote of the stockholders of the surviving corporation is
required to approve the merger or share exchange under certain provisions of
Colorado law.
Delaware
Appraisal rights are not available (a) with respect to the sale, lease or
exchange of all or substantially all of the assets of a corporation, (b) 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 Delaware law.
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Colorado
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.
Delaware
Dissolution
Colorado
If the board of directors initially approves the dissolution, it may be
approved by a simple majority of the outstanding shares of the corporation's
stock entitled to vote. In the event of such a board-initiated dissolution,
Colorado law allows a Colorado corporation to include in its certificate of
incorporation a supermajority (greater than a simple majority) voting
requirement in connection with dissolutions. Under Colorado law, shareholders
may only initiate dissolution by way of a judicial proceeding.
Delaware
Unless the board of directors approves the proposal to dissolve, the
dissolution must be approved by all the stockholders entitled to vote thereon.
Only if the board of directors initially approves the dissolution may it be
approved by a simple majority of the outstanding shares of the corporation's
stock entitled to vote. In the event of such a board initiated dissolution,
Delaware law allows a Delaware corporation to include in its certificate of
incorporation a supermajority (greater than a simple 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.
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
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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.
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.
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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.
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.
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New Plan Benefits--The Option Plan
<TABLE>
<CAPTION>
Name and Position Dollar Value ($) Number of Shares
----------------------------------------------------------------------- ------------------ ------------------------
<S> <C> <C>
Dean M. Leavitt-Chief Executive Officer and Chairman of the Board --(1) 2,500,000(2)
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 group (consisting of 4 persons) . --(1) 2,500,000(2)(3)
All current directors (including nominees for director) who are
executive officers (1 person) ...................................... --(1) 2,500,000(2)(3)
All employees (other than current executive officers and directors
who are not executive officers) as a group (approximately 50
persons) ........................................................... --(1) 881,000
</TABLE>
------------
(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
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
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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.
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 32,396,748 to approximately 8,099,187 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.
39
<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.
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.
40
<PAGE>
DEADLINE FOR SHAREHOLDER PROPOSALS FOR 2001
Shareholder proposals intended to be considered for inclusion in the Proxy
Statement for presentation at the Company's 2001 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 April 6, 2001, 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. THESE REPORTS WILL BE PROVIDED
WITHOUT EXHIBITS; HOWEVER, ANY PERSON WISHING TO RECEIVE A COPY OF ANY EXHIBIT
MAY DO SO UPON WRITTEN REQUEST AND PAYMENT OF REASONABLE COPYING CHARGES. 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.
41
<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-four 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.
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.
<TABLE>
<S> <C>
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 Delaware corporation)
By:
-------------------------------------
Dean M. Leavitt
Chairman and Chief Executive Officer
Attest:
By:
-------------------------------
</TABLE>
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 US 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 is National Registered Agents,
Inc.
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 225,000,000 shares of which 200,000,000 shares, par value of $.01
per share, shall be designated "Common Stock" and 25,000,000 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.
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.
C-2
<PAGE>
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
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.
C-3
<PAGE>
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 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.
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
C-4
<PAGE>
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.
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 (a) 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.
C-5
<PAGE>
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 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 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
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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.
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.
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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.
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 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
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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 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.
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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 3rd of August, 2000.
----------------------------------------
Ralph A. Blessey,
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.
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
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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.
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.
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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 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:
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(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;
(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.
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.
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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.
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
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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.
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
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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.
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
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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 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;
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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.
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.
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.
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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 "Option
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:
Period of Optionee's Continuous
Relationship With the Company
or Related Corporation Portion of Total Option
From the Date the Option is Granted Which is Exercisable
------------------------------------- ------------------------
After 1 year ...................... 33.3%
After 2 years ..................... 66.6%
After 3 years ..................... 100.0%
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.
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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 (a) 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 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.
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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 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.
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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).
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(a) and (c). The value of
Common Stock received by the Optionee from an exercise under Sections 5.4(a)
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(a) 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 (a)
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
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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.
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
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
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<PAGE>
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 (a) 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.
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<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:
Period of Your Continuous
Relationship With the Company
or a Related Corporation Portion of Total Option
From the Date Option is Granted Which is Exercisable
--------------------------------- ------------------------
After 1 year .................. 33.3%
After 2 years ................. 66.6%
After 3 years ................. 100.0%
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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.
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
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<PAGE>
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.
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: _____________________________________
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<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
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<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.
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)
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<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:
Period of Your Continuous
Relationship With the Company
or a Related Corporation Portion of Total Option
From the Date Option is Granted Which is Exercisable
--------------------------------- ------------------------
After 1 year .................. 33.3%
After 2 years ................. 66.6%
After 3 years ................. 100.0%
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.
6
<PAGE>
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.
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.
7
<PAGE>
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.
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: _____________________________________
8
<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
9
<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.
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: _____________________________________
Name:
Title:
10
<PAGE>
U.S. WIRELESS DATA, INC.
Annual Meeting of Shareholders September 7, 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 the New York Marriott East Side, 525 Lexington Avenue, New York, New
York 10017, on September 7, 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
The Board recommends a vote FOR all Proposals.
/X/ Please mark your votes as this example
1 (a). Election of Directors by holders of Common Stock
/ / GRANT AUTHORITY / / WITHHOLD AUTHORITY
to vote for all nominees listed to vote for all nominees
(except as marked in the contrary, listed at left
see instruction below)
Michael S. Falk, Dean M. Leavitt, Amy L. Newmark, Alvin C. Rice and
Chester N. Winter
INSTRUCTION: To withhold authority to vote for any individual nominee,
line through the name of the nominee above.
(continued and to be signed on reverse side)
<PAGE>
2. Proposal to approve an amendment to 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."
/ / FOR / /AGAINST / / ABSTAIN
3. Proposal to reincorporate in the State of Delaware.
/ / FOR / /AGAINST / / ABSTAIN
4. Proposal to approve the U.S. Wireless Data, Inc. 2000 Stock Option Plan.
/ / FOR / /AGAINST / / ABSTAIN
5. Proposal to approve an amendment of the Company's Article of Incorporation
to effectuate a one-for-four reverse stock split of the Company's Common
Stock.
/ / FOR / /AGAINST / / ABSTAIN
6. Proposal to ratify M.R. Weiser & Co. LLP as independent auditors and public
accountants
/ / FOR / /AGAINST / / ABSTAIN
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
---------------------
----------------------------------
Signature(s)
----------------------------------
Signature
Please sign exactly as your name
appears and return this Proxy
immediately in the enclosed
stamped self-addressed envelope.
<PAGE>
U.S. WIRELESS DATA, INC.
Annual Meeting of Shareholders September 7, 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 the New York Marriott East Side, 525 Lexington Avenue, New York, New
York 10017, on September 7, 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>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
-----
| | Please mark your |
| X | votes as this |
| | example. |
----- -----
----------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL PROPOSALS.
GRANT AUTHORITY WITHHOLD
to vote for all nominees AUTHORITY
listed (except as marked) to vote for all
in the contrary, see nominees
instructions below) listed below
----- -----
| | | |
1(b). Election | | | |
of Directors | | | |
by holders ----- -----
of Series C
Preferred Stock
Nominees: 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.
FOR AGAINST ABSTAIN
2 Proposal to approve an amendment to 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."
3 Proposal to reincorporate in the State of Delaware. ----- ----- -----
| | | | | |
| | | | | |
| | | | | |
----- ----- -----
4 Proposal to approve the U.S. Wireless Data, Inc. 2000 ----- ----- -----
Stock Option Plan. | | | | | |
| | | | | |
| | | | | |
----- ----- -----
5 Proposal to approve an 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. Weiser & Co. LLP as ----- ----- -----
independent auditors and public accountants | | | | | |
| | | | | |
| | | | | |
----- ----- -----
</TABLE>
DO NOT PRINT
IN THIS AREA
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.
Class of Stock
Dated 2000
------------------------------------------- -----------------
Signature(s)
Dated 2000
------------------------------------------- -----------------
Signature
Please sign exactly as your name appears and return this Proxy immediately in
the enclosed stamped self-addressed envelope.
