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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only ( as permitted by Rule
14a-6 (e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
OBJECTSOFT CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[ObjectSoft Logo]
April__, 1999
Dear Stockholder of ObjectSoft Corporation:
It is a pleasure to send to you the attached notice and proxy materials with
regard to the Annual Meeting of Stockholders (the "Meeting") of ObjectSoft
Corporation (the "Company").
The matters to be considered at the Meeting include election of directors,
approval of an amendment to the Company's certificate of incorporation, approval
of an amendment to the Company's stock option plan, approval of the issuance of
all securities which the Company would be entitled to issue pursuant to a Series
D Convertible Preferred Stock Subscription Agreement, approval of the issuance
of all securities which the Company would be entitled to issue pursuant to a
Series E Convertible Preferred Stock Subscription Agreement and ratification of
the selection of the Company's independent auditors. The Company's board of
directors unanimously recommends that you vote FOR all of the above-mentioned
proposals.
I hope you will be able to attend the Meeting. Whether or not you plan to attend
the Meeting, however, we request that you sign, date and return the enclosed
Proxy card as soon as possible.
If you should have any questions in regard to any of the above-mentioned
proposals, please do not hesitate to call Dodi Zirkle, of the Continental
Capital and Equity Corp., investor relations counsel for the Company, at (407)
682-2001.
We are grateful for the confidence you have shown in us.
Sincerely yours,
David E.Y. Sarna
Chairman and Secretary
<PAGE>
OBJECTSOFT CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 13, 1999
To the Stockholders of ObjectSoft Corporation:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders of
ObjectSoft Corporation, a Delaware corporation (the "Company"), will be held at
10:00 a.m., local time, on May 13, 1999, at the offices of the Company at
Continental Plaza III, 433 Hackensack Avenue, Hackensack, New Jersey 07601, for
the following purposes:
1. To elect two Class I directors to the Company's
Board of Directors to hold office until the
Company's second Annual Meeting of Stockholders
following their election or until their successors
are duly elected and qualified;
2. To amend the Company's Certificate of Incorporation
to increase the number of shares of Common Stock
which the Company is authorized to issue from
20,000,000 shares to 50,000,000 shares;
3. To approve the issuance of the Company's securities
pursuant to a Subscription Agreement dated as of
December 30, 1998 among the Company, Settondown
Capital International Ltd. and the investors
referred to therein.
4. To approve the issuance of the Company's securities
pursuant to a Subscription Agreement dated as of
March 17, 1999 among the Company, Settondown
Capital International Ltd. and the investors
referred to therein.
5. To approve an amendment to the Company's 1996 Stock
Option Plan (the "1996 Plan"), pursuant to which an
additional 500,000 shares of the Company's Common
Stock are reserved for issuance over the term of
the 1996 Plan and certain other changes to the 1996
Plan are made;
6. To ratify the appointment of Richard A. Eisner &
Company, LLP as the independent auditors of the
Company for the fiscal year ended December 31,
1999; and
7. To transact such other business as may properly
come before the Annual Meeting and any adjournments
or postponements thereof.
The Board of Directors has fixed the close of business on April 7, 1999
as the record date for determining those stockholders entitled to notice of, and
to vote at, the Annual Meeting and any adjournments or postponements thereof. A
complete list of the stockholders entitled to vote will be available for
inspection by any stockholder during the meeting; in addition, the list will be
open for examination by any stockholder, for any purpose germane to the meeting,
during ordinary business hours,
<PAGE>
for a period of at least 10 days prior to the meeting, at the offices of the
Company at Continental Plaza III, 433 Hackensack Avenue, Hackensack, New Jersey
07601.
Whether or not you expect to be present at the meeting, please promptly
mark, sign and date the enclosed proxy and return it in the enclosed
pre-addressed envelope. No postage is required if mailed in the United States.
By Order of the Board of Directors
David E. Y. Sarna
Chairman and Secretary
Hackensack, New Jersey
April__, 1999
THIS IS AN IMPORTANT MEETING AND ALL STOCKHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. THOSE STOCKHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY
URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE.
STOCKHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING,
REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
IMPORTANT
The return of your signed Proxy as promptly as possible will greatly facilitate
arrangements for the Meeting. No postage is required if the Proxy is returned in
the envelope enclosed for your convenience and mailed in the United States.
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<PAGE>
1999 ANNUAL MEETING OF STOCKHOLDERS
OF
OBJECTSOFT CORPORATION
--------------------------
PROXY STATEMENT
--------------------------
The Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of ObjectSoft Corporation, a Delaware corporation (the
"Company"), of proxies from the holders of the Company's common stock, par value
$.0001 per share (the "Common Stock"), for use at the Annual Meeting of
Stockholders of the Company to be held on May 13, 1999, or at any adjournments
or postponements thereof (the "Annual Meeting"), pursuant to the enclosed Notice
of Annual Meeting.
The approximate date that this Proxy Statement and the enclosed proxy
are first being sent to stockholders (the "Stockholders") of the Company is
April__, 1999. Stockholders should review the information provided herein in
conjunction with the Company's Annual Report to Stockholders for the year ended
December 31, 1998 which accompanies this Proxy Statement. The Company's
principal executive offices are located at Continental Plaza III, 433 Hackensack
Avenue, Hackensack, New Jersey 07601, and its telephone number is (201)
343-9100. The Company can also be reached on the Internet at
www.objectsoftcorp.com.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should you so desire. Stockholders have an unconditional right to revoke their
proxy at any time prior to the exercise thereof, either in person at the Annual
Meeting or by filing with the Company's Secretary at the Company's headquarters
a written revocation or duly executed proxy bearing a later date; however, no
such revocation will be effective until written notice of the revocation is
received by the Company at or prior to the Annual Meeting.
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the form of
proxy and any additional solicitation materials furnished to the stockholders.
Copies of solicitation materials will be furnished to brokerage houses,
fiduciaries and custodians holding shares in their names that are beneficially
owned by others so that they may forward this solicitation material to such
beneficial owners. The Company may reimburse such persons for their costs in
forwarding the solicitation materials to such beneficial owners. In addition to
the solicitation of proxies by mail, proxies may be solicited without extra
compensation paid by the Company by directors, officers and employees of the
Company by telephone, facsimile, telegraph or personal interview. The Company
also has engaged the proxy solicitation firm of _________________ to solicit
votes for the Meeting for a fee of approximately $_____, plus reimbursement of
certain expenses.
<PAGE>
PURPOSES OF THE MEETING
At the Annual Meeting, the Stockholders will consider and vote upon the
following matters:
1. The election of two Class I directors to the
Company's Board of Directors to serve until the
Company's second Annual Meeting of Stockholders
following their election or until their successors
are duly elected and qualified;
2. The amendment of the Company's Certificate of
Incorporation to increase the number of shares of
Common Stock which the Company is authorized to
issue from 20,000,000 shares to 50,000,000 shares.
3. The approval of the issuance of the Company's
securities pursuant to a Subscription Agreement
dated as of December 30, 1998 among the Company,
Settondown Capital International Ltd. and the
investors referred to therein.
4. The approval of the issuance of the Company's
securities pursuant to a Subscription Agreement
dated as of March 17, 1999 among the Company,
Settondown Capital International Ltd. and the
investors referred to therein.
5. The approval of an amendment to the Company's 1996
Stock Option Plan (the "1996 Plan"), pursuant to
which an additional 500,000 shares of the Company's
Common Stock are reserved for issuance over the
term of the 1996 Plan and certain other changes to
the 1996 Plan are made;
6. The ratification of the appointment of Richard A.
Eisner & Company, LLP as the independent auditors
of the Company for the fiscal year ending December
31, 1999; and
7. Such other business as may properly come before the
Annual Meeting, including any adjournments or
postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth above)
will be voted in favor of the election of the nominees for director named below,
in favor of the amendments to the Company's Certificate of Incorporation to
increase the Company's authorized number of shares, in favor of the issuance of
securities under the two Subscription Agreements, in favor of amending the
Company's Stock Option Plan and in favor of ratification of the appointment of
auditors. In the event a stockholder specifies a different choice by means of
the enclosed proxy, such shares will be voted in accordance with the
specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on April 7, 1999
as the record date (the "Record Date") for determining Stockholders entitled to
notice of and to vote at the Annual Meeting. As of the Record Date, there were
[6,913,469] shares of Common Stock, par value $.0001 per share, issued and
outstanding. Each share of Common Stock outstanding on the Record Date is
entitled to one vote at the Annual Meeting on each matter submitted to
Stockholders for approval at the Annual Meeting.
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<PAGE>
The attendance, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. A vote of the holders of a majority of the
voting power of the issued and outstanding Common Stock of the Company, present
in person or represented by proxy at the Annual Meeting and entitled to vote at
the Annual Meeting will be required to for the election of Directors, for the
amendments to the Company's Stock Option Plan, for the approval of the issuance
of the securities under the two Subscription Agreements and for the ratification
of the appointment of auditors. A vote of the holders of a majority of the
voting power of the issued and outstanding Common Stock of the Company entitled
to vote at the Annual Meeting will be required for the approval of the
amendments to the Company's Certificate of Incorporation to increase the
Company's authorized number of shares. All votes will be tabulated by the
inspector of election appointed for the Annual Meeting, who will separately
tabulate affirmative and negative votes, abstentions and broker non-votes.
Proxies submitted which contain abstentions or broker non-votes will be
deemed present at the Annual Meeting for purposes of determining the presence of
a quorum. Shares of Common Stock that are voted to abstain with respect to any
matter will be considered cast with respect to that matter and will have the
same effect as negative votes except in regard to the election of directors.
Shares subject to broker non- votes with respect to any matter will not be
considered cast with respect to that matter.
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<PAGE>
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 16, 1999, information with
respect to the beneficial ownership of the Company's Common Stock by (i) each
person known by the Company to beneficially own more than 5% of the outstanding
shares of Common Stock, (ii) each director of the Company, (iii) each Executive
Officer named in the Summary Compensation Table herein titled "Executive
Compensation" and (iv) all directors and executive officers of the Company as a
group.
Amount and
Name and Nature of
Address of Beneficial Percent of
Beneficial Owner(1) Owner(2) Class(3)
--------------------- ------------ ----------
David E. Y. Sarna (4) (5) 694,000 9.86%
George J. Febish (4) (6) 932,500 13.25
Daniel E. Ryan (7) 25,000 *
Michael A. Burak (8) 10,000 *
All officers and directors as 1,661,500 23.08%
a group (4 persons) (3)(9)
- --------------
* Less than 1%.
(1) Unless otherwise indicated, the business address of each of the
officers and directors is c/o ObjectSoft Corporation, Continental
Plaza III, 433 Hackensack Avenue, Hackensack, New Jersey 07601.
(2) Unless otherwise noted, the Company believes that all persons
named have sole voting and investment power with respect to all
shares of Common Stock listed as owned by them.
(3) Each person's percentage interest is determined assuming that all
options, warrants and convertible securities that are held by
such person (but not by anyone else) and which are exercisable or
convertible within 60 days have been exercised for or converted
into Common Stock.
(4) Includes, for each of Messrs. Sarna and Febish, immediately
exercisable warrants to purchase 50,000 shares of Common Stock
and immediately exercisable options to purchase 75,000 shares of
Common Stock granted under the Company's 1996 Plan.
(5) Includes 150,000 shares held by The David E. Y. Sarna Family
Trust ("Sarna Trust"), of which Rachel Sarna, the wife of Mr.
Sarna, and Melvin Weinberg, Esq. are the trustees. The children
of Mr. and Dr. Sarna are the sole beneficiaries. Mr. Sarna
disclaims beneficial ownership of the shares held by the Sarna
Trust. Mr. Melvin Weinberg and Dr. Sarna are trustees of the
Sarna Trust and share dispositive power with respect to the
shares of Common Stock owned by the Sarna Trust, but Dr. Sarna
has the sole voting power with respect to such shares. Mr.
Weinberg disclaims beneficial ownership of the shares held by the
Sarna Trust.
-4-
<PAGE>
(6) Includes 150,000 shares held by The George J. Febish Family Trust
("Febish Trust"), of which Janis Febish, the wife of Mr. Febish,
and Melvin Weinberg, Esq. are the trustees. The children of Mr.
and Mrs. Febish are the sole beneficiaries. Mr. Febish disclaims
beneficial ownership of the shares held by the Febish Trust. Mr.
Weinberg and Mrs. Febish are trustees of the Febish Trust and
share dispositive power with respect to the shares of Common
Stock owned by the Febish Trust, but Mrs. Febish has the sole
voting power with respect to such shares. Mr. Weinberg disclaims
beneficial ownership of the shares of Common Stock held by the
Febish Trust.
(7) Includes immediately exercisable stock options to purchase 25,000
shares of Common Stock granted under the Company's 1996 Plan.
(8) Includes immediately exercisable stock options to purchase 10,000
shares of Common Stock granted under the Company's 1996 Plan.
(9) Includes 185,000 shares of Common Stock which certain of the
current Executive Officers and Directors have a right to acquire
pursuant to presently exercisable stock options and 100,000
shares of Common Stock which certain of the current Executive
Officers and Directors have a right to acquire pursuant to
presently exercisable warrants.
-5-
<PAGE>
PROPOSAL 1 - ELECTION OF DIRECTORS; NOMINEES
The Company's Bylaws provides that the number of directors constituting
the Company's Board of Directors shall be not less than three nor more than
seven as fixed from time to time by the Board of Directors or the Stockholders.
The Board of Directors has fixed at four the number of directors that will
constitute the Board for the ensuing year.
Pursuant to the Company's Certificate of Incorporation and Bylaws, the
Board of Directors is divided into two classes. The term of office of the
current Class I directors expires at the Annual Meeting. The term of office of
Class II directors expires at the Company's 2000 Annual Meetings of
Stockholders. Directors elected to succeed those whose terms expire are elected
to a term of office expiring at the second Annual Meeting of Stockholders
following their election. On November 12, 1998, Gunther L. Less resigned from
his position as a director of the Company. Michael A. Burak was appointed Class
I director by the Board of Directors to fill the vacancy created upon the
resignation of Mr. Less. The current directors of the Company and their
respective Classes and terms of office are as follows:
Term
Director Class Expires At
-------- ----- ----------
Michael A. Burak I 1999 Annual Meeting
George J. Febish II 2000 Annual Meeting
Daniel E. Ryan II 2000 Annual Meeting
David E. Y. Sarna I 1999 Annual Meeting
Accordingly, two Class I directors are to be elected at the Annual
Meeting, for a term expiring at the Company's 2001 Annual Meeting of
Stockholders. All of the Company's current Class I directors, Mr. Sarna and Mr.
Burak, have been nominated to be reelected as Class I directors at the Annual
Meeting.
The Board of Directors has no reason to believe that any of the
nominees will refuse to act or be unable to accept election; however, in the
event that any of the nominees is unable to accept election or if any other
unforeseen contingencies should arise the persons named in the enclosed proxy
will exercise discretionary authority to vote of substitutes.
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<PAGE>
MANAGEMENT
Executive Officers and Directors
The executive officers and directors of the Company are as follows:
Name Age Position
- ----- --- --------
David E. Y. Sarna 1 48 Chairman, Secretary and Director
George J. Febish 1 49 President, Treasurer and Director
Daniel E. Ryan 1 2 3 4 50 Director
Michael A. Burak 2 4 58 Director
1 Member of Executive Committee.
2 Member of Audit Committee.
3 Member of Compensation Committee.
4 Member of Stock Option Plan Committee
Background of Nominees
David E. Y. Sarna together with Mr. Febish founded the Company in 1990.
Mr. Sarna has been the Chairman, Co-Chief Executive Officer, Secretary and a
director of the Company since December 1990. He has also been, since 1994, a
Contributing Editor of Datamation magazine. Prior to co-founding the Company,
Mr. Sarna founded Image Business Systems Corporation, a computer software
development company, in 1988. Prior to founding Image Business Systems
Corporation, Mr. Sarna was formerly Executive Vice-President and a co-founder of
International Systems Services Corp., a computer software company that developed
ISS Three(TM). From 1976 to 1981, Mr. Sarna was employed by Price Waterhouse &
Co., as a management consultant, beginning as a senior consultant and rising to
the position of senior manager. From 1970 to 1976 Mr. Sarna was employed by IBM
Corporation in technical and sales positions. Mr. Sarna began his professional
career at Honeywell in 1968. Mr. Sarna holds a BA degree from Brandeis
University and did graduate work at the Technion - Israel Institute of
Technology. Mr. Sarna is a Certified Systems Professional and a Certified
Computer Programmer. He is the co-author, with Mr. Febish, of PC Magazine
Windows Rapid Application Development (published by Ziff- Davis Press in 1994),
several other books and over 50 articles published in professional magazines.
Mr. Sarna is also the co-inventor of patented software for the recognition of
bar-codes.
Michael A. Burak has been a director since February 1999. Mr. Burak is
President of the firm of Michael A. Burak, Inc. and has been actively engaged in
real estate operations for over 30 years as an owner, a property manager and
broker dealing with sales and leasing. Mr. Burak received a B.S. in Real Estate
from New York University's School of Commerce and M.S. from Urban Planning
division of the Graduate School of Architecture at Columbia University. As a
William Kinne Fellow, he spent 1964 and 1965 studying Urban problems in Europe.
He is past president of the Metropolitan Real Estate Square Club, and currently,
an active member of the Associated Owners and Builders of Greater New York, the
National Realty Club and the National Association of Home Builders.
Background of Continuing Directors
George J. Febish together with Mr. Sarna founded the Company in 1990.
Mr. Febish has been the President, Co-Chief Executive Officer, Treasurer and a
director of the Company since December 1990.
-7-
<PAGE>
He has also been, since 1994, a Contributing Editor of Datamation magazine.
Prior to co-founding the Company, Mr. Febish was Executive Vice President and
Chief Operating Officer of Image Business Systems Corporation, a computer
software development company, from 1988 to 1990. Prior to joining Image Business
Systems Corporation, Mr. Febish was the Director of Marketing at ISS, a computer
software company that developed ISS Three(TM). Prior to joining ISS, Mr. Febish
was the Eastern Regional Sales Manager for Bool & Babbage. In 1970, Mr. Febish
began his professional career with New York Life Insurance Company. Mr. Febish
holds a BS degree from Seton Hall University. He is the co-author, with Mr.
Sarna, of PC Magazine Windows Rapid Application Development and the author of
numerous published articles.
Daniel E. Ryan has been a director since 1991. Mr. Ryan has been
employed by New York Life Insurance Company since July, 1965 where, since 1981,
he has held the title of Corporate Vice President. Mr. Ryan is the head of the
Service Center Development of New York Life Insurance Company's Information
Systems organization. Mr. Ryan holds an MBA in Computer Science from Baruch
College and a BS/BA in Industrial Management from Manhattan College. Mr. Ryan is
a Certified Systems Professional.
The Company's officers are elected annually and serve at the discretion
of the Board of Directors for one year subject to any rights provided in
employment agreements. Certain employment agreements are described below under
"Executive Compensation - Employment Agreements".
Meetings and Committees of the Board of Directors
During the fiscal year ended December 31, 1998, the Board of
Directors held 1 meeting and took certain actions on 9 other occasions by
written consent. During such year, no director attended fewer than 75 percent of
the aggregate of (i) the total number of meetings of the Board of Directors held
during the period he served on the Board, and (ii) the total number of meetings
of committees of the Board of Directors held during the period he served on such
committees.
The Stock Option Committee was composed of Mr. Daniel E. Ryan and Mr.
Gunther L. Less. On February 11, 1999, Mr. Michael A. Burak was appointed a
member of the Committee to fill the vacancy created by the resignation of Mr.
Less. The function of this committee is to administer the Company's 1996 Plan.
The Stock Option Committee met once during fiscal 1998.
The Compensation Committee, composed of Mr. Daniel E. Ryan, has
authority over the salaries, bonuses and other compensation arrangements of the
executive officers of the Company, and it also has the authority to examine,
administer and make recommendations to the Board of Directors with respect to
benefit plans and arrangements (other than the stock option plans which are
administered by the Stock Option Committee) of the Company. The Compensation
Committee met once during fiscal 1998.
The Audit Committee is currently composed of Daniel E. Ryan and Michael
A. Burak. On February 19, 1998 Mr. Gunther L. Less was appointed as a member of
the Audit Committee to fill a vacancy on the committee. Mr. Less resigned as a
member of the Board of Directors and of the Audit Committee on November 12, 1998
and on February 11, 1999 Mr. Michael A. Burak was appointed in his stead. The
Audit Committee's function is to nominate independent auditors, subject to
approval by the Board of Directors, and to examine and consider matters related
to the audit of the Company's accounts,
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<PAGE>
the financial affairs and accounts of the Company, the scope of the independent
auditors' engagement and their compensation, the effect on the Company's
financial statements of any proposed changes in generally accepted accounting
principles, disagreements, if any, between the Company's independent auditors
and management, and matters of concern to the independent auditors resulting
from the audit, including the results of the independent auditors' review of
internal accounting controls. The Audit Committee met once during fiscal 1998.
The Board of Directors has no standing nominating committee.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "Act"), as
amended, requires the Company's Executive Officers and Directors, and any
persons who own more than 10% of any class of the Company's equity securities
which are registered under the Act to file certain reports relating to their
ownership of such securities and changes in such ownership with the Securities
and Exchange Commission and NASDAQ, and to furnish the Company with copies of
such reports. To the Company's knowledge, all Section 16(a) filing requirements
applicable to such Officers, Directors and owners of over 10% of the Company's
equity securities registered under the Act, during the year ended December 31,
1998, have been satisfied.
1996 Stock Option Plan
The Company's 1996 Stock Option Plan (the "1996 Plan") was ratified and
adopted by the Board of Directors on July 15, 1996 and approved by the
Stockholders at a Special Meeting on September 16, 1996. The 1996 Plan was later
amended on March 3, 1998 by the Board of Directors and the amendment was
approved by the Stockholders on July 9, 1998. The purpose of the 1996 Plan is to
provide an incentive to key employees (including directors and officers who are
key employees) and to consultants and advisors and directors who are not
employees of the Company and to offer an additional inducement in obtaining the
services of such persons.
The 1996 Plan is administered by a committee of the Board of Directors,
the Stock Option Plan Committee (the "Committee") consisting of not less than
two Directors, each of whom must be a non-employee Director within the meaning
of regulations promulgated by the Securities and Exchange Commission. The
Committee has the authority under the 1996 Plan to determine the terms of
options granted under the 1996 Plan, including, among other things, the
individuals who shall receive options, the times when they shall receive them,
whether an incentive stock option and/or non-qualified option shall be granted,
the number of shares to be subject to each option and the date or dates each
option shall become exercisable.
No Incentive Stock Option (as the term is defined in the 1996 Plan) may
be granted under the 1996 Plan after March 15, 2006. The Board of Directors,
without further approval of the Stockholders, may amend, suspend or terminate
the 1996 Plan, in whole or in part, at any time and from time to time in such
respects as it deems advisable (including without limitation to conform with
applicable law or the regulations or rulings thereunder), but may not without
the approval of the Stockholders make any alteration or amendment thereof which
would (i) increase the maximum number of shares of Common Stock for which
options may be granted under the 1996 Plan (except for anti-dilution
adjustments) or (ii) materially increase the benefits to participants under the
1996 Plan or (iii) change the eligibility
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<PAGE>
requirements for individuals entitled to receive options under the 1996 Plan. No
termination, suspension or amendment of the 1996 Plan shall, without the consent
of the holder of an existing option affected thereby, adversely affect the
option holders rights under such option. The power of the Committee to construe
and administer any options granted under the 1996 Plan prior to the termination
or suspension of the 1996 Plan nevertheless shall continue after such
termination or during such suspension.
The 1996 Stock Option Plan is proposed to be amended under
Proposal 5 to increase the number of shares of Common Stock for which options
may be granted under the 1996 Plan from 750,000 to 1,250,000 shares, to increase
the number of shares which may be granted to any individual during any calendar
year from 50,000 to 250,000 and to introduce certain other changes.
Non-Employee Directors' Compensation
Non-employee directors are reimbursed for out-of-pocket expenses
incurred in connection with attendance at meetings or other Company business and
may be granted stock options at the discretion of the Stock Option Committee of
the Board of Directors.
During the fiscal year ended December 1998, Daniel E. Ryan and
Gunther L. Less, non-employee directors of the Company, each received an option
to purchase 10,000 shares of Common Stock at a purchase price of $1.45.
EXECUTIVE COMPENSATION
The following table sets forth information concerning annual and
long-term compensation, paid or accrued, for the Chief Executive Officers and
for each other executive officer of the Company whose compensation exceeded
$100,000 in fiscal 1998 (the "Named Executive Officers") for services in all
capacities to the Company during the last three fiscal years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------- -------------------------
Other Awards(1) Payouts
--------- -------
Name and Annual Securities All
Principal Compen- Underlying Other
Position Year Salary(2) sation (3) Options/SARs Compensation
- -------- ---- ------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
David E.Y. Sarna, Chairman, 1998 $215,000 -- 50,000 --
Secretary and Co-Chief 1997 $208,000 -- 50,000 --
Executive Officer 1996 $208,000 -- 50,000 --
George J. Febish, President, 1998 $215,000 -- 50,000 --
Treasurer and Co-Chief 1997 $208,000 -- 50,000 --
Executive Officer 1996 $208,000 -- 50,000 --
- ----------------
</TABLE>
(1) None of the Named Executive Officers received any Restricted Stock
Awards or LTIP Payouts in 1996, 1997 or 1998.
-10-
<PAGE>
(2) Does not include a sum of $195,844 of compensation which was
accrued as of December 31, 1995 and paid in 1996. Such sum was
paid as follows: $100,000 and $50,000 paid to each of Messrs.
Sarna and Febish from the proceeds of a bridge loan offering of
notes and warrants completed in June 1996 and an offering of
units of Common Stock and warrants completed in August 1996,
respectively, and the balance paid from operating revenues.
(3) As to each individual named, the aggregate amounts of perquisites
and personal benefits not included in the Summary Compensation
Table did not exceed the lesser of either $50,000 or 10% of the
total annual salary and bonus reported for the Named Executive
Officer.
Stock Options
The following table sets forth information as to all grants of
stock options to the Named Executive Officers during fiscal 1998.
OPTION GRANTS IN 1998(1)
Individual Grants (1)
--------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise Expiration
Name Granted in 1998 Price Date (2)
- ---- ------- ------- ----- ----------
David E.Y. Sarna 50,000 23.25% $1.45 July 8, 2003
George J. Febish 50,000 23.25% $1.45 July 8, 2003
- -----------------------
(1) No stock appreciation rights ("SARs") were granted to any of the
Named Executive Officers during fiscal 1998.
(2) The options vested as to fifty percent of the shares on July 9,
1998, the grant date, and fifty percent will vest on July 9,
1999.
There were no stock options or SAR exercises by Named Executive
Officers during fiscal 1998 and no SARs were outstanding at December 31, 1998.
Option Repricing
The following table sets forth information with respect to the
participation by the Company's current and former executive officers in a
repricing of options implemented by the Company during fiscal year 1998. Under
the repricing, all outstanding employee stock options (and no non-employee
director options) previously granted under the 1996 Plan were repriced from
$3.50 to $1.45 and the vesting periods were modified as follows:
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<PAGE>
<TABLE>
<CAPTION>
Length of
Original
Number of Option Term
Securities Remaining at
Underlying Market Price of Exercise Price Date of
Options Stock at Time at Time of New Repricing or
Repriced or of Repricing or Repricing or Exercise Amendment
Date Amended (#)(1) Amendment ($) Amendment ($) Price ($) (Years)
----- -------------- ------------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
David E.Y. Sarna, Chairman,
Secretary and Co-Chief
Executive Officer 7/9/98 50,000 1.45 3.50 1.45 3
George J. Febish, President, 7/9/98 50,000 1.45 3.50 1.45 3
Treasurer and Co-Chief
Executive Officer
</TABLE>
(1) The vesting period for these repriced options granted to Mr.
Sarna and Mr. Febish was extended and revised so that options for
half of the shares remained vested as of July 9, 1998 and options
for half of the shares will vest on July 9, 1999.
Compensation Committee Report on Option Repricing
The 1996 Plan was established as an employment incentive to
retain the persons necessary for the development and financial success of the
Company. As a result of a decrease in the market price of the Company's Common
Stock and recognizing that previously granted stock options had lost much of
their value in motivating employees, including the Named Executive Officers, to
remain with the Company and share in its overall financial goals, the Stock
Option Committee of the Board of Directors, in July 1998, voted to approve the
repricing of 170,000 options, including 100,000 options granted to the executive
officers named above. Such repricing was effected by amending the exercise price
in the option contracts of the employees to an exercise price of $1.45 per
share, which was the fair market value of the Common Stock on the date of
repricing. In exchange, each employee who accepted the repricing amendment
agreed to a revised vesting schedule. By repricing the existing options granted
under the 1996 Plan, the Company intended to reward key employees, including the
Named Executive Officers, holding such options for their contributions to the
Company.
Daniel E. Ryan
Member of the Compensation Committee
Employment Agreements
The Company entered into an employment agreement with each of
David E. Y. Sarna and George J. Febish, effective as of July 1, 1996, which
expires on December 31, 2001. The employment agreements each provide for a
current annual base salary of $215,000. Each of the employment agreements also
provides for a bonus of 5% per annum of the Company's Earnings Before
Depreciation, Interest, Taxes and Amortization. In addition, on an annual basis,
the Board of Directors will consider paying an additional bonus to each of
Messrs. Sarna and Febish that is based upon the increase in the Company's gross
revenues, taking into account any increase in the Company's expenses. The annual
base salary under the current agreements may be increased at the discretion of
the Board of Directors. The agreements provide for (i) a severance payment of
the base compensation and bonus of the prior full fiscal year and payment of all
medical, health, disability and insurance benefits then payable by the Company
for the longer of (a) the
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<PAGE>
remainder of the term of the employment agreement or (b) 12 months, as well as
(ii) the base compensation and bonus accrued to the date of termination, upon
the occurrence of (x) termination by the Company without cause, (y) termination
by the employee for good reason or (z) a change in control of the Company, if
the employee resigns after the occurrence of the such change in control. Each of
the employment agreements limit the severance payments to an amount that is less
than the amount that would cause an excise tax or loss of deduction under the
rules relating to golden parachutes under the Internal Revenue Code.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Loan to Officer
On January 2, 1997 the Company extended to Mr. Sarna a loan in
the amount of $440,000 (the "Loan "). The Loan was approved by the Board of the
Directors of the Company, with Mr. Sarna abstaining. Subsequently, the Board of
Directors, with Mr. Sarna abstaining, unanimously agreed to extend the maturity
date of the Loan from November 30, 1997 to May 31, 1999. Mr. Sarna utilized the
funds for a block purchase of 80,000 shares of the Company's Common Stock from
the market maker, who was also the underwriter of the Company's Public Offering,
in an open market transaction. In March 1998, Mr. Sarna executed a Security
Agreement in favor of the Company in which he pledged as collateral for the Loan
certain contract rights to receive an option to acquire certain marketable
securities.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE ELECTION ON THE NOMINEES LISTED ABOVE.
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<PAGE>
PROPOSAL 2 - APPROVAL OF AN AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED COMMON STOCK
On March 15, 1999, the Board adopted a resolution by unanimous written
consent approving a proposal to amend Article Fourth of the Company's
Certificate of Incorporation (the "Certificate") to increase the number of
shares of Common Stock which the Company is authorized to issue from 20,000,000
shares to 50,000,000 shares. The Board determined that such amendment is
advisable and directed that the proposed amendment be considered at the Meeting.
Purposes and Effects of Increasing the Number of Authorized Shares of Common
Stock
The proposed amendment would increase the number of shares of Common
Stock which the Company is authorized to issue from 20,000,000 shares to
50,000,000 shares. The additional 30,000,000 shares will be a part of the
existing Common Stock.
Reference is made to the proposed amendment to Article Fourth of the
Company's Certificate which is substantially set forth in the form listed under
the heading "Proposed New Article Fourth to the Company's Certificate of
Incorporation" in Exhibit A to this Proxy Statement.
The Company is presently authorized to issue 20,000,000 shares of
Common Stock. As of March 16, 1999, there were 6,912,469 shares of Common Stock
outstanding and approximately 4,300,000 additional shares of Common Stock
reserved for issuance upon exercise of outstanding warrants and options granted
pursuant to the Company's stock options plan. Based on the market prices of the
Common Stock as of and for the periods preceding March __, 1999 and pursuant to
the formulae of conversion in the Company's Series D and Series E Certificates
of Designation, approximately _____additional shares of the Company's Common
Stock may be issued upon conversion of the Series D Convertible Preferred Stock
and Series E Convertible Preferred Stock and a greater number of shares may be
issued if the market price of the Common Stock were to decline.
The additional 30,000,000 shares of Common Stock to be authorized would
provide needed flexibility for future financial and capital requirements so that
proper advantage could be taken of favorable market conditions and possible
business acquisitions. On February 19, 1999, the Company entered into a letter
of intent with a New York Stock Exchange member firm for a proposed underwritten
secondary public offering of up to $20 million of Common Stock. The proposed
public offering would be made only by means of a prospectus. In addition, in the
event the market price of the Common Stock decreases from present levels, the
additional shares would also be available for issuance upon conversion of the
Series D Convertible Preferred Stock and the Series E Convertible Preferred
Stock. Additional shares of Common Stock would also be available to the Company
for stock dividends or splits should the Board of Directors decide that it would
be desirable, in light of market conditions then prevailing, to broaden the
public ownership of, and to enhance the market for, the shares of the Company's
Common Stock. The additional shares would be available for issuance for these
and other purposes, subject to the laws of Delaware and Nasdaq rules, at the
discretion of the Company's Board of Directors without, in most cases, the
delays and expenses attendant to obtain further stockholder approval.
Although the Company's Board of Directors does not consider the
proposed amendment to be an anti-takeover proposal, the authority possessed by
the Board to issue Common Stock could also potentially
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<PAGE>
be used to discourage attempts by others to obtain control of the Company
through merger, tender offer, proxy contest or otherwise by making such attempts
more difficult or costly to achieve. However, the issuance of Common Stock may
adversely effect the market price of the Common Stock and may result in dilution
of the voting power of the holders of Common Stock.
If the proposed amendment is adopted, there will be approximately
[________] authorized shares of Common Stock that will not be outstanding or
reserved for issuance.
Vote Required
In accordance with the Delaware General Corporation Law and the
Company's Certificate of Incorporation, the affirmative vote of a majority of
the outstanding shares of Common Stock entitled to vote thereon is required to
adopt this proposed amendment. As a result, any shares not voted (whether by
abstention, broker non-vote or otherwise) will have the same effect as a vote
against the proposal.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THIS PROPOSAL.
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<PAGE>
PROPOSAL 3 - TO APPROVE THE ISSUANCE OF THE COMPANY'S SECURITIES
PURSUANT TO A SUBSCRIPTION AGREEMENT DATED DECEMBER
30, 1998
General
On December 30, 1998, the Company entered into an Amended and Restated
6% Series D Convertible Preferred Stock Subscription Agreement, formerly known
as the Private Equity Line of Credit Agreement (the "Series D Agreement"), with
Settondown Capital International, Ltd. as placement agent and certain investors,
contemplating a potential funding of up to $ 2,000,000 of 6% Series D
Convertible Preferred Stock (the "Series D Shares") in three separate tranches.
On December 31, 1998, the Investors purchased the first tranche of 10,000
Preferred Shares and Warrants to purchase an aggregate of 50,000 shares of
Common Stock for an aggregate purchase price of $1,000,000. The Company filed a
registration statement under the Securities Act of 1933, as amended, registering
for resale the shares of Common Stock issuable in connection with the Agreement.
The obligation of the company and the investors to consummate the
second and third tranches in an aggregate principal amount of $1,000,000 was
later terminated in connection with a later funding described in proposal 4
herein.
In connection with this funding the Company issued to the placement
agent 500 Series D Shares, a Warrant to purchase 40,000 shares of Common Stock
and 2% of the investment amount in cash, as placement agent fees.
Each Series D Share may be converted into shares of Common Stock at a
conversion rate determined by dividing $100, the purchase price per Series D
Share, by the Conversion Price, which is the lesser of (a) 0.80 times the
average closing bid price of the Common Stock for the five trading days ending
on the day prior to conversion, or (b) $2.03.
The investors have agreed to vote all shares of Common Stock which may
be beneficially held by them in favor of all nominees to the Company's board of
directors who are nominated by the then current management.
The Series D Shares are convertible into shares of Common Stock as more
fully described below; provided, however, that the number of shares of Common
Stock issuable to each holder at any time upon conversion will not exceed the
number of shares which, when aggregated with all other shares of Common Stock
then owned of record by such holder, would result in such holder owning, in
aggregate, more than 9.99% of all of the Company's outstanding Common Stock on
the date of conversion.
The Company will not be able, under the Series D Agreement, to issue an
amount of shares of Common Stock exceeding 19.99 percent or more of the
outstanding Common Stock of the Company unless this proposal is approved by the
Company's stockholders or unless a waiver is obtained from the Nasdaq Stock
Market. See below "Reason for Stockholder Approval". In the event that approval
from stockholders or a waiver from the Nasdaq Stock Market are not obtained, the
Company is only obligated under the Series D Agreement to convert the Series D
Shares into Common Stock at the applicable below market conversion price in the
applicable pro rata amounts so that no more than 19.99 percent of the Company's
Common Stock then outstanding will be issued.
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<PAGE>
The investors will have the option to convert or exercise the remainder
of their securities in excess of 20% at any time at market.
Reason for Stockholder Approval
Under the rules of the National Association of Securities
Dealers, issuers whose securities are listed on the Nasdaq SmallCap Market, the
exchange on which the Company's Common Stock is listed, are required to obtain
stockholder approval, prior to the issuance of securities, in the following
limited circumstances, in connection with a transaction other than a public
offering involving: (i) the sale or issuance by the issuer of common stock (or
securities convertible into or exercisable for common stock) at a price less
than the greater of book or market value which together with sales by officers,
directors or substantial stockholders of the company equals 20 percent or more
of common stock or 20 percent or more of the voting power outstanding before the
issuance; or (ii) the sale or issuance by the Company of common stock (or
securities convertible into or exercisable to purchase common stock) equal to 20
percent or more of the common stock or 20 percent or more of the voting power
outstanding before the issuance for less than the greater of book or market
value of the stock.
Based on the closing bid price of the Common Stock, on March __,
1999, of $________, if all Series D Shares were converted into Common Stock, the
Common Stock issuable would be approximately ___% of the shares outstanding. In
addition, if the closing bid price of the Common Stock were to decrease
significantly, the exercise of the conversion of the Series D Shares could
conceivably effect a change in control of the Company.
Therefore, the Board of Directors seeks stockholder approval of
the proposed issuances of the Securities which, if issued to full extent, could
potentially involve the Company issuing 20% or more of the shares of Common
Stock outstanding. Stockholders are being asked to approve only the proposed
issuances and are not being asked to approve any other aspect of the funding.
Vote Required
A vote of the holders of a majority of the voting power of the
issued and outstanding Common Stock of the Company, present in person or
represented by proxy at the Annual Meeting and entitled to vote at the Annual
Meeting, is required to approve the issuance of the securities pursuant to the
Series D Agreement.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS
PROPOSAL.
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<PAGE>
PROPOSAL 4 - TO APPROVE THE ISSUANCE OF THE COMPANY'S SECURITIES
PURSUANT TO A SUBSCRIPTION AGREEMENT DATED MARCH 17,
1999
On March 17, 1999, the Company closed a private financing under a
6% Series E Convertible Preferred Stock Subscription Agreement dated as of March
17, 1999 (the "Series E Agreement") with Settondown Capital International, Ltd.
as placement agent and certain investors pursuant to which the Company sold, and
the Investors purchased, 20,000 shares of 6% Series E Convertible Preferred
Stock (the "Series E Shares") and Warrants to purchase an aggregate of 50,000
shares of the Company's Common Stock for an aggregate purchase price of
$2,000,000. The Company agreed to promptly file a registration statement under
the Securities Act of 1933, as amended, registering for resale shares of Common
Stock issuable in connection with the Agreement.
Pursuant to the Series E Agreement, the Company issued to the
placement agent as placement agent fees (i) 1,000 Series E Shares, (ii) a
Warrant to purchase 50,000 shares of Common Stock and (iii) three percent of the
investment amount in cash ($60,000).
The Series E Shares are convertible into shares of Common Stock
as more fully described below; provided, however, that the number of shares of
Common Stock issuable to each holder at any time upon conversion will not exceed
the number of shares which, when aggregated with all other shares of Common
Stock then owned of record by such holder, would result in such holder owning,
in aggregate, more than 9.99% of all of the Company's outstanding Common Stock
on the date of conversion.
Each Series E Share may be converted into shares of Common Stock,
beginning on the earlier of (i) sixty days following the closing of the
transaction or (ii) the effective date of the registration statement covering
the resale of the Common Stock, at a conversion rate determined by dividing
$100, the purchase price per share of Series E Shares, by the "Conversion
Price," which is the lesser of (x) the closing bid price for the Common Stock on
the day immediately preceding the closing date for the transaction or (y) the
average of (A) the average of the three lowest closing bid prices of the Common
Stock during the 22 day trading period immediately preceding the conversion date
(the "Lookback Period") and (B) the converting holder's choice of five
consecutive closing bid prices of the Common during the Lookback Period. (The
Lookback Period is increased by two trading days on the last trading day of each
month, starting on the first day of the fourth month from the closing, until the
Lookback Period equals a maximum of 30 trading days.)
The investors have agreed to vote all shares of Common Stock
which may be beneficially held by them in favor of all nominees to the Company's
board of directors who are nominated by the then current management.
The Company will not be able, under the Series E Agreement, to
issue an amount of shares of Common Stock exceeding 19.99 percent or more of the
outstanding Common Stock of the Company unless this proposal is approved by the
Company's stockholders or unless a waiver is obtained from the Nasdaq Stock
Market. See below "Reason for Stockholder Approval". In the event that approval
from stockholders or a waiver from the Nasdaq Stock Market are not obtained, the
Company is only obligated under the Series E Agreement to convert the Series E
Shares into Common Stock at the applicable below market conversion price in the
applicable pro rata amounts so that no more than 19.99 percent of the Company's
Common Stock then outstanding will be issued.
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<PAGE>
The investors will have the option to convert or exercise the
remainder of their securities in excess of 20% at any time at market.
Reason for Stockholder Approval
Under the rules of the National Association of Securities
Dealers, issuers whose securities are listed on the Nasdaq SmallCap Market, the
exchange on which the Company's Common Stock is listed, are required to obtain
stockholder approval, prior to the issuance of securities, in the following
limited circumstances, in connection with a transaction other than a public
offering involving: (i) the sale or issuance by the issuer of common stock (or
securities convertible into or exercisable for common stock) at a price less
than the greater of book or market value which together with sales by officers,
directors or substantial stockholders of the company equals 20 percent or more
of common stock or 20 percent or more of the voting power outstanding before the
issuance; or (ii) the sale or issuance by the Company of common stock (or
securities convertible into or exercisable to purchase common stock) equal to 20
percent or more of the common stock or 20 percent or more of the voting power
outstanding before the issuance for less than the greater of book or market
value of the stock.
Based on the closing bid price of the Common Stock during the
Lookback Period ending April __, 1999, if all Series E Shares were converted
into Common Stock, the Common Stock issuable would be approximately ___% of the
shares outstanding. In addition, if the closing bid price of the Common Stock
were to decrease significantly, the exercise of the conversion of the Series E
Shares could conceivably effect a change in control of the Company.
Therefore, the Board of Directors seeks Stockholder approval of
the proposed issuances of the Securities which, if issued to full extent, could
potentially involve the Company issuing 20% or more of the shares of Common
Stock outstanding. Stockholders are being asked to approve only the proposed
issuances and are not being asked to approve any other aspect of the funding.
Vote Required
A vote of the holders of a majority of the voting power of the
issued and outstanding Common Stock of the Company, present in person or
represented by proxy at the Annual Meeting and entitled to vote at the Annual
Meeting, is required to approve the issuance of the securities pursuant to the
Series E Agreement.
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<PAGE>
PROPOSAL 5 - AMENDMENT TO THE COMPANY'S STOCK OPTION PLAN
The Company's 1996 Plan was adopted by the Board of Directors on
July 15, 1996 and was approved by the Stockholders on September 16, 1996. The
1996 Plan was later amended on March 3, 1998 by the Board of Directors and the
amendment was approved by the Stockholders on July 9, 1998. The number of shares
available under the 1996 Plan is 750,000. As of March 23, 1999, 16,033 options
had been exercised and options to purchase 598,134 shares held by 18 optionees
were outstanding at a weighted average per share exercise price of $1.90.
Proposed Amendments
On March 15, 1999 the Board of Directors unanimously adopted and
recommended for submission to the Stockholders for their approval at the Annual
Meeting, the amendments to the 1996 Plan (the "Plan Amendments") to:
(i) increase the number of shares of Common Stock for which
options may be granted under the 1996 Plan from 750,000 to 1,250,000. The Board
of Directors believes that, although the Company has not experienced difficulty
in attracting and retaining personnel, the 1996 Plan has been and will be
instrumental in attracting and retaining employees, officers and consultants of
outstanding ability and that this objective will be furthered by providing
additional shares for future option grants; and
(ii) amend section 4 of the 1996 Plan to increase the number of
shares which may be granted to any individual during any calendar year under the
Plan from 50,000 to 250,000. The Board of Directors believes that by amending
this provision, the Company will have greater flexibility in granting options to
employees and non-employee directors which will facilitate its attracting and
retaining qualified employees and non-employee directors. In order for the
compensation granted under the 1996 Plan to constitute "qualified
performance-based compensation" for purposes of Section 162 (m) of the Internal
Revenue Code of 1986, as amended, the Plan must specify a maximum number of
shares with respect to which options may be granted during a specified period to
any one employee. The purpose of raising the cap is to provide the Company with
greater flexibility in implementing the 1999 Plan while complying with the
requirements of the Code.
(iii) amend section 8 of the 1996 Plan to allow the Company to
include terms in the option contracts it enters into with consultants and
non-employee directors which govern the effect of termination of the
relationship of such consultants and non-employee directors with the Company on
the expiration of options granted to them. The Company currently has no plans to
issue such options to consultants and non-employee directors; however, the Board
of Directors believes that by amending this provision, the Company will have the
flexibility it needs when granting such options, to reach arrangements with such
consultants and non-employee directors which, in each specific case, will be the
most beneficial to the Company.
(iv) amend section 12 of the 1996 Plan to provide for greater
flexibility in the treatment of the Company's outstanding options through
contractual provisions, in cases of dissolution, liquidation, mergers,
consolidations or other similar transactions (including certain transactions in
which the Company is the surviving corporation ). This amendment provides that
provisions may be made either in the terms of the particular transaction or in
the terms of the particular option contract with regard to the treatment of
outstanding options in the event of any such transactions. If no such provisions
are made as to any options,
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<PAGE>
the options will terminate upon the earliest of any such transactions. The
Company currently has no plans for any such transactions. The Company believes
that this amendment is needed to provide it with the flexibility to implement
the Plan in a manner most beneficial to the Company. In addition, this amendment
better implements the original intention of the applicable provisions in the
Plan, i.e. the termination of outstanding options in the event of certain
corporate transactions subject, however, to the Company's discretion to make
alternative contractual arrangements.
Types of Grants and Awards
The 1996 Plan permits the grant of options which may either be
"incentive stock options" ("ISOs"), within the meaning of Section 422 of the
Code, or "non-qualified stock options" ("NQSOs"), which do not meet the
requirements of Section 422 of the Code.
Eligibility
All employees (including officers) and directors of the Company
or its subsidiaries, consultants and advisors to, the Company or its
subsidiaries are eligible to be granted options under the 1996 Plan. The Company
currently has approximately 19 employees, 16 of which are full-time employees.
Stock Subject to the 1996 Plan
The total number of shares of Common Stock for which options may
be granted under the 1996 Plan may not exceed 750,000, subject to possible
adjustment in the future. One of the proposed amendments to the 1996 Plan is to
increase the number of shares for which options may be granted under the 1996
Plan to 1,250,000. Any shares of Common Stock subject to any option which for
any reason expires, is canceled or is terminated unexercised or which ceases for
any reason to be exercised will again become available for granting of options
under the 1996 Plan.
Administration
The 1996 Plan is administered by a committee of the Board of
Directors of not less than two Directors, each of whom must be a "Non-Employee
Director" within the meaning of regulations promulgated by the Securities and
Exchange Commission. The Board of Directors has designated the Stock Option Plan
Committee of the Board consisting of Messrs. Burak and Ryan to administer the
1996 Plan. The Stock Option Plan Committee has the authority under the 1996 Plan
to determine the terms of options granted under the 1996 Plan, including, among
other things, the individuals who shall receive options, the times when they
shall receive them, whether an incentive stock option and/or non-qualified
option shall be granted, the number of shares to be subject to each option, and
the date or dates each option shall become exercisable.
Exercise Price
The exercise price of options granted under the 1996 Plan is
determined by the Stock Option Plan Committee, but in the case of an ISO may not
be less than 100% of the fair market value of the Common Stock on the date the
ISO is granted (110% of such fair market value in the case of ISOs granted to an
optionee who owns or is deemed to own stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company (a "Ten
Percent Stockholder")). The exercise price of the
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shares of Common Stock under each Non-Employee Director Option shall be equal to
the fair market value of the Common Stock subject to such option on the date of
grant. The exercise price is payable at the time of exercise of the option in
cash or by certified check, previously acquired shares of Common Stock (valued
at their fair market value on the date of exercise of the option) or a
combination thereof, in the discretion of the Stock Option Plan Committee. The
Stock Option Plan Committee may, in its discretion, permit payment of the
exercise price of options by delivery of properly executed exercise notices,
together with a copy of irrevocable instructions from the optionee to a broker
acceptable to the Stock Option Plan Committee to deliver promptly to the Company
the amount of sale or loan proceeds to pay such exercise. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.
Terms and Conditions
As to options granted to employees and consultants:
i. Options granted to employees and consultants
may be granted for such terms as is
established by the Stock Option Committee,
provided that, the term of each ISO shall be
for a period not exceeding ten years from the
date of the grant, and further provided that
ISOs granted to a Ten Percent Stockholder
shall be for a period not exceeding five years
from the date of grant.
ii. If an employee or consultant optionee's
relationship with the Company is terminated
for any reason other than "disability" or
death, the option may be exercised at any time
within three months thereafter to the extent
exercisable on the date of termination.
However, in the event such relationship is
terminated either (a) for cause, or (b)
without the consent of the Company, such
option shall terminate immediately.
iii. In the event of the death of an optionee while
an employee of, or consultant or advisor to
the Company, within three months after the
termination of such relationship (unless such
termination was for cause or without the
consent of the Company) or within one year
following the termination of such relationship
by reason of the optionee's "disability", the
option may be exercised, to the extent
exercisable on the date of his death, by the
optionee's legal representatives at any time
within one year after death, but not
thereafter and in no event after the date the
option would otherwise have expired.
iv. An option may not be transferred other than by
will or the laws of descent and distribution
and may be exercised during the lifetime of
the optionee only by the optionee or by the
optionee's legal representatives.
v. The foregoing notwithstanding, in no case may
options be exercised later than the expiration
date specified in the grant.
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As to options granted to Non-Employee Directors:
i. The Non-Employee Director Option shall not be
affected by the optionee ceasing to be a
director of the Company or becoming an
employee of the Company, any of its
Subsidiaries or a Parent; provided, however,
that if he is terminated for cause, such
option shall terminate immediately.
ii. The term of a Non-Employee Director Option
shall not be affected by the death or
disability of the optionee. If an optionee
holding a Non-Employee Director Option dies
during the term of such option, the option may
be exercised at any time during its term by
his/her legal representative.
iii. An option may not be transferred other than by
will or the laws of descent and distribution
and may be exercised during a holder's
lifetime only by the holder or by his/her or
legal representative. Except to the extent
provided above, options may not be assigned,
transferred, pledged, hypothecated or disposed
of in any way (whether by operation of law or
otherwise) and shall not be subject to
execution, attachment or similar process, and
any such attempted assignment, transfer,
pledge, hypothecation or disposition shall be
null and void ab initio and of no force or
effect.
iv. The foregoing notwithstanding, in no case may
options be exercised later than the expiration
date specified in the grant.
Vote Required
A vote of the holders of a majority of the voting power of the
issued and outstanding Common Stock of the Company, present in person or
represented by proxy at the Annual Meeting and entitled to vote at the Annual
Meeting, is required to approve the amendments to the 1996 Plan.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
-23-
<PAGE>
PROPOSAL 6 - RATIFICATION AND APPROVAL OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors has appointed Richard A. Eisner & Company,
LLP, as the independent auditors of the Company for the fiscal year ending
December 31, 1999, subject to ratification by the Stockholders. The firm of
Richard A. Eisner & Company, LLP, has audited the books of the Company since
1991. A representative of Richard A. Eisner & Company, LLP, is expected to be
present at the Annual Meeting to respond to questions from Stockholders and to
make a statement if such representative desires to do so.
Vote Required
A vote of the holders of a majority of the voting power of the
issued and outstanding Common Stock of the Company, present in person or
represented by proxy at the Annual Meeting and entitled to vote at the Annual
Meeting, is required to ratify the appointment of Richard A. Eisner & Company,
LLP as the independent auditors of the Company.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS
PROPOSAL.
-24-
<PAGE>
MISCELLANEOUS
Other Matters
The Board of Directors does not intend to bring before the Annual
Meeting any matters other than those specifically described above and knows of
no matters other than the foregoing to come before the Annual Meeting. If,
however, any other matters should properly come before the Annual Meeting, the
persons named in the accompanying proxy will vote proxies as in their discretion
they may deem appropriate, unless they are directed by a proxy to do otherwise.
Information Concerning Stockholder Proposals
From time to time, Stockholders may present proposals for
consideration at a Stockholders meeting which may be proper subjects for
inclusion in the proxy statement related to that meeting. Stockholder proposals
intended for inclusion in the proxy statement for the Company's 2000 Annual
Meeting of Stockholders must be received by the Company's Secretary at its
principal offices, Continental Plaza III, 433 Hackensack Avenue, Hackensack, New
Jersey 07601 by February 10, 2000.
Form 10-KSB Exhibits
The Company will furnish, upon payment of a reasonable fee to
cover reproduction and mailing expenses, a copy of any exhibit to the Company's
Annual Report on Form 10-KSB requested by any person solicited hereunder.
By Order of the Board of Directors
David E.Y. Sarna
Chairman and Secretary
Hackensack, New Jersey
April__, 1999
-25-
<PAGE>
OBJECTSOFT CORPORATION
ANNUAL MEETING OF STOCKHOLDERS MAY 13, 1999
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of Common Stock of ObjectSoft Corporation, a
Delaware corporation (the "Company"), hereby appoints George J. Febish and
Janice Barsuk and each of them, as proxies for the undersigned, each with full
power of substitution, for and in the name of the undersigned to act for the
undersigned and to vote, as designated below, all of the shares of stock of the
Company that the undersigned is entitled to vote at the 1999 Annual Meeting of
Stockholders of the Company, to be held on Thursday, May 13, 1999, at 10:00
a.m., local time, at the offices of the Company at Continental Plaza III, 433
Hackensack Avenue, Hackensack, New Jersey 07601 and at any adjournments or
postponements thereof.
<TABLE>
<CAPTION>
<S> <C>
WITHHOLD
1. Election of AUTHORITY 5. Amendment to the Company's 1996 Stock Option
Directors: FOR ALL to vote Plan (the "1996 Plan") pursuant to which the
NOMINEES: for all nominees: number of shares of Common Stock which may be
issued thereunder is increased from 750,000 to
[ ] [ ] Nominees: David E.Y. Sarna 1,250,000 shares and certain other changes are
Michael A. Burak made.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
INSTRUCTIONS To withhold authority for any individual nominee, strike a line
through the nominee's name on the list to the top right.
2. Approval of the amendment to the Company's Certificate of Incorporation to
increase the number of shares of Common Stock which the Company is
authorized to issue from 20,000,000 to 50,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<TABLE>
<CAPTION>
<S> <C>
3. Approval of the issuance of the Company's securities pursuant to a 6. Ratification of the appointment of Richard A.
Subcription Agreement dated as of December 30, 1998. Eisner & Company, LLP as the independent
auditors of the Company for the fiscal year
[ ] FOR [ ] AGAINST [ ] ABSTAIN ended December 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
4. Approval of the issuance of the Company' securities pursuant to a
Subscription Agreement dated as of March 17, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
7. Upon such other matters as may properly come before the Annual Meeting and
any adjournments or postponements thereof. In their discretion, the
proxies are authorized to vote upon such other business as may properly
come before the Annual Meeting and any adjournments or postponements
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" THE ELECTION OF ALL CLASS I DIRECTOR NOMINEES LISTED
ABOVE AND IN FAVOR OF THE ITEMS LISTED UNDER (2), (3), (4)., (5) AND (6).
The undersigned hereby acknowledges receipt of (i) the Notice of
Annual Meeting, (ii) the Proxy Statement and (iii) the Company's 1998 Annual
Report.
<TABLE>
<CAPTION>
<S> <C>
IMPORTANT:Please sign exactly as your name appears hereon and mail it promptly Dated _______________________, 1999
even though you now plan to attend the meeting. When shares are held
by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title __________________________________
as such. If a corporation, please sign in full corporate name by Print Full Name
president or other authorized officer. If a partnership, please sign
in partnership name by authorized person.
__________________________________
PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND PROMPTLY (Signature)
RETURN IT IN THE ENVELOPE PROVIDED. NO POSTAGE NECESSARY IF
MAILED IN THE UNITED STATES.
Print Full Name
__________________________________
(Signature if held jointly)
</TABLE>
[UPDATE]
-2-
<PAGE>
Exhibit A
----------
Form of Proposed Amendment to Article Fourth to the
Company's Certificate of Incorporation
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
OBJECTSOFT CORPORATION
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation")
is ObjectSoft Corporation.
2. The Certificate of Incorporation of the Corporation (hereinafter
called the "Certificate of Incorporation") is hereby amended by deleting the
number 20,000,000 in the second sentence of Section (1) of Article Fourth and
inserting the number 50,000,000 in its place.
3. The amendment of the Certificate of Incorporation herein certified
has been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
Dated: April __, 1999
------------------------------------------
George J. Febish, President and Treasurer
Attest:
- ---------------------------------
David E.Y. Sarna,
Chairman and Secretary
