SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
[ ] Preliminary Proxy Materials [ ] Confidential, For Use of the
Commission only (as permitted by
[X] Definitive Proxy Statement Rule 14a-6(e)(2)
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
Ultradata Systems, Incorporated
____________________________________________________________________________
(Name of Registrant as Specified in its Charter)
____________________________________________________________________________
(Name of Person Filing Proxy Statement, if Other Than the Registrant)
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(1) Title of each class of securities to which transaction applies:
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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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<PAGE>
PROXY
ULTRADATA SYSTEMS, INCORPORATED
SOLICITED BY THE BOARD OF DIRECTORS
For use at the July 27, 2000 Annual Meeting
The undersigned hereby appoints Monte Ross and Ernest Clarke as Proxies
and each with power of substitution, who shall be present at the meeting to
vote all of the shares of the undersigned as follows:
(1) ELECTION OF DIRECTORS
_____ FOR all nominees listed _____ WITHHOLD AUTHORITY
below (except as indicated to vote for all nominees
to the contrary below) listed below
Nominees: Monte Ross, Mark L. Peterson, Ernest Clarke, Steven H. Akre, John
J. Clancy, Donald Rattner, Howard Krollfeifer, Jr.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the line provided below.)
(2) PROPOSAL TO RATIFY THE APPOINTMENT OF BDO SEIDMAN, LLP TO EXAMINE THE
COMPANY'S ACCOUNTS FOR THE YEAR 2000.
/ / FOR / / AGAINST / / ABSTAIN
(3) PROPOSAL TO APPROVE AN INCREASE IN THE NUMBER OF SHARES AUTHORIZED FOR
ISSUANCE UNDER THE 1996 INCENTIVE STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
(4) PROPOSAL TO APPROVE THE ISSUANCE OF MORE THAN 20% OF THE COMPANY'S
COMMON STOCK ON CONVERSION OF PREFERRED SHARES HELD BY TWO INVESTMENT
FUNDS.
/ / FOR / / AGAINST / / ABSTAIN
and in their discretion upon such other business as may be properly
brought before the Annual Meeting of Stockholders of ULTRADATA SYSTEMS,
INCORPORATED to be held at the Holiday Inn-Westport, St. Louis, MO on
July 27, 2000 at 10:00 a.m. local time, and any adjournments thereof.
This proxy revokes all prior proxies given by the undersigned.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS.
Date:_________________________
Signature:____________________
Print Name:___________________
Signature:____________________
(if jointly held)
IMPORTANT: Please sign exactly as name appears here. Joint owners should
both sign. When signing as executor, trustee, guardian, attorney or officer
of a corporation, give title as such. If a partnership, please sign in
partnership name.
PLEASE COMPLETE, SIGN, DATE AND MAIL THIS PROXY IN THE ENCLOSED ENVELOPE.
<PAGE>
ULTRADATA SYSTEMS, INCORPORATED
9375 Dielmann Industrial Drive
St. Louis, MO 63132
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 27, 2000
The Annual Meeting of the Shareholders of Ultradata Systems, Incorporated
("Ultradata") will be held on July 27, 2000 at the Holiday Inn-Westport,
located at 1973 Craigshire (I-270 at Page Blvd.), St. Louis, Missouri at
10:00 A.M., local time, for the following purposes:
(1) To elect seven directors of Ultradata to serve until the next annual
meeting of shareholders and until their successors are elected and
qualify;
(2) To ratify the appointment of BDO Seidman, LLP as Ultradata's
independent certified public accountants for the fiscal year ending
December 31, 2000;
(3) To approve an amendment to the Ultradata Systems, Incorporated 1996
Stock Option Plan increasing the number of shares authorized for
issuance from 175,000 to 325,000;
(4) To approve the issuance of more than 20% of Ultradata's Common Stock
upon conversion of Convertible Preferred Shares held by two
investment funds; and
(5) To transact such other business as may properly come before the
meeting.
Stockholders of record as of the close of business on June 16, 2000 will
be entitled to vote at the meeting.
Enclosed is Ultradata's 1999 Annual Report on Form 10-KSB, along with a
proxy statement and form of proxy. Shareholders who do not expect to attend
the Annual Meeting are requested to sign and return the proxy in the enclosed
envelope.
By Order of the Board of Directors
MARK L. PETERSON,
Secretary
June 23, 2000
<PAGE>
ULTRADATA SYSTEMS, INCORPORATED
9375 Dielmann Industrial Drive
St. Louis, MO 63132
PROXY STATEMENT
This Proxy Statement is furnished to shareholders of ULTRADATA SYSTEMS,
INCORPORATED ("Ultradata") in connection with the solicitation by the Board of
Directors of proxies to be used at the 2000 Annual Meeting of the Shareholders
of Ultradata. This notice of Annual Meeting and Proxy Statement, the
accompanying proxy card and Ultradata's Annual Report on Form 10-KSB for 1999
have been mailed to the shareholders on or after June 23, 2000 for the purpose
set forth in the notice of the Annual Meeting. Ultradata's Annual Report on
Form 10-KSB contains the information required by Rule 14a-3 under the
Securities Exchange Act of 1934 (the "Exchange Act").
If the enclosed form of proxy is executed and returned, it may
nevertheless be revoked at any time up until the time when it is voted by the
Proxy Committee. The proxy may be revoked by sending written revocation to the
Proxy Committee (c/o Ultradata) or by making a proxy bearing a later date or
by appearing and voting at the Annual Meeting. The proxy is in ballot form
and each shareholder may indicate approval or disapproval as to the proposals
identified in the proxy and accompanying Notice of Annual Meeting and as set
forth and discussed in this Proxy Statement. The proposals will be presented
by the Board of Directors of Ultradata. Where a choice is specified with
respect to a proposal, the shares represented by the proxy will be voted in
accordance with the specification made. Where a choice is not so specified,
the shares represented by the proxy will be voted in favor of the proposal.
The Proxy Committee appointed by the Board of Directors consists of Monte
Ross and Ernest Clarke.
VOTING SECURITIES OUTSTANDING
Stockholders of record entitled to vote will be determined as of the close
of business on June 16, 2000. At that date, there were outstanding and entitled
to vote 3,195,345 shares of common stock of Ultradata (constituting the only
class of stock outstanding and entitled to vote at the meeting). Each share of
common stock entitles the holder thereof to one vote.
The following table sets forth the beneficial ownership of outstanding
shares of Common Stock of Ultradata as of June 16, 2000 by any person who,
to the knowledge of Ultradata, owns beneficially more than 5% of the
outstanding Common Stock, by each director and nominee for director, by
Ultradata's President, and by the directors and officers of Ultradata as
a group. None of the persons identified below owns any securities of
Ultradata other than the Common Stock listed below:
Name and Amount and
Address of Nature of Percentage
Beneficial Beneficial of Outstanding
Owner (1) Ownership Shares (10)
------------------------------------------------------------------------
Monte Ross 452,500(2) 13.84%
Mark L. Peterson 162,382(3) 4.97%
Ernest Clarke 165,352(4) 5.12%
Steven H. Akre, Esq. 3,496(5) 0.11%
Donald Rattner 14,000 0.44%
John J. Clancy 3,692(6) 0.12%
Howard Krollfeifer, Jr. - -
All officers and 896,565(7) 25.99%
directors as a
group (10 persons)
BH Capital Investments LLP 319,534(8) 9.90%
175 Bloor St. East,
7th Floor
Toronto, Ontario
Canada M4W3R8
Excalibur Limited 319,534(8) 9.90%
Partnership
33 Prince Arthur Avenue
Toronto, Ontario
Canada M5R1B2
Influence Incubator, LLC 300,000(9) 8.58%
9666 Olive Street Road
St. Louis, MO 63132
(1) Except as otherwise noted, the address of each of these shareholders
is c/o Ultradata Systems, Incorporated, 9375 Dielman Industrial Drive,
St. Louis, Missouri 63132.
(2) Includes 236,000 shares owned by the Monte Ross and Harriet J. Ross
Living Trust. Mr. Ross and his wife share investment control over the
trust; they may revoke it or amend it at will; and they receive all
income from the trust during the life of either of them. Also includes
options to purchase 73,500 shares.
(3) Includes 91,964 shares owned by the Mark L. Peterson and Ryia Peterson
Living Trust and 8,318 owned by Ryia Peterson. Mr. Peterson and his
wife share investment control over the trust; they may revoke it or
amend it at will; and they receive all income from the trust during
the life of either of them. Also includes options to purchase 58,000
shares.
(4) Includes options to purchase 34,500 shares.
(5) Includes 3,120 shares owned by the G. Akre Irrevocable Trust, over which
Mr. Akre's wife has investment control. Also included options to
purchase 1,000 shares.
(6) Includes options to purchase 3,692 shares.
(7) Includes options to purchase 262,192 shares.
(8) Represents for each shareholder: (a) the number of shares of Common
Stock into which the Series A Convertible Preferred Shares could have been
converted on the Record Date plus (b) Warrants to purchase 239,253 shares
of Common Stock, but subject to a limit that on conversion and exercise
each shareholder may not acquire more than 9.9% of the outstanding Common
Stock. The limit may be waived by the shareholder on 75 days notice to
Ultradata, in which event the Preferred Shares and Warrants owned by each
shareholder could have been converted into 559,253 shares of Common
Stock, or 14.90% of the shares outstanding on the Record Date.
(9) Represents options to purchase 300,000 shares.
(10) In determining the percentage of outstanding shares, all presently
convertible securities owned by the shareholder are treated as having been
converted and all presently exercisable options or warrants owned by the
shareholder or the group are treated as having been exercised.
ELECTION OF DIRECTORS
(Item #1 on the Proxy Card)
The Proxy Committee intends to vote for the election of the seven nominees
listed below, unless otherwise instructed by the shareholders on the proxy
card. These nominees have been selected by the Board of Directors. Those who
are elected to serve as Directors will hold office until the Annual Meeting to
be held in 2001 and until their respective successors are elected and qualify.
Management has no reason to expect that any of the nominees will fail to be a
candidate at the meeting and, therefore, does not at this time have in mind any
substitute for any nominee. In the event that any nominee for director should
become unavailable to serve, the Proxy Committee will vote for any substitute
nominee or nominees as may be determined by the Board of Directors.
In accordance with the laws of the State of Delaware and Ultradata's
Certificate of Incorporation, the election of directors requires a plurality of
the votes cast. Proxies and ballots marked "FOR all nominees," "WITHHOLD
AUTHORITY to vote for all nominees," or specifying that votes be withheld for
one or more designated nominees, or which are executed without specification
of a choice (in which case they will be voted for all nominees), are counted
to determine the total number of votes cast. Broker non-votes are not counted.
Nominees for Election as Directors:
Monte Ross founded Ultradata in 1986, and has served as its President and
Chief Executive Officer since the founding. In addition to his management
responsibilities, Mr. Ross is responsible for new product development and for
supervision of sales and marketing. Mr. Ross is a Fellow of the Institute of
Electrical and Electronic Engineers, and the past President of the International
Laser Communication Society. Mr. Ross was awarded a Master of Science degree in
Electrical Engineering by Northwestern University in 1962. Mr. Ross is the
father-in-law of Mark L. Peterson, Ultradata's Vice President - Engineering. He
is 67.
Mark L. Peterson has been a Director of Ultradata since it was founded in
1986, and has served as Ultradata's Vice President of Engineering since 1988.
He is responsible for the design of Ultradata's hand-held products. Mr.
Peterson was awarded a Master of Science degree in Electrical Engineering by
Washington University in 1980. Mr. Peterson is the son-in-law of Monte Ross,
Ultradata's President. He is 43.
Ernest Clarke has been a Director of Ultradata since 1990. From 1990 until
1999 Mr. Clarke was employed as Ultradata's Vice President-Government Programs.
In 1999 Mr. Clarke became Ultradata's Chief Financial Officer. Mr. Clarke was
awarded a Master of Science degree in Electrical Engineering by Stanford
University in 1966. He is 60.
Steven Akre has served as a member of the Board of Directors and as the
corporate counsel for Ultradata since it was founded in 1986. Mr. Akre is an
attorney at law, whose specialization is in taxation and corporate mergers and
acquisitions. He is 47.
John J. Clancy has been a Director of Ultradata since 1995. Mr. Clancy has
served on the Board of Directors at Cimplex Corporation, Inc. in San Jose, and
Engineering Software Research & Development, Inc. in St. Louis. Previously, Mr.
Clancy was employed by McDonnell Douglas in a variety of positions progressing
from Programmer, Salesman to Divisional President. Mr. Clancy was awarded a
Master of Science degree in Chemical Engineering by The Johns Hopkins University
and a Master of Business Administration degree by Washington University, St.
Louis. He is 63.
Donald Rattner has been a Director of Ultradata since 1999. Mr. Rattner
is a member/partner in BrookWeiner, LLC, a Chicago-based accounting firm, and a
member of the American Institute of Certified Public Accountants and the
Illinois CPA Society. He is 67.
Howard Krollfeifer, Jr. has not previously been affiliated with Ultradata.
In connection with Ultradata's recent private placement of securities, the
placement agent, Thornhill Group, Inc., was given the right to nominate a
candidate for election to the Board. Thornhill nominated Mr. Krollfeifer. Mr.
Krollfeifer has been employed since 1993 as Senior Vice President and General
Manager of the Manufacturing Technology Division and the Financial Intermediary
Group at Copelco Capital, Inc. Mr. Krollfeifer was awarded an LL.B by
Blackstone School of Law in 1969. He is 60.
Committees, Meetings and Compensation of the Board of Directors
Ultradata's Board of Directors has a standing Audit Committee. The
members of the Board who served on the Audit Committee during Ultradata's last
fiscal year were Steven H. Akre and John J. Clancy. The Committee met once
during such fiscal year, which ended December 31, 1999. The functions of the
Committee include the recommendation to the Board of independent auditors for
the annual audit of Ultradata, and the discussion and review of the audit
work with the auditors so appointed. Ultradata has no Nominating Committee or
Compensation Committee.
The Board of Directors met four times during the last fiscal year. No
director failed to attend at least 75% of the meetings.
The Directors of Ultradata who are not officers receive $500 per meeting
and are reimbursed for out-of-pocket expenses incurred on Ultradata's behalf.
Officers
The following table sets forth the names, ages, and positions with
Ultradata of Ultradata's executive officers who are not nominees for the Board
of Directors.
Name Age Position With Ultradata
----------------------------------------------------------------------
Leonard Missler 54 Vice President - Software Development
Duane Crofts 63 Vice President - Advanced Products
David Biernbaum 45 Vice President
Employment Agreements
Messrs. Ross, Peterson, and Clarke have individual employment agreements with
Ultradata which, except as noted, are substantially identical. The agreements
terminate on October 31, 2000. Each agreement provides for a base salary, which
is adjusted annually by the Board of Directors. If the majority of the Board
cannot agree as to a level of salary adjustment, the salary will increase by 10%
for Messrs. Clarke and Peterson and 5% for Mr. Ross. The employment agreements
restrict each officer from competing with Ultradata for one year after the
termination of his employment unless that employee establishes that his
employment by a competitor will not involve the use of any information which is
considered confidential by Ultradata.
Executive Compensation
Annual Compensation Long-Term Compensation
Year Salary Other(2) Options (#)
-------------------------------------------------------------------------
Monte Ross, President(1) 1999 $ 142,588 $ 6,000 10,000
1998 $ 154,999 $ 6,000 6,000
1997 $ 130,000 $ 5,000 12,500
(1) Mr. Ross is the only officer of Ultradata whose total salary and bonus
for 1999 exceeded $100,000.
(2) Represents the premium paid for an insurance policy on Mr. Ross's life,
the beneficiary of which is Mr. Ross's estate.
Option Grants in the Last Fiscal Year
Percent of Total
Number of Shares Options Granted
Underlying to Employees in Exercise Expiration
Name Options Granted Fiscal Year Price Date
------------------------------------------------------------------------------
Monte Ross 10,000 9.7% $2.00 12/31/04
Aggregated Fiscal Year-End Option Values
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options
Name Options at December 31, 1999 at December 31, 1999
----------------------------------------------------------------------------
Monte Ross 73,500 exercisable Not Applicable
Related Party Transactions
In 1994 a number of the officers of Ultradata purchased shares of the
common stock and gave Ultradata promissory notes in payment. On June 11, 1999
three of the officers surrendered a portion of the shares they had purchased in
exchange for forgiveness of a portion of the notes. The surrendered shares
were valued at the weighted average market price for the 30 trading days
preceding the surrender date. The table below shows data concerning the 1994
purchase and 1999 surrender of shares.
Shares Purchased Shares Surrendered
Total Price Average Total Price Average
-----------------------------------------------------------------------------
Monte Ross 155,734 $254,500 $1.63 100,000 $215,000 $2.15
Mark Peterson 38,725 $ 63,375 $1.64 37,423 $ 80,456 $2.15
Leonard Missler 17,676 $ 21,250 $1.20 12,548 $ 26,978 $2.15
Ultradata has an agreement with Leonard Missler, its Vice President -
Software Development, under which, through September 13, 2009, it pays Mr.
Missler a 1% royalty on all net sales of ROAD WHIZ products and 1/2% on net
sales of other products incorporating the ROAD WHIZ database. During the
years ended December 31, 1999 and 1998, Ultradata paid royalties to Mr.
Missler of $39,820 and $53,752, respectively.
Steven H. Akre, Esquire, a member of Ultradata's Board of Directors, has
performed legal services as general counsel for Ultradata since its inception.
During 1999 and 1998, Ultradata paid the law firm with which Mr. Akre was then
associated $108,411 and $103,984, respectively, for legal services.
Compliance With Section 16(a) Of The Exchange Act
None of the directors, officers or beneficial owners of more than 10% of
Ultradata's common stock failed to file on a timely basis reports required
during 1999 by Section 16(a) of the Exchange Act, except as follows: each of
Ultradata's five senior officers was late in filing a report on Form 4, each
report containing one transaction.
RATIFICATION OF APPOINTMENT OF AUDITORS
(Item #2 on the Proxy Card)
Subject to Shareholder ratification, the Board of Directors, upon the
recommendation of the Audit Committee, has reappointed BDO Seidman, LLP as
Ultradata's independent auditors for the fiscal year ending December 31, 2000.
BDO Seidman, LLP also served as Ultradata's auditors for the year ended
December 31, 1999. The Board of Directors recommends a vote for the
ratification of the selection of BDO Seidman, LLP. If the shareholders do
not ratify the appointment of BDO Seidman, LLP , other independent auditors
will be considered by the Board, upon recommendation by the Audit Committee.
Representatives of BDO Seidman, LLP are expected to be present at the
Annual Meeting to respond to appropriate questions and to make a statement if
they so desire.
On July 24, 1998, the Board of Directors dismissed KPMG LLP from its
engagement to audit Ultradata's 1998 financial statements. The report of KPMG
LLP on Ultradata's 1997 and 1996 financial statements did not contain an
adverse opinion or a disclaimer of opinion, and was not qualified or modified
as to uncertainty, audit scope, or accounting principles. Ultradata and KPMG
LLP did not have, in connection with the audit of Ultradata's 1997 or 1996
financial statements or any subsequent period, any disagreement on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreement, if not resolved to KPMG
LLP's satisfaction, would have caused KPMG LLP to make reference in
connection with its reports to the subject matter of the disagreement.
PROPOSAL TO INCREASE THE NUMBER
OF SHARES AVAILABLE FOR ISSUANCE
UNDER THE 1996 STOCK OPTION PLAN
(Item #3 on the Proxy Card)
In 1994, Ultradata adopted the 1994 Incentive Stock Option Plan (the
"1994 Plan") under which a total of 175,000 shares of Common Stock were
reserved for issuance. In 1996, Ultradata adopted the 1996 Incentive Stock
Option Plan (the "1996 Plan") under which an additional 175,000 shares of
Common Stock were reserved for issuance. By late 1999, options for all
350,000 shares reserved under the two Plans had been granted to employees of
Ultradata. From those, options for 92,023 shares were exercised; options for
257,977 shares (out of the 350,000 shares originally authorized) remain
outstanding.
The Board of Directors believes that the ability to grant stock options
is necessary to support Ultradata's ongoing expansion into new fields of
technology and new markets. The competition for software engineers qualified to
work in the GPS, Internet and wireless fields is fierce. Individuals
possessing a high level of technological or marketing skill in those fields
have come to expect that their compensation package will include options.
If Ultradata hopes to retain the individuals it presently has and attract
those it will need to compete in those markets, it must be able to offer stock
options. For that reason, in December 1999 the Board of Directors approved an
increase of 100,000 in the number of shares available for issuance under the
1996 Plan, and in May 2000 the Board of Directors approved an additional
50,000 shares, bringing the total available under the 1996 Plan to 325,000
shares. In order for the new options to qualify as "incentive stock options,"
however, approval of the increase by Ultradata's shareholders is required.
Summary of the 1996 Incentive Stock Option Plan
The Plan provides for grants of stock options. All employees of
Ultradata, non-employee directors of Ultradata, and consultants performing
services for Ultradata are eligible to participate in the Plan. Some of these
options may qualify under Section 422 of the Internal Revenue Code of 1986
(the "Code"), and others may not. Stock options designed to qualify under
Section 422 are referred to as "incentive stock options." All other stock
options are referred to as "non-qualified stock options."
The Board of Directors will determine the number of shares subject to
options and all other terms and conditions of the options. No option will have
a term of more than 10 years. Every incentive stock option granted to a
shareholder who owns 10% or more of the voting power in Ultradata, will expire
not later than five (5) years after the grant. No option will be transferable,
except by will or the laws of inheritance. Grants of incentive stock options
are limited in that the aggregate exercise price of all stock options,
incentive and otherwise, vesting in one employee in any single calendar year
may not exceed $100,000. There is no limit on vesting of non-qualified stock
options.
The exercise price for non-qualified stock options may not be less than
eighty-five percent (85%) of the fair market value of the shares on the date
of grant. In order to qualify under Section 422 of the Code, however, the
exercise price of an incentive stock option may not be less than (i) 110%
of the fair market value of a share of Common Stock on the date the stock
option is granted to a shareholder who owns 10% or more of the voting power
in Ultradata, or (ii) 100% of the fair market value of a share of Common
Stock on the date the stock option is granted to anyone else. An employee
may, at the discretion of the Board, be permitted to exercise an option and
make payment by giving a personal note.
Federal Income Tax Matters Relating to Stock Options.
A participant in the Plan will not be deemed to have received any income
subject to tax at the time an incentive stock option or, under certain
circumstances, a non-qualified stock option is granted. Nor will Ultradata be
entitled to a tax deduction at that time. When a non-qualified stock option is
exercised, the participant will be deemed to have received an amount of
ordinary income equal to the excess of the fair market value of the shares of
Common Stock purchased over the exercise price. Ultradata will be allowed a
tax deduction in the year the shares are valued in an amount equal to the
ordinary income that the participant is deemed to have received. If an
incentive stock option is exercised by a participant who is employed by
Ultradata at the time of exercise or has been employed by Ultradata within
three months prior to exercise, the participant will not be deemed to have
received any income subject to tax at such time, although the excess of the
fair market value of the Common Stock so acquired on the date of exercise
over the exercise price will be an item of tax preference for purposes of the
alternative minimum tax.
The participant who exercises an incentive stock option and holds his
shares of Common Stock for at least (i) one year after the exercise date and
(ii) two years after the date of the grant will realize a long term capital
gain or loss, in the amount of the difference between the exercise price and
the sales price, upon the subsequent sale of such shares.
A "disqualifying disposition" of an incentive stock option will result
whenever the shares of Common Stock acquired upon the exercise of an incentive
stock option are not held for at least one year. At that time the participant
will be deemed to have received an amount of ordinary income equal to the lesser
of (a)the excess of the fair market value of the shares of Common Stock on the
date of exercise over the exercise price, or (b)the excess of the amount
realized on the disposition of the shares of Common Stock over the exercise
price. If the amount realized on the "disqualifying disposition" of the shares
of Common Stock exceeds the fair market value on the date of exercise, the gain
on the excess of the ordinary income portion will be treated as capital gain.
Any loss on the disposition of the shares of Common Stock acquired through the
exercise of incentive stock options is capital loss. In the event of a
"disqualifying disposition," Ultradata will be entitled to a tax deduction equal
to the amount of ordinary income recognized by the participant. In the absence
of a "disqualifying disposition," no income tax deduction will be allowed to
Ultradata with respect to the shares of Common Stock purchased by the
participant through the exercise of an Incentive Stock Option.
Awards of Additional Options to Date
From the 150,000 additional shares reserved by the Board of Directors under
the 1996 Plan, the Board has already granted options for 64,088 shares. These
were granted as incentive stock options; however, if the Shareholders do not
approve the increase in the number of shares available under the Plan, these
recent options will convert into non-qualified stock options. The options were
granted at prices ranging from $2.00 to $5.56. The following table contains
information regarding the grant of 64,088 additional options.
Grantee Number of Options Average Exercise Price
------------------------------------------------------------------------
Monte Ross 0 $ -
All Executive Officers 20,930 $ 2.00
Non-Officer Employees 43,158 $ 2.14
------ ----
Total 64,088 $ 2.09
The Board of Directors believes that the availability of additional
options is important to Ultradata in that it will help Ultradata to attract
and retain qualified personnel. The Board of Directors recommends a vote
FOR this proposal.
PROPOSAL TO APPROVE THE ISSUANCE
OF MORE THAN 20% OF ULTRADATA'S COMMON STOCK
UPON CONVERSION OF CONVERTIBLE PREFERRED SHARES
HELD BY TWO INVESTMENT FUNDS.
(Item #4 on the Proxy Card)
Management expects that, in the next few months, Ultradata will enter the
market for automotive GPS-based (i.e. "global positioning satellite")
directional systems with the Travel Star 24, a low-cost, portable navigation
unit for the automotive after-market. The logical next step is to develop
a unit that incorporates a cellular transceiver into the Travel Star 24. The
Travel Star 24 could in this way become a link between the driver and the
Internet, thus enabling a wide set of innovative applications, such as the
ability to track your vehicle from your home computer and the ability to
receive targeted discount coupons in real time from hotels and other vendors
along your travel route. Management, therefore, has developed a budget for
the development of a GPS/Internet product. Ultradata's cash resources are
inadequate, however, to fund any expansion of operations. For that reason,
during the past Winter Management explored a number of possible sources of
financing. That search culminated in a Securities Purchase Agreement made on
May 10, 2000 with two Toronto-based investment funds: BH Capital Investments,
L.P. and Excalibur Limited Partnership (the "Investors").
The securities issued to the Investors consist of (a)Series A
Convertible Preferred Stock, which is under some circumstances convertible into
Common Stock at a discount from the market price of Common Stock, and (b)Common
Stock Purchase Warrants to purchase Common Stock for $5.00 per share.
Ultradata's Certificate of Incorporation and Delaware corporation law give
authority to the Board of Directors to issue those securities. If all of the
Preferred Shares are converted, however, the number of shares of Common Stock
issued to the Investors would exceed 635,668, which is 20% of the number of
Common Shares outstanding on May 10, 2000. The Corporate Governance
Requirements imposed by NASDAQ on any company listed on NASDAQ require that
an issuer obtain shareholder approval of any transaction (other than a public
offering) involving the issuance for a price less than market value of
securities convertible into 20% or more of the common stock outstanding prior
to the transaction. For this reason, the Board of Directors will propose at
the Annual Meeting that the Shareholders ratify the issuance of the Series A
Convertible Preferred Stock that will convert into more than 635,668 shares
of Common Stock.
Summary of the Securities Purchase Agreement
The Securities Purchase Agreement provides for two closings, at each of
which Ultradata will sell Preferred Shares and Warrants to the two Investors,
each of which will purchase 50% of the securities. The first closing occurred
on May 16, 2000, at which time the Investors paid a total of $1,600,000 for
1,600 shares of Series A Preferred Stock and Warrants to purchase 478,506
shares of Common Stock at $5.00 per share. The Certificate of Designations,
which sets forth the terms of the Preferred Stock, contain provisions that
will prevent the Investors from acquiring more than 635,668 shares of Common
Stock in total on conversion of the Preferred Shares unless the Ultradata
Shareholders approve the issuance of shares in excess of that number.
A second closing, at which the Investors will purchase Preferred Shares and
Warrants for a total of $1,400,000, may occur. If the second closing occurs,
the Investors will purchase 1,400 shares of Series A Preferred Stock. The terms
of the Warrants issued at the second closing would be identical to those issued
at the first closing, except that the Warrants then issued will allow the
Investors together to purchase a number of shares equal to $1,400,000 divided
by the 5-day average closing price of the Common Stock preceding the second
closing.
The second closing will occur only if the following conditions are
satisfied or are waived by the Investors:
(1) The shareholders of Ultradata must approve the issuance of more than
20% of the Common Stock outstanding on May 10, 2000 on conversion of
the Preferred Shares.
(2) A registration statement permitting the resale of the Common Stock
into which the Preferred Shares are convertible as well as the
Common Stock underlying the Warrants must be filed with the
Securities and Exchange Commission ("SEC"), declared effective by the
SEC, and have been effective for a period of 40 trading days.
(3) The average daily trading volume of the Common Stock for the 30
trading days preceding the closing must have been no less than
75,000 shares.
(4) The average of the closing bid prices for the Common Stock for the
30 trading days preceding the closing must be no less than $4.50.
Ultradata made a number of covenants to the Investors in the Securities
Purchase Agreement, which included the following:
(1) Prior to November 16, 2000, Ultradata will not issue any securities
for the purpose of financing itself without the approval of the
Investors.
(2) The Investors will have a right of first refusal on any sale of
securities by Ultradata during the next twelve months.
(3) Ultradata will file with the SEC a registration statement permitting
the resale of the Common Stock into which the Preferred Shares are
convertible as well as the Common Stock underlying the Warrants.
A number of penalties have been built into the Securities Purchase
Agreement to compensate the Investors if Ultradata fails to satisfy its
covenants. The more significant of the penalties are:
(1) If the meeting of the Shareholders to approve this Proposal does not
occur prior to August 15, 2000, Ultradata must pay the Investors
$13,333 for each day the meeting is delayed.
(2) If the SEC has not, prior to August 15, 2000, declared effective a
prospectus filed by Ultradata to permit the Investors to resell the
Common Shares underlying the Preferred Stock and the Warrants,
Ultradata must pay the Investors an amount for each day of delay
equal to .0005 times the closing ask price times the number of
shares which the Investors could acquire on conversion and exercise
of the securities they purchased at the first closing.
(3) If the Investors are unable to convert any of the Preferred Stock
into freely-tradeable Common Stock, either because the Ultradata
Shareholders fail to approve this Proposal or because the
registration statement is not available or for any other reason, the
Investors will have the right to force Ultradata to redeem the
Preferred Stock that could not be converted. The redemption price
would be the greater of (a) 130% of the purchase price plus 11.25%
of the face value from the date of issuance or (b) the number of
shares of Common Stock that the Investors would have received on
conversion multiplied by the five day average closing ask price.
Terms of the Preferred Stock
The Series A Convertible Preferred Stock has no voting rights, except as
to matters which directly affect the rights of the holders of the Preferred
Shares. The holders of Preferred Shares are not entitled to any dividends.
Among the rights that are attendant to the Preferred Shares are:
(1) The Preferred Shares have a liquidation preference equal to their
face value plus an accrual amount equal to 11.25% from the date of
issuance (22.5% if the Common Stock is delisted by NASDAQ). The
holders will be entitled to payment of the liquidation preference
upon the liquidation of Ultradata or its bankruptcy or certain other
events.
(2) The Preferred Shares may be converted into Common Stock at any time
at the option of the holders. If not previously converted, the
Preferred Shares will automatically convert into Common Stock on May
16, 2003. The amount to be converted will equal the purchase price
paid by the Investors plus the accrual amount of 11.25% from the
date of issuance. The conversion rate will be the lower of $3.50 or
75% of the 5-day average closing bid price, subject to certain anti-
dilution rights and to the Floor. The "Floor", below which
conversion cannot occur, will be $2.50, but only during the first 18
months after the issuance of the Preferred Shares. After 18 months
there is no limit to how far the conversion price could fall.
Moreover, if the conversion price for any 20 trading days during the
first 18 months would have been less than $2.50 but for the Floor,
then the Floor will be reduced to $2.00; and if the conversion price
for any 20 trading days during months 13 through 18 after issuance
would have been less than $2.00 but for the Floor, the Floor will
reduce to $1.50.
The Investors have agreed that they will not engage in short-selling of the
Common Stock except during the ten days preceding conversion, and each of them
will limit its short sales during those periods to ten percent of the daily
trading volume.
The terms of the Securities Purchase Agreement put the Shareholders of
Ultradata at risk that they could be significantly diluted by conversion of the
Preferred Shares. For example, if the second closing occurs on September 1,
2000 so that the outstanding Preferred Shares have a face value of $3,000,000,
the least number of Common Shares into which the Preferred Stock will be
convertible will be 872,142 shares (i.e. $3,052,500 divided by $3.50), or
21.4% of the outstanding shares (assuming no other shares are issued before
the conversion date). But, if (a)the second closing occurs and (b)the
Investors convert all of the Preferred Stock on December 1, 2001 (after the
"Floor" is no longer applicable), and (c)the bid price of the Common Stock on
that date is $2.00, then the Preferred Stock would convert into approximately
2,306,000 shares of Common Stock , or 41.9% of the outstanding Common Stock
(assuming no other shares are issued in the meantime).
While aware of the risk attendant to issuance of the Preferred Stock,
Management believes that the funds offered by the Investors are crucial to the
future prospects of Ultradata, particularly its ability to capitalize on the
progress it has made to date in developing GPS-based products. Despite its
efforts, Management has been unable to secure the needed funds on terms better
than those offered by the Securities Purchase Agreement. For this reason, the
Board of Directors recommends that Shareholders vote to approve the issuance of
more than 20% of the Common Stock if necessary to satisfy the conversion rights
of the Series A Convertible Preferred Stock.
OTHER MATTERS
Vote Required to Approve Proposals
The affirmative vote of the majority of the shares present in person or
represented by proxy at the Meeting and entitled to vote will be required for
approval of each of the Proposals. Abstentions will have the same effect as
negative votes since the percentage requirement for approval is based on all
shares present at the meeting and not only on those shares casting votes.
Broker non-votes, if any, will not be counted and will have no effect on the
vote.
Transaction of Other Business.
As of the date of this Proxy Statement, Management has no knowledge of any
business which will be presented for consideration at the meeting other than
that described above. Should any other matter come before the meeting, it
is the intention of the Proxy Committee to vote such proxy in accordance with
their best judgment.
Submission of Shareholder Proposals.
In order for shareholder proposals intended to be presented at the 2001
Annual Meeting of Shareholders to be eligible for inclusion in Ultradata's
Proxy Statement and the form of proxy for such meeting, they must be received
by Ultradata at its principal offices in St. Louis prior to February 25,
2001.
Solicitation of Proxies
The entire expense of preparing, assembling and mailing this Proxy
Statement, the form of proxy and other material used in the solicitation of
proxies will be paid by Ultradata. In addition to the solicitation of proxies
by mail, arrangements may be made with brokerage houses and other custodians,
nominees and fiduciaries to send proxy material to their principals, and
Ultradata will reimburse them for expenses in so doing. To the extent
necessary in order to insure sufficient representation, officers and other
regular employees of Ultradata, who will not be additionally compensated
therefor, may request the return of proxies personally, by telephone or
telegram. The extent to which this will be necessary depends on how promptly
proxies are received, and shareholders are urged to send their proxies
without delay.
By Order of the Board of Directors
MONTE ROSS
Chairman of the Board
Dated: St. Louis, Missouri
June 23, 2000
