Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|_| Preliminary proxy statement
|X| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Coin Bill Validator, Inc.
(Name of Registrant as Specified in Its Charter)
Board of Directors of Coin Bill Validator, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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|_| 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.:
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(3) Filing party:
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(4) Date filed:
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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
COIN BILL VALIDATOR, INC.
425-B OSER AVENUE
HAUPPAUGE, NEW YORK 11788
February 11, 1997
Dear Fellow Shareholders:
You are cordially invited to attend our Annual Meeting of Shareholders
which will be held on Monday, March 17, 1997 at 9:30 A.M., at the Holiday Inn,
173 Sunrise Highway, Rockville Centre, New York 11570.
The Notice of Annual Meeting and Proxy Statement which follow describe the
business to be conducted at the meeting.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. After reading the enclosed Notice of
Annual Meeting and Proxy Statement, I urge you to complete, sign, date and
return your proxy card in the envelope provided. If the address on the
accompanying material is incorrect, please advise our Transfer Agent, American
Stock Transfer & Trust Company, in writing, at 40 Wall Street, New York, New
York 10005.
Your vote is very important, and we would appreciate a prompt return of
your signed proxy card. We hope to see you at the meeting.
Cordially,
Stephen Katz
Chairman and Chief Executive Officer
<PAGE>
COIN BILL VALIDATOR, INC.
425-B OSER AVENUE
HAUPPAUGE, NEW YORK 11788
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 17, 1997
-------------------
To the Shareholders of COIN BILL VALIDATOR, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Coin Bill
Validator, Inc. (the "Company") will be held at the Holiday Inn, 173 Sunrise
Highway, Rockville Centre, New York 11570, on Monday, March 17, 1997 at 9:30
A.M., Eastern Standard Time, for the following purposes:
1. To elect seven (7) directors to serve until the 1998 Annual Meeting of
Shareholders;
2. To approve the Company's 1996 Stock Option Plan;
3. To consider a proposal to approve an Agreement and Plan of Merger
between the Company and Global Payment Technologies, Inc., a wholly
owned subsidiary of the Company, as set forth more fully in the
accompanying Proxy Statement and Exhibit B thereto;
4. To transact such other business as may properly be brought before the
meeting or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on February 7, 1997
are entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
Shareholders who dissent from the proposed merger may exercise their
appraisal right under New York law by complying with the provisions of Section
623 of the New York Business Corporation Law, a copy of which is attached to the
accompanying Proxy Statement as Appendix I.
By Order of the Board of Directors
Edward Seidenberg
Secretary
Dated: Hauppauge, N.Y.
February 11, 1997
- --------------------------------------------------------------------------------
IMPORTANT: WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE AND SIGN THE PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
<PAGE>
COIN BILL VALIDATOR, INC.
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Coin Bill
Validator, Inc. (the "Company") in connection with the solicitation of proxies
by the Board of Directors of the Company for use at the Annual Meeting of
Shareholders of the Company to be held at the Holiday Inn, 173 Sunrise Highway,
Rockville Centre, New York 11570, on Monday, March 17, 1997 at 9:30 A.M.,
Eastern Standard Time, and at any adjournments thereof, for the purposes set
forth in the accompanying Notice of Meeting.
Management intends to mail this proxy statement and the accompanying form
of proxy to shareholders on or about February 11, 1997.
The cost of solicitation of proxies will be borne by the Company. The
Company may also reimburse brokerage houses and other custodians, nominees and
fiduciaries for their expenses incurred in forwarding solicitation materials to
the beneficial owners of shares held of record by such persons. It is
contemplated that proxies will be solicited principally through the mail, but
directors, officers and regular employees of the Company may, without additional
compensation, solicit proxies personally or by telephone, facsimile or special
letter.
Proxies in the accompanying form, duly executed, returned to the management
of the Company and not revoked, will be voted at the Annual Meeting. Any proxy
given pursuant to such solicitation may be revoked by the shareholder at any
time prior to the voting of the proxy by a subsequently dated proxy, by written
notification to the Secretary of the Company, or by personally withdrawing the
proxy at the meeting and voting in person.
The address and telephone number of the principal executive offices of the
Company are:
425-B Oser Avenue
Hauppauge, New York 11788
Telephone No.: (516) 231-1177
OUTSTANDING STOCK AND VOTING RIGHTS
Only shareholders of record at the close of business on February 7, 1997
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.
As of the Record Date, there were issued and outstanding 2,750,000 shares of the
Company's common stock, par value $.01 per share ("Common Stock"), the only
class of voting securities of the Company. Each share of Common Stock entitles
the holder thereof to one vote on each matter submitted to a vote at the Annual
Meeting.
VOTING PROCEDURES
Directors will be elected by a plurality of the votes cast by the holders
of Common Stock in person or represented by proxy at the Annual Meeting. The
proposal to approve the Company's 1996 Stock Option Plan requires the
affirmative vote of a majority of all of the votes cast by the holders of the
shares of Common Stock present in person or represented by proxy at the Annual
Meeting. The proposal to merge the Company into Global Payment Technologies,
Inc. ("GPTI") requires the affirmative vote
<PAGE>
of the holders of at least two-thirds of the outstanding Common Stock. Any other
matter to be acted upon at the Annual Meeting requires the affirmative vote of a
majority of the votes cast by the holders of the shares of Common Stock present
in person or represented by proxy at the Annual Meeting. The foregoing matters
may be acted upon only if a quorum is present at the Annual Meeting. A quorum
will be present at the Annual Meeting if at least the holders of a majority of
the outstanding shares of Common Stock as of the Record Date are present in
person or represented by proxy. Votes will be counted and certified by one or
more Inspectors of Election who are expected to be either employees of the
Company, counsel to the Company or American Stock Transfer & Trust Company, the
Company's transfer agent.
Shares of Common Stock represented at the Annual Meeting by a properly
executed, dated and returned proxy will be treated as present at the Annual
Meeting for purposes of determining a quorum, without regard to whether the
proxy is marked as casting a vote or abstaining. In accordance with New York
law, abstentions and "broker non votes" (i.e., proxies from brokers or nominees
indicating that such person have not received instructions from the beneficial
owner or other persons entitled to vote shares as to a matter with respect to
which the brokers or nominees do not have discretionary power to vote) will be
treated as present for purposes for determining the presence of a quorum. For
purposes of determining approval of a matter presented at the meeting,
abstentions will be deemed present and entitled to vote and will, therefore,
have the same legal effect as a vote "against" a matter presented at the
meeting. Broker non-votes are deemed not entitled to vote on the subject matter
as to which the non-vote is indicated. However, because of the requirement for
an affirmative vote of the holders of at least two-thirds of the outstanding
Common Stock to approve the merger of the Company with and into GPTI, broker
non-votes will also have the same effect as a vote "against" the merger.
Abstentions and broker non-votes will have no effect on the election of
directors or the approval of the 1996 Stock Option Plan.
The enclosed proxy will be voted in accordance with the instructions
thereon. Unless otherwise stated, all shares represented by such proxy will be
voted as instructed. Proxies may be revoked as noted above.
ELECTION OF DIRECTORS
At this Meeting, seven directors will be elected for a term of one year
expiring at the Annual Meeting of Shareholders to be held in 1998 and until
their respective successors have been elected and qualified.
Proxies will be voted individually for the nominees named below, unless
authority is withheld. Should any nominees listed below be unable to serve, it
is intended that the proxies will be voted for such other nominees as may be
designated by the Board of Directors. Each of the nominees has indicated to the
Board that he will be available to serve.
Recommendation
THE BOARD OF DIRECTORS BELIEVES THAT THE ELECTION OF THE NOMINATED
DIRECTORS IS IN THE BEST INTEREST OF THE COMPANY AND ITS
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<PAGE>
SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS ELECT THE
NOMINATED DIRECTORS.
The following table sets forth the certain information concerning the
nominees for director of the Company.
Principal Occupation
Name or Employment Age
- ---- ------------- ---
Stephen Katz Chairman of the Board of Directors and 53
Chief Executive Officer of the Company
William H. Wood President and Director of the Company 54
Edward Seidenberg Secretary and Director of the Company 39
Henry B. Ellis (1) Director of the Company and Private 47
Investor
Richard Gerzof (1) Director of the Company and Private 52
Investor
Jay Goldberg (1) Director of the Company and Private 55
Investor
Joan Vogel Director of the Company and Private 55
Investor
- ------------------
(1) Member of the Compensation and Audit Committees
Stephen Katz has been Chairman of the Board of Directors since September
1996 and Chief Executive Officer and a director of the Company since May 1996.
Mr. Katz served as Vice Chairman of the Board of Directors from May 1996 until
September 1996. From September 1984 until September 1995, Mr. Katz was Chairman
of the Board and Chief Executive Officer and from September 1984 until September
1993, President, of Nationwide Cellular Service, Inc. Since 1992, Mr. Katz has
been Chairman of the Board and Chief Executive Officer of Cellular Technical
Services Company, Inc., a publicly held company engaged in developing software
for the cellular telephone industry.
William H. Wood has been President of the Company since January 1993 and
served as Chief Executive Officer of the Company from April 1993 to May 1996. He
has been a director of the Company since May 1993. From January 1990 until
January 1993 he held various executive positions at Maytag Corp./Dixie Narco
Division, including Director of Product Development (January 1990 to June 1990),
Vice President, Engineering and Technical Resources (July 1990 to April 1992),
and Vice President, Gaming and OEM Business (May 1992 to January 1993). From
July 1990 to January 1993 he was also a corporate officer of Maytag Corp. with
responsibilities in its Dixie Narco Division.
-3-
<PAGE>
Edward Seidenberg has been Secretary of the Company since January 1997 and
a director of the Company since July 1996. For more than five years prior to
October 1994 he had been Vice President and Chief Financial Officer of
Nationwide Cellular Service, Inc.
Henry B. Ellis has been a director of the Company since July 1996. Since
1992, Mr. Ellis has acted as President and Chief Executive Officer of Bassett
California Company, a family owned real estate holding company located in El
Paso, Texas. From June 1992 to February 1994 Mr. Ellis served as Chairman of the
Board and Chief Executive Officer of Grayson County State Bank located in
Sherman, Texas. Since 1992, Mr. Ellis has served as a member of the Board of
Directors of Bluebonnet Savings Bank, a savings and loan institution located in
Dallas, Texas.
Richard E. Gerzof has been a director of the Company since its inception.
Mr. Gerzof has been a partner of Sun Harbor Manor, a nursing home, since 1974.
He has also been a licensed real estate broker since 1982 and was a partner or
principal in Sonom Realty Co., a property management and construction firm, from
1974 through 1992. He was also a partner in TFTS Restaurant, Inc., a restaurant,
from 1985 to 1992, and has been a partner in Frank's Steaks, a restaurant, since
1993.
Jay Goldberg has served as a director of the Company since July 1996. Since
July 1996, Mr. Goldberg has been Chief Executive Officer of two technical
consulting firms, Opcenter, LLC and Lexstra, Inc. Since August 1991, Mr.
Goldberg has served as director of Cellular Technical Services, Inc., a publicly
held company engaged in developing software for the cellular telephone industry.
Mr. Goldberg had been Chairman of the Board, since November 1990, and President
and Chief Executive Officer from August 1990 until January 1994, of Image
Business Systems Inc., a company previously engaged in image processing that has
been inactive since August 1994.
Joan Vogel has been a director of the Company since January 1996 and from
January 1996 to September 1996 served as the Company's Chairperson of the Board
of Directors. From 1989 to 1994 she was director of Young Sport, Inc. a
children's sportswear company.
There were seven meetings of the Company's Board of Directors during the
Company's 1996 fiscal year. The Board of Directors has a Compensation Committee
and an Audit Committee, each of which is presently comprised of Messrs. Ellis,
Gerzof and Goldberg. Ms. Vogel served on each committee prior to her resignation
from each committee in September, 1996. The Compensation Committee reviews and
recommends to the Board of Directors the compensation and benefits of all
officers of the Company, reviews general policy matters relating to the
compensation and benefits of employees of the Company and administers the
issuance of stock options to the Company's officers, employees, directors and
consultants. This committee met twice during the Company's fiscal year ended
September 30, 1996. The Audit Committee meets with management and the Company's
independent auditors to determine the adequacy of internal controls and other
financial reporting matters. Each director attended at least 75% of the
aggregate of the total number of meetings of the Board of Directors held while
he was a director and meetings held by a committee of the Board on which he
served.
Other Directors and Executive Officers
The following table sets forth certain information with respect to the
directors and executive officers of the Company (other than those who are also
nominees for election to the Board of Directors of the Company). Officers are
elected annually by the Board of Directors and serve at the discretion of the
Board.
-4-
<PAGE>
Name Age Position
- ---- --- --------
Henry Kayser 57 Vice President and Chief
Financial and Accounting Officer
Michael Walsh 41 Vice President of Engineering
Robert W. Nader 37 Vice President, Product/
Market Development
Henry Kayser has been Vice President, Chief Financial and Accounting
Officer and a director of the Company since October 1994 and the Secretary of
the Company from October 1994 until January 1997. Prior thereto and for more
than five years he was an accountant and financial consultant in private
practice providing services to various clients, including the Company.
Michael Walsh has been a Vice President of Engineering of the Company since
April 1990. From December 1987 until April 1990 he was a Systems Engineer at
Aerospace Technologies, Inc. which provides consulting services with respect to
computer systems integration with responsibility for specification of that
corporation's main product line utilizing 386 microprocessor-based high
performance systems.
Robert W. Nader has been Vice President, Production/Market Development of
the Company since January 1995. From September 1991 through December 1994 he was
Engineering Manager at Hardware for United Gaming, Inc., a manufacturer and
route operator of electronic gaming machines. From July 1991 through September
1991 he was a design specialist in the Air Defense Systems Division of General
Dynamics, Inc.
ADOPTION OF 1996 STOCK OPTION PLAN
The Board of Directors adopted the Company's 1996 Stock Option Plan (the
"Plan") on March 19, 1996, authorizing the issuance under the Plan of 200,000
shares of Common Stock, and amended the Plan in September 1996, to increase the
shares of Common Stock authorized for issuance under the Plan to 450,000. The
adoption of the Plan and the amendment thereto by the Board of Directors is
subject to approval by the shareholders at the Annual Meeting.
The Board believes that it is in the best interest of the Company and its
shareholders to provide to officers, directors, key employees and, to a lesser
extent, consultants and other independent contractors who perform services for
the Company the opportunity to participate in the value and/or appreciation in
value of the Company's Common Stock through the granting of stock options. The
Board has found that the prior grant of options under the Company's 1994 Stock
Option Plan, which plan currently has almost no options available for future
grants, has proven to be a valuable tool in attracting and retaining key
employees. The Board believes that the Plan will (i) provide the Company with
significant means to attract and retain talented personnel, (ii) will result in
saving cash, which otherwise would be required to retain current key employees,
and adequately attract and reward key personnel, and (iii) consequently prove
beneficial to the Company's ability to
-5-
<PAGE>
compete. In view of the substantial growth of the Company and the need to
continue to expand, the Board recommends that the Plan should be approved.
To date, options to purchase 206,750 shares of Common Stock have been
granted under the Plan, subject to shareholder approval of the Plan, 140,500 of
which were granted to certain of the Company's current executive officers and
directors. See "Participation in the Option Plan." If the Plan is approved by
the shareholders, additional options may be granted under the Plan, the timing,
amounts and specific terms of which cannot be determined at this time.
The following summary of the Plan does not purport to be complete, and is
subject to and qualified in its entirety by reference to the full text of the
Plan, set forth as Exhibit "A" attached hereto and made a part hereof.
Summary of the 1996 Stock Option Plan
The Plan currently authorizes the granting of options to purchase up to
450,000 shares of Common Stock subject to adjustment as described below. Any
person, including, but not limited to, employees, directors, consultants,
attorneys and other independent contractors of the Company, including those of
the Company's subsidiaries, if any, believed by the Plan's Compensation
Committee to have contributed to the success of the Company, are eligible to be
granted Non-Qualified Stock Options (as defined below) under the Plan. Incentive
Stock Options (as defined below) may be granted only to employees of the Company
or any subsidiary of the Company.
The Plan is administered by a Compensation Committee (the "Committee")
consisting of two or more members of the Board of Directors, appointed by the
Board of Directors. The Committee will determine, among other things, the
persons to whom options will be granted, the type of options to be granted, the
number of shares subject to each option and the share price. The Committee will
also determine the term of each option, the restrictions or limitations thereon,
and the manner in which each such option may be exercised. The Committee
currently consists of Messrs. Ellis, Gerzof and Goldberg. Unless sooner
terminated, no options may be granted under the Plan after March 18, 2006.
Participation in the Option Plan
The following table sets forth information with respect to options granted
under the Plan, subject to shareholder approval of the Plan, during the fiscal
year ended September 30, 1996 to (i) the Company's Chief Executive Officer and
each other executive officer of the Company who received compensation in excess
of $100,000 for services rendered in all capacities to the Company for the
fiscal year ended September 30, 1996 (the "Named Executive Officers"); (ii) all
current executive officers as a group; (iii) all current directors who are not
executive officers as a group and (iv) all employees who are not executive
officers, as a group. The term of all options outstanding under the Plan ranges
from five to ten years from the date of grant:
-6-
<PAGE>
<TABLE>
<CAPTION>
Weighted Average Market Dollar
Exercise Price of Value
Shares Subject to Price Underlying of
Name and Position Options Granted Per Share Shares(1) Options(1)
- ----------------- --------------- --------- --------- ----------
<S> <C> <C> <C> <C>
Stephen Katz, Chairman of the Board, 100,000 $6.60 $9.75 $315,000
Chief Executive Officer........................
William H. Wood, President..................... 0 -- -- --
Michael Walsh, Vice President of 4,000 7.56 9.75 8,760
Engineering....................................
Henry Kayser, Vice President and Chief 0 -- -- --
Financial and Accounting Officer ..............
Robert W. Nader, Vice President 4,000 7.56 9.75 8,760
Production/Market Development..................
All current executive officers as a 133,000 6.87 9.75 383,040
group (6 persons)(2)...........................
All current directors who are not 7,500 7.75 9.75 15,000
executive officers as a group
(4 persons)....................................
All employees who are not executive 37,500 7.56 9.75 82,125
officers as a group (101 persons)..............
</TABLE>
(1) Determined on the basis of the market price of the Company's Common Stock
as reported by the NASDAQ National Market as of the close of trading on
September 30, 1996 (The market price of the Company's Common stock as of
the close of trading on the latest practicable date, January 15, 1997, was
$12.00).
(2) Includes shares subject to options granted to Edward Seidenberg.
Stock Options
The Plan provides for the grant of "incentive stock options" ("Incentive
Stock Options") as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), and for options not qualifying as Incentive Stock
Options ("Non-Qualified Stock Options"). The Committee shall determine those
persons to whom stock options may be granted.
Under the Plan the maximum number of shares that may be covered by stock
options granted to any employee during any taxable year is 200,000 shares.
All options granted pursuant to the Plan are nontransferable by the
optionee during his lifetime. All options granted under the Plan, will, unless a
shorter term is established by the Committee, expire if not exercised within ten
years of the grant (five years in the case of Incentive Stock Options granted to
an eligible employee owning stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or a parent or subsidiary of
the Company immediately before the grant ("10% Shareholder")), and under certain
circumstances set forth in the Plan, may be exercised within 30 days following
termination of employment (one year in the event of death of the optionee).
Options may be granted to optionees in such amounts and at such prices as may be
determined, from time to time, by the Committee. The exercise price of an
Incentive Stock Option will not be less than the fair market value of the shares
underlying the
-7-
<PAGE>
Incentive Stock Option on the date the Incentive Stock Option is granted,
provided, however, that the exercise price of an Incentive Stock Option granted
to a 10% Shareholder may not be less than 110% of such fair market value. The
exercise price of Non-Qualified Stock Options will not be less than the fair
market value of the shares underlying the Non-Qualified Stock Option on the date
the Non-Qualified Stock Option is granted. The Company may not, in the
aggregate, grant Incentive Stock Options that are first exercisable by any
optionee during any calendar year (under all such plans of the optionee's
employer corporation and its "parent" and "subsidiary" corporations, as those
terms are defined in Section 424 of the Code) to the extent that the aggregate
fair market value of the underlying stock (determined at the time the option is
granted) exceeds $100,000.
The Plan contains anti-dilution provisions authorizing appropriate
adjustments in certain circumstances. Shares of Common Stock subject to options
which expire without being exercised or which are cancelled as a result of the
cessation of employment are available for future grants. No shares of Common
Stock of the Company may be issued to any optionee until the full option price
has been paid. The Committee may grant individual options under the Plan with
more stringent provisions than those specified in the Plan.
Any stock options granted shall become exercisable in such amounts, at such
intervals and upon such terms and conditions as the Committee shall provide.
Stock options granted under the Plan are exercisable until the earlier of (i) a
date set by the Committee at the time of grant or (ii) the close of business on
the day before the tenth anniversary of the stock option's date of grant (the
day before the fifth anniversary in the case of an Incentive Stock Option
granted to a 10% Shareholder). The Plan shall remain in effect until all stock
options are exercised or terminated. Notwithstanding the foregoing, no options
may be granted after March 18, 2006 under the Plan.
Certain Federal Income Tax Consequences of the Plan
The following is a brief summary of the Federal income tax aspects of
grants made under the Plan based upon statutes, regulations and interpretations
in effect on the date hereof. This summary is not intended to be exhaustive, and
does not describe state, local or foreign tax consequences.
1. Incentive Stock Options. The participant will recognize no taxable
income upon the grant or exercise of an Incentive Stock Option. Upon a
disposition of the shares after the later of two years from the date of grant
and one year after the transfer of the shares to the participant, (i) the
participant will recognize the difference, if any, between the amount realized
and the exercise price as long-term capital gain or long-term capital loss (as
the case may be) if the shares are capital assets in his or her hands; and (ii)
the Company will not qualify for any deduction in connection with the grant or
exercise of the options. The excess, if any, of the fair market value of the
shares on the date of exercise of an Incentive Stock Option over the exercise
price will be treated as an item of adjustment for his or her taxable year in
which the exercise occurs and may result in an alternative minimum tax liability
for the participant. In the case of a disposition of shares in the same taxable
year as the exercise where the amount realized on the disposition is less than
the fair market value of the shares on the date of exercise, there will be no
adjustment since the amount treated as an item of adjustment, for alternative
minimum tax purposes, is limited to the excess of the amount realized on such
disposition over the exercise price which is the same amount included in regular
taxable income.
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<PAGE>
If Common Stock acquired upon the exercise of an Incentive Stock Option is
disposed of prior to the expiration of the holding periods described above, (i)
the participant will recognize ordinary compensation income in the taxable year
of disposition in an amount equal to the excess, if any, of the lesser of the
fair market value of the shares on the date of exercise or the amount realized
on the disposition of the shares, over the exercise price paid for such shares;
and (ii) the Company will qualify for a deduction equal to any such amount
recognized, subject to any limitations of Section 162(m) of the Code and the
requirement that the compensation be reasonable. The participant will recognize
the excess, if any, of the amount realized over the fair market value of the
shares on the date of exercise, if the shares are capital assets in his or her
hands, as short-term or long-term capital gain, depending on the length of time
that the participant held the shares, and the Company will not qualify for a
deduction with respect to such excess.
Subject to certain exceptions for disability or death, if an Incentive
Stock Option is exercised more than three months following the termination of
the participant's employment, the option will generally be taxed as a
Non-Qualified Stock Option. See "Non-Qualified Stock Options."
2. Non-Qualified Stock Options. With respect to Non-Qualified Stock Options
(i) upon grant of the option, the participant will recognize no income; (ii)
upon exercise of the option (if the shares are not subject to a substantial risk
of forfeiture), the participant will recognize ordinary compensation income in
an amount equal to the excess, if any, of the fair market value of the shares on
the date of exercise over the exercise price, and the Company will qualify for a
deduction in the same amount, subject to any limitations of Section 162(m) of
the Code and the requirement that the compensation be reasonable; (iii) the
Company will be required to comply with applicable Federal income tax
withholding requirements with respect to the amount of ordinary compensation
income recognized by employees who are participants; and (iv) on a sale of the
shares, the participant will recognize gain or loss equal to the difference, if
any, between the amount realized and the sum of the exercise price and the
ordinary compensation income recognized. Such gain or loss will be treated as
short-term or long-term capital gain or loss if the shares are capital assets in
the participant's hands depending upon the length of time that the participant
held the shares.
Recommendation
BASED UPON THE FOREGOING AND OTHER FACTORS, THE BOARD OF DIRECTORS BELIEVES
THAT THE ADOPTION OF THE PLAN IS IN THE BEST INTEREST OF THE COMPANY AND ITS
SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE PLAN.
MERGER WITH GLOBAL PAYMENT TECHNOLOGIES, INC.
General
The Board of Directors has unanimously approved and, for the reasons
discussed below, recommends that the shareholders approve a change of the
Company's state of incorporation from New York to Delaware to be effected by the
merger of the Company into the Company's wholly-owned subsidiary, Global Payment
Technologies, Inc. ("GPTI"), a Delaware corporation (the "Merger"), pursuant to
an Agreement and Plan of Merger ("Merger Agreement")
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<PAGE>
substantially in the form attached hereto as Exhibit B. Adoption and approval of
the Merger Agreement and the subsequent consummation of the Merger will affect
certain rights of shareholders of the Company. Accordingly, shareholders are
urged to read carefully the following sections of the Proxy Statement, which
describe the purpose and effects of the reincorporation and Exhibit B hereto,
before voting on the proposed Merger.
In the event the Merger is effected, each share of Common Stock of the
Company will automatically be converted into one share of Common Stock of GPTI.
GPTI will thereupon be the surviving publicly-owned corporation.
Principal Reasons for the Merger
For many years, Delaware has followed a policy of encouraging incorporation
in that state and, in furtherance of that policy, has adopted comprehensive,
modern and flexible corporate laws which are periodically updated and revised to
meet changing business needs. As a result, many corporations initially choose
Delaware for their domicile, and many others reincorporate in Delaware. Because
of Delaware's longstanding policy of encouraging incorporation in that state,
and consequently its preeminence as the state of incorporation for many major
corporations, the Delaware courts have developed a considerable expertise in
dealing with corporate issues and a substantial body of case law has developed
construing Delaware law and establishing public policies with respect to
Delaware corporations. These factors often provide the directors and management
of Delaware corporations with greater certainty and predictability in managing
the affairs of the corporation. For a discussion of certain differences in
shareholders' rights and the powers of management under the New York Business
Corporation Law (the "NYBCL") and the Delaware General Corporation Law (the
"DGCL"), see "Material Differences between the Corporation Laws of New York and
Delaware".
Material Differences Between the Corporation Laws of New York and Delaware
The Merger will effect several changes in the rights of shareholders as a
result of differences between the NYBCL and the DGCL. Summarized below are the
material differences affecting the rights of shareholders. This summary does not
purport to be a complete statement of differences affecting shareholders' rights
under the NYBCL or the DGCL and is subject to, and qualified in its entirety by
reference to, all the provisions thereof.
Cash Dividends
The DGCL provides that a corporation may, unless otherwise restricted by
its certificate of incorporation, declare and pay dividends out of surplus, or
if no surplus exists, out of net profit for the current or preceding fiscal year
(provided that the amount of capital of the corporation is not less than the
aggregate amount of the capital represented by the issued and outstanding stock
of all classes having a preference upon the distribution of assets). Under the
NYBCL, dividends may be paid only out of surplus.
-10-
<PAGE>
Vote Required for Certain Corporate Action
The NYBCL generally requires that certain mergers and consolidations and
sales of all or substantially all of the assets of a New York corporation not in
the ordinary course of business be approved by the owners of two-thirds of the
outstanding shares entitled to vote thereon. Under the DGCL, such transactions
require approval by the owners of a majority of the outstanding stock entitled
to vote thereon, and a vote of the shareholders of the surviving corporation is
not necessary where, in the case of a merger, (i) no amendment of its
certificate of incorporation or change in its outstanding stock is involved and
(ii) the merger results in no more than a 20% increase in its outstanding common
stock.
Dissenters' Rights of Appraisal
Under the NYBCL, dissenting shareholders who follow prescribed statutory
procedures are entitled to appraisal rights in connection with certain mergers,
consolidations and sales of all or substantially all the assets of a
corporation. The DGCL provides similar rights and procedures for mergers and
consolidations only. Furthermore, under the DGCL, even in those cases, such
rights are not provided in certain circumstances, including transactions in
which shares of the corporation being voted in a merger or consolidation are
listed on a national securities exchange or designated as a National Market
System security on NASDAQ (the Company's Common Stock is, and, subsequent to the
merger, GPTI's Common Stock will be, listed on the NASDAQ National Market
System) or are held of record by more than 2,000 shareholders and in which the
shares to be received in such merger or consolidation are shares of the
surviving corporation or are listed on a national securities exchange or
designated as a National Market System security on NASDAQ or are held of record
by more than 2,000 shareholders.
The availability of appraisal rights to shareholders of the Company who
dissent from the Merger is discussed under "Rights of Dissenting Shareholders"
below.
Business Combination Statutes
The NYBCL prohibits any "business combination" (as therein defined) between
a "resident domestic corporation" and an "interested shareholder" for five years
after the date that the interested shareholder became an interested shareholder
unless prior to that date the board of directors of the domestic corporation
approved the business combination or the transaction that resulted in the
interested shareholder becoming an interested shareholder. After five years,
such a business combination is permitted only if (i) it is approved by a
majority of the shares not owned by, or by an affiliate of, the interested
shareholder or (ii) certain statutory fair price requirements are met. A
"resident domestic corporation" is defined as any corporation that (i) is
incorporated in New York, (ii) has its principal executive offices and
significant business operations in New York or has at least 250 or 25% of its
employees in New York (including employees of its 80% subsidiaries), and (iii)
has at least 10% of its stock beneficially owned by New York residents. An
"interested shareholder" is any person who beneficially owns, directly or
indirectly, 20% or more of the outstanding voting stock of the corporation.
-11-
<PAGE>
The DGCL prohibits any "business combination" (as therein defined) between
a Delaware corporation and an "interested shareholder" for three years following
the date that the interested shareholder became an interested shareholder unless
(i) prior to the time the board of directors approved the business combination
or the transaction that resulted in the interested shareholder becoming an
interested shareholder, (ii) upon consummation of the transaction that resulted
in the interested shareholder becoming an interested shareholder, the interested
shareholder held at least 85% of the outstanding voting stock of the corporation
(not counting shares owned by officers and directors and certain shares in
employee stock plans), or (iii) at or subsequent to such time the business
combination is approved by the board of directors and at least two-thirds of the
outstanding shares of voting stock not owned by the interested shareholder. The
DGCL defines "interested shareholder" as any person who beneficially owns,
directly or indirectly, 15% or more of the outstanding voting stock of the
corporation. Unlike the NYBCL, the DGCL does not require that the corporation's
principal executive offices or significant operations be located in Delaware in
order to be covered by this law.
Consideration for Shares
Under the NYBCL, neither obligations of the subscriber for future payments
nor obligations of the subscriber for future services may constitute payment or
part payment for shares of a corporation. Furthermore, certificates for shares
may not be issued until the full amount of the consideration therefor has been
paid (except in the case of shares purchased pursuant to stock options under a
plan permitting installment payments). Under the DGCL, shares of stock may be
issued, and deemed to be fully paid and nonassessable, if the corporation
receives consideration (in the form of cash, services rendered, personal
property, real property, leases of real property or a combination thereof)
having a value of not less than the par value of such shares, and the
corporation receives a binding obligation of the subscriber to pay the balance
of the subscription price.
Classification of the Board of Directors
The NYBCL permits but does not require the adoption of a classified board
with as many as four classes but forbids fewer than three directors in any
class. Directors who serve on a classified board may be removed with or without
cause under the NYBCL.
The DGCL permits but does not require the adoption of a classified board of
directors pursuant to which the directors can be divided into as many as three
classes, with staggered terms of office and with only one class of directors
coming up for election each year. The DGCL also provides that directors who
serve on a classified board can only be removed for cause.
Redeemable Shares
The NYBCL generally permits redemption only at the option of the
corporation, while the DGCL permits redeemable shares to be redeemed at the
option of the corporation or the shareholder.
-12-
<PAGE>
Issuance to Officers, Directors and Employees of Rights or Options to Purchase
Shares
The NYBCL requires the affirmative vote of a majority of the shares
entitled to vote in order to issue to officers, directors or employees options
or rights to purchase stock. The DGCL does not require shareholder approval of
such transactions.
Number of Directors
Under the NYBCL, the number of directors may not be less than three, and
any higher number may be fixed by the By-laws or by action of the shareholders
or of the Board of Directors under specific provisions of the By-laws adopted by
the shareholders. The number of directors may be increased or decreased by
amendment of the By-laws or by action of the shareholders or of the Board of
Directors under the specific provisions of a By-law adopted by the shareholders,
subject to certain conditions.
Under the DGCL, a corporation may have as few as one director and there are
no maximum limits. The specific number may be fixed in the certificate of
incorporation but if so, it may be changed only with both Board of Directors and
shareholder approval. If the certificate of incorporation is silent as to the
number of directors, the Board of Directors may fix or change the authorized
number of directors pursuant to a provision of the By-laws.
Loans to Directors
The NYBCL requires that loans to directors be authorized by an affirmative
vote of shareholders. Under the DGCL, loans may be made to directors if the
Board of Directors determines that the loan may benefit the corporation.
Inspection of Shareholders List
With respect to the inspection of shareholders lists, the NYBCL provides a
right of inspection on at least five days' written demand to (i) any person who
shall have been a shareholder for at least six months immediately preceding the
demand or (ii) any person holding, or authorized in writing by, at least five
percent of any class of outstanding shares. The corporation has certain rights
calculated to assure itself that the demand for inspection is not for a purpose
or interest other than that of the corporation.
The DGCL permits any shareholder to inspect the shareholders list for a
purpose reasonably related to such person's interest as a shareholder and,
during the ten days preceding the shareholders' meeting, for any purpose germane
to that meeting.
Differences Between the Certificate and By-laws of the Company and GPTI
The GPTI Certificate provides that to the fullest extent permitted by law a
director will not be personally liable for monetary damages to GPTI or its
shareholders for or with respect to any acts
-13-
<PAGE>
or omissions in the performance of such director's duties, except for liability
(i) for any breach of the director's duty of loyalty to GPTI or its
shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the DGCL, or (iv) for any transaction from which the director
derived an improper personal benefit. The Company's Certificate does not include
such a provision but the Company's By-laws provide for indemnification of
directors to the full extent permitted by law.
The provision contained in the GPTI Certificate is intended to afford
directors additional protection and limit their potential liability from suits
alleging a breach of the duty of care by a director. As a result of the
inclusion of such a provision, shareholders may be unable to recover monetary
damages against directors for actions taken by them that constitute negligence
or that are otherwise in violation of their fiduciary duty of care, although it
may be possible to obtain injunctive or other equitable relief with respect to
such actions. If equitable remedies are found not to be available to
shareholders in any particular situation, shareholders may not have an effective
remedy against a director in connection with such conduct.
Federal Income Tax Consequences
It is expected that the Merger will, under current law, constitute a
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"). The Company has not obtained an opinion of counsel, an
opinion of a certified public accountant or a ruling from the Internal Revenue
Service ("IRS") as to the tax consequences of such Merger. Since no ruling has
been obtained, no assurance can be given that the IRS will agree with such
reorganization treatment or that a challenge thereto by the IRS, if made, will
not be successful.
Assuming that the Merger constitutes a reorganization, the federal income
tax consequences to the Company and its shareholders are as follows. No gain or
loss will be recognized to the Company or shareholders who exchange their
Company shares solely for GPTI shares. Such shareholders will have the same tax
basis in the shares of GPTI received in the transaction as the basis in the
shares of the Company exchanged therefor, and their holding period of the shares
of GPTI will include the period during which the shares of the Company were
held, provided such shares of the Company were held as capital assets on the
effective date of the Merger. In most instances, a dissenting stockholder who
receives payment for shares upon exercise of the right of appraisal will
recognize gain or loss for federal income tax purposes measured by the
difference between the basis for the shares of the Company and the amount of
payment received. Such gain or loss will be capital gain or loss if the shares
were held as capital assets on the effective date of the Merger.
The foregoing summary of federal income tax consequences is included for
general information only and does not address the federal income tax
consequences to all shareholders of the Company, including those who acquired
shares of common stock pursuant to the exercise of employee stock options or
otherwise as compensation and corporations subject to the alternative minimum
tax. In view of the individual nature of tax consequences, such shareholders are
urged to consult their own tax advisors as to the specific tax consequences of
the transaction, including the application and effect of state, local and
foreign income and other tax laws.
-14-
<PAGE>
Rights of Dissenting Shareholders
Section 910 of the NYBCL sets forth the rights of shareholders of the
Company who object to the Merger. Any owner of the Common Stock of the Company
who does not vote in favor of the Merger, or who duly revokes his or her vote in
favor of such transaction, may if the Merger is consummated, obtain payment, in
cash, for the fair market value of such owner's shares by strictly complying
with the requirements of Section 623 of the NYBCL.
The dissenting shareholder must file with the Company before the taking of
the vote on the Merger proposal a written objection including a notice of
election to dissent, such owner's name and residence address, the number and
class of shares as to which such owner dissents (which number may not be less
than all of the shares as to which such owner has a right to dissent) and a
demand for payment of the fair value of such shares if the Merger is
consummated. Any such written objection should be addressed to: Coin Bill
Validator, Inc., 425-B Oser Avenue, Hauppauge, New York 11788, Attention:
Secretary.
Within ten days after the vote of shareholders authorizing the Merger, the
Company must give written notice of such authorization to each such dissenting
shareholder. At the time of filing the notice of election to dissent or within
one month thereafter, the shareholder must submit certificates representing such
owner's shares to the Company or its transfer agent, American Stock Transfer and
Trust Company, for notation thereon of the election to dissent, after which such
certificates will be returned to the shareholder. Any shareholder who fails to
submit his or her shares for such notation shall, at the option of the Company
exercised by written notice to the shareholder within 45 days from the date of
filing of the notice of election to dissent, lose such owner's appraisal rights
unless a court, for good cause shown, shall otherwise direct.
Within 15 days after the expiration of the period within which shareholders
may file their notices of election to dissent or with 15 days after the Merger,
whichever is later (but not later than 90 days after the shareholders' vote
authorizing the Merger), the Company must make a written offer (which, if the
Merger has not been consummated, may be conditioned upon such consummation) to
each shareholder who has filed such notice of election to pay for the shares at
a specified price which the Company considers to be their fair value. If the
Company and the dissenting shareholder are unable to agree as to such value,
Section 623(h) of the NYBCL provides for judicial determination of fair value.
In the event of such a disagreement, a court proceeding shall be commenced by
the Company in the Supreme Court of the State of New York, County of Suffolk, or
by the dissenting shareholder if the Company fails to commence the proceeding
within the time required by Section 623 of the NYBCL. The Company intends to
commence such a proceeding in the event of such a disagreement.
A vote against the Merger proposal does not constitute a "written
objection" required to be filed by an objecting shareholder. Failure by a
shareholder to vote against the Merger will not constitute a waiver of rights
under Section 623 provided that a written objection has been properly filed and
such shareholder has not voted in favor of the Merger.
THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROVISIONS
OF SECTION 623 OF THE NYBCL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
SECTION, A COPY OF WHICH IS REPRODUCED IN FULL AS APPENDIX I. EACH SHAREHOLDER
INTENDING TO EXERCISE
-15-
<PAGE>
DISSENTERS' RIGHTS SHOULD REVIEW SUCH APPENDIX CAREFULLY AND CONSULT SUCH
SHAREHOLDER'S COUNSEL FOR A MORE COMPLETE AND DEFINITIVE STATEMENT OF THE RIGHTS
OF DISSENTING SHAREHOLDERS AND THE PROPER PROCEDURE TO FOLLOW TO EXERCISE SUCH
RIGHTS.
Under the Merger Agreement, the Board of Directors may abandon the Merger,
even after shareholder approval, if for any reason the board determines that it
is inadvisable to proceed with the Merger, including considering the number of
shares for which appraisal rights have been exercised and the cost to the
Company thereof.
The affirmative vote of the owners of two-thirds of all outstanding shares
of Common Stock entitled to vote on the Merger proposal, is required for
approval of the Merger proposal. A vote for the proposal will constitute
specific shareholder approval for the adoption of the Merger Agreement.
Exchange of Certificates
Upon the effectiveness of the Merger each outstanding share of the Common
Stock of the Company will be converted into one share of Common Stock of GPTI.
Shareholders may, but will not be required to, exchange their certificates of
the Company's Common Stock for certificates of GPTI's Common Stock.
Recommendation
BASED UPON THE FOREGOING AND OTHER FACTORS, THE BOARD OF DIRECTORS BELIEVES
THAT CONSUMMATION OF THE MERGER IS IN THE BEST INTEREST OF THE COMPANY AND ITS
SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE MERGER
AGREEMENT.
EXECUTIVE COMPENSATION
The following table summarizes the compensation earned for the last three
fiscal years by the Company's Chief Executive Officer and the Named Executive
Officers.
-16-
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
----------------------------------------------------------
Securities
Underlying
Name and Principal Position Fiscal Year Salary Bonus Options
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stephen Katz 1996 $ 77,884 200,000
Chairman of the Board and Chief Executive
Officer
William H. Wood 1996 200,000
President
1995 193,269 25,000
1994 154,808 $13,462
Michael Walsh 1996 125,481 4,000
Vice President of Engineering
1995 125,000
1994 100,000
Henry Kayser 1996 129,568
Vice President and Chief Financial and
Accounting Officer
1995 101,200
1994 11,538
Robert W. Nader 1996 111,961 4,000
1995 77,692 15,000
</TABLE>
The following table sets forth information as to all grants of options to each
of the Named Executive Officers during fiscal 1996.
-17-
<PAGE>
<TABLE>
<CAPTION>
Option Grants in Fiscal Year 1996
Individual Grants
---------------------------------------------------------------------------------------------------
Number of Securities % of Total Options
Underlying Granted to Employees Exercise
Name Options Granted in 1996 Price Expiration Date
---- --------------- ------- ----- ---------------
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stephen Katz 100,000(1) 32.6 $6.00 3/18/01
100,000(2) 32.6 6.60 3/18/01
Michael Walsh 4,000(3) 1.3 7.5625 5/21/06
Robert W. Nader 4,000(3) 1.3 7.5625 5/21/06
</TABLE>
- ----------------
(1) The option was awarded at the fair market value of the Company's Common
Stock at March 19, 1996, the date of the award, and becomes exercisable in
cumulative annual installments of 33-1/3% per year on each of the first
three anniversaries of the grant date. The option is exercisable over a
five-year period.
(2) The option was awarded, subject to shareholder approval of the Plan, at
110% of the fair market value of the Company's Common Stock at March 19,
1996, the date of the award, and becomes exercisable in cumulative annual
installments of 33-1/3% per year on each of the first three anniversaries
of the grant date. The option is exercisable over a five-year period.
(3) The option was awarded, subject to shareholder approval of the Plan, at the
fair market value of the Company's Common Stock at May 22, 1996, the date
of the award, and becomes exercisable in cumulative annual installments of
20% per year on each of the first five anniversaries of the grant date. The
option is exercisable over a ten-year period.
-18-
<PAGE>
The following table sets forth information with respect to the exercised
stock options held by the Named Executive Officers during fiscal 1996. As noted
below, no options were exercised by the Named Executive Officers during fiscal
1996.
<TABLE>
<CAPTION>
Aggregated Fiscal Year End Option Values
---------------------------------------------------------
Shares Number of Securities
Acquired Underlying Unexercised Value of Unexercised
on Exercise Options at In-the-Money Options
----------- Value September 30, 1996 September 30, 1996
Name (#) Realized Exercisable (Unexercisable) Exercisable (Unexercisable(1))
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stephen Katz 0 0 0 200,000 0 $690,000
William H. Wood 0 0 10,000 15,000 0 0
Michael Walsh 0 0 0 4,000 0 8,750
Robert W. Nader 0 0 6,000 13,000 0 8,750
</TABLE>
- -----------------
(1) The closing price of the Company's Common Stock as reported on the NASDAQ
National Market on September 30, 1996 was $9.75 per share. Value is
calculated by multiplying (a) the difference between the closing price and
the option exercise price by (b) the number of shares of Common Stock
underlying the option.
Compensation of Directors
Messrs. Gerzof, Goldberg and Ellis each were granted options to purchase
2,500 shares of Common Stock at a price of $9.00 per share, subject to
shareholder approval of the Plan, for attending Board meetings during the fiscal
year ended September 30, 1996.
Employment Agreements
In May 1996, the Company entered into an agreement with Stephen Katz
providing for his employment as Vice Chairman of the Board of Directors and
Chief Executive Officer on a year to year basis. In September 1996, Mr. Katz was
elected Chairman of the Board of Directors. The agreement provides that Mr. Katz
shall be paid a salary at the rate of $150,000 per year, all fringe benefits
offered by the Company and shall receive options to purchase an aggregate of
200,000 shares of Common Stock under the Company's 1994 and 1996 Stock Option
Plans. Such options shall vest at the rate of 33-1/3% per year beginning one
year after the date of employment.
In January 1993, the Company entered into an agreement with William H. Wood
providing for his employment as President for a five-year term expiring on
January 31, 1998. The agreement provides for a base salary of $150,000 per year
for the first year of the term, $175,000 for the second year and $200,000 for
the final three years of the term. The agreement also provides for participation
in all employee benefit plans, the use of an automobile and certain other fringe
benefits.
-19-
<PAGE>
In August 1993, the Company entered into an employment agreement with
Michael Walsh, providing for his employment as Vice President of Engineering for
a four-year term expiring on September 30, 1997. The agreement provides for base
salary of $100,000 per year with an automatic increase to $110,000 per year
following any 13-week period in which the Company average validator sales exceed
1,000 units per week. The agreement also provides for participation in all
employee benefit plans and certain other fringe benefits.
In December 1994, the Company entered into an employment agreement with
Robert W. Nader providing for his employment as Vice President Product/Market
Development for a three-year term commencing in January 1995. The agreement
provides for base salaries of $100,000 for the first year of the term, $110,000
for the second year and $120,000 for the final year of the term. The agreement
also provides for participation in all employee benefit plans of the Company,
and certain other fringe benefits, including the payment of a $12,000 relocation
allowance and the grant of a five-year option to purchase 15,000 shares of
Common Stock exercisable at $11.00 per share.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information as of January 15, 1997
with respect to the beneficial ownership of the Company's Common Stock by each
shareholder known by the Company to be the beneficial owner of more than 5% of
its outstanding Common Stock, by each director of the Company, by each of the
Named Executive Officers and by the directors and executive officers of the
Company as a group:
<TABLE>
<CAPTION>
Percentage
Amount and of
Nature of Outstanding
Beneficial Shares
Name and Address(1) Ownership(2) Owned
- ------------------- ------------ -----
<S> <C> <C>
Stephen Katz............................................................ 472,520(3) 17.18%
Joan Vogel.............................................................. 322,020(4) 11.71%
Odyssey Financial Company............................................... 200,000 7.27%
Richard E. Gerzof....................................................... 206,009 7.41%
William H. (Bill) Wood.................................................. 152,893(5) 5.53%
Michael Walsh........................................................... 78,995 2.87%
Edward Seidenberg....................................................... 50,000 1.82%
Henry Kayser............................................................ 45,998 1.67%
Jay Goldberg............................................................ 20,000 *
Robert W. Nader......................................................... 9,000(6) *
Henry B. Ellis.......................................................... 1,000 *
All directors and executive officers as a group (ten persons)........... 1,358,435(7) 48.97%
</TABLE>
- ---------------------------
* Less than 1%
-20-
<PAGE>
(1) The addresses of the persons named in this table are: Messrs. Katz, Wood,
Seidenberg, Walsh, and Nader, c/o Coin Bill Validator, Inc., 425-B Oser
Avenue, Hauppauge, New York, 11788, Ms. Vogel, 400 East 56th Street, Apt.
#33H, New York, New York 10022; Odyssey Financial Company, c/o Stephen
Katz, 20 East Sunrise Highway, Valley Stream, New York 11581, Mr. Gerzof,
161 Sportsman Avenue, Freeport, New York 11520; Mr. Goldberg, 1 East 72nd
Street, Apt. #44, New York, New York 10023; Mr. Ellis, 303 Texas Avenue
#15, El Paso, Texas 79901; Mr. Kayser, 25 Andover Drive, Deer Park, New
York 11729.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from January 15, 1997 upon the
exercise of options or warrants. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that are held
by such person (but not those held by any other person) and which are
exercisable within 60 days from January 15, 1997 have been exercised.
Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them.
(3) Includes 10,000 shares owned of record by Mr. Katz and 200,000 shares owned
of record by Odyssey Financial Company, a partnership of which Mr. Katz is
Managing General Partner. Also includes 163,520 owned of record by the
Joseph Vogel Revocable Trust and 99,000 shares owned of record by Joan
Vogel all of which are currently being held in a Voting Trust of which
Stephen Katz is voting trustee and possesses sole voting power pursuant to
a Voting Trust Agreement dated May 23, 1996.
(4) Includes 186,520 shares beneficially owned by the Joseph Vogel Revocable
Trust, of which Ms. Vogel is a trustee and beneficiary.
(5) Includes 15,000 shares which may be purchased under immediately exercisable
options.
(6) Represents shares which may be purchased under immediately exercisable
options.
(7) Includes 24,000 shares which may be purchased under immediately exercisable
options.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Based solely on a review of Forms 3 and 4 and amendments thereto furnished
to the Company with respect to its most recent fiscal year, the Company believes
that during the fiscal year ending September 30, 1996, all filing requirements
applicable to executive officers, directors and 10% shareholders have been
complied with except, that, Forms 4 were filed late in connection with certain
sales of Common Stock made by Joan Vogel and the Joseph Vogel Revocable Trust in
July and August 1996.
INDEPENDENT AUDITORS
Arthur Andersen LLP has audited and reported upon the financial statements
of the Company for the fiscal year ended September 30, 1996. It is currently
anticipated that Arthur Andersen LLP will be selected by the Board of Directors
to examine and report on the financial statements of the Company for the year
ending September 30, 1997. Representatives of Arthur Andersen LLP are expected
to be present at the Annual Meeting, will have the opportunity to make a
statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
-21-
<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the Company's Annual
Meeting to be held in 1998 must be received by the Company for inclusion in the
Company's proxy statement relating to that meeting not later than December 13,
1997. Such proposals should be addressed to Edward Seidenberg, Secretary, Coin
Bill Validator, Inc., 425-B Oser Avenue, Hauppauge, New York 11788.
OTHER INFORMATION
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED
SEPTEMBER 30, 1996 IS BEING FURNISHED HEREWITH TO EACH SHAREHOLDER OF RECORD AS
OF THE CLOSE OF BUSINESS ON FEBRUARY 7, 1997. COPIES OF THE COMPANY'S ANNUAL
REPORT TO SHAREHOLDERS WILL BE PROVIDED FREE OF CHARGE UPON WRITTEN REQUEST TO:
COIN BILL VALIDATOR, INC.
425-B OSER AVENUE
HAUPPAUGE, NEW YORK 11788
ATTENTION: EDWARD SEIDENBERG, SECRETARY
IN ADDITION, COPIES OF ANY EXHIBITS TO THE ANNUAL REPORT ON FORM 10-KSB
WILL BE PROVIDED FOR A NOMINAL CHARGE TO SHAREHOLDERS WHO MAKE A WRITTEN REQUEST
TO THE COMPANY AT THE ABOVE ADDRESS.
The Board of Directors is aware of no other matters, except for those
incident to the conduct of the Annual Meeting, that are to be presented to
shareholders for formal action at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting or any adjournments thereof, it
is the intention of the persons named in the proxy to vote the proxy in
accordance with their judgment.
By order of the Board
of Directors
Edward Seidenberg
Secretary
February 11, 1997
-22-
<PAGE>
EXHIBIT A
COIN BILL VALIDATOR, INC.
1996 STOCK OPTION PLAN
1. PURPOSES. The purposes of this Stock Option Plan are to attract and
retain the best qualified personnel for positions of substantial responsibility,
to provide additional incentive to the Employees of the Company or its
Subsidiaries, if any (as defined in Section 2 below), as well as other
individuals who perform services for the Company or its Subsidiaries, and to
promote the success of the Company's business.
Options granted hereunder may be either "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, as amended, or
"non-qualified stock options," at the discretion of the Board and as reflected
in the terms of the written instrument evidencing an Option.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Committee, if one has been appointed, or
the Board of Directors of the Company, if no Committee is appointed.
(b) "Common Stock" shall mean the Common Shares of the Company (par
value $.01 per share).
(c) "Company" shall mean Coin Bill Validator, Inc., a New York
corporation.
(d) "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one
is appointed.
(e) "Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Board.
(f) "Employee" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient to constitute "employment" by the Company.
(g) "Exchange Act" shall mean the Securities Act of 1934, as amended.
(h) "Incentive Stock Option" shall mean a stock option intended to
qualify as an incentive stock option within the
<PAGE>
meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
(i) "Non-qualified Stock Option" shall mean a stock option not
intended to qualify as an Incentive Stock Option.
(j) "Option" shall mean a stock option granted pursuant to the Plan.
(k) "Optioned Stock" shall mean the Common Stock subject to an option.
(l) "Optionee" shall mean an Employee or other person who receives an
Option.
(m) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 425(e) of the Internal Revenue
Code of 1986, as amended.
(n) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(o) "SEC" shall mean the Securities and Exchange Commission.
(p) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(q) "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 425(f) of the Internal Revenue
Code of 1986, as amended.
3. STOCK.
Subject to the provisions of Section 11 of the Plan, the maximum aggregate
number of shares which may be optioned and sold under the Plan is 450,000 shares
of Common Stock. If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for further grant under the Plan.
4. ADMINISTRATION.
(a) Procedure. The Company's Board of Directors may appoint a
Committee to administer the Plan. The Committee shall consist of not less
than two members of the Board of Directors who shall administer the Plan on
behalf of the Board of Directors. Once appointed, the Committee shall
continue to serve until otherwise directed by the Board of Directors. From
time to time the Board of Directors may increase the size of the Committee
and appoint additional members thereof, remove members (with or without
cause), and appoint new members in substitution
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<PAGE>
therefor, fill vacancies, however caused, or remove all members of the
Committee and thereafter directly administer the Plan.
If a majority of the Board of Directors is eligible to be granted
Options or has been eligible at any time within the preceding year, a
Committee must be appointed to administer the Plan. It is intended that the
appointment of the members of the Committee comply with the provisions of
Rule 16b-3 of the General Rules and Regulations promulgated under the
Exchange Act.
(b) Powers of the Board. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant Incentive
Stock Options, in accordance with Section 422 of the Internal Revenue Code
of 1986, as amended, or to grant Non-qualified Stock Options; (ii) to
determine, upon review of relevant information and in accordance with
Section 8(b) of the Plan, the fair market value of the Common Stock; (iii)
to determine the exercise price per share of Options to be granted which
exercise price shall be determined in accordance with Section 8(a) of the
Plan; (iv) to determine the persons to whom, and the time or times at
which, Options shall be granted and the number of shares to be represented
by each Option; (v) to interpret the Plan; (vi) to prescribe, amended and
rescind rules and regulations relating to the Plan; (vii) to determine the
terms and provisions of each Option granted (which need not be identical)
and, with the consent of the holder thereof, modify or amend each Option;
(viii) to accelerate or defer (with the consent of the Optionee) the
exercise date of any Option; (ix) to authorize any person to execute on
behalf of the Company any instrument required to effectuate the grant of an
Option previously granted by the Board; and (x) to make all other
determinations deemed necessary or advisable for the administration of the
Plan.
(c) Effect of the Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees
and any other holders of any Options granted under the Plan.
5. ELIGIBILITY; NON-DISCRETIONARY GRANTS.
(a) General. Incentive Stock Options may be granted only to Employees.
Non-qualified Stock Options may be granted to employees as well as
directors (subject to the limitations set forth in Section 4), independent
contractors and agents, as determined by the Board. Any person who has been
granted an Option may, if he is otherwise eligible, be granted an
additional Option or Options. The Plan shall not offer upon any Optionee
any right with respect to continuation of employment by the Company, nor
shall it interfere in any way with his right or the Company's right to
terminate his employment at any time.
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<PAGE>
(b) Limitation on Incentive Stock Options. No Incentive Stock Option
may be granted to an Employee if, as the result of such grant, the
aggregate fair market value (determined at the time each option was
granted) of the Shares with respect to which such Incentive Stock Options
are exercisable for the first time by such Employee during any calendar
year (under all such plans of the Company and any Parent and Subsidiary)
shall exceed One Hundred Thousand Dollars ($100,000).
(c) Annual Limitation on all Stock Options. No Stock Options may be
granted to any Employee in any fiscal year if as a result of such grant the
aggregate number of shares subject to options granted to such Employee that
year (under all such plans of the Company and any Parent or Subsidiary)
exceed 200,000 shares subject to the anti-dilution provisions of this Plan
(Section 11) and/or other Plans as applicable.
6. TERM OF THE PLAN. The Plan shall become effective upon the earlier to
occur of (i) its adoption by the Board of Directors, or (ii) its approval by
vote of the holders of a majority of the outstanding shares of the Company
entitled to vote on the adoption of the Plan. The Plan shall continue in effect
until March 18, 2006 unless sooner terminated under Section 13 of the Plan.
7. TERM OF THE OPTION. The term of each Option shall be ten (10) years from
the date of grant hereof or such shorter term as may be provided in the
instrument evidencing the Option. However, in the case of an Incentive Stock
Option granted to an Employee who, immediately before the Incentive Stock Option
is granted, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the day of grant
thereof or such shorter time as may be provided in the instrument evidencing the
Option.
8. EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price for the Shares to be issued pursuant
to the exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option:
(A) granted to an employee who, immediately before the
grant of such Incentive Stock Option, owns stock
representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less
than
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<PAGE>
110% of the fair market value per Share on the date of
grant, as the case may be;
(B) granted to an Employee not subject to the
provisions of Section 8(a)(i)(A), the per Share exercise
price shall be no less than one hundred percent (100%) of
the fair market value per Share on the date of grant.
(ii) In the case of a Non-qualified Stock Option, the per
share exercise price shall be no less than one hundred percent
(100%) of the fair market value per Share on the date of grant.
(b) The fair market value shall be determined by the Board in its
discretion; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid
and asked prices or, if applicable, the closing price of the Common Stock
on the date of grant, as reported by the National Association of Securities
Dealers Automated Quotation (NASDAQ) System or, in the event the Common
Stock is listed on a stock exchange, the fair market value per Share shall
be the closing price on such exchange on the date of grant of the Option,
as reported in the Wall Street Journal.
(c) The consideration to be paid for the shares to be issued upon
exercise of an Option or in payment of any withholding taxes thereon,
including the method of payment, shall be determined by the Board and may
consist entirely of (i) cash, check or promissory note; (ii) other Shares
of Common Stock owned by the Employee have a fair market value on the date
of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised; (iii) an assignment by the Employee
of the net proceeds to be received from a registered broker in such amount;
or (iv) any combination of such methods of payment, or such other
consideration and method of payment for the issuance of Shares to the
extent permitted under New York law and meeting rules and regulations of
the SEC to plans meeting the requirements of Section 16(b)(3) of the
Exchange Act.
9. EXERCISE OF OPTION.
(a) Procedure or Exercise; Rights as a Stockholder. Any option granted
hereunder shall be exercisable at such times and subject to such conditions
as may be determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be perishable
under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
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<PAGE>
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the
terms of the instrument evidencing the Option by the person entitled
to exercise the Option and full payment for the Shares with respect to
which the Option is exercised has been received by the Company. Full
payment may, as authorized by the Board, consist of any consideration
and method of payment allowable under Section 8(c) of the Plan; it
being understood that the Company shall take such action as may be
reasonably required to permit use of an approved payment method. Until
the issuance, which in no event will be delayed more than thirty (30)
days from the date of the exercise of the Option, (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights
as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. No adjustment will be made
for a dividend or other right for which the record date is prior to
the date the stock certificate is issued, except as provided in the
Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised.
(b) Termination of Status as an Employee. If any Employee ceases to
serve as an Employee, he may, but only within thirty (30) days (or such
other period of time not exceeding three (3) months as is determined by the
Board) after the date he ceases to be an Employee of the Company, exercise
his Option to the extent that he was entitled to exercise it as of the date
of such termination. To the extent that he was not entitled to exercise the
Option at the date of such termination, or if he does not exercise such
Option (which he was entitled to exercise) within the time specified
herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event an Employee is unable to continue his employment
with the Company as a result of his total and permanent disability (as
defined in Section 105(d)(4) of the Internal Revenue Code of 1986, as
amended), he may, but only within three (3) months (or such other period of
time not exceeding twelve (12) months as is determined by the Board) from
the date of disability, exercise his Option to the extent he was entitled
to exercise it at the date of such disability. To the extent that he was
not entitled to exercise it at the date of such disability, or if he does
not exercise such Option (which he was entitled to exercise) within the
time specified here, the Option shall terminate.
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<PAGE>
(d) Death of Optionee. In the event of the death of an Optionee:
(i) during the term of the Option who is at the time of his
death an Employee of the Company and who shall have been in
Continuous Status as an Employee since the date of grant of the
Option, the Option may be exercised, at any time within twelve
(12) months following the date of death, by the Optionee's estate
or by a person who acquired the right to exercise that would have
accrued had the Optionee continued living one (1) month after the
date of death; or
(ii) within thirty (30) days (or such other period of time
not exceeding three (3) months as is determined by the Board)
after the termination of Continuous Status as an Employee, the
Option may be exercised, at any time within three (3) months
following the date of death, by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest
or inheritance, by only to the extent of the right to exercise
that had accrued at the date of termination.
10. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. ADJUSTMENTS UPON CHANGES CAPITALIZATION OR MERGER. Subject to any
required action by the Stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of any Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split or the payment of a stock dividend with
respect to the Common Stock or any other increase or decrease in the number of
issued shares of Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in the respect by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.
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<PAGE>
In the event of proposed dissolution or liquidation of the Company, or in
the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of te Company with or into another corporation, the Board
of Directors of the Company shall, as to outstanding Options, either (i) make
appropriate provision for the protection of any such outstanding Options by the
substitution on an equitable basis of appropriate stock of the Company or of the
merged, consolidated or otherwise reorganized corporation which will be issuable
in respect to one share of Common Stock of the Company; provided, only that the
excess of the aggregate fair market value of the shares subject to the Options
immediately after such substitution over the purchase price thereof is not more
than the excess of the aggregate fair market value of the shares subject to such
Options immediately before such substitution over the purchase price thereof, or
(ii) upon written notice to an Optionee, provide that all unexercised Options
must be exercised within a specified number of days of the date of such notice
or they will be terminated. In any such case, the Board of Directors may, in its
discretion, advance the lapse of any waiting or installment periods and exercise
dates.
12. TIME FOR GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Board makes the determination granting
such Option. Notice of the determination shall be given to each person to whom
an Option is so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) The Board may amend or terminate the Plan from time to time in
such respects as the Board may deem advisable; provided, however, that the
following revisions or amendments shall require approval of the holders of
a majority of the outstanding shares of the Company entitled to vote:
(i) any increase in the number of Shares subject to the Plan,
other than in connection with an adjustment under Section 11 of the
Plan;
(ii) any change in the designation of the class of persons
eligible to be granted options; or
(iii) any material increase in the benefits accruing to
participants under the Plan.
(b) Stockholder Approval. If any amendment requiring stockholder
approval under Section 13(a) of the Plan is made, such stockholder approval
shall be solicited as described in Section 17(a) of the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options
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<PAGE>
already granted and such Options shall remain in full force and effect as
if this Plan had not been amended or terminated, unless mutually agreed
otherwise between the Optionee and the Board, which agreement must be in
writing and signed by the Optionee and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such shares pursuant to thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares, if in the opinion of
counsel for the Company, such a representation is required by, or appropriate
under, any of the aforementioned relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. STOCKHOLDER APPROVAL. Continuation of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. If such stockholder approval is obtained at
a duly held stockholder's meeting, it may be obtained by the affirmative vote of
the holders of a majority of the outstanding shares of the Company entitled to
vote thereon. The approval of such stockholders of the Company shall be (1)
solicited substantially in accordance with Section 14(a) of the Exchange Act and
the rules and regulations promulgated thereunder, or (2) solicited
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<PAGE>
after the Company has furnished in writing to the holders entitled to vote
substantially the same information concerning the Plan as that which would be
required by the rules and regulations in effect under Section 14(a) of the
Exchange Act at the time such information is furnished.
18. OTHER PROVISIONS. The Stock Option Agreement authorized under the Plan
shall contain such other provisions, including, without limitations,
restrictions upon the exercise of the Option, as the Board of Directors of the
Company shall deem advisable. Any Incentive Stock Option Agreement shall contain
such limitations and restrictions upon the exercise of the Incentive Stock
Option as shall be necessary in order that such option will be an Incentive
Stock Option as defined in Section 422 of the Internal Revenue Code of 1986, as
amended.
19. INDEMNIFICATION OF BOARD. In addition to such other rights of
indemnification as they may have as directors or as members of the Board, the
members of the Board shall be indemnified by the Company against the reasonable
expenses, including attorneys' fees actually and necessarily incurred in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection without
the Plan or any Option granted thereunder, and against all amounts paid by them
in settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding that such Board member is liable for
negligence or misconduct in the performance of his duties, provided that within
sixty (60) days after institution of any such action, suit or proceeding a Board
member shall, in writing, offer the Company the opportunity, at its own expense,
to handle and defend the same.
20. OTHER COMPENSATION PLANS. The adoption of the plan shall not affect any
other stock option or incentive or other compensation plans in effect for the
Company or any Subsidiary, nor shall the Plan preclude the Company from
establishing any other forms of incentive or other compensation for employees
and directors of the Company or any Subsidiary.
21. COMPLIANCE WITH EXCHANGE ACT RULE 16b-3. With respect to persons
subject to Section 16 of the Exchange Act, transactions under the Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the Exchange Act. To the extent any provision of the Plan or
action by the Board fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Board.
22. SINGULAR, PLURAL; GENDER. Whenever used herein, nouns in the singular
shall include the plural, and the masculine gender shall including the feminine
gender.
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23. HEADINGS, ETC., NO PART OF PLAN. Headings of Articles and Sections
hereof are inserted for convenience and reference; they constitute no part of
the Plan.
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EXHIBIT B
AGREEMENT AND PLAN OF MERGER (the "Plan") made the ____ day of March, 1997,
between GLOBAL PAYMENT TECHNOLOGIES, INC., a Delaware corporation ("GPTI"), and
COIN BILL VALIDATOR, INC., a New York corporation ("CBVI").
WHEREAS, GPTI has an authorized capital stock consisting of 20,000,000
shares of Common Stock, $.01 par value; and
WHEREAS, CBVI has an authorized capital stock consisting of 20,000,000
shares of Common Stock of which 2,750,000 are issued and outstanding, and
entitled to vote; and
WHEREAS, the Boards of Directors of each of GPTI and of CBVI deem it
advisable and in the best interests of GPTI and CBVI that CBVI merge with and
into GPTI;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein and of the mutual benefits hereby provided, it is
agreed that CBVI merge with and into GPTI, pursuant to the applicable laws of
the States of Delaware and New York and do hereby agree to the following terms
and conditions:
1. Merger. CBVI shall be merged with and into GPTI in accordance with the
applicable provisions of each of the Delaware General Corporation Law and the
New York Business Corporation Law.
2. Effective Date. This Plan shall become effective immediately upon
compliance with the laws of the States of New York and Delaware (the "Effective
Date").
<PAGE>
3. Surviving Corporation. GPTI shall survive the merger herein contemplated
and shall continue to be governed by the laws of the State of Delaware, but the
separate corporate existence of CBVI shall cease forthwith upon the Effective
Date. GPTI shall have the rights, privileges, immunities and franchises of CBVI
and all property, real and personality, and all debts due on whatever account
and all choses in action and every other interest belonging or due to CBVI shall
be taken and deemed transferred to and vested in GPTI without further act or
deed. GPTI shall be responsible and liable for all liabilities and obligations
of CBVI. Neither the rights of creditors nor liens upon the property of CBVI
shall be impaired by the merger.
4. Authorized Capital. The authorized capital stock of GPTI following the
Effective Date shall be 20,000,000 shares of Common Stock, $.01 par value,
unless and until the same shall be changed in accordance with the laws of the
State of Delaware.
5. Certificate of Incorporation. The Certificate of Incorporation of GPTI,
as in effect on the Effective Date, shall continue to be the Certificate of
Incorporation of GPTI following the Effective Date unless and until the same
shall be amended in accordance with the provisions thereof and applicable law.
6. By-Laws. The By-Laws of GPTI as in effect on the Effective Date shall
continue to be the By-Laws of GPTI following the Effective Date unless and until
the same shall be amended or repealed in accordance with the provisions thereof
and applicable law.
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<PAGE>
7. Further Assurance of Title. If at any time CBVI shall consider or be
advised that any acknowledgments or assurances in law or other similar actions
are necessary or desirable in order to acknowledge or confirm in and to GPTI any
right, title or interest of CBVI held immediately prior to the Effective Date,
CBVI and its proper officers and directors shall execute and deliver all such
acknowledgments or assurances in law and do all things necessary or proper to
acknowledge or confirm such right, title or interest in CBVI as shall be
necessary to carry out the purposes of this Plan, and CBVI and the proper
officers and directors thereof are fully authorized to take any and all such
action in the name of CBVI or otherwise.
8. Conversion of Outstanding Securities. On the Effective Date:
(a) None of the authorized shares, $.01 par value, of GPTI, shall be
converted as a result of the merger.
(b) Each of the issued and outstanding shares of Common Stock of CBVI
and all rights in respect thereof shall be converted into the right to
receive one (1) share of the Common Stock, $.01 par value, of GPTI (a "GPTI
Share") (and each such share of the Common Stock of CBVI shall be deemed
cancelled and the holder thereof shall cease to have any rights with
respect thereto), and each certificate representing such shares of the
Common Stock of CBVI shall thereafter and until surrendered be deemed to
represent for all corporate purposes the right to receive one (1) GPTI
Share.
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Each issued share of the Common Stock of CBVI which is held in its
Treasury, if any, at the Effective Date shall be cancelled and shall cease
to exist.
(c) Each of the outstanding options, warrants and shares reserved for
issuance upon the conversion of outstanding indebtedness of CBVI shall be
converted into an option, warrant or shares, as the case may be, to
purchase the number of GPTI Shares, which the holder would have owned
following the exercise or conversion thereof prior to the Effective Date,
with no other changes in the terms or conditions of such securities.
9. Directors and Officers. The directors and officers of GPTI, on the
Effective Date, shall continue to serve a and officers of GPTI and until their
successors are elected and qualified as provided by law and the By-Laws of GPTI.
10. Vacancies. If, upon the Effective Date, a vacancy shall exist in the
Board of Directors or in any of the offices of GPTI, such vacancy shall
thereafter be filled in the manner provided by law and the By-Laws of GPTI.
11. Abandonment. Anything herein or elsewhere to the contrary
notwithstanding, and notwithstanding shareholder approval hereof, this Plan may
be terminated and abandoned by action of the Board of Directors of any of the
corporations party hereto at any time prior to the Effective Date of this Plan
for any cause.
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IN WITNESS WHEREOF, each of the parties hereto have caused this Plan to be
executed by its duly authorized officers on the day and year first above
written.
GLOBAL PAYMENT TECHNOLOGIES, INC.
(A Delaware Corporation)
By: ____________________________
William H. Wood, President
By: ____________________________
Edward Seidenberg, Secretary
COIN BILL VALIDATOR, INC.
(A New York Corporation)
By: ____________________________
William H. Wood, President
By: ____________________________
Edward Seidenberg, Secretary
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<PAGE>
COIN BILL VALIDATOR, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 17, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Edward Seidenberg and each of them,
Proxies, with full power of substitution in each of them, in the name, place and
stead of the undersigned, to vote at the Annual Meeting of Shareholders of Coin
Bill Validator, Inc. (the "Company") on Monday, March 17, 1997, at the offices
of the Company, 425-B Oser Avenue, Hauppauge, New York 11788 or at any
adjournment or adjournments thereof, according to the number of votes that the
undersigned would be entitled to vote if personally present, upon the following
matters:
1. ELECTION OF DIRECTORS.
|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY
(except as marked to the contrary below). to vote for all nominees
listed below.
Stephen Katz, William H. Wood, Edward Seidenberg, Henry B. Ellis,
Richard Gerzof, Jay Goldberg, Joan Vogel
2. ADOPTION OF 1996 STOCK OPTION PLAN.
FOR AGAINST ABSTAIN
|_| |_| |_|
3. MERGER WITH GLOBAL PAYMENT TECHNOLOGIES, INC.
FOR AGAINST ABSTAIN
|_| |_| |_|
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
(Continued and to be signed on reverse side)
<PAGE>
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE NOMINEES AND PROPOSAL
LISTED ABOVE.
DATED: _______________________________, 1997
Please sign exactly as name appears hereon.
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 President or other authorized officer.
If a partnership, please sign in partnership
name by authorized person.
--------------------------------------------
Signature
--------------------------------------------
Signature if held jointly
Please mark, sign, date and return this proxy card promptly using the enclosed
envelope.
