By Order of the Board of Directors
Gustave T. Dotoli
Corporate Secretary
PRELIMINARY/ PROXY STATEMENT
PRELIMINARY COPY
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mPHASE TECHNOLOGIES, INC.
587 CONNECTICUT AVENUE
NORWALK, CONNECTICUT 06854-056606854-1711
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
FOR FISCAL YEAR ENDED JUNE 30,2008
TO BE HELD THURSDAY MAY 17, 2001
WEDNESDAY MARCH 10, 2010
The Annual Shareholders Meeting of mPhase Technologies, Inc. for fiscal year ended June 30, 2008 will be held at our headquartersoffices at 587 Connecticut Avenue, Norwalk, CT 06854, on May 17, 2001,Wednesday March 10, 2010, at 10:00 a.m. local time, for the purpose of considering and voting upon:
(1)
A proposal to elect nine (9)six (6) Directors to hold office until our next Annual Meeting.
(2)
A proposal to ratify the appointment of Rosenberg, Rich Baker Berman. &Company as the independent accountants for the our 2009 fiscal year commencing July 1,2008 through June 30, 2009.
(3)
A proposal to approve and adopt an amendment to our Amended Certificate of Incorporation to changeincrease the par valuenumber of our shares from no par value to $.01 par value per share and to authorize a class of 20,000,000authorized shares of preferred stock.
(4)
Such other business as may properly come before the meeting and any adjournment thereof.
The above items are more fully described in the attached Proxy Statement. Only shareholders of record at the close of business on April 6, 2001January 15, 2010 are entitled to notice of and to vote at the meeting or any adjournment or postponement thereof. A list of stockholders as of the record date will be available for inspection by stockholders at our corporate headquarters during business hours for a period of 10 days before the meeting.
By Order of the Board of Directors
Gustave T. Dotoli
Corporate Secretary
April , 2001
IMPORTANT
Whether or not you expect to be present at the meeting, PLEASE FILL IN, SIGN, DATE AND MAIL THE ENCLOSED PROXY as promptly as possible in order to save us further solicitation expense. Shareholders of record attending the meeting may revoke their proxies at that time and personally vote all matters under consideration. There is an addressed envelope enclosed with the Proxy for which no postage is required if mailed in the United States.
*** Exercise Your Right to Vote ***
IMPORTANT NOTICE Regarding the Availability of Proxy Materials
| MPHASE TECHNOLOGIES, INC. | Meeting Information |
| Meeting Type: Annual Meeting | |
| For holders as of: January 15, 2009 | |
| Date: March 10, 2010 Time: 10:00 AM EST | |
| Location: mPhase Technologies, Inc. | |
| 587 Connecticut Avenue | |
| Norwalk, CT 06854 | |
 | You are receiving this communication because you hold Shares in the above named company. This is not a ballot. You cannot use this notice to vote these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online at www.proxyvote.com or easily request a paper copy (see reverse side). We encourage you to access and review all of the important information contained in the proxy materials before voting. See the reverse side of this notice to obtain proxy Materials and voting instructions. |
--Before You Vote --
How to Access the Proxy Materials
Proxy Materials Available to VIEW or RECEIVE:
1. Annual Report 2. Notice & Proxy Statement
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Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded to your investment Advisor. Please make the request as instructed above on or before February 15, 2009 to facilitate timely delivery.
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Vote In Person: Many shareholder meetings have attendance requirements including, but not limited to, the possession of an attendance ticket issued by the entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. At the Meeting you will need to request a ballot to vote these shares.
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Vote By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a proxy card.
Voting items
The Board of Directors recommends that you vote FOR the following:
1. Election of Directors
Nominees
01 Ronald A. Durando 02 Gustave T. Dotoli 03 Victor Lawrence 04 Abraham Biderman 05 Martin S. Smiley 06 Anthony H. Guerino
The Board of Directors recommends you vote FOR the following proposal(s):
2 Ratify the appointment of our independent accountants, Rosenberg Rich Baker Berman & Co. for fiscal year 2009.
3 Approval of an amendment to our Amended Certificate of Incorporation authorizing an increase in authorized shares of common stock from 2 billion shares to 3 billion shares
PRELIMINARY COPY
mPHASE TECHNOLOGIES, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 17, 2001WEDNESDAY MARCH 10, 2010
This Proxy Statement is furnished to the shareholders of mPhase Technologies, Inc. in connection with the solicitation of proxies by our Board of Directors to be voted at the Annual Meeting of Shareholders and at any adjournments thereof. The Annual Meeting will be held at our headquartersoffices at 587 Connecticut Avenue, Norwalk, CT 06854, at 10:00 a.m. Eastern Time on Thursday, May 17, 2001.Wednesday March 10, 2010.
The Company has delayed its Annual Meeting of Shareholders for the fiscal year ended June 30, 2008 owing to financial considerations during fiscal year 2009 as a result, in part, of the global financial crisis. The board of directors of the Company has set the meeting date in fiscal year 2010 pursuant to its authority set forth in Section 14A:5-2 of the Business Corporation Law of the State of New Jersey. It is the intent of the Company to use its best efforts to hold its next annual meeting for the fiscal year ended June 30, 2009 no later than June of 2010.
The approximate date on which this Proxy Statement and the accompanying Proxy Card are first being sent or given to shareholders is April 21, 2001.January 22, 2010
General
The securities that may be voted at the Annual Meeting consist of our common stock, with each share entitling its owner to one vote on each matter submitted to the shareholders. The record date for determining the holders of our shares who are entitled to notice of and to vote at the Annual Meeting is April 6, 2001.January 15, 2010. On the record date ____________ shares were outstanding and eligible to be voted at the Annual Meeting.
Quorum and Vote Required
The presence, in person or by proxy, of a majority of the outstanding shares of our shares is necessary to constitute a quorum at the Annual Meeting. Abstentions and broker non-votes shall be counted for purposes of determining a quorum, but not have the effect of votes for or against any proposal. Therefore, abstentions and broker non-votes will not affect the outcome of such matter. At a meeting where a quorum is present, on the proposalwith respect to Proposal I for the election of directors, nominees who receive a plurality of the votes cast will be elected to serve until the next annual meetingAnnual Meeting of shareholders,Shareholders, and on each other proposal,with respect to Proposal II for the ratification of appointment of Independent Accountants for the Company, the affirmative vote of a majority of the shares represented at the Annual Meeting will be required to approve eachsuch proposal and broker non-votes will be counted as an vote in the affirmative. With respect to Proposal III for the amendment of the proposals detailed herein.Company’s certificate of incorporation to authorize an additional 2 billion shares of common stock for a total number of 3 billion authorized shares of common stock, the affirmative vote of a majority of the shares of the Company represented at the meeting or by proxy is required for approval.
Brokers holding shares of record for customers generally are not entitled to vote on certain matters unless they receive voting instructions from their customers. "Broker non-votes"“Broker non-votes” means the votes that could have been cast on the matter in question if the brokers had received their customers'customers’ instructions, and as to which the broker has notified us on a proxyProxy form in accordance with industry practice or has otherwise advised us that it lacks voting authority.If no direction is made this Proxy will be considered a non vote on the election of nominees for the Directors of the Company.
Voting by Proxy
Shares represented by properly executed proxies received at or before the Annual Meeting that have not been revoked will be voted at the Annual Meeting in accordance with the instructions contained therein. Shares represented by properly executed proxies for which no instruction is given will be voted "FOR"“FOR” approval of the proposals described in this Proxy Statement. If any other matters properly come before the Annual Meeting, the persons named as proxies will vote upon such matters according to their judgment. Our shareholders are requested to complete, sign, date and promptly return the enclosed Proxy Card in the postage-prepaid envelope provided for this purpose to ensure that their shares are voted. A shareholder may revoke a proxy at any time before it is voted by signing and returning a later-datedlater- dated proxy with respect to the same shares, by filing with our corporate Secretary,secretary, a written revocation bearing a later date or by attending and voting in person at the Annual Meeting. Mere attendance at the Annual Meeting will not in and of itself revoke a proxy.
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If the Annual Meeting is postponed or adjourned for any reason, at any subsequent reconvening of the Annual Meeting, all proxies (except for any proxies that have theretofore effectively been revoked or withdrawn) will be voted in the same manner as such proxies would have been voted at the original convening of the Annual Meeting, notwithstanding that such proxies may have been effectively voted on the same or any other matter at a previous meeting.
ELECTION OF DIRECTORS
The Board has nominated its nine (9)six (6) incumbent directors for re-election, Necdet F. Ergul,election: Ronald A. Durando, Gustave T. Dotoli, David Klimek, Craig Vickers, J. Allen Layman, Anthony Guerino, J. Lee BartonAbraham Biderman, Victor Lawrence and Abraham Biderman. Under our By-Laws, directors serve on the Board until the next Annual Meeting or until their successors shall have been elected and qualified.Martin S. Smiley
Each of the incumbent director nominees has consented to be named a nominee in this Proxy Statement and to serve as a director if elected. Proxies not marked to the contrary will be voted "FOR"“FOR” the election to the Board of each nominee. Management has no reason to believe that any of the nominees will not be a candidate or will be unable to serve. However, in the event that any of the nominees should become unable or unwilling to serve as a director, the proxy will be voted for the election of such person or persons as shall be designated by the current directors.
Nominees
��The Board of Directors recommends that you vote FOR all of the following nominees:
Name |
| Age | |||||
|---|---|---|---|---|---|---|---|
Positions | |||||||
Ronald A. Durando | 52 | Chief Executive Officer and | |||||
Gustave T. Dotoli (2) | 74 | Chief Operating Officer and Director | |||||
Anthony H. Guerino (1)(2) | 65 | Director | |||||
Abraham Biderman (1)(2) | 62 | Director | |||||
Victor Lawrence | 60 | Director | |||||
Martin S. Smiley | 62 | Director, EVP, General Counsel, CFO |
____________________
(1) | Member of Audit Committee. |
(2) | Member of Compensation Committee . |
The following is biographical information about each of the nominees.
Necdet F. Ergul has served as our Chairman of the Board since October 1996 with the exception of a three-month period in 2000 when he temporarily resigned. Mr. Ergul also currently serves as the President and Chief Executive Officer of Microphase Corporation, a leading developer of military electronic defense and telecommunications technology, which he founded in 1955. In addition to his management responsibilities at Microphase, he is active in engineering design and related research and development. Mr. Ergul holds a Masters Degree in Electrical Engineering from the Polytechnic Institute of Brooklyn, New York.
Ronald A. Durando is a co-founder of mPhase Technologies, Inc. and has served as ourthe Company’s President, and Chief Executive Officer and a Director since its inception in October 1996. Since 1994, Mr. Durando has been Chief Operating Officeran officer of Microphase Corporation. From 1986 to 1994, heMr. Durando was President and Chief Executive Officer of Nutley Securities, Inc., a registered broker-dealer. HeIn addition, Mr. Durando is also Chairman of the Board of Janifast Ltd., a U.S. Holding Corp. for operational andHong Kong company that does manufacturing companies in Hong Kong and ChinaChina. Mr. Durando is also President and ChairmanDirector of the Board and Chief Executive Officer of Packetport.com,PacketPort.com, Inc.
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Gustave T. Dotoli has served as our Chief Operating Officer since October 1996. Prior to joining us, Mr. Dotoli was President and CEO of State Industrial Safety, Inc. from 1986-1996. In addition, Mr. Dotoli currently serves as the Vice President of Corporate Development of Microphase Corporation as well as a Director and Chief Operating Officer of Packetport.com, Inc. and a Director and Officer of Janifest Ltd.Corporation. He is formerly the President and Chief Executive Officer of the following corporations: Imperial Electro-Plating, Inc., World Imports USA, Industrial Chemical Supply, Inc., SISCO Beverage, Inc. and Met Pack, Inc. Mr. Dotoli holds a B.S. in Industrial Engineering from Fairleigh Dickinson University.
David KlimekMartin Smiley is a co-founderthe EVP, CEO and General Counsel of mPhase Technologies, Inc. and hasMr. Smiley joined the Company on August 21, 2000. From June of 1994 through July of 2000, Mr. Smiley was a Managing Director in the Investment Banking Division of CIBC/Oppenheimer focusing on high yield debt placements for the independent power industry. From 1990 through 1994, Mr. Smiley served as our Chief Technology Officer since June 1997Vice President of Investment Banking specializing in International Lease Financing and served as DirectorVice President and General Counsel of Engineering since its inceptionChrysler Capital Corporation commencing in October 1996. From 1990-1996,1984. Prior to that Mr. Klimek ownedSmiley was a practicing attorney with the New York Law Firms of Leboeuf, Lamb Greene & MacRade specializing in corporate finance and operated Mashiyach Design, Inc., an engineering consulting firm. He has more than 18 yearsSEC matters. Mr. Smiley received his B.A. in Mathematics from the University of technical engineeringPennsylvania in 1969 and design expertise and presently holds 14 individual or co-authored U.S. patents. From 1982 to 1990, Mr. Klimek washis J.D. from the R&D managerUniversity of Digital Controls, Inc. Mr. Klimek holds a B.S. in Electrical Engineering from MilwaukeeVirginia School of Engineering, Milwaukee, Wisconsin.Law in 1975.
J. Lee Barton has served as a director since February 1999. Mr. Barton is the President and Chief Executive Officer of Lintel, Inc., a holding company that owns Hart Telephone Company, a 10,000-line local exchange carrier in northeast Georgia, Hart Communications, an interconnect carriers' carrier and long distance company, Hart Cellular, a partnership in two RSAs in North Georgia, and Hart Cable, a recently formed cable television company and Hart GlobalNet.
J. Allen Layman has been a member of the Board since February 23, 2000. Mr. Layman is the President and Chairman of the Board of NETOLOS, which provides services in the telecommunications industry, and has been employed by NETOLOS in various capacities since 1974. Mr. Layman is a member of several boards of directors, including The Bank of Fincastle, the United States Telephone Association, the Organization for the Promotion and Advancement of Small Telecommunications Companies, Virginia Telephone Industry Association, Valley Network Partnership, Layman Development Corporation, Botetourt County Public Schools Education Foundation, Inc., Virginia PCS Alliance, West Virginia PCS Alliance and the Blue Ridge Mountains Council, Boy Scouts of America.
Anthony H. Guerino has been a member of the Board since February 23, 2000. Since December 1997, Mr. Guerino has been an attorney in private practice in New Jersey. Prior thereto, Mr. Guerino served as a judge of the Newark Municipal Courts for over twenty (20) years, periodically sitting in the Essex County Central Judicial Processing Court at the Essex County Courthouse. Mr. Guerino has been a chairperson for and member of several judicial committees and associations in New Jersey, and has been an instructor for the Seton Hall School of Law'sLaw’s Trial Moot Court Program.
Craig Vickers has been a member of the Board since March 4, 2000. From 1995 to the present, Mr. Vickers has been a principal of Convergence Capital, a firm that provides advisory services in international and domestic investment banking, in corporate finance and in the industry sectors of media, information communications and entertainment. Mr. Vickers is responsible for advising management of mid-stage companies on strategic relationships, mergers and acquisition matters. Prior to his position at Convergence Capital, to Mr. Vickers served as the Director, Business Development, Sports Information Services at Infotechnology. Mr. Vickers is a member of the Internet Society, the MIT Enterprise Forum, the New York Media Association, the New York Venture Group, ABANA and the US/Arab Chamber of Commerce.
Abraham Biderman has been a member of the Board since August 3, 2000. Since 1990,October of 2003, Mr. Biderman has been a Managing Director of Investment Banking of Eagle Advisers, an investment banking firm located in New York City. From 1990-September of 2003, Mr. Biderman had been employed by Lipper & Co. as Executive Vice President. He is alsoPresident; Executive Vice President, Secretary and Treasurer of the Managing DirectorLipper Funds; and Co-Manager of Lipper Funds, Inc. and Lipper Prime Asset Management.Convertibles, L.P. Prior to joining Lipper & Co., in 1990, Mr. Biderman held several high-level government positions inwas Commissioner of the New York City Department of Housing, Preservation and Development from 1988 to 1989 and Commissioner of the New York City Department of Finance from 1986 to 1987. He was Chairman of the New York City Retirement System from 1986 to 1989. Mr Biderman was Special Advisor to former Mayor Edward I. Koch from 1985 to 1986 and assistant to former Deputy Mayor Kenneth Lipper from 1983 to 1985. Mr. Biderman is a Director of the Municipal Assistance Corporation for the City of New York. Mr. Biderman graduated from Brooklyn College and is a certified public accountant.
Dr Victor Lawrence is bachelor Chair professor of Electrical Engineering and Associate Dean for Special Programs, in the Charles V Schafer, Jr. School of Engineering, at Steven Institute of Technology. Dr. Victor Lawrence is a member of the National Academy of Engineering and has worked in the information technology and communications field for over thirty years. He is an industry leader in digital communications R&D and services, an entrepreneur, an active member of engineering professional organizations, an author, and a teacher who has extensive international experience. Prior to joining Steven Institute of Technology Dr. Lawrence was Vice President, Advanced Communications Technology, Bell Laboratories, Lucent Technologies. He led the development of technologies that go into the most innovative, reliable, and cost-effective communications networks for the leading telecommunications service providers. He has supported Lucent’s businesses with a staff of about 500 leading technologists and a budget of about $100M. Major projects included gigabit, photonic, and wireless networking developments and services. He was responsible for a team of engineers that worked on performance analysis, simulations and development of broadband access and backbone networks for many national and international service providers. All of Lucent’s R&D organizations relied on his high-technology support of computer-aided hardware design, physical and thermal design, systems compliance testing and certification, and design for high performance network control, signaling, and management. Earlier, he was Director, Advanced Multimedia Communications at Bell Labs, where he was responsible for systems engineering, exploratory development of multimedia signal processing, transmission, and switching, including speech and audio coding, modems, broadband transmission, ATM switching and protocols, and wireless communication and signal processing. He held a variety of leadership positions in data communications research, digital techniques, and information systems. His application of digital signal processing to data communications in the late 1980s and early 1990s led to many significant advances in high-speed transmission over copper lines (e.g., voice band modems and DSL), which helped create a global industry that leverages the public switched telephone network. Dr. Lawrence played a significant role in the development of every major international voiceband modem standard, making high-speed data communication over international networks possible. The universal availability of high-speed data connectivity stimulated the growth and widespread use of the Internet. He led the development of high-speed modem/fax chip sets that are used in data terminals, computers, and voice terminals for secure communications worldwide. His work on high-speed transceivers for local loop and for premises applications led to the development of a variety of DSL technologies, many of which are deployed today for broadband services.
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Chairman Dr. Lawrence is a member of the National Academy of Engineering and a Fellow of both the Retirement SystemInstitute of Electrical and Electronics Engineers (IEEE) and AT&T Bell Labs. For his scientific achievements, Dr . Lawrence has received numerous awards, including the 2004 IEEE Award in International Communication and a 1997 Emmy Award for the HDTV Grand Alliance Standard. He was also the co-recipient of the 1984 J. Harry Karp Best Paper Award and the Housing Development Corporation,1981 Gullemin-Cauer Prize Award.
He served as the Chairman, IEEE Awards Board in addition1994-1995, was Editor-In-Chief, IEEE Transactions on Communications from 1987 to roles as Commissioner1991, and a member of Housingthe Board of Governors of the IEEE Communications Society from 1990 to 1992. He was also Special Rapporteur on Coding (1982-1984) and Finance. Heon Transmission Impairments (1984) for CCITT (now ITU).Dr. Lawrence has been a key proponent of R&D globalization and is alsochampioning the effort to bring fiber optic connectivity to Africa. Over the past several years at Bell Labs, he managed a certified public accountantworldwide R&D organization, with branches in Beijing and Shanghai in China and in Hilversum and Twente in the stateNetherlands, as well as four states in the US. Before joining Bell Labs in 1974, he taught at Kumasi University of New York.Science and Technology in Ghana, and was employed as a research engineer at the General Electric Company in the UK. Dr. Lawrence is the co-author of five books : “Introduction to Digital Filters,” “Tutorials on Modem Communications,” “Intelligent Broadband Multimedia Networks,” “Design and Engineering of Intelligent Communications Systems,” and “The Art of Scientific Innovation.” He holds over 20 U.S. and international patents and has over 45 papers in referenced journals and conference proceedings, covering digital signal processing and data communications. Dr. Lawrence has taught Signal Processing and Data Networking courses at the University of Pennsylvania, Rutgers University, Princeton University, Columbia University, and Fairleigh Dickinson University, and delivered the Chancellor’s Distinguished Lecture Series at the University of California at Berkeley in 1986. He has also taught Technology Management and Technology Incubation courses at Bell Labs to new engineers.
Since 1996, Dr. Lawrence has taught a short-course each year at the US Industrial College of the Armed Forces.
From 1997-2001, Dr. Lawrence and his staff supported Senator Frist and the US Sub-Committee on Science and Technology.
Dr. Lawrence received his undergraduate, masters, and doctorate degrees from the University of London in the United Kingdom.
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The Board of Directors and Committees
During fiscal year ended June 30, 2000,2008, the Board of Directors held ten meetings.one meeting. Each director attended at least 70%75% of the combined number of meetings of the Board and Board committees of which he was a member.
The Board of Directors created an Audit and Compensation Committee on February 23, 2000. The Audit Committee isduring fiscal 2008 was comprised of Messrs. Biderman Layman and Guerino. Mr. Guerino who meetmeets the independence criteria established by the National Association of Securities Dealers, Inc. The report of the Audit Committee describes the scope of authority of the committee and may be found on page 4. The committee's charter which was approved by the Board of Directors on August 3, 2000 is included as Exhibit A.herein.
The Board of Directors also has a Compensation Committee. As more fully described in the Report of the Compensation Committee set forth on page 15 ofin this Proxy Statement, the Compensation Committee is responsible for our management and employee compensation. Specifically, the Compensation Committee determines the adequacy of management and employee compensation including the administration of our 2001 Long-Term Stock Incentive Plan and, if approved, the 2001 Stock Incentive Plan. The Compensation Committee is presently comprised of Messrs. Dotoli, VickersBiderman and Guerino.
Director Compensation
We pay eachOn October 19, 2007, in connection with the settlement and dismissal of a civil law suit originally filed on November 16, 2005 by the Securities and Exchange Commission in the Federal District Court in the District of Connecticut, the SEC issued a Cease and Desist Order and certain remedial sanctions against two officers of mPhase Technologies, Inc. (the "Company"). The civil suit was filed against Packport.com, Inc. a Nevada corporation, Microphase Corporation, a Connecticut corporation, a company that provides administrative services to the Company and shares common management with the Company, and others. The two officers of the Company were Mr. Ronald A. Durando, President and Chief Executive Officer and Mr. Gustave T. Dotoli, the Chief Operating Officer. The Civil suit by the SEC named as respondents Mr. Durando, Mr. Dotoli and others in connection with their activities as officers and directors $15,000 annuallyof Packetport.com. The cease and desist order from the SEC found that (1) Mr. Durando had violated Section 5 of the Securities Act of 1933, as amended, by making unregistered sales of common stock of Packetport.com.(2) Mr. Durando and Mr. Dotoli had violated Section 16(a) of the Securities Exchange Act of 1934, as amended, and Rule 16(a) thereunder by failing to timely disclose the acquisition of their holdings on Form 3’s and (3) Mr. Durando had violated Section 13(d) of the Securities Exchange Act of 1934, as amended, for their servicesfailing to disclose the acquisition of more than five percent of the stock of Packetport.com. Under the order Mr. Durando was required to disgorge $150,000 and Mr. Dotoli was required to disgorge $100,000. The Company was not named as a party to the civil suit. More information regarding the detailed terms of the settlement can be found in SEC release No 8858 dated October 18, 2007 promulgated under the Securities Act of 1933 and SEC Release No. 56672 dated October 18,2007 promulgated pursuant to the Securities Exchange Act of 1934.
Mr. Durando and Mr. Dotoli have continued to serve as officers and directors of the Company. Mr Durando and Mr. Dotoli together with Microphase corporation and others, without admitting or denying the findings of the SEC, except as to jurisdiction and subject matter, have consented to the entry of the Order Instituting Cease and Desist Proceedings, Making findings and Imposing a Cease and Desist Order and Remedial Sanctions pursuant to Section 8A of the Securities Exchange Act of 1933 and Section 21C of the Securities Exchange Act of 1934.
Director and forCompensation
For their attendance of Board and Committee meetings. Additionally, certain ofmeetings, we compensate the Directors have beenwith an annual stipend and stock options granted options under our Long-Term Stock Incentive Plan, which grants are included in the table "Security“Security Ownership of Certain Beneficial Owners and Management"Management” and the notes thereto.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee during fiscal 20002008 were Messrs. Dotoli, VickersBiderman and Guerino. Mr. Dotoli is our Chief Operating Officer. Neither Messrs. VickersBiderman nor Guerino is or has been one of our officers or employees. None of our directors or executive officers served as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of such committee, the entire boardBoard of directors)Directors) of another entity during fiscal 20002008 that has a director or executive officer serving on our Board of Directors except that Mr. Dotoli who iswas also a member of the Board of Directors of PacketPort.com, Inc., a company in which Mr. Durando servesserved as Chairman of the Board and Chief Executive Officer.Officer until the Company merged with Wyndstorm Corporation, at which time Mr. Dotoli and Mr. Durando resigned from their respective positions.
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The Audit Committee oversees our financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. Our audit committee met on September 26, 2000,has reviewed in accordance with recent revisions to review form 10 KSB,the law pursuant to the Sarbanes-Oxley Act our Form 10-K, covering the fiscal year of the companyCompany ending June 30, 2000.2008.
In fulfilling our oversight responsibilities, we have discussedwill with our independent accountants who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the committee under generally accepted auditing standards. We also have discussed with the independent accountants their independence from management, including the matters in the written disclosures from the
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independent accountants required by the Independence Standards Board. We further considered whether the provision by the independent accountants of the non-audit services described elsewhere in this proxyProxy statement is compatible with maintaining their independence. Finally, we recommended, and the Board of Directors approved, the selection of Arthur Andersen, CPAsRosenberg, Rich, Baker, Berman & Company as our independent accountants for 2000.the fiscal year 2009 commencing July 1, 2008 and ending June 30, 2009.
We have also discussed with our internal auditors and independent accountants the overall scope and plans for their respective audits. We have spokenmeet with the internal auditors and independent accountants, with and without management present, to discuss the results of their examinations, their evaluations of our internal controls, and the overall quality of financial reporting.
Anthony Guerino
Abraham Biderman
PROPOSAL IIAPPROVAL OF AN AMENDMENT TO THECOMPANY'S AMENDED CERTIFICATE OF INCORPORATION
The Board of Directors has approved, and is recommending to the stockholders for approval at the Annual Meeting, an amendment to our Amended Certificate of Incorporation to (a) authorize a new class of 20,000,000 undesignated shares of preferred stock having a par value of $.01 per share and to (b) change the par value of our shares from "no par" stock to $.01 par value per share. The Board of Directors determined that this amendment is advisable and should be considered at the Annual Meeting. The full text of the proposed amendment to the Certificate of Incorporation appears as Exhibit B to this Proxy Statement.
Purpose and Effect of the Amendment to Authorize Preferred Stock
Under the present Certificate of Incorporation, we have the authority to issue 150,000,000 shares of common stock. No preferred shares are authorized for issuance. As of April 6, 2001, shares of common stock were issued and outstanding and shares of common stock were reserved for issuance upon the exercise of our outstanding stock options, warrants and other securities, which are convertible into common stock. The proposed amendment would provide for the issuance of 20,000,000 shares of preferred stock available for issuance. The preferred stock may be issued by resolution of a majority of our Board of Directors then in office in one or more series with such designations, rights, preferences, privileges and restrictions, including, without limitation, dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, and such qualifications and limitations as our Board may determine. No additional stockholder approval would be required to set the terms of, or for issuance of, the preferred stock. Authorization of shares of preferred stock could affect the rights of the holders of common stock if the preferred stock, when issued, has rights and preferences senior to the common stock. The holders of common stock do not presently have preemptive rights to subscribe for the shares of preferred stock proposed to be authorized.
If the amendment is adopted, it will become effective upon filing a Certificate of Amendment to our Certificate of Incorporation with the Secretary of State of New Jersey. The purpose of the authorization of preferred stock is to permit the issuance of different classes of preferred stock for corporate purposes. Our Board believes that it is in the best interests of our stockholders to have shares of preferred stock authorized at this time to alleviate the delay of holding a special meeting of stockholders to authorize additional shares of preferred stock when the need arises. Possible purposes for additional shares of preferred stock include adopting a shareholder rights plan, which would be used to defend against unwanted takeover attempts. The Board intends to adopt such a right's plan if
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the amendment is approved. Other uses of the preferred stock include effecting acquisitions of other businesses or properties, establishing strategic relationships with other companies and securing additional financing for our operations through the issuance of additional shares or other equity-based securities. We could also use the additional shares of preferred stock to oppose a hostile takeover attempt or delay or prevent changes of control (whether by merger, tender offer, proxy contest or assumption of control by a holder of a large block of our securities) or changes in or removal of our management. For example, in addition to the approval of a rights plan, without further stockholder approval, the Board of Directors could strategically sell shares of common stock or preferred stock in a private transaction to purchasers who would oppose a takeover or favor the current Board of Directors. Although the Board of Directors is motivated by business and financial considerations in proposing this amendment, and not by the threat of any attempt to accumulate shares or otherwise gain control of our company (and the Board of Directors is not currently aware of any such attempts), stockholders nevertheless should be aware that approval of the amendment could facilitate efforts by us to deter or prevent changes of control of our company in the future, including transactions in which the stockholders might otherwise receive a premium for their shares over then-current market prices or benefit in some other manner.
Purpose of the Change to par Value Stock
The proposed change in the "no par" value designation of the common stock to a par value of $.01 is being taken in order to facilitate our recordkeeping and accounting practices.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDED CERTIFICATE OF INCORPORATION AS DESCRIBED ABOVE. THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF THE SHARES OF COMMON STOCK REPRESENTED AT THE MEETING IS REQUIRED TO APPROVE THE AMENDMENT TO THE AMENDED CERTIFICATE OF INCORPORATION. SHARES OF COMMON STOCK REPRESENTED AT THE MEETING BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED "FOR" APPROVAL OF THE AMENDED CERTIFICATE OF INCORPORATION.
PROPOSAL IIIPROPOSAL TO ADOPT THE 2001 STOCK INCENTIVE PLAN
Our Board of Directors proposes that you approve the adoption of the 2001 Stock Incentive Plan (the "2001 Plan"). For purposes of administrative efficiency, the Board of Directors has authorized merger of our Long-Term Stock Incentive Plan (the "Prior Plan") into the 2001 Plan effective upon the adoption of the 2001 Plan. The following is a fair and complete summary of the 2001 Plan as proposed. This summary is qualified in its entirety by reference to the full text of the 2001 Plan, which appears as Exhibit C to this document.
General
Purpose: The purpose of the 2001 Plan as proposed is to promote our long-term growth and profitability by providing key people with incentives to improve stockholder value and contribute to our growth and financial success and by enabling us to attract, retain and reward the best available people.
Shares Available under the Plan: The maximum number of shares of common stock that we may issue with respect to awards under the 2001 Plan is 20,000,000 shares, in addition to the shares previously authorized for issuance under the Prior Plan, but which were not issued before the Prior Plan is merged into the 2001 Plan. We will reserve such number of shares, and will continue to reserve the shares remaining under the Prior Plan, for awards under the 2001 Plan. The maximum number of shares of common stock subject to awards of any combination that may be granted under the proposed 2001 Plan during any fiscal year to any one individual is limited to 500,000. These limits will be adjusted to reflect any stock dividends, split-ups and reverse stock split, unless the Board determines
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otherwise. If any award, or portion of an award, under the 2001 Plan expires or terminates unexercised, becomes unexercisable or is forfeited or otherwise terminated, surrendered or canceled as to any shares, or if any shares of common stock are surrendered to us in connection with any award (whether or not such surrendered shares were acquired pursuant to any award), or if any shares are withheld by the Company, the shares subject to such award and the surrendered or withheld shares will thereafter be available for further awards under the 2001 Plan. Those shares that are surrendered to or withheld by the Company, or that are forfeited after issuance, however, will not be available for incentive stock options. As of March 20, 2001, the fair market value of a share of common stock, determined by the last reported sale price per share of common stock on such date as quoted on the Nasdaq-Over-The-Counter Bulletin Board, was $1.37.
Administration: The proposed 2001 Plan will be administered by our Board or by a committee or committees as the Board may appoint from time to time. The administrator has full power and authority to take all actions necessary to carry out the purpose and intent of the 2001 Plan, including, but not limited to, the authority to: (i) determine who is eligible for awards, and the time or times at which such awards will be granted; (ii) determine the types of awards to be granted; (iii) determine the number of shares covered by or used for reference purposes for each award; (iv) impose such terms, limitations, restrictions and conditions upon any such award as the administrator deems appropriate; (v) modify, amend, extend or renew outstanding awards, or accept the surrender of outstanding awards and substitute new awards (provided however, that, except as noted below, any modification that would materially adversely affect any outstanding award may not be made without the consent of the holder); (vi) accelerate or otherwise change the time in which an award may be exercised or becomes payable and to waive or accelerate the lapse, in whole or in part, of any restriction or condition with respect to such award, including, but not limited to, any restriction or condition with respect to the vesting or exercisability of an award following termination of any grantee's employment or consulting relationship; and (vii) establish objectives and conditions, if any, for earning awards and determining whether awards will be paid after the end of a performance period.
In the event of changes in our common stock by reason of any stock dividend, split-up, recapitalization, merger, consolidation, business combination or exchange of shares and the like, the administrator may make adjustments to the number and kind of shares reserved for issuance or with respect to which awards may be granted under the 2001 Plan, in the aggregate or per individual per year, and to the number, kind and price of shares covered by outstanding award.
The administrator in its discretion is authorized to make adjustments in the terms and conditions of, and the criteria included in, awards in recognition of unusual or nonrecurring events affecting us, or our financial statements or those of any of our affiliates, or of changes in applicable laws, regulations, or accounting principles, whenever the administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the 2001 Plan.
Participation: Participation in the 2001 Plan will be open to all of our employees, officers, directors and other individuals providing bona fide services to us or any of our affiliates, as the administrator may select from time to time. As of July 1, 2001, all 6 non-employee directors, and approximately 20 employees would be eligible to participate in the 2001 Plan.
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Type of Awards
The 2001 Plan as proposed would allow for the grant of stock options, stock appreciation rights, stock awards, phantom stock awards and performance awards. The administrator may grant these awards separately or in tandem with other awards. The administrator will also determine the prices, expiration dates and other material conditions governing the exercise of the awards. We, or any of our affiliates, may make or guarantee loans to assist grantees in exercising awards and satisfying any withholding tax obligations arising from awards.
Stock Options: The proposed 2001 Plan allows the administrator to grant either awards of incentive stock options, as that term is defined in section 422 of the Internal Revenue Code, or nonqualified stock options; provided, however, that only our employees or employees of our subsidiaries may receive incentive stock option awards. Options intended to qualify as incentive stock must have an exercise price at least equal to fair market value on the date of grant, but nonqualified stock options may be granted with an exercise price less than fair market value. The terms of a stock option agreement, as determined by the administrator with respect to each option, may permit the option holder to pay the exercise price in cash, by tendering shares of common stock, by a combination of cash and shares, or by any other means the administrator approves.
Stock Appreciation Rights: The proposed 2001 Plan allows the administrator to grant awards of stock appreciation rights which entitle the holder to receive a payment in cash, in shares of common stock, or in a combination of both, having an aggregate value equal to the spread on the date of exercise between the fair market value of the underlying shares on that date and the base price of the shares specified in the grant agreement.
Stock and Phantom Stock Awards: The proposed 2001 Plan allows the administrator to grant restricted or unrestricted stock awards, or awards denominated in stock-equivalent units to eligible participants with or without payment of consideration by the grantee. Stock awards and phantom stock awards may be paid in cash, in shares of common stock, or in a combination of both.
Performance Awards: The proposed 2001 Plan allows the administrator to grant performance awards which become payable in cash, in shares of common stock, or in a combination of both, on account of attainment of one or more performance goals established by the administrator. The administrator may establish performance goals based on our operating income, or that of our affiliates, or one or more other business criteria the administrator may select that applies to an individual or group of individuals, a business unit, or us or our affiliate as a whole, over such performance period as the administrator may designate.
Other Stock-Based Awards: The proposed 2001 Plan allows the administrator to grant stock-based awards which may be denominated in cash, common stock, or other securities, stock equivalent units, stock appreciation units, securities or debentures convertible into common stock, or any combination of the foregoing. These awards may be paid in common stock or other securities, in cash, or in a combination of common stock, other securities and cash.
Awards Under the Plan
Because participation and the types of awards available for grant under the 2001 Plan as proposed are subject to the discretion of the administrator, the benefits or amounts that any participant or groups of participants may receive if the 2001 Plan is approved are not currently determinable. For this purpose, the benefits or amounts that participants may receive if the 2001 Plan is approved do not include awards granted under the Prior Plan that are amended and restated to become awards covering the same number of shares under the terms of the 2001 Plan. These amended and restated awards are not contingent on stock holder approval since the Prior Plan was previously approved by the stockholders.
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Amendment and Termination
Our Board of Directors may terminate, amend or modify all or any provision of the 2001 Plan at any time.
Federal Income Tax Consequences
The following is a general summary of the current federal income tax treatment of stock options, which would be authorized for grants under the 2001 Plan as proposed, based upon the current provisions of the Internal Revenue Code and regulations promulgated thereunder.
Incentive Stock Options: Incentive stock options under the 2001 Plan are intended to meet the requirements of section 422 of the Internal Revenue Code. No tax consequences result from the grant of the option. If an option holder acquires stock upon exercise, the option holder will not recognize income for ordinary income tax purposes (although the difference between the option exercise price and the fair market value of the stock subject to the option may result in alternative minimum tax liability to the option holder) and they will not be allowed a deduction as a result of such exercise, provided that the following conditions are met: (a) at all times during the period beginning with the date of the granting of the option and ending on the day three months before the date of such exercise, the option holder is our employee or an employee of one of our subsidiaries; and (b) the option holder makes no disposition of the stock within two years from the date of the option grant nor within one year after the transfer of the stock to the option holder. The three-month period extends to one year in the event of disability and is waived in the event of death of the employee. If an option is modified to give the option holder additional benefits (including the increase in the exercise price of Prior Plan options effected in connection with the adoption of the 2001 Plan), the modification may be deemed to be the granting of a new option for purposes of determining the two-year holding period. If the option holder sells the stock after complying with the conditions as discussed above, any gain realized over the price paid for the stock ordinarily will be treated as capital gain, and any loss will be treated as capital loss, in the year of the sale.
If the option holder fails to comply with the employment requirement discussed above, the tax consequences will be substantially the same as for a nonqualified option, discussed below. If the option holder fails to comply with the holding period requirements discussed above, the option holder will recognize ordinary income in an amount equal to the lesser of (i) the excess of the fair market value of the stock on the date of the exercise of the option over the exercise price or (ii) the excess of the amount realized upon such disposition over the adjusted tax basis of the stock. Any additional gain ordinarily will be recognized by the option holder as capital gain, either long-term or short-term, depending on the holding period of the shares. If the option holder is treated as having received ordinary income because of his or her failure to comply with either condition above, we will be allowed an equivalent deduction in the same year.
Nonqualified Stock Options: No tax consequences result from the grant of the option. An option holder who exercises a nonqualified stock option with cash generally will realize compensation taxable as ordinary income in an amount equal to the difference between the exercise price and the fair market value of the shares on the date of exercise, and we will be entitled to a deduction from income in the same amount in the fiscal year in which the exercise occurred. The option holder's basis in these shares will be the fair market value on the date income is realized, and when the holder disposes of the shares he or she will recognize capital gain or loss, either long-term or short-term, depending on the holding period of the shares.
Disallowance of Deductions: The Internal Revenue Code disallows deductions for publicly held corporations with respect to compensation in excess of $1,000,000 paid to the corporation's chief executive officer and its four other most highly compensated officers. However, compensation payable
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solely on account of attainment of one or more performance goals is not subject to this deduction limitation if the performance goals are objective, pre-established and determined by a compensation committee comprised solely of two or more outside directors, the material terms under which the compensation is to be paid are disclosed to the stockholders and approved by a majority vote, and the compensation committee certifies that the performance goals and other material terms were in fact satisfied before the compensation is paid. Under this exception, the deduction limitation does not apply with respect to compensation otherwise deductible on account of stock options and stock appreciation rights granted at fair market value under a plan, such as the proposed 2001 Plan, that limits the number of shares that may be issued to any individual and which is approved by the corporation's stockholders.
Required Vote
THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF THE SHARES OF COMMON STOCK REPRESENTED AT THE MEETING IS REQUIRED TO APPROVE THE ADOPTION OF THE 2001 STOCK INCENTIVE PLAN. SHARES OF COMMON STOCK REPRESENTED AT THE MEETING BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED "FOR" APPROVAL OF THE 2001 STOCK INCENTIVE PLAN.
Recommendation of the Board of Directors
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" ADOPTION OF THE 2001 STOCK INCENTIVE PLAN.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
We have engaged Arthur Andersen, CPAs,Rosenberg, Rich, Baker, Berman & Company certified public accountants having offices in Stamford, Connecticut,Bridgewater, New Jersey, as our independent auditors for the fiscal year 2009 commencing July 1, 2008 and ending June 30, 2001. Arthur Andersen2009.
The Company believes that management has audited our financial statements forfull legal authority to retain the auditors approved at its last annual meeting beyond the fiscal year ended June 30, 2000. It is anticipated2008 under the Business Corporation Law of the State of New Jersey without seeking shareholder approval. Nevertheless, the Company believes that representatives of such firm will be present at the Annual Meeting, willshareholders should have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.express through their vote, approval or disapproval of the Company’s decision in this matter.
Audit Fees. Fees for the audit for the fiscal year ended June 30, 20002008 and the reviews of Forms 10-Q for such fiscal year all of which has been billed.amounted to $63,750.
Fees for Financial Information Systems Design and Implementation. None.
All other fees. None
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"“FOR” RATIFICATION OF APPOINTMENT OF ARTHUR ANDERSEN, CPAs,ROSENBERG, RICH, BAKER, BERMAN & COMPANY AS THE EXTERNAL AUDITORS FOR US FOR THE FISCAL YEAR 2009 COMMENCING ON JULY 1,2008 AND ENDING ON JUNE 30, 2001.2009. THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF THE SHARES OF COMMON STOCK REPRESENTED AT THE MEETING IS REQUIRED TO RATIFY THE APPOINTMENT OF THE AUDITORS. SHARES OF COMMON STOCK REPRESENTED AT THE MEETING BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED "FOR"“FOR” RATIFICATION OF ARTHUR ANDERSEN, CPAS.ROSENBERG, RICH, BAKER, BERMAN & COMPANY.
APPROVAL OF AN AMENDMENT TO THE COMPANY’S AMENDED CERTIFICATE OF INCORPORATION
The Board of Directors has approved, and is recommending to the stockholders for approval at the Annual Meeting, an amendment to our Amended Certificate of Incorporation to increase the number of authorized shares of common stock from 2,000,000,000 to 3,000,000,000 shares. The Board of Directors determined that this amendment is advisable and should be considered at the Annual Meeting.
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Purpose and Effect of the Amendment to Authorize Additional Shares of Common Stock
PROPOSAL TO AMEND THE COMPANY’S AMENDED CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED COMMON STOCK
FROM 2,000,000,000 SHARES TO 3,000,000,000,000 SHARES
Background
The Company’s Amended Certificate of Incorporation, as currently in effect, provides that the Company’s authorized capital stock consists of 2,000,000,000 shares of common stock, $.01 par value per share. Effective as of April 25, 2009, the Company’s Board of Directors unanimously approved an amendment to Article 4 of the Company’s Amended Certificate of Incorporation to increase the number of authorized shares of common stock from 2,000,000,000 shares to 3,000,000,000 shares. In accordance with New Jersey law, the proposed amendment to the Amended Certificate of Incorporation is subject to shareholder approval.
In the event that shareholder approval of the proposed amendment is obtained, the Company expects to file a Certificate of Amendment to the Amended Certificate of Incorporation with the New Jersey Secretary of State on or about the close of business on the date of the Annual Meeting.
As of November 30, 2009, out of the 2,000,000,000 shares of common stock currently authorized for issuance under the Amended Certificate of Incorporation, a total of 1,032,615 shares were issued and outstanding and 714,203,309 shares were reserved for issuance upon exercise of the Company’s stock options, warrants and other convertible securities. An increase in the number of shares of common stock authorized for issuance under the Company’s Amended Certificate of Incorporation is necessary to permit the Company to have additional shares available for issuance in furtherance of the Company’s business purposes, as more fully set forth below under “Reasons For and Effects Of the Proposal.”.
Reasons for and Effects of the Proposal
Due to the limited number of shares of common stock available to be issued, the Board of Directors has unanimously approved, and voted to recommend that the shareholders approve, an amendment to the Company’s Amended Certificate of Incorporation pursuant to which the number of shares of common stock which the Company would be authorized to issue would be increased from 2,000,000,000 shares to 3,000,000,000 shares.
The Board of Directors believes that an increase in authorized common stock would provide the Company with increased flexibility to issue and/or sell common stock from time to time at the discretion of the Board of Directors, and without further authorization by the shareholders, for one or more of the following business purposes: (i) in public or private offerings as a means of obtaining additional capital for the Company’s business; (ii) as part or all of the consideration required to be paid for the acquisition of ongoing businesses or other assets; (iii) to satisfy any current or future financial obligations of the Company; (iv) in connection with the exercise of options, warrants or rights, or the conversion of convertible securities that may be issued by the Company; or (v) pursuant to any benefit, option or stock ownership plan or employment agreement.INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
The Company anticipates to receive approximately $400,000 per month during the next 15 months through the conversion of convertible debentures that is essential capital to maintain ongoing operations until sales revenues of its new emergency flashlight product materialize. In addition, the Company will need to raise an additional $5-10 million for product expansion and marketing and distribution during the next 12 months. Since the Company uses its stock as its main source of currency to sustain operations and fund further product development and commercialization, management believes that the additional number of authorized shares will enable it to accelerate development of the Company into an enterprise with significant revenue in the future.
SeveralThe proposed increase in the number of authorized shares of common stock will not change the number of shares of common stock outstanding or the rights of the individuals who have served as our directorsholders of such stock. Other than issuing new shares of common stock upon the exercise of options, warrants, Convertible Debentures and Convertible Notes, the Company has no immediate plans to issue additional common stock out of the additional authorized shares. However, the Company does anticipate that it will need to raise additional equity capital in the near future through the issuance of common stock or executive officers have been issued warrants and/securities convertible into or optionsotherwise grant the holder the right to purchase common stock. The records of the Company’s transfer agent indicated that as of November 30, 2009, the Company has 1,037,332,615 shares of our shares. Further, our directorscommon stock outstanding plus warrants at prices ranging from $.05 to $.35 per share convertible into 138,900,788 shares of common stock and officers are eligibleoptions ranging from $.05 per share to receive options under the Plan, as amended, and therefore will be eligible for future grants$.30 per share convertible into 145,293,000 shares of options pursuant thereto. Accordingly, if the Plan is not approved as requested in Proposal III hereof
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and such directors and officers are unable to exercise suchcommon stock. Warrants convertible into 2,409,000 shares of common stock expired from July 1, 2009 through November 30, 2009. All warrants and options have fixed strike prices and none allow for cashless exercise.
As of November 30, 2009, the Company’s Convertible Debentures are immediately convertible into 53,095,238 shares of common stock at a price discounted from the market price of $.021 per share for $836,875 of funding already received by the Company and 376,914,283 shares of common stock through November 17, 2012 provided that the Company receives funding of $5,678,458 under these agreements. The shares that would be issued under the Convertible Debentures would increase in cases where the price of the Company’s common stock decreased. The Company may experience requests for conversions exceeding the total shares it has available over the life of the Convertible Debt and Note agreements should its stock price decrease; in such case the Company believes it would not have a greater liability than that recorded on its Financial Statements for Convertible Notes Payable and the corresponding Derivative Liability. The Company also has outstanding officer notes for amounts owed that have limited conversion features effective from April of 2009 through April of 2014, provided such shares are available, that could be convertible into approximately 195,000,000 shares of common stock.
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The following table illustrates the shares issuable at a range of prices from $.01, $.02 (the actual price as of November 30, 2009) and $.03 for obligations the Company has outstanding as of November 30, 2009.
Potential Shares Issuable Upon Changes in the Company’s Stock Price for
Convertible Debt Outstanding at November 30, 2009
Stock Price for Conversion Calculation
| Amount | $.01 | $.02 | $.03 | |
| Convertible | Price | Actual Price | Price | |
| Under Agreements | Decline | November | Increase | |
| Illustration | 30, | Illustration | ||
| 2009 | ||||
| Shares Currently | $836,875 | 111,500,000 | 53,095,238 | 37,166,667 |
| Issuable | ||||
| Shares Issuable | ||||
| Over | $6,052,400 | 719,519,994 | 376,914,283 | 263,839,998 |
| Life of Agreements | ||||
| Totals | $6,889,275 | 903,019,994 | 430,009,521 | 301,006,665 |
A detailed discussion of common stock, option, warrants and convertible debentures is set forth in Note 8 entitled “Stockholders Equity” and Note 13 entitled “Subsequent Events” and further discussion of the officer’s loans and the limited conversion feature is set forth in Note 9 entitled “Related Party Transactions” included in the Company’s proposed Form 10K/A that will be filed by the Company prior to the filing of our Definitive Proxy. The terms of the relevant Convertible Debentures may be found in our in our respective Form 8K filings of September 18, 2008, January 21, 2009 and August 21, 2009.
The Company has set forth on Page 9 of this Proxy the Beneficial Ownership of Related Parties as of June 30, 2009.
In private placements that occurred during the fiscal year ended June 30, 2008 and the fiscal year ended June 30, 2009 and continuing through the quarter ended September 30, 2009, the Company has, as indicated in its Form 10K and Form 10Q filings, the issuance of reparation shares during such period to induce prior investors from earlier offerings to invest in additional shares of common stock of the Company. The Company also issued 1,700,000 reparation shares in November 2009 relating to the same private placements. The Company had no contractual or legal obligation to issue such shares for reparations and determined the issuance of each on a case by case basis as negotiated with its investor. As of the date hereof, there are no current agreements for the issuance of any additional reparation shares. The Company is unable to predict whether conditions in the financial markets in the future may require it to issue additional reparation shares in order to attract monies in future private placements of its common stock.
The following tables summarize details of reparation expense for the last two fiscal years as follows:
| mPhase Technologies, Inc | |||||||||||||||||||||||||||
| Reparation Expense Year Ended June 30, 2008 | |||||||||||||||||||||||||||
| NEW | ISSUANCE OF | REPARATION | |||||||||||||||||||||||||
| CONFIDENTIAL | REPARATION | PRIOR | NEW | INVESTMENT | REPLACEMENT | EXPENSE | |||||||||||||||||||||
| DATE | INVESTOR | SHARES | VALUE | INVESTMENT | INVESTMENT | SHARES | WARRANTS | VALUE | TOTAL | ||||||||||||||||||
| 9/30/07 | investor 1 | 1,349,842 | $ | 146,204 | $ | 1,026,723 | $ | 100,000.00 | 1,000,000 | $ | 146,204 | ||||||||||||||||
| 9/30/07 | investor 2 | 444,444 | $ | 22,222 | $ | 100,000 | $ | 50,000.00 | 500,000 | $ | 22,222 | ||||||||||||||||
| 12/31/07 | investor 3 | 792,857 | $ | 30,778 | $ | 55,000 | $ | 24,500.00 | 350,000 | $ | 30,778 | ||||||||||||||||
| 4/8/08 | investor 4 | 576,598 | $ | 31,719 | $ | 288,000 | $ | 85,000.00 | 1,700,000 | $ | 31,719 | ||||||||||||||||
| 5/9/08 | investor 5 | 1,500,000 | $ | 126,000 | $ | 100,000 | $ | 100,000.00 | 2,000,000 | $ | 126,000 | ||||||||||||||||
| 4/1/08 | investor 6 | 0 | 11,111,112 | $ | 35,115 | $ | 35,115 | ||||||||||||||||||||
| TOTALS | 4,663,741 | $ | 356,923 | $ | 1,569,723 | $ | 359,500.00 | 5,550,000 | 11,111,112 | $ | 35,115 | $ | 392,038.00 | ||||||||||||||
| mPhase Technologies, Inc | |||||||||||||||||||||||||||
| Reparation Expense Year Ended June 30, 2009 | |||||||||||||||||||||||||||
| NEW | ISSUANCE OF | ||||||||||||||||||||||||||
| CONFIDENTIAL | REPARATION | PRIOR | NEW | INVESTMENT | REPLACEMENT | ||||||||||||||||||||||
| DATE | INVESTOR | SHARES | VALUE | INVESTMENT | INVESTMENT | SHARES | WARRANTS | VALUE | TOTAL | ||||||||||||||||||
| 9/30/08 | investor 1 | 3,862,000 | $ | 216,689 | $ | 1,000,000 | 200,000 | 4,000,000 | 0 | 0 | $ | 216,689 | |||||||||||||||
| 3/25/09 | investor 2 | 7,660,000 | $ | 99,483 | $ | 520,000 | 150,000 | 15,000,000 | 0 | 0 | $ | 99,483 | |||||||||||||||
| 4/15/09 | investor 3 | 1,000,000 | $ | 12,000 | $ | 1,126,723 | 0 | 0 | 0 | 0 | $ | 12,000 | |||||||||||||||
| 5/15/09 | investor 3 | 1,000,000 | $ | 20,000 | $ | - | 0 | 0 | 0 | 0 | $ | 20,000 | |||||||||||||||
| 6/15/09 | investor 3 | 1,000,000 | $ | 20,000 | $ | - | 0 | 0 | 0 | 0 | $ | 20,000 | |||||||||||||||
| 6/29/09 | investor 4 | 5,000,000 | $ | 64,000 | $ | 250,000 | 50,000 | 5,000,000 | 0 | 0 | $ | 64,000 | |||||||||||||||
| TOTALS | 19,522,000 | $ | 432,172 | $ | 2,896,723 | $ | 400,000 | 24,000,000 | 0 | 0 | $ | 432,172 | |||||||||||||||
8
Any issuance of additional shares of common stock could reduce the current shareholders' proportionate interests in the Company, depending on the number of shares issued and the purpose, terms and conditions of the issuance. Moreover, the issuance of additional shares of common stock could discourage attempts to acquire control of the Company by tender offer or other means. In such a case, shareholders might be deprived of benefits that could result from such an attempt, such as realization of a premium over the market price of their shares in a tender offer or the temporary increase in market price that could result from such an attempt. Also, the issuance of stock to persons supportive of the Board of Directors could make it more difficult to remove incumbent management and directors and officersfrom office. Although the Board of Directors intends to issue common stock only when it considers such issuance to be in the best interest of the Company, the issuance of additional shares of common stock may have, claims against usamong others, a dilutive effect on earnings per share of common stock and on the equity and voting rights of holders of shares of common stock. The Board of Directors believes, however, that the benefits of providing the flexibility to issue shares without delay for breachany business purpose outweigh any such possible disadvantages.
Ownership of contractshares of common stock entitles each shareholder to one vote per share of common stock. Holders of shares of common stock do not have preemptive rights to subscribe to additional securities that may be issued by the Company, which means that current shareholders do not have a prior right to purchase any new issue of capital stock of the Company in order to maintain their proportionate ownership. Shareholders wishing to maintain their interest, however, may be able to do so through normal market purchases.
The increase in the authorized common stock will be implemented by effecting an amendment to the Company’s Amended Certificate of Incorporation, replacing the current Article 4 with a new Article 4 that states as follows:
“The aggregate number of shares of common stock which the Corporation shall have authority to issue is 3,000,000,000 shares, par value $.01 per share”
Assuming the increase in authorized common stock is approved by the shareholders at the Annual Meeting, an amendment to the Company’s Amended Certificate of Incorporation will be filed with the Secretary of State of the State of New Jersey, and the increase in authorized common stock will become effective as of 5:00 p.m. Eastern time on the date of such filing. The Company expects that such filing will take place on or otherwise.shortly after the date the Annual Meeting is held. The increase in authorized common stock may be abandoned by the Board of Directors at any time before or after the Annual Meeting should the shareholders not approve this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE AMENDED CERTIFICATE OF INCORPORATION THEREFORE INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 2,000,000,000 SHARES TO 3,000,000,000 SHARES, AS SET FORTH ABOVE. THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF OUTSTANDING SHARES OF COMMON STOCK IS REQUIRED TO APPROVE THE AMENDMENT TO THE AMENDED CERTIFICATE OF INCORPORATION. SHARES OF COMMON STOCK REPRESENTED AT THE MEETING BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED “FOR” APPROVAL OF THE PROPOSAL.
9
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of February 9, 2001June 30, 2009 certain information regarding the beneficial ownership of our shares:
1. | by each person | |
2. | each of our directors; | |
3. | by each executive officer named in the Summary Compensation Table; and, | |
| by all of our directors and executive officers as a group. |
| Name and Address of Beneficial Owner(1) | Number of Shares of Common Stock Beneficially Owned | Percentage Ownership of Common Stock Outstanding(2) | |||
|---|---|---|---|---|---|
| Necdet F. Ergul | 1,637,500 | 3.4 | % | ||
| Ronald A. Durando(3) | 4,020,363 | 5.9 | % | ||
| Gustave T. Dotoli | 2,067,500 | 2.7 | % | ||
| J. Lee Barton(4) | 3,595,000 | 10.3 | % | ||
| David Klimek | 1,117,500 | 1.1 | % | ||
| Craig Vickers | 144,000 | * | |||
| Lintel, Inc.(5) | 2,445,000 | 7.0 | % | ||
| All executive officers and directors as A group (nine people) | 12,482,863 | 23.6 | % | ||
| J. Allen Layman | 25,000 | * | |||
| Anthony Guerino | 25,000 | * | |||
| Abraham Biderman | 5,000 | * |
AFFILIATES (1 & 2) | Shares | Warrants | Options | TOTAL | % |
|
|
|
|
|
|
Victor Lawrence | - | - | - | - |
|
Anthony Guerino | - | - | 765,000 | 765,000 | 0.05% |
Abraham Biderman | 1,076,900 | - | 1,065,000 | 2,141,900 | 0.15% |
Gustave Dotoli | 22,793,033 |
| 36,775,000 | 59,568,033 | 4.20% |
Ron Durando (3) | 43,588,965 | 65,000 | 63,675,000 | 107,328,965 | 7.57% |
Ned Ergul | 2,850,000 |
| 2,655,000 | 5,505,000 | 0.39% |
Martin Smiley | 16,262,629 | 2,345,569 | 19,700,000 | 38,308,198 | 2.69% |
Microphase | 16,060,019 | 5,572,222 | - | 21,632,241 | 1.54% |
Janifast | 8,227,778 | 1,950,000 | - | 10,177,778 | 0.72% |
Total Affiliates | 110,859,324 | 9,932,791 | 122,510,000 | 243,302,115 | 17.33% |
(1)
(2)
(3)
(4) Does not include 90,519,050 and 50,00036,510,585 shares held by Nutley Securities, Inc., a company wholly-owned by Mr. Durando.
1110
EXECUTIVE COMPENSATION
Our executive officers, directors and other significant employees and their ages and positions as of February 9, 2001June 30, 2008 are as follows:
| Name of Individual | Age | Position with the Company and Subsidiaries | |||||
| Ronald A. Durando | 51 | Chief Executive Officer, Chairman of the Board | |||||
| Gustave T. Dotoli (2) | 73 | Chief Operating Officer | |||||
| 59 | Director | ||||||
| Anthony | |||||||
| 64 | Director | ||||||
| Abraham | 61 | Director | |||||
| Martin Smiley | 61 | Chief Financial Officer and General Counsel |
| (1) | Member of Audit Committee |
| (2) | Member of Compensation Committee |
The following table sets forth, for the fiscal year ended June 30, 20002009 and the two previous fiscal years, the compensation paidearned by us to, as well as anymPhase's chief executive officer and the four other compensation paid to or earned by,
12
SUMMARY EXECUTIVE COMPENSATION
| NAME & | STOCK | OPTION | NON_EQUITY | PENSION | |||||||||||||||||||||||
| PRINCIPAL POSITION | YEAR | SALARY | BONUS | AWARDS | AWARDS | INCENTIVE | VALUE | OTHER | TOTAL | ||||||||||||||||||
| Ronald Durando | 2009 | $ | 275,718 | $ | 0 | $ | 1,541,700 | $ | 1,944,912 | N/A | N/A | $ | 61,473 | $ | 3,823,803 | ||||||||||||
| President | 2008 | $ | 393,600 | $ | 0 | $ | 0 | $ | 0 | N/A | N/A | $ | 19,490 #4 | $ | 413,090 | ||||||||||||
| Chief Executive Officer | 2007 | $ | 393,600 | $ | 0 | $ | 860,000 | $ | 196,000 | N/A | N/A | $ | 7,500 #1 | $ | 1,457,100 | ||||||||||||
Gustave Dotoli | |||||||||||||||||||||||||||
| Chief Operating Officer | 2009 | $ | 229,000 | $ | 0 | $ | 913,600 | $ | 1,166,947 | N/A | N/A | $ | 62,514 | $ | 2,372,061 | ||||||||||||
| 2008 | $ | 282,000 | $ | 0 | $ | 0 | $ | 0 | N/A | N/A | $ | 4,156 #4 | $ | 286,156 | |||||||||||||
| 2007 | $ | 282,000 | $ | 0 | $ | 450,000 | $ | 126,000 | N/A | N/A | $ | 7,538 #2 | $ | 865,538 | |||||||||||||
Martin Smiley | 2009 | $ 182,292 | $ 0 | $ 571,000 | $ 700,168 | N/A | N/A | $ 21,048 | $ 1,474,508 | ||||||||||||||||||
| Executive Vice President | 2008 | $ | 200,000 | $ | 0 | $ | 0 | $ | 0 | N/A | N/A | $ | 18,752#4 | $ | 218,752 | ||||||||||||
| CFO and General Council | 2007 | $ | 200,000 | $ | 0 | $ | 262,500 | $ | 56,000 | N/A | N/A | $ | 8,550 #3 | $ | 527,050 |
| Footnotes |
#1 consists of directors fees of $7,500 in 2007
# 2 consists of directors fees of $7,500 in 2007 plus interest of $38 in 2007 on loan to the bonus formula, seeCompany #3 consists of directors fees of $3,750 plus $4,800 interest on loans to the descriptionCompany #4 Interest on loans to the Company
11
Compensation of Mr. Durando's Employment Agreement below.
No individual named above received pre-requisites or non-cash compensation during the years indicated which exceeded the lesser of $50,000 or an amount equal to 10% of such person's salary. No other executive officer received compensation and bonuses that exceeded $100,000 during any year.Directors
Stock Options
The following table sets forth certain information concerning individual issues of options made during theDuring fiscal year ended June 30, 2000 to our executive officers named in the summary compensation table above. For2009, mPhase did not compensate any Directors with cash stipends. During the fiscal year ended June 30, 2000, we granted2009 inside directors were compensated for services both as officers and directors with stock options and stock grants. Outside directors of the Company were compensated with the following stock options and stock grants:
Option Exercises and Stock Vesting | ||||
FYE June 30,2009 | ||||
| ||||
| OPTION AWARDS | STOCK AWARDS | ||
| Number of | Number of | ||
| shares | Value | shares | Value |
| acquired | realized | acquired | realized |
Name | on exercise | on exercise | on exercise | on exercise |
| ||||
Ronald Durando | ||||
President CEO | none | none | 27,000,000 | $1,541,700 |
| ||||
Gustave Dotoli | ||||
COO | none | none | 16,000,000 | $1,166,947 |
| ||||
Martin Smiley | ||||
Executive VP | ||||
CFO Chief Legal | ||||
Council | none | none | 10,000,000 | $700,168 |
| ||||
Abraham Biderman | ||||
Director | none | none | 4,000,000 | $228,400 |
| ||||
Anthony Guerino | ||||
Director | none | none | 100,000 | $5,710 |
| ||||
Victor Lawrence | ||||
Director | none | none | 100,000 | $5,710 |
During fiscal year ended June 30, 2009 mPhase did not compensate inside or outside directors with any cash stipends for their service as Directors of the Company. The Company did award Mssrs. Durando, Dotoli, Smiley, Biderman, Guer Lawrence five year stock options at an exercise price of $.05 each on September 2, 2008 to acquire up to an aggregatepurchase 50,000,000; 30,000, 18,000,000; 2,000,000; 100,000 and 100,000 shares respectively; none of shares to employees and directors.which have been exercised through this date.
12
Option Exercises and Stock VestingOPTION GRANTS IN LASTFYE June 30,2008
| OPTION AWARDS | STOCK AWARDS | |||||||||||
| Number of | Number of | |||||||||||
| shares | Value | shares | Value | |||||||||
| acquired | realized | acquired | realized | |||||||||
| Name | on exercise | on exercise | on exercise | on exercise | ||||||||
| Ronald Durando | ||||||||||||
| President CEO | 0 | N/A | 6,000,000 | $ | 860,000 | |||||||
| Gustave Dotoli | ||||||||||||
| COO | 0 | N/A | 3,000,000 | $ | 450,000 | |||||||
| Martin Smiley | ||||||||||||
| Executive VP | ||||||||||||
| CFO Chief Legal | ||||||||||||
| Council | 0 | N/A | 1,750,000 | $ | 262,500 | |||||||
During fiscal years ended June 30, 2008 mPhase did not compensate inside or outside directors with any cash stipends or stock options or other compensation for their service as Directors of the Company.
OUTSTANDING EQUITY AWARDS
at FISCAL YEAR(INDIVIDUAL GRANTS)
END JUNE 30, 2009
| | | % of Total Options Granted to Employees in Fiscal 2000 | | | | | | | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for 5 year Option Term | ||||||||||||||||
| | | | Market Price on Grant Date | | |||||||||||||||||
| | Option Granted (#) | Exercise or Base Price ($/Share) | Expiration Date | ||||||||||||||||||
| Name | 0% | 5% | 10% | ||||||||||||||||||
| Ronald A. Durando | 250,000 | 13.3 | $ | 4.00 | $ | 7.0 | 2005 | $ | 750,000 | $ | 1,233,525 | $ | 1,818,375 | ||||||||
| Gustave T. Dotoli | 175,000 | 9.3 | 4.00 | 7.0 | 2005 | 525,000 | 863,467 | 1,272,863 | |||||||||||||
| Susan Cifelli | 25,000 100,000 | 1.3 5.3 | 4.00 1.50 | 7.0 7.0 | 2005 2005 | 75,000 550,000 | 123,353 743,410 | 181,838 977,350 | |||||||||||||
| David Klimek | 50,000 | 2.7 | 4.00 | 7.0 | 2005 | 150,000 | 246,705 | 363,675 | |||||||||||||
| Number | ||||||||||||||||||||||||
| Equity | of | |||||||||||||||||||||||
| Number of | Number of | Incentive | shares | Market | ||||||||||||||||||||
| Securities | Securities | Plan | of stock | Value | ||||||||||||||||||||
| underlying | underlying | awards | that has | of | ||||||||||||||||||||
| Unexercised | Unexercised | Number | Option | Option | not | Shares | ||||||||||||||||||
| Options | Options | of | Exercise | Expiration | been | not | Equity | |||||||||||||||||
| (Exercisable) | (Unexercisable) | Securities | Price | Date | vested | vested | Incentive | |||||||||||||||||
| Ronald Durando President CEO | 2,500,000 550,000 3,450,000 475,000 3,525,000 1,000,000 750,000 25,000 1,400,000 50,000,000 | 0 0 0 0 0 0 0 0 0 0 | 0 0 0 0 0 0 0 0 0 0 | $ $ $ $ $ $ $ $ $ $ | 0.35 0.18 0.18 0.21 0.21 0.21 0.25 0.25 0.21 0.05 | 12/31/2009 2/23/2011 2/23/2011 2/23/2011 2/23/2011 3/28/2011 6/14/2011 6/14/2011 8/24/2011 9/16/2013 | 0 0 0 0 0 0 0 0 0 0 | 0 0 0 0 0 0 0 0 0 0 | 0 0 0 0 0 0 0 0 0 0 |
| Gustave Dotoli COO | 1,000,000 550,000 1,250,000 475,000 1,325,000 750,000 500,000 25,000 900,000 30,000,000 | 0 0 0 0 0 0 0 0 0 0 | 0 0 0 0 0 0 0 0 0 0 | $ $ $ $ $ $ $ $ $ $ | 0.35 0.18 0.18 0.21 0.21 0.21 0.25 0.25 0.21 0.05 | 12/31/2009 2/23/2011 2/23/2011 2/23/2011 2/23/2011 3/28/2011 6/14/2011 6/14/2011 8/24/2011 9/16/2013 | 0 0 0 0 0 0 0 0 0 0 | 0 0 0 0 0 0 0 0 0 0 | 0 0 0 0 0 0 0 0 0 0 | |||||||||||||||
| Martin Smiley Executive VP CFO Chief Legal Council | 550,000 475,000 25,000 250,000 400,000 18,000,000 | 0 0 0 0 0 0 | 0 0 0 0 0 0 | $ $ $ $ $ $ | 0.18 0.21 0.21 0.25 0.21 0.05 | 2/23/2011 2/23/2011 2/23/2011 6/14/2011 6/24/2011 9/16/2013 | 0 0 0 0 0 0 | 0 0 0 0 0 0 | 0 0 0 0 0 0 |
13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal 2008 were Messrs. Biderman and Guerino. Neither Messrs. Biderman, nor Guerino have been one of mPhase's officers or employees. None of the Company's directors or executive officers served as a member of the Compensation Committee (or other board committee performing equivalent functions or, in the absence of such committee, the entire Board of Directors) of another entity during fiscal 2008 that has a director or executive officer serving also as a director on mPhase's Board of Directors.. Mr. Dotoli, together with Mr. Durando and Mr. Ergul, were collectively controlling shareholders and Directors of Janifast Ltd. and Mr. Dotoli. In March of 2009 Janifast Ltd terminated operations.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 30, 2009 certain information regarding the beneficial ownership of our shares:
| 1. | by each person who is known by us to be the beneficial owner of more than five percent (5%) of its outstanding common stock; |
| 2. | each of our directors; |
| 3. | by each executive officer named in the Summary Compensation Table; and, by all of our directors and executive officers as a group. |
| AFFILIATES (1 & 2) | Shares | Warrants | Options | TOTAL | % | ||||||||||
| Victor Lawrence | - | - | - | - | |||||||||||
| Anthony Guerino | - | - | 765,000 | 765,000 | 0.05% | ||||||||||
| Abraham Biderman | 1,076,900 | - | 1,065,000 | 2,141,900 | 0.15% | ||||||||||
| Gustave Dotoli | 22,793,033 | 36,775,000 | 59,568,033 | 4.20% | |||||||||||
| Ron Durando (3) | 43,588,965 | 65,000 | 63,675,000 | 107,328,965 | 7.57% | ||||||||||
| Ned Ergul | 2,850,000 | 2,655,000 | 5,505,000 | 0.39% | |||||||||||
| Martin Smiley | 16,262,629 | 2,345,569 | 19,700,000 | 38,308,198 | 2.69% | ||||||||||
| Microphase | 16,060,019 | 5,572,222 | - | 21,632,241 | 1.54% | ||||||||||
| Janifast | 8,227,778 | 1,950,000 | - | 10,177,778 | 0.72% | ||||||||||
| Total Affiliates | 110,859,324 | 9,932,791 | 122,510,000 | 243,302,115 | 17.33% |
(1) Unless otherwise indicated, the address of each beneficial owner is 587 Connecticut Avenue, Norwalk, Connecticut 06854-1711.
(2) Unless otherwise indicated, mPhase believes that all persons named in the table have sole voting and investment power with respect to all shares of the number and value of outstanding options heldCompany shares beneficially owned by our executive officers named in the Summary Compensation Tablethem. The percentage for each beneficial owner listed above at June 30, 2000. The value of unexercised in-the-money options is based upon the difference between closing price of ouron 1,103,089,650 shares outstanding on June 30, 20002009, and, the exercise price of the options.
| | | | Number of Securities Underlying Unexercised Options at Fiscal Year-End (#) | | | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Shares Acquired on Exercise (#) | | Value of Unexercised In-the-Money Options at Fiscal Year-End ($) | |||||||||||||
| | Value Realized | |||||||||||||||
| Name | Exercisable | Unexercisable(*) | Exercisable | Unexercisable(*) | ||||||||||||
| Ronald A. Durando | 0 | 0 | 1,750,000 | 3,000,000 | * | $ | 10,360,375 | $ | 18,375,000 | * | ||||||
| Gustave T. Dotoli | 140,000 | $ | 857,500 | 1,090,000 | 1,500,000 | * | 6,403,125 | 9,187,500 | * | |||||||
| David Klimek | 0 | 0 | 675,000 | 0 | 4,129,687 | 0 | ||||||||||
| Susan E. Cifelli | 0 | 0 | 165,000 | 90,000 | 962,813 | 545,625 | ||||||||||
13
We have an employment agreement with Ronald A. Durando, our President, Chief Executive Officer and Director. The agreement, executed June 24, 1999, is for a term of thirty-six months expiring on June 30, 2002. Under the terms of the agreement, Mr. Durando receives a base annual salary of $275,000, a bonus and a salary increase based upon a performance review every six months, beginning six months from the effective date of the agreement, as well as health benefits, vacation and such other fringe benefits as would be paid to our similarly situated senior management. In consideration of devoting such time as would be required of our Chief Executive Officer to our business and specifically to his duties under the agreement to provide investor relations, Mr. Durando is entitled to a bonus at the end of each year equal to five percent (5%) of the increase in the market value of the issued and outstanding shares of our shares, of which bonus twenty-five percent (25%) shall be payable in cash and the remaining balance in shares.
Such agreement is terminable upon Mr. Durando's death, permanent disability, or for "just cause" (defined below) and is renewable within two months of the expiration date of the agreement upon the mutual terms agreed to by Mr. Durando and us. Mr. Durando shall be deemed "permanently disabled" under the agreement if he shall fail to render and perform the executive services required under the agreement for a continuous period of three consecutive months. "Just cause" is defined under the agreement as the commission of acts constituting theft, embezzlement, the receipt of funds or property under false pretenses or similar acts of gross misconduct with respect to our property,each person holding options or warrants to purchase shares that are exercisable within 60 days after June 30, 2009, the convictionnumber of a felony involving mattersoptions and warrants are deemed to be outstanding and beneficially owned by the person for the purpose of computing such person's percentage ownership, but are not directly relateddeemed to our business if, inbe outstanding for the Board's discretion, it adversely affects his ability to perform his executive duties.purpose of computing the percentage ownership of any other person.
The agreement also contains work-for-hire, confidentiality and non-disclosure provisions. In the event that(3) Includes 1,816,148 shares held by Durando Investment LLC, Shares held by Janifast which Mr. Durando breaches such provisions, wecontrols are entitledstated separately.
(4) Does not include 90,519,050 and 36,510,585 shares issuable for unpaid compensation, loans plus accord interest, if converted for Messrs. Durando, Dotoli and Smiley respectively. Such conversions are subject to injunctive relief restraining him from any further breach, in addition to any other remedies that we may have arising outavailability of such breach.authorized shares.
14
Additionally, in the event of a change in control that is not approved by Mr. Durando as one of our Directors or shareholders, he is entitled to exercise an option to purchase 3,000,000 shares at a price of $1.00 per share.
We also have an employment agreement with Gustave T. Dotoli, our Chief Operating Officer and Director. The agreement, executed June 24, 1999, is for a term of thirty-six months expiring June 30, 2002, and Mr. Dotoli receives a base annual salary of $200,000, a bonus and a salary increase based upon performance review every six months, beginning six months from the effective date of the agreement, as well as health benefits, vacation and such other fringe benefits as would be paid to our similarly situated senior management.
The employment agreement is terminable upon Mr. Dotoli's death, permanent disability, or for "just cause"(defined below), and is renewable within two months of the expiration date of the agreement upon the mutual terms agreed to by Mr. Dotoli and us. Mr. Dotoli shall be deemed "permanently disabled" under the agreement if he shall fail to render and perform the executive services required under the agreement for a continuous period of three consecutive months. "Just cause" is defined under the agreement as the commission of acts constituting theft, embezzlement, the receipt of funds or property under false pretenses or similar acts of gross misconduct with respect to our property, or the conviction of a felony involving matters not directly related to our business if, in the Board's discretion, it adversely affects his ability to perform his executive duties. The agreement also contains work-for-hire, confidentiality and non-disclosure provisions. Additionally, in the event of a change in control that is not approved by Mr. Dotoli as one of our Directors or shareholders, he is entitled to exercise an option to purchase 1,500,000 shares as a price of $1.00 per share.
We also have an employment agreement with Martin Smiley, our Executive Vice President, Chief Financial Officer and General Counsel. The agreement executed August 21, 2000, is for a term of twenty-four months expiring on August 20, 2002. Mr. Smiley receives a base annual salary of $175,000, a bonus and a salary increase based upon performance review every twelve months, beginning twelve months from the effective date of the agreement, as well as health benefits, vacation and such other fringe benefits as would be paid to our similarly situated senior management.
Such agreement is terminable upon Mr. Smiley's death, significant disability, or for good cause, and is renewable within one month of the expiration date of the agreement upon the mutual terms agreed to by Mr. Smiley and us. Mr. Smiley shall be deemed "significantly disabled" under the agreement for a continuous period of six months. "Good cause" is defined under the agreement as the commission of acts constituting a felony or crime; fraud or misappropriation of funds; personal dishonesty, incompetence or, gross negligence; willful misconduct; repeated use of drugs, alcohol or similar substance; or breach of the agreement. The agreement also contains confidentiality and non-disclosure provisions.
None of our other executive officers have an employment agreement with us.
Ms. Cifelli is no longer employed with the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
As indicated above, our Compensation Committee consists of Messrs. Dotoli, VickersBiderman and Guerino. The committee determines all compensation paid or awarded to our executive officers and approves our overall compensation policies.
The committee's goals are to attract and retain an executive management team that is capable of taking full advantage of our opportunities, and to provide incentives for outstanding performance. In arriving at an initial compensation offer to an individual, the committee considers determinants of the individual's market value, including experience, education, accomplishments and reputation, as well as the level of responsibility to be assumed, in relation to the market value of such qualifications and
15
industry standards. When determining subsequent adjustments to an individual's compensation package, the committee also evaluates the importance to stockholders of that person's continued service. This is a judgment process, exercised by the committee with the advice of our management and a compensation consultant.
The executive officers' compensation structure consists of: (i) base salary, (ii) cash bonus and (iii) stock options.
Base Salary.Each individual's base salary is determined by the committee after considering a variety of factors that make up our market value and prospective value, including the knowledge, experience and accomplishments of the individual, the individual's level of responsibility, and the typical compensation levels for individuals with similar credentials. The committee may change the salary of an individual on the basis of its judgment for any reason, including our performance or the performance of the individual, changes in responsibility, and changes in the market for executives with similar credentials. Salaries for 20002008 and 2009 were set based on the above factors.factors and after review of industry comparables.
Cash Bonus.Bonuses are awarded for accomplishments during the past year. Bonuses are determined by the committee with advice from our management, based upon the committee's assessment of the individual's contributions during the year, compared to, but not limited to, a list of individualized goals previously approved by our management and the committee. In determining bonuses for the fiscal year ended June 30, 2000, the committee considered in addition to the individualized goals, our raising of approximately $17,622,000 additional capital to support ongoing research and significant progress in conducting trials of our system and, and further additions to our intellectual property and to its capability to convert this to product development programs.
Stock Options.Options. Stock options are prospective incentives, aimed at keeping and motivating key people by letting them share in the value they create for stockholders. They are awarded at times deemed appropriate by the committee in amounts calculated to secure the full attention and best efforts of executives on whose future performance our success will depend. Executive officers other than the C.E.O. (discussed below) received options covering 350,000 shares of our common stock in 2000.
Chief Executive Officer's Compensation. The committee awarded Mr. Durando a discretional bonus for the fiscal year ended June 30, 2000. Mr. Durando received a cash bonus and shares of our stock. The bonus is based on the committee's assessments of Mr. Durando's role in our performance in 2000. Under Mr. Durando's leadership, our capabilities and opportunities were significantly enhanced by raising an additional $17,622,000 million to support ongoing research efforts and product development. At the same time, we have made significant progress in developing new products. Organizational development is keeping pace with the expanding opportunities. The committee also reviewed Mr. Durando's bonus in light15
Compliance With Section 16(a) of the progress we have made in raising additional capital, as well as in the testing of the our products. The committee decided to award Mr. Durando this bonus due to the foregoing achievements.Exchange Act
16
As part of the proxy statement disclosure requirements mandated by the Securities and Exchange Commission, we are required to provide a comparison of the cumulative total stockholder return on our shares with that of a broad equity market index and either a published industry index or a company-constructed peer group index. The following graph compares the performance of our shares, the Nasdaq Composite Index (the "CCMP") and the Russell 2000 Index (the "RTY). The comparison assumes $100 was invested on June 3, 1997 (date of our shares first became publicly traded) in our shares and in each of the foregoing indices and assumes no dividends.
ADDITIONAL INFORMATION COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC and to provide us with copies of such reports. We havemPhase has reviewed such reports received by itthe report copies filed in 2009 and based also on written representations from its directors and executive officers. Based solely on such review,officers, the Company believes that there were no Form 4s filed late.was compliance with Section 16 (a) filing requirements for 2009.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Material Related Party Transactions
The Company has material related party transactions. The Company incurs costs for engineering, design and production of prototypes and certain administrative functions from Microphase Corporation and the purchase of finished goods, primarily consisting of DSL splitter shelves and filters, from Janifast Limited. The Company has incurred costs for obtaining transmission rights. This enabled the Company to obtain re-transmission accreditation to proprietary television content that the Company plans to provide with its flagship product, the TV+ within its incorporated joint venture mPhase Television.Net, in which the Company owns a 56.5% interest.
Mr. Durando, the President and CEO of mPhase, owns a controlling interest and is a director and COB of Janifast Limited. Mr. Durando and Mr. Dotoli are officers of Microphase Corporation. Mr. Dotoli is also a shareholder of Janifast Limited. Mr. Ergul, the chairman of the board of mPhase, owns a controlling interest and is a director of Microphase Corporation and is a director and shareholder of Janifast Limited. Microphase, Janifast, are significant shareholders of mPhase. In March of 2009 Janifast Ltd. ceased operations owing , in part, to the global financial crisis.
Our management isManagement believes the amounts charged to the Company by Microphase, Janifast, mPhase Television.Net and Hart Telephone are commensurate to amounts that would be incurred if outside parties were used. The Company believes Microphase, and Janifast Limited has the ability to fulfill their obligations to the Company without further support from the Company.
Transactions with Officers, Directors and their Affiliates
Directors that are significant shareholders of Janifast Limited include Messrs Ronald A. Durando and Gustave T. Dotoli,
The Following Summaries Compensation to Related Parties for the Fiscal Year Ended June 30, 2009
| TOTAL | ||||||||||||||||||
| Durando | Dotoli | Biderman | Smiley | Microphase | RELATED | |||||||||||||
| Consulting / Salary | $ | 275,718 | $ | 229,000 | $ | 182,292 | $ | 687,010 | ||||||||||
| Interest | $ | 61,473 | $ | 62,514 | $ | 21,048 | $ | 145,035 | ||||||||||
| G&A | $ | 16,773 | $ | 16,773 | ||||||||||||||
| Rent | $ | 36,000 | $ | 36,000 | ||||||||||||||
| R&D | $ | 16,773 | $ | 150,000 | ||||||||||||||
| Finders Fees | $ | 571,000 | $ | 80,000 | $ | 150,000 | 80,000 | |||||||||||
| Stock based compensation | $ | 1,541,700 | $ | 913,600 | $ | 228,400 | $ | 3,254,700 | ||||||||||
| (shares issued)* | ||||||||||||||||||
| Stock based compensation | $ | 1,944,912 | $ | 1,166,947 | $ | 700,168 | $ | 77,796 | $ | 3,889,823 | ||||||||
| (options issued)** | ||||||||||||||||||
| Total Compensation | $ | 3,823,803 | $ | 2,372,061 | $ | 1,474,508 | $ | 386,196 | $ | 202,773 | $ | 8,259,341 | ||||||
| Common Stock Issued* | 27,000,000 | 16,000,000 | 10,000,000 | 4,000,000 | 57,000,000 | |||||||||||||
| Options issued (5 years @ 5 cents)** | 50,000,000 | 30,000,000 | 18,000,000 | 2,000,000 | 100,000,000 |
16
Summary of Transactions with Officers
Twelve Months Ended June 30, 2009
| RON | GUS | MARTIN | ||||||||||
| DURANDO | DOTOLI | SMILEY | TOTAL | |||||||||
| NOTES PAYABLE OFFICERS | ||||||||||||
| BALANCE 6/30/08 | $ | 0 | $ | 0 | $ | 204,038 | $ | 204,038 | ||||
| July 2008 Advances (Payments) | $ | 0 | $ | 0 | $ | 2,500 | $ | 2,500 | ||||
| August 2008 Advances (Payments) | $ | 0 | $ | 0 | $ | 711 | $ | 711 | ||||
| Sept 2008 Advances (Payments) | $ | 0 | $ | 8,000 | $ | 9,289 | $ | 17,289 | ||||
| Oct 2007 Advances (Payments) | $ | 0 | ($8,000 | ) | $ | 478 | ($7,522 | ) | ||||
| Nov 2008 Advances (Payments) | $ | 0 | $ | 0 | ($10,000 | ) | ($10,000 | ) | ||||
| Dec 2008 Advances (Payments) | $ | 17,000 | $ | 23,000 | $ | 22,810 | $ | 62,810 | ||||
| Jan 2009 Advances (Payments) | ($17,000 | ) | ($23,000 | ) | ($8,016 | ) | ($48,016 | ) | ||||
| Feb 2009 Advances (Payments) | $ | 0 | $ | 16,000 | $ | 10,000 | $ | 26,000 | ||||
| Mar 2009 Advances (Payments) | $ | 0 | ($16,000 | ) | $ | 32,415 | $ | 16,415 | ||||
| Apr 2009 Advances (Payments) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||
| May 2009 Advances (Payments) | $ | 55,000 | $ | 30,000 | $ | 0 | $ | 85,000 | ||||
| June 2009 Advances (Payments) | ($55,000 | ) | ($30,000 | ) | $ | 0 | ($85,000 | ) | ||||
| BALANCE Notes Payable Officers | $ | 0 | $ | 0 | $ | 264,225 | $ | 264,225 | ||||
Deferred Compensation Convertedinto Notes | $ | 278,000 | $ | 323,500 | $ | 0 | $ | 601,500 |
| Net Consulting Fees Converted into | $ | 339,420 | $ | 127,256 | $ | 0 | $ | 466,676 | ||||
| Notes | ||||||||||||
| Total Notes Due to Officers | $ | 617,420 | $ | 450,756 | $ | 264,225 | $ | 1,332,400 | ||||
| Due To Officers | ||||||||||||
| BALANCE 6/30/08 | $ | 298,990 | $ | 102,256 | $ | 0 | $ | 401,246 | ||||
| Consulting Fees & Expenses Incurred - 1st Qtr | $ | 98,400 | $ | 70,500 | $ | 0 | $ | 168,900 | ||||
| Consulting Fees & Expenses Paid - 1st Qtr | ($101,500 | ) | ($84,000 | ) | $ | 0 | ($185,500 | ) | ||||
| Consulting Fees & Expenses Incurred - 2nd Qtr | $ | 66,817 | $ | 58,000 | $ | 0 | $ | 124,817 | ||||
| Consulting Fees & Expenses Paid - 2nd Qtr | ($35,000 | ) | ($32,500 | ) | $ | 0 | ($67,500 | ) | ||||
| Consulting Fees & Expenses Incurred - 3rd Qtr | $ | 60,501 | $ | 55,500 | $ | 0 | $ | 116,001 | ||||
| Consulting Fees & Expenses Paid - 3rd Qtr | ($31,626 | ) | ($25,500 | ) | $ | 0 | ($57,126 | ) | ||||
| Converted into Notes | ($339,582 | ) | ($127,256 | ) | $ | 0 | ($466,838 | ) | ||||
| Consulting Fees & Expenses Incurred - 4th Qtr | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||
| Consulting Fees & Expenses Paid - 4th Qtr | ($17,000 | ) | ($11,450 | ) | $ | 0 | ($28,450 | ) | ||||
| Other Adjustment | $ | 0 | ($5,550 | ) | $ | 0 | ($5,550 | ) | ||||
| Balance Due to Officers | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||
| Total Due to Officers Before Interest | $ | 617,420 | $ | 450,756 | $ | 264,225 | $ | 1,332,400 | ||||
| Interest Payable | $ | 61,473 | $ | 62,514 | $ | 9,605 | $ | 133,592 | ||||
| Total Payable to Officers | $ | 678,892 | $ | 513,270 | $ | 273,830 | $ | 1,465,992 | ||||
| COMPENSATION | ||||||||||||
| Consulting / Salary Earned | $ | 275,718 | $ | 229,000 | $ | 182,292 | $ | 687,010 | ||||
| Interest Earned | $ | 61,473 | $ | 62,514 | $ | 21,048 | $ | 145,035 | ||||
| Stock Based Compensation - Shares | $ | 1,541,700 | $ | 913,600 | $ | 571,000 | $ | 3,026,300 | ||||
| Stock Based Compensation - Options | $ | 1,944,912 | $ | 1,166,947 | $ | 700,168 | $ | 3,812,027 | ||||
| Total Compensation Officers | $ | 3,823,803 | $ | 2,372,061 | $ | 1,474,508 | $ | 7,670,072 |
The Following Summaries Compensation to Related Parties for the Fiscal Year Ended June 30, 2008
| TOTAL | |||||||||||||||||
| Durando | Dotoli | Biderman | Smiley | Microphase | RELATED | ||||||||||||
| Consulting / Salary | $ | 393,600 | $ | 282,000 | $ | 200,000 | $ | 875,600 | |||||||||
| Interest | $ | 19,490 | $ | 4,156 | $ | 18,752 | $ | 42,398 | |||||||||
| Rent | $ | 60,000 | $ | 60,000 | |||||||||||||
| R&D | $ | 28,151 | $ | 28,151 | |||||||||||||
| Finders Fees | $ | 188,472 | $ | 188,472 | |||||||||||||
| Cost of Sales and SG&A | $ | 30,089 | $ | 30,089 | |||||||||||||
| Totals | $ | 413,090 | $ | 286,156 | $ | 188,472 | $ | 218,752 | $ | 118,240 | $ | 1,224,710 |
17
Summary of amounts due to Officers
For the year ended June 30, 2008
| RON | GUS | MARTIN | ||||||||||
| DURANDO | DOTOLI | SMILEY | TOTAL | |||||||||
| NOTES PAYABLE OFFICERS | ||||||||||||
| BALANCE 6/30/07 | $ | 85,000 | $ | 75,000 | $ | 161,000 | $ | 321,000 | ||||
| July 2007 Advances (Payments) | ($30,000 | ) | ($75,000 | ) | ($105,000 | ) | ||||||
| August 2007 Advances (Payments) | $ | 35,000 | $ | 75,100 | $ | 35,000 | $ | 145,100 | ||||
| Sept 2007 Advances (Payments) | $ | 110,000 | $ | 110,000 | ||||||||
| Assumption of Note Payable- Sovereign | $ | 110,000 | $ | 110,000 | ||||||||
| Oct 2007 Advances (Payments) | $ | 25,000 | $ | 25,000 | $ | 25,000 | $ | 75,000 | ||||
| Nov 2007 Advances (Payments) | $ | 76,000 | $ | 36,000 | $ | 11,000 | $ | 123,000 | ||||
| Dec 2007 Advances (Payments) | $ | 25,000 | $ | 0 | $ | 0 | $ | 25,000 | ||||
| Transferred to Deferred Comp | ($148,000 | ) | ($123,500 | ) | ($271,500 | ) | ||||||
| Jan 2008 Advances (Payments) | $ | 2,000 | $ | 32,000 | $ | 34,000 | ||||||
| Feb 2008 Advances (Payments) | $ | 0 | $ | 55,000 | $ | 72,038 | $ | 127,038 | ||||
| Mar 2008 Advances (Payments) | ($180,000 | ) | ($47,500 | ) | ($40,000 | ) | ($267,500 | ) | ||||
| April 2008 Advances (Payments) | ($110,000 | ) | ($52,100 | ) | ($45,000 | ) | ($207,100 | ) | ||||
| May 2008 Advances (Payments) | ($15,000 | ) | ($15,000 | ) | ||||||||
| June 2008 Advances (Payments) | ||||||||||||
| BALANCE Notes Payable Officers | $ | 0 | $ | 0 | $ | 204,038 | $ | 204,038 | ||||
| Deferred Compensation | $ | 278,000 | $ | 323,500 | $ | 601,500 | ||||||
| Due To Officers | ||||||||||||
| BALANCE 6/30/07 | $ | 188,400 | $ | 75,500 | $ | 263,900 | ||||||
| Consulting Fee Earned -1st Qtr | $ | 98,400 | $ | 70,500 | $ | 168,900 | ||||||
| Consulting Fees Paid - 1st Qtr | ($39,500 | ) | ($32,500 | ) | ($72,000 | ) | ||||||
| Consulting Fee Earned - 2nd Qtr | $ | 98,400 | $ | 70,500 | $ | 168,900 | ||||||
| Consulting Fees Paid - 2nd Qtr | ($10,000 | ) | ($10,000 | ) | ($20,000 | ) | ||||||
| Consulting Fee Earned - 3rd Qtr | $ | 98,400 | $ | 70,500 | $ | 168,900 | ||||||
| Consulting Fees Paid - 3rd Qtr | ($12,000 | ) | ($8,500 | ) | ($20,500 | ) | ||||||
| Consulting Fee Earned - 4th Qtr | $ | 98,400 | $ | 70,500 | $ | 168,900 | ||||||
| Consulting Fees Paid - 4th Qtr | ($221,510 | ) | ($204,244 | ) | ($425,754 | ) | ||||||
| Balance Due to Officers | $ | 298,990 | $ | 102,256 | $ | 401,246 | ||||||
| Interest Payable | $ | 0 | $ | 0 | $ | 18,751 | $ | 18,751 | ||||
| Totals Payable to Officers | $ | 576,990 | $ | 425,756 | $ | 222,789 | $ | 1,225,535 |
The Following Summaries Compensation to Related Parties for the Fiscal Year Ended June 30, 2007
| TOTAL | ||||||||||||||||||||||||||||||
| Durando | Dotoli | Ergul | Biderman | Smiley | Guerino | Lawrence | Janifast | Microphase | RELATED | |||||||||||||||||||||
| Consulting / Salary | $ | 393,600 | $ | 282,000 | $ | 200,000 | $ | 875,600 | ||||||||||||||||||||||
| Directors Stipend and | ||||||||||||||||||||||||||||||
| Interest | $ | 7,500 | $ | 7,538 | $ | 3,750 | $ | 3,750 | $ | 8,550 | $ | 3,750 | $ | 3,750 | $ | 38,588 | ||||||||||||||
| Rent | $ | 60,000 | $ | 60,000 | ||||||||||||||||||||||||||
| R&D | $ | 236,492 | $ | 236,492 | ||||||||||||||||||||||||||
| Finders Fees (including | ||||||||||||||||||||||||||||||
| common shares) | $ | 520,000 | $ | 520,000 | ||||||||||||||||||||||||||
| Cost of Sales and SG&A | $ | 110,912 | $ | 36,342 | $ | 147,254 |
| Reparations and Stock | ||||||||||||||||||||||||||||||
| Based Compensation | $ | 1,044,000 | $ | 555,000 | $ | 201,000 | $ | 16,800 | $ | 306,250 | $ | 14,700 | $ | 138,462 | $ | 2,276,212 | ||||||||||||||
| Totals | $ | 1,445,100 | $ | 844,538 | $ | 204,750 | $ | 540,550 | $ | 514,800 | $ | 18,450 | $ | 3,750 | $ | 249,374 | $ | 332,834 | $4,154,146 | |||||||||||
| PacketPort.com legal | ||||||||||||||||||||||||||||||
| expense | $ | 611,807 | ||||||||||||||||||||||||||||
| Total expense to related | ||||||||||||||||||||||||||||||
| parties | $ | 4,765,953 |
During the twelve months ended June 30, 2007, Mr. Biderman's through his affiliated firm of Palladium Capital Advisors earned finder's fees of $520,000 in connection with the raising of approximately $5 million in various equity transactions during the year.
In addition at various points during fiscal year ended June 2007, Messrs Durando, Dotoli and Smiley provided $650,000 in bridge loans to the Company which was evidenced by employmentindividual promissory notes. During December 2006, Messrs Durando and Dotoli agreed to convert their notes, in the amounts of $130,000 and $200,000 respectively, to a deferred compensation arrangement, the repayment terms of which have not been specified. Mr. Smiley has extended bridge loans to the Company of $160,000, evidenced by promissory notes for $101,000 and a $60,000 note with a 12% rate of interest. In summary as of June 30, 2007, bridge loans outstanding were $85,000, $75,000 and $161,000 to the Messrs Durando, Dotoli and Smiley, respectively. All of the foregoing promissory notes are payable on demand.
During the 12 month period ended June 30, 2006 Eagle Advisers, an investment banking firm founded by Mr. Abraham Biderman, a member of the Board of Directors of the Company, earned fees and reimbursement expenses of approximately $782,568 in connection with services in regard to private placements of the Company's common stock and warrants and raised a total of $5,820,652 net of such fees for the Company.
During the 12 month period ended June 30, 2005 Eagle Advisers, earned fees and reimbursement expenses of approximately $633,000 in connection with services in connection with private placements of the Company's common stock and warrants and raised a total of $6,117,000 net of such fees for the Company.
18
Additionally at and/or ownershipJune 30, 2004, Mr. Durando was owed $300,000 and Mr. Smiley was owed $100,000 by the Company as evidenced by a non-interest bearing promissory note that was repaid in July 2004. As of June 30, 2004 a total of $55,000 in the aggregate was due to Mr. Durando and Mr. Dotoli for unpaid compensation.
Mr. Durando's June 30, 2004 note payable balance of $300,000 was repaid by the Company during fiscal year 2005. During the first and second quarters of fiscal year 2005, Mr. Durando made additional bridge loans to the Company evidenced by various 12% demand notes in the aggregate of $525,000. Mr. Durando was repaid a total of $450,000 of such loans in January of 2005. In addition, Mr. Durando converted $13,954 of the principal amount of a related group$75,000 promissory note leaving unpaid principal of companies, including$61,046 outstanding. Mr. Durando converted $13,000 of accrued and unpaid interest on various promissory notes of the Company into 65,000 shares of common stock and a 5 year warrant to purchase a like amount of common stock at $.25 per share.
During the twelve month period ended June 30, 2005 Mr. Dotoli and Mr. Smiley, the COO, and CFO and General Counsel of the Company respectively, each lent the Company $75,000. Mr. Dotoli was repaid, the principal amount of such loan, in cash in January, 2005 and Mr. Smiley converted his $75,000 loan into 375,000 shares of common stock of the Company plus a 5 year warrant to purchase a like amount of shares at $.25 per share. In addition, Mr. Smiley converted $9,975 of accrued interest into 49,875 shares of common stock plus a 5 year warrant to purchase a like amount of shares at $.25 per share. Finally Mr. Smiley received 25,000 additional shares of common stock as a market adjustment to his equity investment of $25,000 on August 30, 2004. Mr. Dotoli cancelled $3,750 of accrued and unpaid interest from August 15, 2004 through January 15, 2004 into 375,000 shares of common stock pursuant to the terms of a portion of a warrant that was exercised at $.01 per share previously given by the Company to Mr. Dotoli in exchange for and cancellation of unpaid compensation. On January 15, 2004, Mr. Smiley was awarded 425,000 shares of common stock as additional compensation.
During the six months ending December 31, 2004, accounts payable in the amount of $250,000 owed by mPhase to Microphase Corporation Complete Telecommunications, Inc. (which was dissolved subjectcancelled in exchange for the 1,250,000 shares of common stock and a 5 year warrant to purchase a like amount of shares at $.25.In addition for such period, Janifast Ltd. cancelled $200,000 of accounts payable owed by mPhase in exchange for 1,000,000 shares of common stock and a 5 year warrant to purchase a like amount of shares at $.25 per share.
In late February and early March of 2005, the various vendors converted approximately $173,898 in accounts payable due from the Company into 535,296 shares of Common stock aggregating $183,310 in full settlement of those obligations.
Mr. Ronald A. Durando converted $13,000 of accrued and unpaid interest on various demand notes issued by the Company for loans by Mr. Durando during the six month period ended December 31, 2004 into 65,000 shares of common stock plus a 5 year warrant to purchase a like amount of shares at $.25 per share. In addition Mr. Durando converted $13,954 of principal of a $75,000 promissory note into the exercise, in full, of a warrant to purchase 1,395,400 shares of common stock at $.01 previously granted to Mr. Durando in exchange for cancellation of unpaid compensation.
In June of 2005, Mr. Smiley converted the his 12% $100,000 note converted plus accrued interest thereon to 520,000 shares of common stock of mPhase at the rate of $.20 cents per share plus a 5 year warrant for an additional 520,000 shares of common stock at $.25 per share.
In addition a demand note payable to Martin Smiley, CFO and General Counsel of mPhase, in the amount of $75,000 was converted into 375,000 shares of common stock plus a 5 year warrant to purchase a like amount of shares at $.25 per share and Mr. Smiley extended from July 25, 2004 to July 25, 2005 a $100,000 promissory note carrying 12% interest. In addition Mr. Smiley converted accrued and unpaid interest on his various promissory notes of $ 9,975 through December 31, 2004 into 49,875 shares of common stock plus a 5 year warrant to purchase a like amount of common stock at $.25 per share. Mr. Smiley's remaining $100,000 note is convertible into Common Stock of mPhase at the rate of $.25 cents per share through July 25, 2009. Upon conversion, the note holder will be granted warrants to purchase an equivalent amount of mPhase Common Stock at $.25 cents per share for a period of five years from the date of conversion plus a 5 year warrant for a like amount of shares at $.25 per share. Mr. Ronald A. Durando converted $13,000 of accrued and unpaid interest on various demand notes issued by the Company for loans by Mr. Durando during the six month period ended December 31, 2004 into 65,000 shares of common stock plus a 5 year warrant to purchase a like amount of shares at $.25 per share. In addition Mr. Durando converted $13,954 of principal of a $75,000 promissory note into the exercise, in full, of a warrant to purchase 1,395,400 shares of common stock at $.01 previously granted to Mr. Durando in exchange for cancellation of unpaid compensation. Finally, Mr. Gustave Dotoli, Chief Operating Officer of the Company converted $ 3,750 of accrued and unpaid interest on a $75,000 promissory note into 375,000 shares of common stock at $.01 pursuant to a settlementportion of a warrant previously granted to Mr. Dotoli for unpaid compensation.
During fiscal year end June 30, 2006, Mr. Edward Suozzo, a consultant of the Company, converted $50,000 of accounts payable owed by the Company into 331,864 shares of common stock plus a 5 year warrant to purchase 277,778 shares of common stock at $.18 per share. During fiscal year end June 30, 2005, Mr. Suozzo converted $20,000 of accounts payable owed by the Company into 100,000 shares of common stock plus a 5 year warrant to purchase 100,000 shares of common stock at $.25 per share.
19
During fiscal year end June 30, 2006, Microphase Corporation and Janifast Corp, both related parties respectively converted $369,000 and $171,000 of accounts payable owed by the Company into 2,050,000 and 950,000 shares of common stock plus a 5 year warrant to purchase 2,050,000 and 950,000 shares of common stock at $.18 per share.
During the three months ending September 30, 2004, a note payable in the amount of $180,000 to Microphase Corporation, Such note was extended by Microphase from July 25, 2004 and now matures on July 25, 2005. Additionally, a note payable to Martin Smiley, CFO and General Counsel of mPhase, in the amount of $100,000 was extended from July 25, 2004 to July 25, 2005. Both liabilities carry an interest rate of 12% payable quarterly in arrears and were extended effective June 30, 2004. Each note is convertible into Common Stock of mPhase at the rate of $.25 cents per share plus a 5 year warrant for a like amount of common stock at $.25 per share through July 25, 2005 and a second 5 year warrant at $.50 per share convertible into a like amount of shares.
On August 30, 2004, the Company paid $100,000 to Piper&Rudnick, LLP, its outside counsel, in connection with the renegotiation of a Payment Agreement effective June 30, 2004. Under the terms of the renegotiated Payment Agreement, the Company agreed to payments of $25,000 each on December 1, 2004, March 1, 2005, June 1, 2005 and September 1, 2005 and a payment of $50,000 on December 1, 2006 plus $25,000 payments on March 1, 2006, June 1, 2006, September 1, 2006 and a final payment of $75,000 payment on December 1, 2007. In addition, Piper&Rudnick LLP agreed to convert $150,000 of such payable into a 5 year cashless warrant to purchase the Company's common stock at $.25 per share.
On August 30, 2004 the Company issued two demand promissory notes each in the principal amount of $75,000 at 12% interest in consideration of loans of $75,000 to the Company from each of Mr. Dotoli, its COO and Mr. Smiley, its CFO and General Counsel. In addition on September 30, 2004, the Company issued a demand promissory note to Microphase Corporation, a related party, for a loan of $175,000 to the Company with a 12% interest rate. Finally, the Company issued demand promissory notes with an interest rate of 12% to Mr. Ronald Durando, CEO of the Company for loans made to the Company dated August 16, 1999), Packet Port, Inc.30, 2004, as well as demand promissory notes to Mr. Durando, its CEO, for loans to the Company of $200,000 on August 30, 2004, $75,000 on September 28, 2004 and PacketPort.com and Janifast Holdings, Ltd., which may record material transactions with us. As a result of such affiliations, our management in the future may have conflicting interests with these affiliated companies.$175,000 on September 30, 2004 respectively.
Necdet F. Ergul, Ronald A. Durando and Gustave T. Dotoli, our Chairman, Chief Executive Officer and Chief Operating Officer, respectively, are executive officers and shareholders of Microphase and Ronald Durando and Gustave T. Dotoli areserved as president and vice-presidentvice- president of PacketPort.com., respectively.
17
We reimburse Microphase $50,000 per month for research and development services and administrative expenses incurred for the userespectively until Packetport.com merged with Wyndstorm Corporation in February of Microphase's office space, lab facilities and administrative staff.
Ronald A. Durando is the owner/sole shareholder of Nutley Securities, Inc., a former registered broker-dealer,2008, at which is not a private investment company under the Investment Advisors Act of 1940.
One of our directors, J. Lee Barton, is the president and chief executive officer of Lintel, Inc. Lintel is the parent corporation of Hart Telephone Company, our beta customer located in Hartwell, Georgia, where we installed our prototype product and commenced beta testing. In December 1998, we issued 3,115,000 shares in a private placement to J. Lee Barton, several members of his family, Lintel, several employees of Lintel and two employees of Microphase for a purchase price of approximately $1.03 per share, or an aggregate purchase price of $3,197,416. In fiscal year 1999, we awarded J. Lee Barton 75,000 shares and an option for 100,000 shares. In fiscal year 2000, we awarded J. Lee Barton a $285,000 bonus, a stock award of 140,000 shares and options for 225,000 shares, which includes options to Hart Telephone.
Janifast Holdings, Ltd., a Delaware corporation, is the parent corporation of the manufacturer which has produced pots splitter shelves, test access shelves and CPE filters as well as other components for our prototype Traverser DVDDS product, and may produce such components for us in the future. Necdet F. Ergul, Ronald A.time Mr. Durando and Gustave T.Mr. Dotoli are controlling shareholders of Janifast with an aggregate ownership interest of greater than 75% of Janifast. Mr. Durando is chairman of the board of directors and each of Messrs. Dotoli and Ergul are directors of Janifast.resigned from their respective positions.
On November 26, 1999, Packet Port,Mr. Durando acquired, via a 100% ownership of PacketPort, Inc., a controlling interest in Linkon Corporation, now known as PacketPort.com, Inc. On November 26, 1999, PacketPort, Inc., a company owned 100% by Mr. Durando, acquired controlling interest in Linkon Corp., which subsequently changed its name to PacketPort.com, Inc. In connection with this transaction, Mr. Durando transferred 350,000 shares of our shares owned by himcommon stock to Packet Port,PacketPort, Inc.
Transactions with Microphase Corporation
mPhase's President and Chairman of the Board of the Company are also employees of Microphase. On May 1, 1997, the Company entered into an agreement with Microphase, whereby it will use office space as well as the administrative services of Microphase, including the use of accounting personnel. This agreement for fiscal year 2006 required mPhase to pay Micophase $10,000 per month. Microphase also charges fees for specific projects on a project-by-project basis. During the year ended June 30, 2006 and for the period of time from mPhase's inception (October 2, 1996) to June 30, 2006, $531,820 and $8,670,776, respectively, have been charged to expense or inventory under these Agreements and is included in operating expenses in the accompanying consolidated statements of operations.
The Company is obligated to pay a 3% royalty to Microphase on revenues from its proprietary Traverser Digital Video and Data Delivery System and DSL component products.
Transactions with Janifast
Janifast Ltd., a Hong Kong corporation manufacturer, which has produced components for our prototype Traverser_ DVDDS product. Necdet F. Ergul, Ronald A. Durando and Gustave T. Dotoli are controlling shareholders of Janifast Ltd. with an aggregate ownership interest of greater than 75% of Janifast Ltd. Mr. Durando was elected presidentis Chairman of the Board of Directors and Mr. Dotoli vice presidentErgul is a Director of PacketPort.com,Janifast. In March of 2009 Janifast LTD. ceased operations due to adverse financial conditions.
Transactions with Other Related Parties
In March 2000, mPhase acquired a 50% interest in mPhaseTelevision.Net (formerly Telco Television Network, Inc.), an incorporated joint venture. This percentage was increased to approximately 57% in fiscal year 2001. Alpha Star International, Inc currently owns the remaining joint venture interest.
Effective June 30, 2004, the Company was $473,787 in arrears with respect to a Promissory Note issued to Piper Rudnick LLP plus other legal fees of $118,773.36. It should be noted that Piper & Rudnick received such Promissory Note plus two warrants received in March of 2002 that expired in March 8, 2007 in exchange for cancellation of certain payables. Such warrants have conversion rights into our common stock for a total of 2,233,490 shares that have been registered under a recently effective Form S-1 Registration Statement, and are cashless. On September 3, 2003, the Company paid $10,000 in cash to Piper in exchange for reducing the total payable to $550,000 plus the issuance of additional cashless warrant for $150,000 worth of the Company's common stock valued at $.25 per share. The remaining $300,000 payable had the following future payment schedule :
1. Payments of $25,000 each on December 1, 2004, March 1, 2005, June 1, 2005, September 1, 2005, March 1, 2006, June 1, 2006 and September 1, 2006.
2. A payment of $50,000 on December 1, 2005
3. A payment of $75,000 due on December 1, 2006
As of June 30, 2008 the Company has made all of the above payments except for the $75,000 due December 1, 2006, that was, in arrears.
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SHAREHOLDERS PROPOSALS FOR THE 20022009 ANNUAL MEETING
Shareholders who may wish to present proposals for inclusion in our proxyProxy materials and for consideration at the 20022009 Annual Meeting of Shareholders must submit such proposals in writing to our corporate Secretary in accordance with all applicable rules and regulations of the SEC for receipt by us no later than December 1, 2001.January 18, 2010. A signed proxyProxy shall confer discretionary authority upon us to vote on all shareholder proposals that are not received by us on or before DecemberMarch 1, 2001.2009.
The accompanying proxyProxy is solicited by and on behalf of our Board of Directors. We will bear the cost of soliciting proxies from its shareholders. In addition to solicitation by mail, our directors, officers and employees may solicit proxies by telephone, telegram or otherwise. Such directors, officers and employees will not receive additional compensation for such solicitation. Brokerage firms, nominees, custodians and fiduciaries also will be requested to forward proxyProxy materials to beneficial owners of shares held of record by them. We may reimburse brokerage firms, nominees, custodians, fiduciaries and other record holders for their reasonable out of pocket expenses in forwarding proxyProxy materials to the beneficial owners and obtaining their proxies.
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A copy of our Annual Report on Form 10-KSB10K for the each of our fiscal yearyears ended June 30, 2000,2009 and June 30, 2008 is being provided to all shareholders with this Proxy Statement. In addition, our Annual Report on Form 10-KSB10-K with exhibits is available via the internetInternet at the website http://www.freeedgar.com.www.freeedgar.com ..
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As of the date of this Proxy Statement, the Board of Directors knows of no matters which will be presented for consideration at the Annual Meeting other than the proposals set forth in this Proxy Statement. If any other matters properly come before the meeting, it is intended that the persons named in the Proxy will act in respect thereof in accordance with their best judgment.
By Order of the Board of Directors
Gustave T. Dotoli
Corporate Secretary
Norwalk, ConnecticutApril , 2001
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EXHIBIT A22
mPHASE TECHNOLOGIES, INCAUDIT COMMITTEE CHARTER
MPHASE TECHNOLOGIES, INC. | VOTE BY INTERNET - www.proxyvote.com | |
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The Audit Committee ("the Committee"), of the Board of Directors ("the Board") of mPhase Technologies, Inc.("the Company"), will have the oversight responsibility, authority and specific duties described below.
Composition
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The Committee will be comprised of three or more directors as determined by the Board. The members of the Committee will meet the independence and experience requirements of the National Association of Securities Dealers, Inc. ("NASD") and its wholly owned subsidiary, The NASDAQ Stock Market, Inc ("NASDAQ") Audit Committee requirements. The members of the Committee will be selected annually at the organizational meeting of the full Board held in May and will be listed in the Annual report to shareholders, One of the members of the Committee will be elected Committee Chair by Board.
Responsibility
The Committee is a part of the Board. It's primary function is to assist the Board in fulfilling its oversight responsibilities with respect to (i) the annual financial information to be provided to shareholders and the Securities and Exchange Commission (SEC); (ii) the system of internal controls that management has established; and (iii) the internal and external audit process. In addition, the Committee provides an avenue for communication between internal audit, the independent accountants, financial management and the Board. The Committee should have a clear understanding with the independent accountants that they must maintain an open and transparent relationship with the Committee, and that the ultimate accountability of the independent accountants is to the Board and the Committee. The Committee will make regular reports to the Board concerning its activities.
While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company's financial statements are complete and accurate and are in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditor. Nor is it the duty of the Audit Committee to conduct investigations, to resolve disagreements, if any, between management and the independent auditor or to assure compliance with laws and regulations and the Company's business conduct guidelines.
Authority
Subject to the prior approval of the Board, the Committee is granted the authority to investigate any matter or activity involving financial accounting and financial reporting, as well as the internal controls of the Company. In that regard, the Committee will have the authority to approve the retention of external professionals to render advice and counsel in such matters. All employees will be directed to cooperate with respect thereto as requested by members of the Committee.
Meetings
The Committee is to meet at least four times annually and as many additional times as the Committee seems necessary. Content of the agenda for each meeting should be cleared by the Committee Chair. The Committee is to meet in separate executive sessions with the chief financial officer, independent accountants and internal audit at least once each year and at other times when considered appropriate.
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Attendance
Committee members will strive to be present at all meetings. As necessary or desirable, the Committee Chair may request that members of management and representatives of the independent accountants and internal audit be present at Committee meetings.
Specific duties
In carrying out its oversight responsibilities, the Committee will:
Have a predetermined arrangement with the independent accountants that they will advise the Committee through its Chair and management of the Company of any matters identified through procedures followed for interim quarterly financial statements, and that such notification is to be made prior to the related press release or, if not practicable, prior to filing Forms 1O-Q. Also receive a written confirmation provided by the independent accountants at the end of each of the first three quarters of the year that they have nothing to report to the Committee, if that is the case, or the written enumeration of required reporting issues.
The annual financial statements and related footnotes and financial information to be included in the Company annual report to shareholders and on Form 1O-K.
Results of the audit of the financial statements and the related report thereon and, if applicable, a report on changes during the year in accounting principles and their application.
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Significant changes to the audit plan, if any, and any serious disputes or difficulties with management encountered during the audit. Inquire about the cooperation received by the independent accountants during their audit, including access to all requested records, data and information. Inquire of the independent accountants whether there have been any disagreements with management which, if not satisfactorily resolved, would have caused them to issue a nonstandard report on the Company's financial statements.
If deemed appropriate after such review and discussion, recommend to the Board that the financial statements be included in the Company's annual report on Form 10-K.
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EXHIBIT B
CERTIFICATE OF AMENDMENTTO THECERTIFICATE OF INCORPORATIONOFmPHASE TECHNOLOGIES, INC.
Pursuant to Section 14A:9-4(3) of Title 14A, Corporations, General, of the New Jersey Statutes, on behalf of mPhase Technologies, Inc. (the "Corporation"), the undersigned executes this Certificate of Amendment to the Corporation's Certificate of Incorporation.
1. Amendment to Authorized Shares of Capital Stock.
Paragraph 4 of the Certificate of Incorporation which reads as follows,
"4. The aggregate number of shares which the corporation shall have authority to issue is 150,000,000 shares, no par value."
shall deleted in its entirety and replaced by the following:
"4. Authorized Shares. The aggregate number of shares which the Corporation shall have authority to issue is One Hundred and Fifty Million (150,000,000) shares, of which One Hundred and Thirty Million (130,000,000) shares, par value $.01 per share, shall be initially classified as "Common Stock," and Twenty Million (20,000,000) shares, par value $.01 per share, shall be initially classified as "Preferred Stock." A statement of the designations and the powers, preferences and rights of such classes of stock and the qualifications, limitations or restrictions thereof, the fixing of which by the Certificate of Incorporation is desired, and the authority of the Board of Directors to fix, by resolution or resolutions, the designations and the powers, preferences and rights of such classes of stock or the qualifications, limitations or restrictions thereof, which are not fixed hereby, are as follows:
A. Provisions Applicable to All Series of Preferred Stock.
(1) The Board of Directors is expressly authorized, subject to the limitations prescribed by law and the provisions of this Paragraph, at any time, and from time to time, to provide for the issuance of shares of Preferred Stock on one or more series, of any number of shares of Preferred Stock, and by filing a certificate pursuant to the applicable law under the New Jersey Business Corporations Act, to establish the number of shares to be included in each series of Preferred Stock and to fix the powers, designations, preferences, relative rights, qualifications and restrictions thereof. The authority of the Board of Directors with respect to each series of Preferred Stock shall include, but not be limited to, a determination of the following:
(a) The number of shares of Preferred Stock constituting that series and the distinctive designation of that series;
(b) The dividend rate on the shares of Preferred Stock of that series, whether dividends shall be cumulative, and if so, from which date or dates, and whether they shall be payable in preference to, or in such relation to, the dividends payable on any other class or classes or of any other series of the capital stock of the Corporation;
(c) Whether that series shall have any voting rights in addition to those provided by law, and if so, the terms of such additional voting rights;
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(d) Whether that series shall have conversion or exchange privileges, and if so, the terms and conditions of such conversion or exchange, including provision for adjustment of the conversion or exchange rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable, and if so, the terms and conditions of such redemption, including the manner of selecting shares for redemption if less than all of the shares are to be redeemed, the date or dates upon or after which they shall be redeemable and the type and amount of consideration payable per share in case of redemption, which amount may vary under different conditions and at different redemption dates;
(f) Whether that series shall be entitled to the benefit of a sinking fund to be applied to the purchase or redemption of shares of that series, and if so, the terms and amount of such sinking fund;
(g) The right of shares of that series to the benefit of conditions and restrictions upon the creation of indebtedness of the Corporation or any subsidiary, upon the issuance of any additional stock (including additional shares of such series or of any other series) and upon the payment of dividends or the making of other distributions on, and the purchase or redemption or other acquisition by the Corporation or any subsidiary of, any outstanding stock of the Corporation;
(h) The rights of the shares of that series in the event of a voluntary or involuntary liquidation, dissolution or winding up of the Corporation and whether such rights shall be in preference to, or in another relation to, the comparable rights or any other class or classes or series of capital stock; and
(i) Any other relative, participating, optional or other special rights, qualifications, limitations or restrictions of that series.
(2) All shares of each series of Preferred Stock shall be identical in all respects to the other shares of such series. The rights of the Common Stock of the Corporation shall be subject to the preferences and relative participating, optional and other special rights of the Preferred Stock of each series as fixed herein and from time to time by the Board of Directors as aforesaid.
B. Provisions Applicable to Common Stock.
(1) After the requirements with respect to preferential dividends upon the Preference Stock of all classes and series thereof shall have been met and after the Corporation shall have complied with all requirements, if any, with respect to the setting aside of sums as a sinking fund or redemption or purchase account for the benefit of any class or series thereof, then, and not otherwise, the holders of Common Stock shall be entitled to receive such dividends in prorata proportion to their share holdings as may be declared from time to time by the Board of Directors.
(2) After distribution in full of the preferential amounts to be distributed to the holders of all classes and series thereof of Preferred Stock then outstanding in the event of a voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to its shareholders ratably in proportion to the number of shares of Common Stock held by them respectively.
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2. Reclassification of Issued Shares.
All shares of common stock of the Corporation, no par value per share, which are issued and outstanding as of the date hereof are hereby deemed to have a par value of $.01 per share without any further action required by the Corporation.
3. Date of Adoption.
The date of adoption of this Amendment to the Certificate of Incorporation by the Stockholders was April , 2001.
4. Number of Shares Outstanding and Entitled to Vote.
The number of shares of the capital stock of the Corporation entitled to vote on the adoption of this Amendment to the Certificate of Incorporation was .
5. Number of Shares Voted.
The number of shares of Common Stock of the Corporation which voted for the adoption of this Amendment was shares and the number of shares voted against the adoption of this Amendment was shares. Shares not voting were shares.
The undersigned as President and Chief Executive Officer of the Corporation has executed this Certificate of Amendment to the Certificate of Incorporation of the Corporation on this day of , 2001.
mPHASE TECHNOLOGIES, INC. | |||||||||
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE PROPOSALS BELOW. | |||||||||
For | Withhold | For | To withhold authority to vote for any individual nominee(s), mark "FOR ALL EXCEPT" and write the nominee’s number on the line below. | ||||||
1. | Election of 01) Ronald A. Durando, | ||||||||
o | o | o | |||||||
For |
| Abstain | |||||||
2. | Approval of our independent accountants, Rosenberg Rich Baker Berman & | o | o | o | |||||
3. | Approval of an amendment to our Amended Certificate of Incorporation authorizing an increase in authorized shares of common stock of the Company from 2 billion shares to 3 billion shares $.01 par value | ||||||||
o | o | o | |||||||
Note: Please sign exactly as your name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee, or guardian, please give full titles as such. | |||||||||
For address changes/comments, please check this box and write them on the back where indicated | o | ||||||||
Yes | No | ||||||||
Please indicate if you plan to attend this meeting | o | o | |||||||
HOUSEHOLDING ELECTION - Please indicate if you consent to receive certain future investor communications in a single package per household | |||||||||
o | o | ||||||||
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
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EXHIBIT C
mPHASE TECHNOLOGIES, INC.
ANNUAL MEETING OF SHAREHOLDERS2001 STOCK INCENTIVE PLAN
1. Establishment, Purpose and Types of Awards
mPhase Technologies, Inc., a New Jersey corporation (the"Company"), hereby establishes the mPhase Technologies, Inc. 2001 Stock Incentive Plan (the"Plan"). The purpose of the Plan is to promote the long-term growth and profitability of the Company by (i) providing key people with incentives to improve stockholder value and to contribute to the growth and financial success of the Company, and (ii) enabling the Company to attract, retain and reward the best-available persons.
The Plan is the continuation of the mPhase Technologies, Inc. Amended Long-Term Stock Incentive Plan (the"Prior Plan"), which is hereby merged and restated as set forth herein. The provisions of the Prior Plan shall continue to control with respect to any options granted and outstanding thereunder that are intended to qualify as "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code to the extent necessary to preserve such status.
The Plan permits the granting of stock options (including incentive stock options qualifying under Code section 422 and nonqualified stock options), stock appreciation rights, restricted or unrestricted stock awards, phantom stock, performance awards, other stock-based awards, or any combination of the foregoing.
2. Definitions
Under this Plan, except where the context otherwise indicates, the following definitions apply:
(a)"Affiliate"shall mean any entity, whether now or hereafter existing, which controls, is controlled by, or is under common control with, the Company (including, but not limited to, joint ventures, limited liability companies, and partnerships). For this purpose, "control" shall mean ownership of 50% or more of the total combined voting power or value of all classes of stock or interests of the entity.
(b)"Award"shall mean any stock option, stock appreciation right, stock award, phantom stock award, performance award, or other stock-based award granted under the Plan or the Prior Plan.
(c)"Board"shall mean the Board of Directors of the Company.
(d)"Change in Control"means: (i) the acquisition (other than from the Company) by any Person, as defined in this Section 2(d), of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of 50% or more of (A) the then outstanding shares of the securities of the Company, or (B) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the"Company Voting Stock");(ii) the closing of a sale or other conveyance of all or substantially all of the assets of the Company; or (iii) the effective time of any merger, share exchange, consolidation, or other business combination of the Company if immediately after such transaction persons who hold a majority of the outstanding voting securities entitled to vote generally in the election of directors of the surviving entity (or the entity owning 100% of such surviving entity) are not persons who, immediately prior to such transaction, held the Company Voting Stock; provided, however, that a Change in Control shall not include a public offering of capital stock of the Company. For purposes of this Section 2(d), a "Person" means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended, other than employee benefit plans sponsored or maintained by the Company and corporations controlled by the Company.
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(e)"Code"shall mean the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder.
(f)"Common Stock"shall mean shares of common stock of the Company, par value of $0.01 per share.
(g)"Fair Market Value"shall mean, with respect to a share of the Company's Common Stock for any purpose on a particular date, the value determined by the Administrator in good faith. However, if the Common Stock is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and listed for trading on a national exchange or market,"Fair Market Value" shall mean, as applicable, (i) either the closing price or the average of the high and low sale price on the relevant date, as determined in the Administrator's discretion, quoted on the New York Stock Exchange, the American Stock Exchange, or the Nasdaq National Market; (ii) the last sale price on the relevant date quoted on the Nasdaq Small Cap Market; (iii) the average of the high bid and low asked prices on the relevant date quoted on the Nasdaq OTC Bulletin Board Service or by the National Quotation Bureau, Inc. or a comparable service as determined in the Administrator's discretion; or (iv) if the Common Stock is not quoted by any of the above, the average of the closing bid and asked prices on the relevant date furnished by a professional market maker for the Common Stock, or by such other source, selected by the Administrator. If no public trading of the Common Stock occurs on the relevant date, then Fair Market Value shall be determined as of the next preceding date on which trading of the Common Stock does occur. For all purposes under this Plan, the term "relevant date" as used in this Section 2(g) shall mean either the date as of which Fair Market Value is to be determined or the next preceding date on which public trading of the Common Stock occurs, as determined in the Administrator's discretion.
(h)"Grant Agreement"shall mean a written document memorializing the terms and conditions of an Award granted pursuant to the Plan and shall incorporate the terms of the Plan.
3. Administration
(a) Administration of the Plan. The Plan shall be administered by the Board or by such committee or committees as may be appointed by the Board from time to time (the Board, committee or committees hereinafter referred to as the "Administrator").
(b) Powers of the Administrator. The Administrator shall have all the powers vested in it by the terms of the Plan, such powers to include authority, in its sole and absolute discretion, to grant Awards under the Plan, prescribe Grant Agreements evidencing such Awards and establish programs for granting Awards.
The Administrator shall have full power and authority to take all other actions necessary to carry out the purpose and intent of the Plan, including, but not limited to, the authority to: (i) determine the eligible persons to whom, and the time or times at which Awards shall be granted; (ii) determine the types of Awards to be granted; (iii) determine the number of shares to be covered by or used for reference purposes for each Award; (iv) impose such terms, limitations, restrictions and conditions upon any such Award as the Administrator shall deem appropriate; (v) modify, amend, extend or renew outstanding Awards, or accept the surrender of outstanding Awards and substitute new Awards (provided however, that, except as provided in Section 7(d) of the Plan, any modification that would materially adversely affect any outstanding Award shall not be made without the consent of the holder); (vi) accelerate or otherwise change the time in which an Award may be exercised or becomes payable and to waive or accelerate the lapse, in whole or in part, of any restriction or condition with respect to such Award, including, but not limited to, any restriction or condition with respect to the vesting or exercisability of an Award following termination of any grantee's employment or other
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relationship with the Company; and (vii) establish objectives and conditions, if any, for earning Awards and determining whether Awards will be paid after the end of a performance period.
The Administrator shall have full power and authority, in its sole and absolute discretion, to administer and interpret the Plan and to adopt and interpret such rules, regulations, agreements, guidelines and instruments for the administration of the Plan and for the conduct of its business as the Administrator deems necessary or advisable.
(c) Non-Uniform Determinations. The Administrator's determinations under the Plan (including without limitation, determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the Grant Agreements evidencing such Awards) need not be uniform and may be made by the Administrator selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated.
(d) Limited Liability. To the maximum extent permitted by law, no member of the Administrator shall be liable for any action taken or decision made in good faith relating to the Plan or any Award thereunder.
(e) Indemnification. To the maximum extent permitted by law and by the Company's charter and by-laws, the members of the Administrator shall be indemnified by the Company in respect of all their activities under the Plan.
(f) Effect of Administrator's Decision. All actions taken and decisions and determinations made by the Administrator on all matters relating to the Plan pursuant to the powers vested in it hereunder shall be in the Administrator's sole and absolute discretion and shall be conclusive and binding on all parties concerned, including the Company, its stockholders, any participants in the Plan and any other employee, consultant, or director of the Company, and their respective successors in interest.
4. Shares Available for the Plan
Subject to adjustments as provided in Section 7(d) of the Plan, the shares of Common Stock that may be issued with respect to Awards granted under the Plan shall not exceed an aggregate of 20,000,000 shares of Common Stock, in addition to the shares authorized for issuance under the Prior Plan but not issued thereunder before the Prior Plan is merged into this Plan. The Company shall reserve such number of shares, and shall continue to reserve the number of shares remaining under the Prior Plan, for Awards under the Plan, subject to adjustments as provided in Section 7(d) of the Plan. If any Award, or portion of an Award, under the Plan expires or terminates unexercised, becomes unexercisable or is forfeited or otherwise terminated, surrendered or canceled as to any shares, or if any shares of Common Stock are surrendered to the Company in connection with any Award (whether or not such surrendered shares were acquired pursuant to any Award), or if any shares are withheld by the Company, the shares subject to such Award and the surrendered and withheld shares shall thereafter be available for further Awards under the Plan; provided, however, that any such shares that are surrendered to or withheld by the Company in connection with any Award or that are otherwise forfeited after issuance shall not be available for purchase pursuant to incentive stock options intended to qualify under Code section 422.
Subject to adjustments as provided in Section 7(d) of the Plan, the maximum number of shares of Common Stock subject to Awards of any combination that may be gamed during any one fiscal year of the Company to any one individual under this Plan shall be limited to 500,000 shares. Such per-individual limit shall not be adjusted to effect a restoration of shares of Common Stock with respect to which the related Award is terminated, surrendered or cancelled.
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5. Participation
Participation in the Plan shall be open to all employees, officers, and directors of, and other individuals providing bona fide services to or for, the Company, or of any Affiliate of the Company, as may be selected by the Administrator from time to time.
6. Awards
The Administrator, in its sole discretion, establishes the terms of all Awards granted under the Plan. Awards may be granted individually or in tandem with other types of Awards. All Awards are subject to the terms and conditions provided in the Grant Agreement. The Administrator may permit or require a recipient of an Award to defer such individual's receipt of the payment of cash or the delivery of Common Stock that would otherwise be due to such individual by virtue of the exercise of, payment of, or lapse or waiver of restrictions respecting, any Award. If any such payment deferral is required or permitted, the Administrator shall, in its sole discretion, establish rules and procedures for such payment deferrals.
(a) Stock Options. The Administrator may from time to time grant to eligible participants Awards of incentive stock options as that term is defined in Code section 422 or nonqualified stock options; provided, however, that Awards of incentive stock options shall be limited to employees of the Company or of any current or hereafter existing "parent corporation" or "subsidiary corporation," as defined in Code sections 424(e) and (f), respectively, of the Company. Options intended to qualify as incentive stock options under Code section 422 must have an exercise price at least equal to Fair Market Value as of the date of grant, but nonqualified stock options may be granted with an exercise price less than Fair Market Value. No stock option shall be an incentive stock option unless so designated by the Administrator at the time of grant or in the Grant Agreement evidencing such stock option.
(b) Stock Appreciation Rights. The Administrator may from time to time grant to eligible participants Awards of Stock Appreciation Rights ("SAR"). An SAR entitles the grantee to receive, subject to the provisions of the Plan and the Grant Agreement, a payment having an aggregate value equal to the product of (i) the excess of (A) the Fair Market Value on the exercise date of one share of Common Stock over (B) the base price per share specified in the Grant Agreement, times (ii) the number of shares specified by the SAR, or portion thereof, which is exercised. Payment by the Company of the amount receivable upon any exercise of an SAR may be made by the delivery of Common Stock or cash, or any combination of Common Stock and cash, as determined in the sole discretion of the Administrator. If upon settlement of the exercise of an SAR a grantee is to receive a portion of such payment in shares of Common Stock, the number of shares shall be determined by dividing such portion by the Fair Market Value of a share of Common Stock on the exercise date. No fractional shares shall be used for such payment and the Administrator shall determine whether cash shall be given in lieu of such fractional shares or whether such fractional shares shall be eliminated.
(c) Stock Awards. The Administrator may from time to time grant restricted or unrestricted stock Awards to eligible participants in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as it shall determine. A stock Award may be paid in Common Stock, in cash, or in a combination of Common Stock and cash, as determined in the sole discretion of the Administrator.
(d) Phantom Stock. The Administrator may from time to time grant Awards to eligible participants denominated in stock-equivalent units("phantom stock") in such amounts and on such terms and conditions as it shall determine. Phantom stock units granted to a participant shall be credited to a bookkeeping reserve account solely for accounting purposes and shall not require a segregation of any of the Company's assets. An Award of phantom stock may be settled in Common Stock, in cash, or in a combination of Common Stock and cash, as determined in the sole discretion of
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the Administrator. Except as otherwise provided in the applicable Grant Agreement, the grantee shall not have the rights of a stockholder with respect to any shares of Common Stock represented by a phantom stock unit solely as a result of the grant of a phantom stock unit to the grantee.
(e) Performance Awards. The Administrator may, in its discretion, grant performance awards which become payable on account of attainment of one or more performance goals established by the Administrator. Performance awards may be paid by the delivery of Common Stock or cash, or any combination of Common Stock and cash, as determined in the sole discretion of the Administrator. Performance goals established by the Administrator may be based on the Company's or an Affiliate's operating income or one or more other business criteria selected by the Administrator that apply to an individual or group of individuals, a business unit, or the Company or an Affiliate as a whole, over such performance period as the Administrator may designate.
(f) Other Stock-Based Awards. The Administrator may from time to time grant other stock-based awards to eligible participants in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as it shall determine. Other stock-based awards may be denominated in cash, in Common Stock or other securities, in stock-equivalent units, in stock appreciation units, in securities or debentures convertible into Common Stock, or in any combination of the foregoing and may be paid in Common Stock or other securities, in cash, or in a combination of Common Stock or other securities and cash, all as determined in the sole discretion of the Administrator.
7. Miscellaneous
(a) Withholding of Taxes. Grantees and holders of Awards shall pay to the Company or its Affiliate, or make provision satisfactory to the Administrator for payment of, any taxes required to be withheld in respect of Awards under the Plan no later than the date of the event creating the tax liability. The Company or its Affiliate may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the grantee or holder of an Award. In the event that payment to the Company or its Affiliate of such tax obligations is made in shares of Common Stock, such shares shall be valued at Fair Market Value on the applicable date for such purposes.
(b) Loans. The Company or its Affiliate may make or guarantee loans to grantees to assist grantees in exercising Awards and satisfying any withholding tax obligations.
(c) Transferability. Except as otherwise determined by the Administrator, and in any event in the case of an incentive stock option or a stock appreciation right granted with respect to an incentive stock option, no Award granted under the Plan shall be transferable by a grantee otherwise than by will or the laws of descent and distribution. Unless otherwise determined by the Administrator in accord with the provisions of the immediately preceding sentence, an Award may be exercised during the lifetime of the grantee, only by the grantee or, during the period the grantee is under a legal disability, by the grantee's guardian or legal representative.
(d) Adjustments for Corporate Transactions and Other Events.
(i) Stock Dividend, Stock Split and Reverse Stock Split. In the event of a stock dividend of, or stock split or reverse stock split affecting, the Common Stock, (A) the maximum number of shares of such Common Stock as to which Awards may be granted under this Plan, as provided in Section 4 of the Plan and the maximum number of shares with respect to which Awards may be granted during any one fiscal year of the Company to any individual, and (B) the number of shares covered by and the exercise price and other terms of outstanding Awards, shall, without further action of the Board, be adjusted to reflect such event. The Administrator may make adjustments,
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in its discretion, to address the treatment of fractional shares and fractional cents that arise with respect to outstanding Awards as a result of the stock dividend, stock split or reverse stock split.
(ii) Non-Changes in Control Transactions. Except with respect to the transactions set forth in Section 7(d)(i), in the event of any change affecting the Common Stock, the Company or its capitalization, by reason of a spin-off, split-up, dividend, recapitalization, merger, consolidation or share exchange, the Administrator, shall make (A) appropriate adjustments to the maximum number and kind of shares reserved for issuance or with respect to which Awards may be granted under the Plan, in the aggregate and with respect to any individual during any one fiscal year of the Company, as provided in Section 4 of the Plan; and (B) appropriate adjustments in outstanding Awards, including but not limited to modifying the number, kind and price of securities subject to Awards.
(iii) Change in Control Transactions. In the event of any transaction resulting in a Change of Control of the Company, outstanding stock options and SARs under this Plan will vest immediately upon the effective time of such Change of Control unless provision is made in connection with the transaction for the continuation or assumption of such Awards by, or for the substitution of the equivalent awards of, the surviving or successor entity or a parent thereof.
(iv) Pooling of Interest Transactions. In connection with any business combination authorized by the Board, the Administrator may, to the extent not in contravention with any other provision hereof, make necessary adjustments to the Plan to facilitate the compliance of such transaction with requirements for treatment as a pooling of interests for accounting purposes under generally accepted accounting principles.
(v) Unusual or Nonrecurring Events. The Administrator is authorized to make, in its discretion and without the consent of holders of Awards, adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events affecting the Company, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations, or accounting principles, whenever the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.
(e) Substitution of Awards in Mergers and Acquisitions. Awards maybe granted under the Plan from time to time in substitution for awards held by employees, officers, consultants or directors of entities who become or are about to become employees, officers, consultants or directors of the Company or an Affiliate as the result of a merger or consolidation of the employing entity with the Company or an Affiliate, or the acquisition by the Company or an Affiliate of the assets or stock of the employing entity. The terms and conditions of any substitute Awards so granted may vary from the terms and conditions set forth herein to the extent that the Administrator deems appropriate at the time of grant to conform the substitute Awards to the provisions of the awards for which they are substituted.
(f) Other Agreements. As a condition precedent to the grant of any Award under the Plan, the exercise pursuant to such an Award, or to the delivery of certificates for shares issued pursuant to any Award, the Administrator may require the grantee or the grantee's successor or permitted transferee, as the case may be, to become a party to a stock restriction agreement, shareholders' agreement, voting trust agreement or other agreements regarding the Common Stock of the Company in such forms) as the Administrator may determine from time to time.
(g) Termination, Amendment and Modification of the Plan. The Board may terminate, amend or modify the Plan or any portion thereof at any time.
(h) Non-Guarantee of Employment or Service. Nothing in the Plan or in any Grant Agreement thereunder shall confer any right on an individual to continue in the service of the Company or shall
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interfere in any way with the right of the Company to terminate such service at any time with or without cause or notice and whether or not such termination results in (i) the failure of any Award to vest; (ii) the forfeiture of any unvested or vested portion of any Award; and/or (iii) any other adverse effect on the individual's interests under the Plan.
(i) Compliance with Securities Laws; Listing and Registration. If at any time the Administrator determines that the delivery of Common Stock under the Plan is or may be unlawful under the laws of any applicable jurisdiction, or federal or state securities laws, the right to exercise an Award or receive shares of Common Stock pursuant to an Award shall be suspended until the Administrator determines that such delivery is lawful. The Company shall have no obligation to effect any registration or qualification of the Common Stock under federal or state laws.
The Company may require that a grantee, as a condition to exercise of an Award, and as a condition to the delivery of any share certificate, make such written representations (including representations to the effect that such person will not dispose of the Common Stock so acquired in violation of federal or state securities laws) and furnish such information as may, in the opinion of counsel for the Company, be appropriate to permit the Company to issue the Common Stock in compliance with applicable federal and state securities laws. The stock certificates for any shares of Common Stock issued pursuant to this Plan may bear a legend restricting transferability of the shares of Common Stock unless such shares are registered or an exemption from registration is available under the Securities Act of 1933, as amended, and applicable state securities laws.
(j) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a grantee or any other person. To the extent that any grantee or other person acquires a right to receive payments from the Company pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company.
(k) Governing Law. The validity, construction and effect of the Plan, of Grant Agreements entered into pursuant to the Plan, and of any rules, regulations, determinations or decisions made by the Administrator relating to the Plan or such Grant Agreements, and the rights of any and all persons having or claiming to have any interest therein or thereunder, shall be determined exclusively in accordance with applicable federal laws and the laws of the State of New Jersey, without regard to its conflict of laws principles.
(1) Effective Date; Termination Date. The Plan is effective as of the date on which the Plan is adopted by the Board, subject to approval of the stockholders within twelve months before or after such date. No Award shall be granted under the Plan after the close of business on the day immediately preceding the tenth anniversary of the effective date of the Plan, or if earlier, the tenth anniversary of the date this Plan is approved by the stockholders. Subject to other applicable provisions of the Plan, all Awards made under the Plan prior to such termination of the Plan shall remain in effect until such Awards have been satisfied or terminated in accordance with the Plan and the terms of such Awards.
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Annual Meeting of Shareholders
mPHASE TECHNOLOGIES, INC.
Thursday, May 17, 2001
MARCH 10, 2010, 10:00 A.M.
PROXY
The undersigned hereby appoints Gustave T. Dotoli and Martin Smiley or either of them individually, with full power of substitution, to act as proxy and to represent the undersigned at the Annual Meeting of Shareholders and to vote all shares of mPhase Technologies, Inc., which the undersigned is entitled to vote and would possess if personally present at said meeting to be held at our headquartersoffices at 587 Connecticut Avenue, Norwalk, CT 06854, on Thursday, May 17, 2001Wednesday March 10, 2010 at 10:00 a.m. and at all postponements or adjournments upon the following matters:matters listed on the reverse side.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 and 3 AND 4 LISTED ON THE REVERSE SIDE. PROXIES ARE ALSO GRANTED THE DISCRETION TO VOTE UPON ALL OTHER MATTERS THAT MAY PROPERLY BE BROUGHT BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
Address Changes/Comments:
(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
(Continued, and to be signed on next page)back)
/x/ Please mark your votes as in this example.Exhibit I
AMENDED AND RESTATED
BY-LAWS
OF
MPHASE TECHNOLOGIES, INC
ARTICLE I –OFFICES
The Board of Directors recommends a vote "FOR" eachregistered office of the proposals at right.corporation shall be 201 Bloomfield Avenue, Verona, New Jersey 07044
1. Election of Necdet F. Ergul, Ronald A. Durando, Gustave T. Dotoli, David Klimek, J. Lee Barton, J. Allen Layman, Anthony H. Guerino, Esq., Abraham Biderman and Craig Vickers as DirectorsThe registered agent of the Boardcorporation is Jersey Transfer & Trust Co. Attn: Jeffrey Manger, Vice President, with an office at 201 Bloomfield Avenue, Verona, New Jersey 07044..
The corporation may also have offices at such other places within or without the State of Directors untilNew Jersey as the nextboard may from time to time determine or the business of the corporation may require.
ARTICLE II-SHAREHOLDERS
| 1. | PLACE OF MEETINGS. |
Meeting of shareholders shall be held at the principal office of the corporation or at such place within or without the State of New Jersey as the board shall authorize.
| 2. | ANNUAL MEETING. |
The annual meeting.
/ / FOR / / AGAINST / / ABSTAIN
2. Approvalmeeting of an amendmentthe shareholders shall be held once a year on a date fixed by the board.
| 3. | SPECIAL MEETINGS. |
Special meetings of the shareholders may be called by the board or by the president and shall be called by the president or the secretary at the request, in writing, of a majority of the board or at the request , in writing, by shareholders owning a majority in amount of the shares issued and outstanding. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at a special meeting shall be confined to the Amended Certificate of Incorporation whereby (a)purpose stated in the par valuenotice.
| 4. | NOTICE OF MEETINGS OF SHAREHOLDERS |
Written notice of the common stocktime, place and purpose or purposes of every meeting of shareholders shall be given not less than 10 nor more than 60 days before the date of the Companymeeting, either personally or by mail, to each shareholder of record entitled to vote at the meeting.
When a meeting is changed from "no par"adjourned to $.01 par valueanother time or place, it shall not be necessary, unless the by-laws otherwise provide, to give notice of the adjourned meeting, if the time and (b) authorizingplace to which the issuance of up to 20,000,000 shares of preferred stock.
/ / FOR / / AGAINST / / ABSTAIN
3. Authorization, approvalmeeting is adjourned are announced at the meeting at which the adjournment is taken and adoption of our 2001 Stock Incentive Plan
/ / FOR / / AGAINST / / ABSTAIN
4. Approval of our independent accountants, Arthur Andersen, CPAs,at the adjourned meeting only such business is transacted as might have been transacted the original meeting. However, if after adjournment the board fixes a new record date for the fiscal year ended June 30, 2001.
/ / FOR / / AGAINST / / ABSTAIN
Changeadjourned meeting, a notice of Address / /
I planthe adjourned meeting shall be given to attendeach shareholder of record on the new record date entitled to notice.
| 5. | WAIVER OF NOTICE OR OF LAPSE OF TIME |
(a) Notice of meeting need not be given to any shareholder who signs a waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of any shareholder at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting / / I do not planthe lack of notice of such meeting, shall constitute a waiver of notice by him.
(b) Whenever shareholders are authorized to attendtake any action after the meeting / /lapse of a prescribed period of time, the action may be taken without such lapse if such requirement is waived, in writing, in person or by proxy, before or after the taking of such action, by every shareholder entitled to vote thereon as at the date of the taking of such action.
6. | ACTION BY SHAREHOLDERS WITHOUT A MEETING. |
Any action required or permitted to be taken at a meeting of shareholders by statute, the certificate of incorporation, or by-laws, other than the annual election of directors, may be taken without a meeting upon the written consent of shareholders who would have been entitled to cast the minimum number of votes which would be necessary to authorize such action at a meeting at which all shareholders entitled to vote thereon were present and voting. The written consents of the shareholders consenting thereto shall be filed with the minutes of proceedings of shareholders.
| 7. | QUORUM OF SHAREHOLDERS. |
(a) Unless otherwise provided in the certificate of incorporation, the holders of shares entitled to cast a majority of the votes at a meeting shall constitute a quorum at such meeting. The shareholders present in person or by proxy at a duly organized meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Less than a quorum may adjourn.
(b) Whenever the holders of any class or series of shares are entitled to vote separately on a specified item of business, the provisions of paragraph (a) shall apply in determining the presence of a quorum of such class or series for the transaction of such specified item of business.
| 8. | ORDER OF BUSINESS |
| The order of business at all meetings of the shareholders shall be as follows: | |
Note: Please sign exactly as your name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee, or guardian, please give full titles as such.
(a) Roll Call. | |||
| (b) Proof of notice of meeting or waiver of notice. | |||
(c) Reading of minutes of preceding meeting. | |||
| (d) Reports of officers. | |||
| (e) Reports of committees. | |||
| (f) Election of inspectors of election. | |||
| (g) Election of directors. | |||
| (h) Unfinished business. | |||
| (i) New business. |
ARTICLE III-DIRECTORS
| 1. | BOARD OF DIRECTORS. |
Subject to any provision in the certificate of incorporation the business of the corporation shall be managed by its board of directors, each of who shall be at least 18 years of age.
| 2. | NUMBER OF DIRECTORS. |
The number of directors shall be not less than 3 and no more than 11.
| 3. | TERM OF DIRECTORS. |
The directors named in the certificate of incorporation shall hold office until the first annual meeting of shareholders, and until their successors shall have been elected and qualified. At the first annual meeting of shareholders and at each annual meeting thereafter the shareholders shall elect directors to hold office until the next succeeding annual meeting, except as otherwise required by the certificate of incorporation or the by-laws in the case of classification of directors. Each director may resign by written notice to the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as shall be specified in the notice of resignation.
| 4. | VACANCIES AND NEWLY CREATED DIRECTORSHIPS. |
(a) Any directorship not filled at the annual meeting and any vacancy, however caused, occurring in the board may be filled by the affirmative vote of a majority of the remaining directors even though less than a quorum of the board, or by a sole remaining director. A director so elected by the board shall hold office until the next succeeding annual meeting of shareholders and until his successor shall have been elected and qualified.
(b) When one or more directors shall resign from the board effective at a future date, a majority of the directors then in office including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as herein provided in the filling of other vacancies.
(c) Any directorship to be filled by reason of an increase in the number of directors shall be filled by election at an annual meeting or at a special meeting of shareholders called for that purpose, unless the certificate of incorporation or a by-law adopted by the shareholders authorizes the board to fill such directorship. A director elected by the board to fill any such directorship shall hold office until the next succeeding annual meeting of shareholders for the election or directors and until his successor shall have been elected and qualified.
(d) If by reason of death, resignation or other cause the corporation has no directors in office, any shareholder or the executor or administrator of a deceased director may call a special meeting of shareholders for the election of directors and, over his own signature, shall give notice of said meeting in accordance with the by-laws.
| 5. | REMOVAL OF DIRECTORS |
One or more or all the directors of the corporation may be removed for cause by the shareholders by the affirmative vote of the majority of the votes cast by the holders of shares entitled to vote for the election of directors.
| 6. | QUORUM OF BOARD OF DIRECTORS AND COMMITTEES; ACTION OF DIRECTORS WITHOUT A MEETING. |
A majority of the entire board, or of any committee thereof, shall constitute a quorum for the transaction of business, unless the certificate of incorporation shall prove that a greater or lesser number shall constitute a quorum, which in no case shall be less than the greater of two persons or one-third of the entire board or committee, except that when a board of one director is authorized one director shall constitute a quorum. Any action required or permitted to be taken pursuant to authorization voted at a meeting of the board or any committee thereof, may be taken without a meeting if, prior or subsequent to such action, all members of the board or of such committee, as the case may be, consent thereto in writing and such written consents are filed with the minutes of the proceedings of the board or committee. Such consent shall have the same effect as a unanimous vote of the board or committee for all purposes.
| 7. | PLACE OF BOARD MEETINGS. |
Meetings of the board may be held either within or without the State of New Jersey.
| 8. | REGULAR ANNUAL MEETING. |
A regular annual meeting of the board shall be held immediately following the annual meeting of shareholders at the place of such annual meeting of shareholders.
| 9. | NOTICE OF MEETINGS OF THE BOARD; ADJOURNMENT. |
(a) Regular meetings of the board may be held with or without notice as prescribed in the bylaws. Special meetings of the board shall be held upon such notice as is prescribed in the by-laws. Notice of any meeting need not be given to any director who signs a waiver of notice, whether before or after the meeting. The attendance of any director at a meeting without protesting prior to the conclusion of the meeting the lack of notice of such meeting shall constitute a waiver of notice by him. Neither the business to be transacted at, nor the purpose of, any meeting of the board need be specified in the notice or waiver of notice of such meeting unless required by the by-laws. Notice of an adjourned meeting need not be given if the time and place are fixed at the meeting adjourning and if the period of adjournment does not exceed ten days in any one adjournment.
(b) A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time and place. Notice of the adjournment shall be given all directors who were absent at the time of the adjournment and, unless such time and place are announced at the meeting, to the other directors.
ARTICLE V-OFFICERS
| 1. | OFFICES, ELECION TERM, SALARIES, SECURITY. |
(a) The officers of a corporation shall consist of a president, a secretary, a treasurer, and, if desired, a chairman of the board, one or more vice presidents, and such other officers as may be prescribed by the by-laws. Unless otherwise provided in the by-laws, the officers shall be elected by the board.
(b) Any two or more offices may be held by the same person.
(c) Any officer elected as herein provided shall hold office for the term for which he is so elected and until a successor is elected and has qualified, subject to earlier termination by removal or resignation.
(d) All officers of the corporation, as between themselves and the corporation, shall have such authority and perform such duties in the management of the corporation as may be provided in the bylaws, or as may be determined by resolution of the board not inconsistent with the by-laws.
(e) The salaries of all officers shall be fixed by the board.
(f) In case the board shall so require, any officer or agent of the corporation shall execute to the corporation a bond in such and with such surety or sureties as the board may direct, conditioned upon the faithful performance of his duties to the corporation and including responsibility for negligence and for the accounting for all property, funds or securities of the corporation which may come into his hands.
| 2 | DELEGATION OF DUTIES. |
In case of the absence of any officer of the corporation, or for any other reason that may seem sufficient to the board, the directors may, by a majority vote of the board, delegate the powers and duties of such officer, for the time being, to any other officer, or to a director.
| 3. | REMOVAL AND RESIGNATION OF OFFICERS; FILING OF VACANCIES |
(a) Any officer elected by the board may be removed by the board with or without cause. An officer elected by the shareholders may be removed, with or without cause, only by vote of the shareholders but his authority to act as an officer may be suspended by the board for cause. The removal of an officer shall be without prejudice to his contract rights, if any. Election of an officer shall not of itself create contract rights.
(b) An officer may resign by written notice to the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as shall be specified in the notice of resignation.
(c) Any vacancy occurring among the officers, however caused, shall be filled in the manner provided in the election of the board for the unexpired term.
| 4. | PRESIDENT |
The president shall be the chief executive officer of the corporation; he shall preside at all meetings of the shareholders and of the board; he shall have the management of the business of the corporation and shall see that all orders and resolutions of the board are carried into effect.
| 5. | VICE PRSIDENTS. |
During the absence or disability of the president, the vice president, or if there are more than one, the executive vice president shall have all the powers and function of the president. Each vice-president shall perform such other duties as the board shall prescribe.
| 6. | SECRETARY. |
The secretary shall: attend all meetings of the board and of the shareholders; record all votes and minutes of all proceedings in a book to be kept for that purpose; give or cause to be given notice of all meetings of shareholders and of the special meeting of the board; keep in safe custody the seal of the corporation and affix it to any instrument when authorized by the board; when required, prepare a list of shareholders entitled to vote thereat, indicating the number of shares of each respective class held by each; keep all the documents and records of the corporation as required by law or otherwise in a proper and safe manner; and perform such other duties as may be prescribed by the board.
| 7. | ASSISTANT-SECRETARIES. |
During the absence or disability of the secretary, the assistant-secretary, or if there are more than one, the one do designated by the secretary or by the board, shall have all the powers and functions of the secretary.
| 8. | TREASURER |
The treasurer shall: have the custody of the corporate funds and securities; keep full and accurate accounts or receipts and disbursements in the corporate books, deposit all money and other valuables in the name and to the credit of the corporation in such depositories as may be designated by the board; disburse the funds of the corporation as may be ordered or authorized by the board and preserve proper vouchers for such disbursements; render to the president and board at the regular meetings of the board, or whenever they require it, an account of all his transactions as treasurer and of the financial condition of the corporation; render a full financial report at the annual meeting of the shareholders if so requested, be furnished by all corporate officers and agents at his request, with such reports and statements as he may require as to all financial transactions of the corporation; and perform such other duties as are given to him by the by-laws or as from time to time are assigned to him by the board or the president.
| 9. | ASSISTANT-TREASURER |
During the absence or disability of the treasurer, the assistant-treasurer, or if there are more than one, the one so designated by the secretary or by the board, shall have all the powers and functions of the treasurer.
ARTICLE V-CERTIFICATES FOR SHARES AND DIVIDENTS
| 1. | CERTIFICATES REPRESENTING SHARES |
The shares of a corporation shall be represented by certificates signed by, or in the name of the corporation by, the chairman or vice-chairman of the board, or the president or a vice-president, and may be countersigned by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation and shall be sealed with the seal of the corporation or a facsimile thereof.
| 2. | LOST OR DESTROYED CERTIFICATES |
The board may direct a new certificate or certificates to be issued in place of any certificate or certificate theretofore issued by the corporation, alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the board may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require and/or give the corporation a bond in such sum and with such surety or sureties as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed.
| 3. | TRANSFER OF SHARES |
(a) Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, and cancel the old certificate; every such transfer shall be entered on the be transfer book of the corporation which shall be kept at its principal office. No transfer shall be made with ten days next preceding the annual meeting of shareholders.
(b) The corporation shall be entitled to treat the holder of record of any share as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not is shall have express or other notice thereof, except as expressly provided by New Jersey Statutes.
| 4. | CLOSING TRANSFER BOOKS |
The board shall have the power to close the share transfer books of the corporation for a period of not more than ten days during the thirty-day period immediately preceding (a) any shareholders’ meeting, or (b) any date upon which shareholders shall be called upon to or have a right to take action without a meeting, or (c) any date fixed for the payment of a dividend or any other form of distribution, and only those shareholders o record at the time the transfer books are closed, shall be recognized as such for the purpose of (a) receiving notice of or voting at such meeting, or (b) allowing them to take appropriate action, or (c) entitling them to receive any dividend or other form of distribution.
| 5. | DIVIDENDS. |
(a) Subject to any restrictions contained in the certificate of incorporation and to applicable law, the corporation may, from time to time, by resolution of its board, pay dividends on its shares in cash, in its own shares, in its bonds or in other property, including the shares or bonds of other corporations, except when the corporation is insolvent or would thereby be made insolvent.
(b) Dividends may be declared or paid and other distributions may be made out of surplus only, except as otherwise provided by statute.
ARTICLE VI-CORPORATE SEAL
The seal of the corporation shall be circular in form and bear the name of the corporation, the year of its organization and the words “Corporate Seal, New Jersey.” The seal may be used by causing it to be impressed directly on the instrument or writing to be sealed, or upon adhesive substance affixed thereto. The seal on the certificates for shares or on any corporate obligation for the payment of money may be a facsimile, engraved or printed.
ARTICLE VII –FISCAL YEAR
The fiscal year shall begin the first day of July each year.
ARTICLE VIII-BY-LAW CHANGES
AMENDMENT, REPEAL, ADOPTIN, ELECTION OF DIRECTORS
(a) Except as otherwise provided in the certificate of incorporation the by-laws may be amended, repealed or adopted by vote of the holders of the shares at the time entitled to vote in the election of any directors. By-laws may also be amended, repealed or adopted by the board but any by-law adopted by the board may be amended by the shareholders entitled to vote thereon.
(b) If any by-law regulating an impending election of directors is adopted, amended or repealed by the board, there shall be set forth in the notice of the next meeting of shareholders for the election of directors the by-law so adopted, amended or repealed, together with a concise statement of the change made.
ARTICLE IX-INDEMNIFICATION OF THE AUDIT COMMITTEE
The corporation shall indemnify any directors, officers, employees, or agents to the full extend permitted by the New Jersey Business Corporation Act.