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INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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ANTS SOFTWARE INC.
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(Name of Registrant as Specified in Its Charter)
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801 Mahler Rd., Suite G. Burlingame, CA 94010 (650) 692-0219
[LOGO] www.antssoftware.com
ANTS=======================================================================
software inc.
March __, 2003
To the Shareholders of ANTs software inc.:
You are cordially invited to the 2003 Annual Meeting of Shareholders, which
will be held on Tuesday, May 6, 2003, at 2:00 p.m. at the Crowne Plaza, San
Francisco International Airport, 1177 Airport Blvd., Burlingame, California
94010, (650) 342-9200.
At our meeting, you will be asked to consider and vote upon the following
proposals: (i) to elect two Class 3 directors, (ii) to approve an amendment to
our Amended and Restated Certificate of Incorporation to authorize 50,000,000
shares of undesignated Preferred Stock, with a par value of $0.0001 per share,
(iii) to approve an amendment to our 2000 Stock Option Plan to increase the
shares reserved under the plan by an additional 1,500,000 shares of Common
Stock, and (iv) to ratify the appointment of Burr, Pilger & Mayer, LLP as our
independent accountants for the fiscal year ending December 31, 2003.
Details with respect to the meeting are set forth in the attached Notice of
Annual Meeting and Proxy Statement.
In preparation for the meeting, we are asking that all shareholders who are
planning to attend the meeting in person check the appropriate box on the proxy
card. Please provide your full name and a phone number where you can be
contacted on the card. Without an RSVP, we cannot guarantee the availability of
seating for all meeting attendees. First priority will be given to those
individuals that have RSVPed in advance of the meeting.
Whether or not you plan to attend the meeting, you are urged to complete,
date, sign and return your proxy. Your vote is very important to us and we
encourage you to read the proxy statement and vote your shares as soon as
possible. A return envelope for your proxy card is enclosed for your
convenience. You may also vote by telephone or via the Internet; specific
instructions on how to vote using these methods are included on the proxy card.
I look forward to seeing you at the Annual Meeting.
Sincerely
/s/ Francis K. Ruotolo
Francis K. Ruotolo
Chairman of the Board, President,
and Chief Executive Officer
ANTs software inc.
801 Mahler Rd, Suite G
Burlingame, CA 94010
Notice of Annual Meeting of Shareholders
Of ANTs software inc.
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of ANTs
software inc., a Delaware corporation (the "Company") will be held at the Crowne
Plaza, San Francisco International Airport, 1177 Airport Blvd., Burlingame,
California 94010, (650) 342-9200, on May 6, 2003, at 2:00 p.m., local time to
transact the following business:
1. Elect two Class 3 directors of the Company. Francis K. Ruotolo and
John R. Gaulding have been nominated to serve until the 2006 Annual
Meeting, and until their successors have been elected and qualified.
2. Approve an amendment to our Amended and Restated Certificate of
Incorporation to authorize 50,000,000 shares of undesignated Preferred
Stock, with a par value of $0.0001 per share.
3. Approve an amendment to our 2000 Stock Option Plan to increase the
shares reserved under the plan by an additional 1,500,000 shares of
Common Stock.
4. Ratify the selection of Burr, Pilger & Mayer, LLP, as independent
accountants for the Company for the calendar year ending December 31,
2003; and
5. Consider and act upon such other business as may properly come before
the meeting or any adjournment or postponement thereof.
All of these matters to be voted upon are more fully presented and
discussed in the Proxy Statement delivered with this notice. Your Board of
directors recommends that you vote in favor of the 4 proposals outlined in this
Proxy Statement.
Your Board of directors has fixed the close of business on March 14, 2003
as the record date for determining those shareholders who are entitled to
receive notice of and to vote at this meeting or any adjournment or postponement
thereof. A list of such shareholders will be available at the meeting and, for a
ten-day period preceding the meeting, at the offices of the Company during
ordinary business hours. The stock transfer books will not be closed between the
record date and the date of the meeting.
Your vote is very important, regardless of the number of shares you own.
Whether or not you plan to attend the meeting, please read the attached Proxy
Statement carefully, complete, date and sign the enclosed proxy card as promptly
as possible and return it in the enclosed envelope. You may revoke your proxy at
any time prior to the time it is voted at the meeting or any adjournment
thereof. If you attend the meeting and vote by ballot, your proxy will be
revoked automatically and only your vote at the meeting will be counted.
By Order of the Board of Directors
/s/ Kenneth Ruotolo
Kenneth Ruotolo, Secretary
Burlingame, California
March ___, 2003
ANTs software inc.
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PROXY STATEMENT
Annual Meeting of Shareholders
May 6, 2003
This Proxy Statement is being mailed to shareholders on or around April 4,
2003, in connection with the solicitation of proxies by the Board of Directors
of ANTs software inc., a Delaware corporation (the "Company") for use at the
Annual Meeting of Shareholders to be held on May 6, 2003, at 2:00 p.m. local
time at the Crowne Plaza, San Francisco International Airport, 1177 Airport
Blvd., Burlingame, California 94010, (650) 342-9200, (the "Annual Meeting").
ABOUT THE ANNUAL MEETING
What is the purpose of the Annual Meeting?
At the Annual Meeting, you will be asked to:
1. Elect two Class 3 directors;
2. Approve an amendment to our Amended and Restated Certificate of
Incorporation to authorize 50,000,000 shares of undesignated
Preferred Stock, with a par value of $0.0001 per share;
3. Approve an amendment to our 2000 Stock Option Plan to increase
the shares reserved under the plan by an additional 1,500,000
shares of Common Stock.
4. Ratify the selection of Burr, Pilger & Mayer, LLP, as independent
accountants for the Company for the year ending December 31,
2003; and
5. Act upon such matters as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
What is the Proxy for, who can vote and how do I vote?
This proxy statement informs the shareholders of the Company about items
that will be voted upon at the Annual Meeting. The Statement also solicits
proxies (a formal way of voting through legal representation) from those
shareholders who are unable to attend the Annual Meeting. The proxy statement
was prepared by the management of the Company for its Board of Directors. The
Company is paying the cost of preparation of this Statement and for its mailing
to and return of executed proxies from Shareholders.
The proxy is for voting shares in connection with the Annual Meeting and at
any adjournment or postponement of that meeting. The Annual Meeting will be held
on May 6, 2003, at 2:00 p.m., local time, at the Crowne Plaza, San Francisco
International Airport, 1177 Airport Blvd., Burlingame, California 94010.
You may vote at the Annual Meeting if you were a shareholder of record of
Common Stock at the close of business on March 14, 2003. On March 14, 2003,
there were outstanding 23,280,038 shares of Common Stock. The presence at the
Annual Meeting, in person or by proxy, of a majority of the total number of
shares entitled to vote on the record date constitutes a quorum for the
transaction of business by such holders at the Annual Meeting. Each share is
entitled to one vote on each matter that is properly brought before the Annual
Meeting.
A list of Shareholders entitled to vote at the Annual Meeting will be
available at the Crowne Plaza, San Francisco International Airport, 1177 Airport
Blvd., Burlingame, California 94010, on the date of the Annual
Meeting. This list will also be available for 10 days prior to the Annual
Meeting at the offices of the Company at 801 Mahler Road, Suite G, Burlingame,
California during normal business hours.
Can I attend the Annual Meeting?
Yes. If you plan to attend the Annual Meeting, we look forward to seeing
you there. We do ask, however, that you let us know that you plan to attend by
checking the appropriate box on your proxy card. If you are unable to attend the
Annual Meeting you may vote by proxy. The enclosed proxy is solicited by the
Company's Board of Directors and, when properly completed and returned, will be
voted as you direct on your proxy. In the absence of contrary instructions,
shares represented by such proxies will be voted FOR the proposals to be
considered at the Annual Meeting and FOR the nominees for Class 3 directors
presented by the Board. You may revoke or change your proxy at any time before
it is exercised at the Annual Meeting. To do this, send a written notice of
revocation or another signed proxy with a later date to the Secretary of the
Company at the Company's address referenced above. You may also revoke your
proxy by giving notice and voting in person at the Annual Meeting.
How will votes be counted?
The presence, in person or by proxy, of holders of a majority of the
outstanding shares of common stock entitled to vote will constitute a quorum for
the transaction of business at the Annual Meeting. Abstentions and broker
non-votes will be counted as present for the purpose of determining the presence
of a quorum. If your shares are held in the name of a nominee, and you do not
tell the nominee how to vote your shares (so-called "broker non-votes"), the
nominee can vote them as it sees fit only on matters that are determined to be
routine, and not on any other proposal. Even though broker non-votes will be
counted as present to determine if a quorum exists, they will not be counted as
present and entitled to vote on any non-routine proposal.
The two director nominees who receive the greatest number of votes cast in
person or by proxy at the Annual Meeting will be elected Class 3 directors of
the Company. Approval of Proposal No. 2 requires the affirmative vote of the
holders of the majority of the outstanding shares entitled to vote. The
affirmative vote of the holders of the majority of the shares present or
represented by proxy at the Annual Meeting is required for the approval of the
other matters to be voted upon. Abstentions will be treated as votes cast
against the particular matter being voted upon.
In what ways can I vote?
You have several options available to vote your shares without attending
the Annual Meeting. You can vote by (i) completing, signing and returning the
enclosed proxy, (ii) calling in your votes by telephone, or (iii) using the
Internet. Please refer to enclosed proxy card for further instructions.
You can vote by telephone using the telephone number shown on your proxy
card. The telephone voting procedure is designed to authenticate your identity
and allow you to vote your shares. It will also confirm that your instructions
have been properly recorded. If your shares are held in the name of a bank or
broker, the availability of telephone voting will depend on the voting process
of the bank or broker. Please follow whatever telephone voting instructions are
on the form you receive from your bank or broker.
You can vote on the Internet at the web address shown on the enclosed proxy
card. The Internet voting procedure is designed to authenticate your identity
and allow you to vote your shares. It will also confirm that your instructions
have been properly received. If your shares are held in the name of a bank or
broker, the availability of Internet voting will depend on the voting process of
the bank or broker. Please follow whatever Internet voting instructions are on
the form you receive from your bank or broker.
If you elect to vote using the Internet you may incur telecommunications
and Internet access charges for which you are responsible.
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Proposal 1 - ELECTION OF DIRECTORS
Our Board of Directors currently has five directors divided into three
classes. Members of each class serve for a three-year term, with one class of
directors being elected each year. The nominees are directors currently
designated as Class 3 Directors, whose terms expire at the 2003 Annual Meeting,
and upon their respective successors being elected and qualified to serve. The
enclosed proxy cannot be voted for a greater number of persons than two.
The Board proposes the election of Francis K. Ruotolo and John R. Gaulding
as Class 3 Directors for a term of three years, expiring at the 2006 Annual
Meeting, and until their successors are elected and qualified to serve. The
nominees have indicated to the Company that they will serve if elected.
Unless otherwise indicated, all proxies that authorize the persons named
therein to vote for the election of directors will be voted for the election of
the nominees listed below. If the nominees are not available for election as a
result of any unforeseen circumstance, it is the intention of the persons named
in the proxy to vote for the election of such substitute nominees, if any, as
our Board of Directors may propose.
Nominees for Class 3 Directors
Class 3 directors generally serve a term of 3 years and until their
successors are elected and qualified. It is anticipated that the Class 3
directors will serve until the annual meeting following the close of the 2005
fiscal year. The nominees for Class 3 directors are as follows:
Francis K. Ruotolo, Age 65
Frank Ruotolo became Chairman of the Board, Chief Executive Officer and
President in January 2001. Prior to that time, he was a member of the Board of
Advisors. Most recently, he was a director in the consulting practice of
Deloitte & Touche. Prior to working at Deloitte Consulting Mr. Ruotolo was CEO
of The Futures Group, a long term strategic planning consultancy whose clients
included: IBM, American Airlines, Monsanto, Ford Motor Co., Pfizer, and numerous
departments of the federal government. Mr. Ruotolo was Senior Vice President of
Macy's California for seven years and held the same position at Lord & Taylor in
New York. Mr. Ruotolo holds a BA degree in English/Journalism from Northeastern
University, Boston, MA.
John R. Gaulding, Age 57
John R. Gaulding joined the Company's Board of Directors in January 2001.
Mr. Gaulding is a private investor and consultant in the fields of strategy and
organization. He is an independent director and serves on the audit and
compensation committees of TMP Worldwide, Inc. Most recently, he served as a
Senior Advisor to Deloitte Consulting specializing in e-Business strategy with
responsibility for advising such clients as Hewlett Packard, 3Com, Bergen
Brunswig, Longs Drugstores, SCE, and PG&E.
A plurality of the votes cast is necessary for the election of a director.
The Board of Directors recommends a vote FOR the nominees listed above.
Class 1 Directors continuing in office
The term of Class 1 directors expires at the annual meeting following the
close of the 2003 fiscal year. The Class 1 directors and the Class 1 director
positions are not up for re-election at this Annual Meeting.
Thomas Holt, Age 57
Thomas Holt joined the Company's Board of Directors in November 2000. Mr.
Holt is currently Vice
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President and CIO for Lucent's Services organization. Mr. Holt was VP of
Information Services and Chief Information Officer at International Network
Services ("INS") from May 1997 before its merger with Lucent. He has also acted
as VP of MIS and CIO at Informix and held senior positions at Motorola after
starting his career with IBM.
Papken S. Der Torossian, Age 64
Papken S. Der Torossian joined the Company's Board of Directors in March
2001. Mr. Der Torossian currently serves as Chairman of the Board of Directors
and Chief Executive Officer for Silicon Valley Group, Inc. (SVGI) and is a Board
member of Nanometrics, Inc. He joined SVGI in 1984 as President and became CEO
in 1986. In 1991, Mr. Der Torossian was appointed SVGI's Chairman of the Board.
Mr. Der Torossian joined the Board of Directors of Nanometrics, Inc. in July
2001. Mr. Der Torossian holds a B.S.M.E. degree from MIT and a M.S.M.E. degree
from Stanford University.
Class 2 Director continuing in office
The term of Class 2 director expires at the annual meeting following the
close of the 2004 fiscal year. The Class 2 directors and the Class 2 director
positions are not up for re-election at this Annual Meeting.
Homer G. Dunn, Age 62
Homer G. Dunn joined the Company's Board of Directors in January 2001. Mr.
Dunn has almost 35 years of business experience encompassing sales, marketing,
product management, and consulting. At present, he is Chairman and Founder of
Evant Inc., a leading provider of demand chain optimization technology,
information and services solutions to manufacturers, wholesale distributors and
retailers.
Board Committees
The Board of Directors met 5 times during the fiscal year ended December
31, 2002 (the "Last Fiscal Year"). During the Last Fiscal Year, except for Clive
G. Whittenbury and John R. Gaulding, each director attended at least 75% of the
total number of meetings of the Board of Directors and the Board committees of
which he was a member while he was a member. Dr. Clive G. Whittenbury resigned
as a Director of the Company and a member of the Audit Committee on March 3,
2002.
The Company has an Audit Committee, which consists of Thomas Holt and John
R. Gaulding. This committee, among other things, reviews the annual audit with
the Company's independent accountants. In addition, the audit committee will
make annual recommendation to the Board of Directors for the appointment of
auditors for the following fiscal year. The Audit Committee held two meetings
during the Last Fiscal Year. A copy of the Charter of the Audit Committee was
attached to the Proxy Statement filed by the Company on March 22, 2001.
The Company also has a Compensation Committee, which was formed in June
2001 and consists of Homer G. Dunn and John R. Gaulding. This committee, among
other things, reviews the compensation policies applicable to our senior
officers. The Compensation Committee held no meetings during the Last Fiscal
Year.
The Company does not have any committees of the Board of directors other
than the Audit Committee and the Compensation Committee.
Compensation of Directors
Directors who are employees of our Company do not receive any compensation
for service on the Board. We do not currently pay any cash compensation to
non-employee directors. We generally grant options or warrants to purchase up to
75,000 shares of Common Stock to our non-employee directors, subject to a
two-year vesting schedule.
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Indemnification Agreements
We have entered into Indemnification Agreements with each of our executive
officers and directors that provide for indemnification against certain possible
judgments and costs which may be brought against them in the course of their
service. Such agreements do not provide indemnification for acts and omissions
for which indemnification is not permitted under Delaware law.
PROPOSAL 2 - AMENDMENT TO CERTIFICATE OF INCORPORATION
TO AUTHORIZE PREFERRED STOCK
Overview
Our Board of Directors is proposing to amend the Company's Amended and
Restated Certificate of Incorporation (the "Certificate") to authorize a class
of undesignated Preferred Stock consisting of 50,000,000 shares, with a par
value of $0.0001 per share.
In the event this Proposal is approved by our shareholders, we will present
for filing the proposed amendment to our Certificate (the "Amendment"), in the
form attached to this proxy statement as Annex A, with the Delaware Secretary of
State in order to authorize a class of undesignated Preferred Stock. Once the
Amendment is filed, the number of authorized shares will be increased from
100,000,000 to 150,000,000, with 100,000,000 shares designated as Common Stock,
par value $0.0001 per share, and 50,000,000 shares designated as Preferred
Stock, par value $0.0001 per share.
In the event this Proposal is approved by our shareholders and the
Amendment is filed with the Delaware Secretary of State, the Preferred Stock
created by this amendment will be undesignated. It will not yet be divided into
any series and the rights, preferences, privileges and restrictions will not yet
be fixed. Our Board of Directors will have the authority to designate or
determine the rights, preferences, privileges and restrictions granted to or
enjoyed by series of Preferred Stock created by the Board and the authority to
approve the issuance of the Preferred Stock from time to time in one or more
series. Our Board will have the right to fix the rights, preferences,
privileges, and restrictions granted to or imposed upon any series of Preferred
Stock, without seeking further shareholder approval. For instance, each class of
series of Preferred Stock created by our Board may have certain of the following
rights, preferences and privileges, among others, as may be determined by our
Board of Directors:
1. Dividend Preferences. The holders of the Preferred Stock may be entitled
to receive dividends in any amount in preference to payment of any dividend on
Common Stock.
2. Liquidation Preferences. In the event of any liquidation or winding up
of the Company, the holders of Preferred Stock may be entitled to receive an
amount of cash, stock or property, as determined by the Board, per share in
preference to receipt of any dividend by the holders of the Common Stock.
3. Conversion or Exchange Rights. The Preferred Stock may be convertible
into, or exchangeable for, shares of Common Stock or other securities as
determined by the Board, at any time, at the election of the holder.
4. Antidilution Rights. The conversion ratio used for the conversion or
exchange of Preferred Stock into shares of common stock or other securities may
be adjusted in favor of the preferred holders in the event of a financing or
other stock issuance at a per share price less than that paid by the preferred
holders.
5. Voting Rights. The holder of each share of Preferred Stock may have the
right to vote their preferred shares and might have rights to a supermajority
number of votes based on such preferred holdings.
6. Protective Voting Rights. The consent of holders of a majority or
supermajority of the shares of outstanding Preferred Stock may be required prior
to the Company taking one of dozens of corporate actions including, without
limitation, any action which (i) alters or changes the rights, preferences, or
privileges of the Preferred Stock, (ii) increases the authorized number of
shares of the Preferred Stock, (iii) creates any new class
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of shares having preference over the Preferred Stock, or (iv) constitutes a
merger, consolidation, sale of substantially all of the assets, or other
reorganization of the Company.
7. Redemption Rights. The holders of Preferred Stock may have rights,
either individually or collectively, to require the Company to repurchase or
redeem their shares of Preferred Stock at some pre-determined date or upon the
vote of holders of Preferred Stock. Such redemption or repurchase may be at
prices that exceed the price paid for such shares, possibly including the right
to have such shares be redeemed at a multiple of the price paid.
Our Board of Directors has approved this Proposal and recommends the
amendment to our Certificate to authorize a class of undesignated Preferred
Stock consisting of 50,000,000 shares, with a par value of $0.0001 per share.
Reasons To Authorize Preferred Stock
The Company is presently authorized to issue only Common Stock. The purpose
of this Proposal is to give our Board of Directors the flexibility and authority
to create classes or series of preferred stock and provide for the issuance of
shares of Preferred Stock without delay and without the need for further action
by the shareholders, except in connection with transactions for which Delaware
law requires shareholder approval. The Preferred Stock would be available for
issuance from time to time, without further shareholder approval, for any proper
corporate purpose including but not limited to issuance in public or private
transactions in connection with future financings, acquisitions, or stock
distributions. The Company may therefore be able to take advantage of favorable
opportunities or meet business needs as they arise.
Potential Effects of Authorizing Preferred Stock
As a result of the authorization of the Preferred Stock, the number of
authorized shares of the Company will be increased from 100,000,000 to
150,000,000 with 100,000,000 shares designated as Common Stock, par value
$0.0001 per share, and 50,000,000 shares designated as Preferred Stock, par
value $0.0001 per share.
The amendment of the Certificate and authorization of shares of Preferred
Stock will not have any immediate effect on the rights of existing shareholders.
However, the Board of directors will have the authority to create classes and
series of Preferred Stock and issue Preferred Stock without requiring future
shareholder approval, except as may be required by applicable law. To the extent
that shares of Preferred Stock are issued in the future, they may decrease the
existing shareholders' percentage equity ownership and, depending on the price
at which they are issued, could be dilutive to the existing shareholders.
Additionally, the rights granted to such classes or series of Preferred Stock
would give the holders thereof preferential rights in the event of payment of
dividends, liquidation of the Company, distributions to shareholders, votes and
voting rights, conversion or exchange for other securities, and in several other
ways, as set forth above.
The precise effect of the amendment of the Company's Certificate and the
authorization of the Preferred Stock upon the rights of the Company's
shareholders cannot be quantified until our Board of Directors determines the
respective preferences, limitations and relative rights of the holders of one or
more series of the Preferred Stock, including dividend rights, conversion
rights, voting rights, redemption rights and liquidation preferences. Our Board
of Directors will have broad discretion to set the terms of any shares of
Preferred Stock that are issued. For example, the Preferred Stock may be
entitled to a separate class vote to approve certain extraordinary transactions
or might be given a disproportionately high number of votes. Moreover, the
Preferred Stock may be convertible into a large number of shares of Common Stock
or enjoy certain purchase rights, either of which could have a dilutive effect
on the Common Stock.
The shares of Preferred Stock that will be available for issuance in the
event this Proposal is approved and the Amendment is filed may be used by us to
oppose a hostile takeover attempt or delay or prevent changes in the persons
controlling us or removal of our management. For example, without further
stockholder approval, our Board of Directors may be able to strategically sell
shares of our preferred stock in a private transaction to purchasers who would
oppose a takeover or favor our current Board of Directors.
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Vote Required and Procedure to Authorize Preferred Stock
The affirmative vote of the holders of the majority of the outstanding
stock entitled to vote is required to approve this Proposal. In the event the
shareholders approve this Proposal, we will present for filing the Amendment
with the Delaware Secretary of State. Following the filing of the Amendment, the
number of authorized shares will be increased from 100,000,000 to 150,000,000,
with 100,000,000 authorized shares of common stock, and 50,000,000 authorized
shares of preferred stock. The number of shareholders and the number of shares
of Common Stock outstanding will not change.
The Board of Directors recommends a vote FOR Proposal Number 2.
PROPOSAL 3 - APPROVAL OF AMENDMENT TO THE 2000 STOCK OPTION PLAN
On February 14, 2003, our Board of Directors approved, subject to
shareholder approval at the Annual Meeting, an amendment to our 2000 Stock
Option Plan (the "Plan") increasing the shares reserved under that Plan by an
additional 1,500,000 shares of Common Stock. This amendment is being submitted
for approval by the affirmative vote of a majority of the shares present, in
person or by proxy, and entitled to vote at the Annual Meeting.
The Board believes that the proposed increase to the shares reserved under
the Plan is necessary to assure that there will be a sufficient number of shares
available to attract and retain the services of individuals we believe will be
essential to our long-term success.
Background
The Plan was originally adopted by our Board on April 10, 2000 and approved
by the shareholders at the annual meeting held on September 12, 2000. An
amendment to the Plan approved by the Board in March 2001 and approved by the
stockholders in April 2001, increased the number of shares of Common Stock
reserved under the Plan from 2,000,000 to 3,950,000 shares. The entire text of
the Plan is attached to this Proxy Statement as Annex B.
Purpose
The purpose of this Plan is to offer certain employees and consultants of
the Company the opportunity to acquire a proprietary interest in the Company by
the grant of options to purchase shares of Common Stock of the Company. Through
the Plan, the Company seeks to attract, motivate, and retain those highly
competent persons upon whose efforts the success of the Company depends. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator of the Plan at the time of grant of
an option and subject to the applicable provisions of Section 422 of the
Internal Revenue Code and the regulations promulgated thereunder. Options
granted under the Plan may be immediately exercisable, or may be exercisable in
installments, as determined by the Administrator at the time of grant.
Administration
The initial Administrator of our Plan is our Board of Directors. The
Administrator generally has the authority, in its discretion to:
(i) determine the fair market value of the Common Stock:
(ii) select the consultants and employees to whom Options may
from time to time be granted;
(iii) determine whether and to what extent Options are granted;
(iv) determine the number of shares to be covered by each such
Option granted;
(v) approve the terms of agreements used under the Plan;
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(vi) determine the terms and conditions not inconsistent with
the terms of the Plan, of each Option granted.
(vii) determine whether and under what circumstances an Option
may be settled in cash or shares of Common Stock owned by
the optionee;
(viii) reduce the exercise price of any Option to the then current
fair market value; and
(ix) construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
Eligibility
Under the Plan, Incentive Stock Options may be granted only to employees.
Nonstatutory Stock Options may be granted to employees and consultants. An
employee or consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options. "Consultant" under the Plan means any
person other than an employee who is engaged to render consulting or advisory
services and is compensated for such services, including a non-employee
director.
Term
The Plan became effective upon its adoption by the Board. It shall continue
in effect for a term of ten (10) years unless sooner terminated under its
provisions. The term of each Option granted under the Plan shall be the term
stated in the option agreement; provided, however, that the term shall be no
more than ten (10) years from the date of grant thereof. However, in the case of
an Incentive Stock Option granted to an optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Affiliate, the term of the Option
shall not exceed five (5) years from the date of grant thereof.
Option Exercise Price
The per share exercise price for the shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board, but in
the case of:
(i) an Option granted to an employee who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Affiliate, the per share exercise
price shall be no less than 110% of the fair market value per share on the date
of grant.
(ii) an Incentive Stock Option granted to any employee other than an
employee described in the preceding paragraph, the per share exercise price
shall be no less than 100% of the fair market value per share on the date of
grant.
(iii) a Non-statutory Stock Option granted to any consultant or employee,
the per share exercise price shall be no less than 85% of the fair market value
per share on the date of grant.
-8-
Exercise of Options
Any Option granted under the Plan shall be exercisable and shall vest at
such times and under such conditions as determined by the Administrator,
including performance criteria with respect to the Company and/or the Optionee,
but in no event shall an Option or the Shares purchased thereunder vest at a
rate of less than 20% per year. Under the Plan an Option may not be exercised
for a fraction of a share.
Termination of Services
Upon termination of an optionee's Continuous Status as an employee or
consultant, other than upon the optionee's death or disability, the optionee may
exercise his or her Option, but only within three (3) months following the
optionee's termination, and only to the extent that the Option was vested at the
date of termination (but in no event later than the expiration of the term of
such Option as set forth in the Notice of Grant). To the extent that the
optionee is not vested in the Option at the date of termination, or if the
Option is not exercised within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to the Plan.
However, in the event of termination of an optionee's Continuous Status as an
Employee or Consultant as a result of misconduct (including, but not limited to,
any act of dishonesty, willful misconduct, fraud or embezzlement) or should the
optionee make or attempt to make any unauthorized use or disclosure of material
confidential information or trade secrets of the Company or any Affiliate, then
in any such event his or her option shall terminate and cease to be exercisable
immediately upon such termination of such Service Provider Status or such
unauthorized disclosure or use of confidential or secret information or attempt
thereat.
In the event of termination of an optionee's Continuous Status as an
employee or consultant as a result of his or her disability, the optionee may,
but only within twelve (12) months from the date of such termination (and in no
event later than the expiration date of the term of his or her Option as set
forth in the Notice of Grant), exercise the Option to the extent the Option was
vested on the date of such termination. To the extent the optionee is not
entitled to exercise the Option on the date of termination, or if the optionee
does not exercise the Option to the extent so entitled within the time specified
herein, the Option shall terminate, and the shares covered by the Option shall
revert to the Plan.
In the event of the death of an optionee while an employee or consultant,
the Option may be exercised at any time within twelve (12) months following the
date of death (but in no event later than the expiration date of the term of his
or her Option as set forth in the Notice of Grant), by the optionee's estate or
by a person who has acquired the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option was vested at the date of
death. To the extent that optionee is not vested in the Option at the date of
death, or if the Option is not exercised within the time specified herein, the
Option shall terminate, and the shares covered by such Option shall revert to
the Plan.
Corporate Transaction
In the event of a Corporate Transaction as defined below, each outstanding
Option shall confer the right to purchase or receive, for each optioned share
subject to the Option immediately prior to such Corporate Transaction, the
consideration (whether stock, cash, or other securities or property) received or
receivable by holders of Common Stock in connection with such Corporate
Transaction. In the event that the successor corporation refuses to confer such
right, the optionee
-9-
shall fully vest in the Option. If an Option becomes fully vested pursuant to
the preceding sentence, the Administrator shall notify the optionee that the
Option shall be fully vested for a period of time not less than fifteen (15)
days from the date of such notice, and the Option shall terminate upon the
expiration of such period.
A Corporate Transaction means (i) a merger or acquisition in which the
Company is not the surviving entity, except for a transaction the principal
purpose of which is to change the state of the Company's incorporation, (ii) the
sale, transfer, or other disposition of all or substantially all of the assets
of the Company, or (iii) any reverse merger in which the Company remains the
surviving entity following its acquisition by another enterprise.
Amendment of the Plan
The Board may at any time amend, alter, suspend, or discontinue the Plan,
but no amendment, alteration, suspension, or discontinuation shall be made which
would impair the rights of any optionee under any grant theretofore made without
his or her consent.
Federal Tax Consequences
Options granted under the Plan may be either incentive stock options that
satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options that are not intended to satisfy such requirements. The
Federal income tax treatment for the two types of options differs as follows:
Incentive Stock Options
No taxable income is recognized by the optionee at the time of the option
grant, and no taxable income is generally recognized at the time the option is
exercised. The optionee will, however, recognize taxable income in the year in
which the purchased shares are sold or otherwise made the subject of
disposition.
For Federal income tax purposes, dispositions are divided into two
categories: (i) qualifying and (ii) disqualifying. A qualifying disposition of
the purchased shares will occur if the sale or disposition is made more than two
years after the date the option for the shares was granted and more than one
year after the date that the option was exercised for the particular shares
involved in the sale or disposition. Unless both of those requirements are
satisfied, a disqualifying disposition of the purchased shares will result.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the date the option was exercised over (ii) the
exercise price paid for such shares. In no other instance will the Company be
allowed a deduction with respect to the optionee's disposition of the purchased
shares.
Non-Statutory Options
No taxable income is recognized by an optionee upon the grant of a
non-statutory option. Unless the shares are subject to a substantial risk of
forfeiture, the optionee will generally recognize ordinary income when the
option is exercised equal to the excess of the fair market value of the
purchased shares on the exercise date over the exercise price.
-10-
If the shares acquired upon exercise of a non-statutory option are subject
to a substantial risk of forfeiture the optionee will not recognize taxable
income at the time the option is exercised. If, as in the Company's plan, the
only substantial risk of forfeiture is the vesting provision, as the shares vest
the optionee will have to report as ordinary income an amount equal to the
excess of (a) the fair market value of the shares on the vesting date over (b)
the exercise price paid for the shares. The optionee may, however, elect under
Section 83(b) of the Internal Revenue Code to include as ordinary income in the
year of exercise the difference between the fair market value of the purchased
shares on the date of exercise, (determined as if the unvested shares were not
subject to the Company's repurchase right) and the exercise price paid for those
shares. If the Section 83(b) election is made, the optionee will not recognize
any additional income as and when the shares vest.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee in connection with the exercise of
the non-statutory option. The deduction will in general be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee.
Shareholder Approval
The affirmative vote of a majority of the shares represented and voting at
the Annual Meeting is required for approval of the proposed 1,500,000 share
increase to the Plan. If shareholder approval is not obtained, then any options
granted which include any of the 1,500,000 share increase will terminate without
becoming exercisable for any of the shares of Common Stock subject to those
options, and no further options will be granted on such increased number of
shares. However, the Plan will continue to remain in effect, and option grants
may continue to be made pursuant to the provisions of the Plan as in effect
prior to the proposed 1,500,000 share increase.
The Board of Directors recommends a vote FOR Proposal Number 3.
PROPOSAL 4 - RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Burr, Pilger & Mayer, LLP have been selected by the Board of Directors to
serve as our independent accountants for the current fiscal year. We are now
asking you to ratify the selection of Burr, Pilger & Mayer, LLP as the Company's
independent accountants. In the event that holders of a majority of the
outstanding shares fail to ratify the selection of Burr, Pilger & Mayer, LLP the
Board of Directors will reconsider such selection, but may still select Burr,
Pilger & Mayer, LLP as independent public accountants for the Company.
Representatives of Burr, Pilger & Mayer, LLP are expected to be present at
the Annual Meeting, will have the opportunity to make a statement if they desire
to do so, and will be available to respond to appropriate questions.
Changes in Registrant's Certifying Accountant
We incorporate by reference the Form 10-KSB filed with the SEC on March 22,
2001, disclosing our change of independent accountants from Farber & Hass, LLP
to Burr, Pilger & Mayer, LLP.
Independent Auditor's Fees
The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the audit of our
annual financial statements and review of financial statements included in our
quarterly reports or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years are as follows:
For the fiscal year ending December 31, 2001: $30,900
Billed and expected billing for the fiscal year ending
December 31, 2002: $30,900
Audit-Related Fees
The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are reasonably
related to the performance of the audit or review of our financial statements
and are not reported above under "Audit Fees" are as follows:
For the fiscal year ending December 31, 2001: $13,442
Billed and expected billing for the fiscal year ended
December 31, 2002: $12,360
Tax Fees
The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning are as follows:
-11-
For the fiscal year ending December 31, 2001: $1,391
For the fiscal year ending December 31, 2002: $4,352
All Other Fees
The aggregate fees billed in each of the last two fiscal years for products
and services provided by the principal accountant, other than the services
reported above under "Audit Fees", "Audit Related Fees" and "Tax Fees" are as
follows:
For the fiscal year ending December 31, 2001: $19,872
Billed and expected billing for the fiscal year ending
December 31, 2002: $8,480
Our Audit Committee pre-approved the principal types of services (audit,
audit assurance and tax preparation) provided by the principal accountant during
the year ended December 31, 2002. 100% of "Audit-Related Fees", 100% of "Tax
Fees" and 0% of "All Other Fees" were approved by our Audit Committee pursuant
to Rule 2-01(c)(7)(i)(C) of Regulation S-X. Our Audit Committee has considered
whether the provision of services rendered by our accountants are compatible
with maintaining the accountant's independence.
The Board of Directors recommends a vote FOR Proposal Number 4.
MANAGEMENT AND DIRECTORS
The following table sets forth information with respect to our current
executive officers, principal employees, consultants and directors.
Name Age Position
Francis K. Ruotolo..................65 Chairman, President, and Chief Executive Officer
Class 3 Director, term expires in 2003
Papken S. Der Torossian.............64 Class 1 Director, term expires in 2004
John R. Gaulding....................57 Class 3 Director, term expires in 2003
Homer G. Dunn.......................62 Class 2 Director, term expires in 2005
Thomas Holt.........................57 Class 1 Director, term expires in 2004
Kenneth Ruotolo.....................42 Chief Financial Officer, Executive Vice President, Finance and
Operations, and Secretary
Clifford Hersh......................55 Managing Director and Chief Scientist
Jeffrey R. Spirn, Ph.D..............54 Vice President, Research and Development
Girish Mundada......................35 Vice President, Engineering
George Arabian......................51 Executive Vice President, Marketing and Business Development
Steven Messino......................51 Vice President, Sales
-12-
Kenneth Ruotolo, Age 42
Chief Financial Officer, Executive Vice President, Finance and Operations, and
Secretary
Mr. Ruotolo joined the Company in June of 2001. Before joining the Company,
Mr. Ruotolo was a founder and served as Vice President of Finance and Operations
for eStar, Inc. a content developer and syndicator. Prior to eStar, Mr. Ruotolo
was a partner for twelve years with era2, an interactive design and internet
consulting agency. Mr. Ruotolo holds a B.A. degree in Economics from the
University of California at Davis and an M.B.A. from Northeastern University.
Clifford Hersh, Age 55
Managing Director and Chief Scientist
Mr. Hersh joined the Company in March 1997. Previously, he was a founder
and Chief Executive Officer of Move Resources, Inc. He was also Vice President
of Engineering for Array Technologies, Inc. and Director of Advanced Development
at Genigraphics Corporation. Mr. Hersh received a bachelor degree in mathematics
from the University of California at Berkeley, and a Master of Science degree in
engineering from the Federal Institute of Technology, Zurich, Switzerland.
Jeffrey R. Spirn, Ph.D., Age 54
Vice President, Research and Development
Dr. Spirn joined ANTs software inc. March 2000, and became Director of
Engineering in February 2001 and was promoted Vice President of Research and
Development in September 2001. Before joining ANTs, Dr. Spirn was a software
architect at Oracle, where he worked on application server, naming, and
multithreading issues. Prior to that, he worked for Sun Microsystems and in the
HP and DEC research labs. Before his industrial career, Dr. Spirn was a Computer
Science Professor at Brown and Penn State Universities, and held visiting
positions at Bell Laboratories and the University of Hawaii. During this period,
he published one book and many technical articles on network and operating
system design and performance modeling. Dr. Spirn holds a Ph.D. in Electrical
Engineering/Computer Science from Princeton University, and a B.S. in Electrical
Engineering from M.I.T.
Girish Mundada, Age 35
Vice President, Engineering
Mr. Mundada joined the Company in September 2001. Prior to joining ANTs, he
was a Senior Vice President and General Manager at NetSol International. He has
also held positions at Informix Corporation, including those in development,
management and senior management. Mr. Mundada completed a bachelor degree in
Computer Science from the University of Pune, India, and obtained an MBA from
the University of California at Berkeley.
George Arabian, Age 51
Executive Vice President, Marketing and Business Development
George R. Arabian joined the Company as a consultant in May 2001. Mr.
Arabian's expertise extends across the business planning, marketing and business
development functions; having participated in three IPO's through his career.
Mr. Arabian is a founding partner in a valuation accelerator, whodoweknow.com, a
company founded specifically to help technology-based start-ups accelerate their
time to market. He is also co-founder of KidsSportsNetwork, the first and only
kid empowered sports entertainment network and esolo, an outsource provider of
marketing solutions to the business market. Previously, Mr. Arabian was a Vice
President of Business Development at NetObjects Inc., during which time he was
responsible for the development and management of the strategic relationships
for NetObjects, with partners ranging from IBM and Novell to such internet
partners as Verio, Netscape, Excite and CNET. Prior to joining NetObjects, Mr.
Arabian was the Director of Sales at America Online (AOL). Mr. Arabian's earlier
positions include Vice President of Sales at Orchid Technology and Director of
Worldwide Sales for Proxim, Inc.; both companies successfully completed IPOs
during his tenure.
-13-
Steven Messino, Age 51
Vice President, Sales
Steven Messino joined the Company as a consultant in January 2003. Steven
Messino has more than 25 years of executive management experience in the
creation of strategic partnerships, business planning and development, sales,
strategic marketing and process implementation as well as customer service both
domestic and international. His focus has been within the computer software
industry and its internet and ecommerce derivatives. As a consultant, Mr.
Messino has assisted over a dozen companies in an executive capacity with the
design, development, financing and implementation of their business. He
established a significant number of corporate strategic partnerships, which
resulted in technology transfers, new product distribution channels, financings,
and M&A. Mr. Messino built his career in sales, marketing and service at Sun
Microsystems as a founding member of the SunSoft subsidiary, and at Digital
Equipment marketing the #1 multi-function office system in the industry.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership by Beneficial Owners
The following table sets forth, as of February 14, 2003, information
regarding ownership of our common stock by any person or entity, known by us to
be the beneficial owner of more than five percent of the outstanding shares of
common stock. The percentages are calculated on the basis of the amount of
outstanding shares of Common Stock on February 14, 2003 which is 23,274,288
plus, for each person, any securities that person has the right to acquire
within 60 days following February 14, 2003 pursuant to options or warrants.
Amount and Nature
of Beneficial Percent of
Name and Address of Beneficial Owner Ownership Class
------------------------------------ ----------------- ----------
Donald R. Hutton, 10995 Boas Road
Sidney, B. C. Canada V8L 5J1.................... 3,502,500 (1) 15.05
Alison B. Hicks, 10995 Boas Road
Sidney, B. C. Canada V8L 5J1.................... 3,502,500 (2) 15.05
Whistler Design, 94 Dowdeswell Street
Box N-75-71, Nassau............................. 2,502,500 10.75
- ----------
(1) Includes 600,000 shares of Common Stock owned by Mr. Hutton, 2,502,500
shares of Common Stock in the name of Whistler Design, controlled by Mr. Hutton,
400,000 shares of Common Stock in the name of Ms. Alison B. Hicks, Mr. Hutton's
spouse; does not include 90,000 shares of Common Stock which Mr. Hutton held in
joint tenancy with Ms. Josephine C. Hutton and for which Mr. Hutton has
disclaimed any beneficial interest in or ownership of such shares.
(2) Includes 400,000 shares of Common Stock owned by Ms. Hicks, 2,502,500 shares
of Common Stock in the name of Whistler Design, controlled by Donald R. Hutton,
Ms. Hicks' spouse, and 600,000 shares of Common Stock in the name of Mr. Hutton;
does not include 90,000 shares of Common Stock which Mr. Hutton held in joint
tenancy with Ms. Josephine C. Hutton and for which Mr. Hutton has disclaimed any
beneficial interest in or ownership of such shares.
Security Ownership by Directors and Executive Officers
The following table sets forth certain information regarding the beneficial
ownership of the shares of Common Stock as of February 14, 2003, by each of our
directors and executive officers. The table also shows the beneficial ownership
of our stock by all directors and executive officers as a group. The table
includes the number of shares
-14-
subject to outstanding options and warrants to purchase shares of Common Stock.
The percentages are calculated on the basis of the amount of outstanding shares
of Common Stock on February 14, 2003 which is 23,274,288 plus, for each person,
any securities that person has the right to acquire within 60 days following
February 14, 2003 pursuant to options or warrants.
Shares of
Common
Stock
Beneficially Percent
Name and Address of Beneficial Owner (1) Owned of Class
--------------------------------------- ------------ --------
Directors and Nominees for Director
Francis K. Ruotolo ............................... 1,027,500(2) 4.23
Thomas Holt ...................................... 90,000(3) *
John R. Gaulding ................................. 90,000(4) *
Homer G. Dunn .................................... 90,000(5) *
Papken S. Der Torossian .......................... 90,000(6) *
Executive Officers
Clifford Hersh ................................... 784,000(7) 3.26
Jeffrey Spirn .................................... 190,000(8) *
Kenneth Ruotolo .................................. 320,000(9) 1.36
8 directors and executive officers as a group .... 2,681,500 10.33
- ----------
* means less than 1%
(1) Unless otherwise indicated, the address of each director and officer is c/o
ANTs software inc., 801 Mahler Road, Suite G, Burlingame, CA 94010.
(2) Includes a Warrant to purchase up to 25,000 shares of Common Stock, an
Option to purchase up to 750,000 shares of Common Stock, an Option to purchase
up to 155,000 shares of Common Stock, an Option to purchase up to 77,500 shares
of Common Stock, and an Option to purchase up to 20,000 shares of Common Stock.
Mr. Ruotolo can acquire 25,000 shares of Common Stock under his Warrant and
1,002,500 shares of Common Stock under his Options in the next 60 days.
(3) Includes an Option to purchase up to 50,000 shares of Common Stock, a second
Option to purchase up to 25,000 shares of Common Stock, and a third Option to
purchase up to 15,000 sharesof Common Stock. Mr. Holt can acquire 83,031 shares
of Common Stock under his Options in the next 60 days. Mr. Holt may also
purchase the remaining shares under his Options at any time during the next 60
days, however such purchase would be subject to our right to repurchase unvested
shares. The address of Mr. Holt is c/o Lucent Technologies, 600 Mountain Ave,
Murray Hill, NJ 07059.
-15-
(4) Includes an Option to purchase up to 75,000 shares of Common Stock and a
second Option to purchase up to 15,000 shares of Common Stock. Mr. Gaulding can
acquire 83,121 shares of Common Stock under his Options in the next 60 days. Mr.
Gaulding may also purchase the remaining shares under his Options at any time
during the next 60 days, however such purchase would be subject to our right to
repurchase unvested shares. The address of Mr. Gaulding is 115 Margarita Drive,
San Rafael, CA 94901.
(5) Includes an Option to purchase up to 75,000 shares of Common Stock and a
second Option to purchase up to 15,000 shares of Common Stock. Mr. Dunn can
acquire 83,121 shares of Common Stock from his Options in the next 60 days. Mr.
Dunn may also purchase the remaining shares under his Option at any time during
the next 60 days, however such purchase would be subject to our right to
repurchase unvested shares. The address of Mr. Dunn is c/o Evant Inc., 235
Montgomery Street, San Francisco, CA 94104
(6) Includes an Option to purchase up to 75,000 shares of Common Stock and a
second Option to purchase up to 15,000 shares of Common Stock. Mr. Der Torossian
can acquire 83,121 shares of Common Stock under his Options in the next 60 days.
Mr. Der Torossian may also purchase the remaining shares under his Option at any
time during the next 60 days, however such purchase would be subject to our
right to repurchase unvested shares. The address of Mr. Der Torossian is 21978
Via Regina, Saratoga, CA 95070.
(7) Includes two fully vested Warrants to purchase an aggregate of up to 500,000
shares of Common Stock, an Option to purchase up to 120,000 shares of Common
Stock, a second Option to purchase up to 72,000 shares of Common Stock, a third
Option to purchase up to 72,000 shares of Common Stock and a fourth Option to
purchase up to 20,000 shares of Common Stock. Mr. Hersh may acquire 500,000
shares of Common Stock under his Warrants in the next 60 days. Mr. Hersh may
acquire 260,639 shares of Common Stock under his Options in the next 60 days.
Mr. Hersh may also purchase the remaining shares under his Options at any time
during the next 60 days, however such purchase would be subject to our right to
repurchase unvested shares.
(8) Includes a Warrant to purchase up to 50,000 shares of Common Stock, an
Option to purchase up to 10,000 shares of Common Stock, a second Option to
purchase up to 40,000 shares of Common Stock, a third Option to purchase up to
10,000 shares of Common Stock, a fourth Option to purchase up to 10,000 shares
of Common Stock, a fifth Option to purchase up to 50,000 shares of Common Stock,
and a sixth Option to purchase up to 20,000 shares of Common Stock. Mr. Spirn
may acquire 50,000 shares of Common Stock under his Warrant in the next 60 days.
Mr. Spirn may acquire 94,984 shares of Common Stock under his Options in the
next 60 days. Mr. Spirn may also purchase the remaining shares under his Options
at any time during the next 60 days, however such purchase would be subject to
our right to repurchase unvested shares.
(9) Includes an Option to purchase up to 10,000 shares of Common Stock (of which
660 have been forfeited), a second Option to purchase up to 30,000 shares of
Common Stock (of which 10,020 have been forfeited), a third Option to purchase
up to 175,000 shares of Common Stock, a fourth Option to purchase up to 17,500
shares of Common Stock, a fifth Option to purchase up to 17,500 shares of Common
Stock and sixth Option to purchase up to 60,680 shares of Common Stock and a
seventh to purchase up to 20,000 shares of Common Stock. Mr. Ruotolo may acquire
213,140 shares of Common Stock under his Options within the next 60 days. Mr.
Ruotolo may also purchase the remaining shares under his Options at any time
during the next 60 days, however such purchase would be subject to our right to
repurchase unvested shares.
Section 16(a) Beneficial Ownership Reporting Compliance
To the best of our knowledge, all our officers, directors and 10%
shareholders timely filed the reports required to be filed under Section 16(a)
of the Securities Exchange Act of 1934, as amended, during the fiscal year ended
December 31, 2002.
-16-
EXECUTIVE COMPENSATION
Summary Compensation Table
This Table sets forth the annual compensation for the three most recent
completed fiscal years and the transition period from May 1, 2000 to December
31, 2000 (the "Transition Period") of the named officers who were serving as
executive officers during the last completed fiscal year or at the end of the
last completed fiscal year.
Annual compensation Long term compensation
-------------------------------------------- -------------------------------------------------------
Award Payouts
-------------------------------------------------------
Securities
Name and principal Other Annual Restricted underlying LTIP All other
position Year Salary Bonus compensation stock award(s) options/SARs payouts compensation
- -------------------------------------------------------------------------------------------------------------------------------
Francis K. Ruotolo 2002 $194,950 $0 20,000
Chief Executive Officer 2001 $362,473 $400,000 982,500
President and Chairman 2000(1) -- -- -- 25,000 --
of the Board 2000 -- -- -- -- -- --
Clifford Hersh 2002 $128,683 $0 20,000
Managing Director 2001 $200,000 $10,000 144,000
and Chief Scientist 2000(1) $133,333 -- -- -- 120,000 -- --
2000 $200,000 -- -- -- -- -- --
Kenneth Ruotolo 2002 $118,389 80,680
Secretary, Chief 2001 $106,666 239,320 $61,600 (2)
Financial Officer and
Executive Vice 2000(1) -- -- -- -- -- -- --
President of Finance and
Operations 2000 -- -- -- -- -- -- --
Jeff Spirn 2002 $104,883 $0 70,000
Vice President, Research 2001 $155,833 $2,186 60,000
and Development
2000(1) -- -- -- -- 60,000 -- --
2000 -- -- -- -- -- -- --
(1) Represents the Transition Period from May 1, 2000 to December 31, 2000.
(2) Represents compensation for consulting services rendered by Mr. Kenneth
Ruotolo before he became an employee of the Company.
-17-
Option/SAR grants in the Last Fiscal Year
The following table sets forth certain information concerning grants of
options and warrants to purchase shares of Common Stock of the Company made
during the last completed fiscal year to the executive officers named in the
Summary Compensation Table.
Number of
securities Percent of total
underlying options/ SARs granted Per share
options/ SARs to employees in exercise price
Name granted fiscal year (1) (2) Expiration date
- ---------------------------------------------------------------------------------------------
Francis K. Ruotolo 20,000 3.92 $0.52 8/6/2012
Kenneth Ruotolo 60,680 11.91 $1.90 4/09/2012
Kenneth Ruotolo 20,000 3.92 $0.52 8/06/2012
Clifford Hersh (3) 20,000 3.92 $0.52 8/06/2012
Jeff Spirn 50,000 9.81 $1.90 4/09/2012
Jeff Spirn 20,000 3.92 $0.52 8/06/2012
(1) During the fiscal year ended December 31, 2002, the Company granted to its
employees options covering 509,690 shares of Common Stock.
(2) The exercise price is equal to the closing sale price of the Common Stock of
the Company traded on the Over the Counter Bulletin Board on the grant date.
(3) We agreed to extend the period during which Mr. Hersh could exercise his
warrant to purchase 400,000 shares of common stock from March 17, 2002 to May
31, 2003. Such warrant has not been included in this table.
Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values
The following table sets forth information concerning the number and value
of shares of common stock underlying the unexercised options and warrants held
by the named officers as of December 31, 2002. The table also sets forth the
value realized upon the exercise of stock options and warrants during the last
fiscal year which is calculated based on the fair market value of our common
stock on the date of exercise, as determined by the closing price of our common
stock as traded on the Over-The-Counter Bulletin Board, less the exercise price
paid for the shares. The value of unexercised in-the-money options and warrants
represents the positive spread between the exercise price of the stock options
and the fair market value of our common stock as of December 31, 2002, which was
$0.80 per share.
Aggregated Option/Warrant Exercises in 2002 and
Fiscal Year-End Option/Warrant Values
Shares
Acquired Number of Securities Value of Unexercised
On Underlying Unexercised In-the-Money Options at
Exercise Value Options at Year-End(#) Year-End($)(2)
Name (#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------
Francis K. Ruotolo ..... -- $ -- 1,027,500 -- $ 5,600 $ --
Kenneth Ruotolo ........ -- -- 320,000 -- 5,600 --
Clifford Hersh (3) ..... 100,000 181,000 784,000 -- 280,600 --
Jeff Spirn ............. -- -- 190,000 -- 5,600 --
(1) Calculated by multiplying the number of shares acquired on exercise by the
difference between the fair market value of the shares on the date of
exercise and the exercise price.
(2) Calculated by determining the difference between the fair market value of
our common stock as of December 31, 2002 and the exercise price of the
option.
(3) During the first quarter of 2002, Mr. Hersh exercised a warrant to purchase
100,000 shares of common stock for the aggregate amount of $25,000.
-18-
Separation Agreement
On January 8, 2001, we entered into a Separation Agreement with Mr. Francis
K. Ruotolo pursuant to which we agreed to pay Mr. Ruotolo his salary for a
period of six months following the termination of his employment in the event
Mr. Ruotolo terminates his employment for Good Cause or in the event we
terminate Mr. Ruotolo's employment without Cause. We also agreed to continue to
pay Mr. Ruotolo his salary for a period of 24 months in the event of a Corporate
Transaction (a merger or acquisition in which we are not the surviving entity,
the sale of all or substantially all of our assets, or any reverse merger in
which we remain the surviving entity) where the consideration received by us is
less than five dollars ($5.00) per share on a full dilution and full conversion
basis and where the successor company does not offer Mr. Ruotolo a position of
similar title, office and responsibilities and equal salary, to the position
held and salary received by Mr. Ruotolo with us immediately prior to such
Corporate Transaction. Under this Agreement Good Cause is defined as (i) a
decrease in Mr. Ruotolo's compensation of greater than twenty-five percent (25%)
of his compensation (x) immediately prior to such decrease or (y) in the
aggregate over a period not exceeding two years (not including any decrease in
compensation that is applied to each of our executive officers equally), (ii) a
material change in Mr. Ruotolo's corporate position, title or responsibilities,
or (iii) the relocation of our principal offices more than 80 miles from their
present location without Mr. Ruotolo's consent. Termination of Mr. Ruotolo's
employment is deemed to be "for Cause" in the event that Mr. Ruotolo (i)
violates any material provisions of the Letter Agreement by which he was
employed, the Separation Agreement or our standard form of Proprietary
Information and Inventions Agreement, (ii) is charged with or indicted for a
felony, any criminal act other than minor traffic violations, or (iii) commits
any act of willful misconduct, gross negligence, or dereliction of his duties
under the Separation Agreement.
Certain Transactions
On January 11, 2001, we entered into an agreement with Mr. Frederick D.
Pettit, our former President and Chief Executive Officer, in connection with
which we agreed to forgive $45,000 (one fifth) plus interest, of a note
receivable by Mr. Pettit on August 4, 2001 and on each 1 year anniversary
thereof, until the entire amount of principal and interest have been discharged,
and we agreed to pay Mr. Pettit the sum of $300,000, payable $75,000 per year
for four (4) years on August 4 of each year.
-19-
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a chart showing a comparison of the four-year cumulative
total return (assuming a $100 investment in the Company's common stock, the S&P
500 and a selected noted peer group) commencing November 10, 1998 and continuing
through December 31, 2002.
COMPARE CUMULATIVE TOTAL RETURN
AMONG ANTS SOFTWARE INC.,
S&P 500 INDEX AND SIC CODE INDEX
[The following table was depicted as a line chart in the printed materials.]
11/10/98 4/30/99 4/30/00 12/31/00 12/31/01 12/31/02
-------- ------- ------- -------- -------- --------
ANTS SOFTWARE INC. 100.00 125.00 760.00 217.50 144.00 64.00
SIC CODE INDEX 100.00 127.05 315.98 178.91 96.75 62.98
S&P 500 INDEX 100.00 122.32 134.71 123.42 108.75 84.71
ASSUMES $100 INVESTED ON NOV. 10, 1998
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2002
-20-
AUDIT COMMITTEE REPORT
Background
The Audit committee of the Board of Director's of ANTs fulfills a fiduciary
role for the Board of Directors, as they represent the Shareholders, by
providing a direct supervisory link to the independent auditors. The Board of
Directors acts upon the recommendations or advice of the Audit Committee, which
has no responsibility to make decisions and take actions separate from the Board
of Directors. In its role, the Audit Committee undertakes the following advisory
or consultative tasks:
o recommend, to the Board, the independent audit firm to be employed
o consult with the independent auditor on their plan of audit for the
company
o review, with the independent auditor, their report of audit and their
letter
o consult, with the independent auditor, on the adequacy of internal
controls
The primary responsibility of the Audit Committee is to oversee the
Company's financial reporting process on behalf of the Board and to report the
results of their activities to the Board. The reporting process is the
responsibility of Company Management: they prepare the Company's financial
statements, while the independent auditors are responsible for auditing those
financial statements.
The committee membership must meet the requirements of the audit committee
policy of the NASDAQ Exchange. Accordingly, all of the members are directors
independent of management and free from any relationship that, in the opinion of
the board of directors, would interfere with the exercise of independent
judgment as a committee member. Accordingly, officers or employees of the
company do not serve on the committee.
The audit committee is composed of two non-management members of the Board
who are selected by the Board, based upon their prior experience in audit
committee matters, their availability as required for review of these matters,
and their individual independence and objectivity. At least one member must have
had employment as a senior officer with financial oversight responsibilities.
Specific Required Items for the Present Report of the ANTs Audit Committee
In support of the Proxy Statement, the audit committee provides this
present report for the company's proxy statement. The following disclosure, as
required, appears over the printed names of each member of the audit committee.
Note that one of the members of the Audit Committee, Clive G. Whittenbury,
resigned from the Board of Directors of ANTs on March 3, 2002 but the other
members of the Audit Committee present at the 2003 meeting have signed the
current disclosure.
Responses to the following requirements follow each requirement as a
bullet:
the audit committee must state whether
(1) the committee has reviewed and discussed the audited financial
statements with management;
o Yes, at the audit committee meeting of 03/14/03.
(2) the committee has discussed with the independent auditors the matters
required by SAS 61;
o Yes at the audit committee meeting of 05/15/02.
(3) the committee has received from the independent accountants the letter
required by the
-21-
Independence standard No.1
o Yes, the letter is filed at the ANTs Corporate office.
(4) the committee recommends to the Board, based on the three items above,
that the audited financials be included in this Form 10-KSB for filing with the
Commission?
o Yes
(5) an Audit Committee Charter governs the Company's audit committee
o Yes: a copy of the Charter is included as an appendix to the proxy
statement filed by the Company on March 22, 2001.
(6) the Company has an audit committee and whether the members of their
audit committee are "independent" as defined in the NASD's, AMEX's or NYSE's
listing standards, and which definition was used
o Yes, the Company has an Audit Committee that meets the strictest of
the standards referred to above: all members of the Audit Committee are
uncompensated members of the Board who are neither members of the management nor
officers of the Company and are, in the view of the company's board of
directors, free of any relationship that would interfere with the exercise of
independent judgment by the members of Audit Committee.
Meetings
The Audit Committee held two meetings during the fiscal year ended December
31, 2002, on March 22, 2002 and May 14, 2002.
The Committee met with the Company's outside accountants at all meetings,
and reviewed their findings, suggestions and plans for continuing audits. The
Committee discussed strengthening controls as the Company grows into operations
and out of research and development and the need for selecting and supporting
strong financial management in support of anticipated growth. The Audit
Committee believes that the Committee has an excellent and forthright working
relationship with the Company's Audit Firm, Burr, Pilger & Mayer, LLP, and
recommends to the Board of Directors that they are qualified candidates for
appointment for the next year as they have performed well. The committee
recognizes, however, that the Board must consider other factors that may
determine the final choice of auditors for the next fiscal year.
Thomas Holt
John R. Gaulding
-22-
SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in our proxy statement and form of
proxy for the fiscal year ending December 31, 2003 must be received by December
31, 2003.
OTHER BUSINESS
We know of no other matters to be submitted to Shareholders at the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed form of Proxy to vote the shares
they represent in accordance with their best judgment.
By Order of the Board of Directors
/s/ Kenneth Ruotolo
--------------------------
Kenneth Ruotolo, Secretary
March ___, 2003
- --------------------------------------------------------------------------------
ALL SHAREHOLDERS ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING
PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE. THANK YOU
- --------------------------------------------------------------------------------
-23-
Annex A
Amended and restated CERTIFICATE OF INCORPORATION
OF
ANTS SOFTWARE Inc.
The undersigned, Francis K. Ruotolo, hereby certifies that:
ONE: He is the President and Chief Executive Officer of ANTs software inc.,
a Delaware corporation (the "Corporation"). The original Certificate of
Incorporation of the Corporation was filed with the Secretary of State of the
State of Delaware on October 6, 2000. An Amended and Restated Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware on
November 16, 2000. The Corporation was originally incorporated in the State of
Delaware under the name "ANTs software.com, Inc."
TWO: Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, the Amended and Restated Certificate of Incorporation of this
Corporation is amended and restated to read in full as follows:
ARTICLE I
The name of the corporation is ANTs software inc.
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 615 South Dupont Highway, Dover, DE 19901, County of Kent. The name of its
registered agent at such address is National Corporate Research, Ltd.
ARTICLE III
The purpose for which the Corporation is organized is to engage in any
business, trade or activity which may lawfully be conducted by a corporation
organized under the General Corporation Law of the State of Delaware.
ARTICLE IV
(A) Classes of Stock. The Corporation is authorized to issue two classes of
stock to be designated, respectively, "Common Stock" and "Preferred Stock." The
total number of shares, which the Corporation is authorized to issue, is One
Hundred Fifty Million (150,000,000). One Hundred Million (100,000,000) shares
shall be Common Stock, each share with a par value of $0.0001, and Fifty Million
(50,000,000) shares shall be Preferred Stock, each share with a par value of
$0.0001.
(B) Rights, Preferences and Restrictions of Preferred Stock. The Preferred
Stock authorized by this Amended and Restated Certificate of Incorporation may
be issued from time to time in series. The Board of Directors is hereby
authorized to create, fix and alter the rights, preferences, privileges and
restrictions granted to or imposed upon series of Preferred Stock, and the
number of shares constituting any such series and the designation thereof, or of
any of them. Subject to compliance with applicable protective voting rights
which have been or may be granted to the Preferred Stock or series thereof in
Certificates of Designation or the corporation's Amended and Restated
Certificate of Incorporation ("Protective Provisions"), but notwithstanding any
other rights of the Preferred Stock or any series thereof, the rights,
privileges, preferences and restrictions of any such additional series may be
subordinated to, pari passu with (including, without limitation, inclusion in
provisions with respect to liquidation and acquisition preferences, redemption
and/or approval of matters by vote or written consent), or senior to any of
those of any present or future class or series of Preferred or Common Stock.
Subject to compliance with applicable Protective Provisions, the Board of
Directors is also authorized to increase or decrease the number of shares of any
series, prior or subsequent to the issue of that series, but
-24-
not below the number of shares of such series then outstanding. In case the
number of shares of any series shall be so decreased, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
ARTICLE V
(A) Limitation of Director Liability. To the fullest extent that the
Delaware General Corporation Law, as it exists on the date hereof or may
hereafter be amended, permits the limitation or elimination of the liability of
directors, a director of the Corporation shall not be liable to the Corporation
or its stockholders for any monetary damages for conduct as a director. Neither
any amendment to or repeal of this Certificate or amendment to the Delaware
General Corporations Law nor the adoption of any provision of this Certificate
of Incorporation inconsistent with this Certificate shall adversely affect any
right or protection of a director of the Corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
(B) Indemnification. To the fullest extent not prohibited by law, the
Corporation: (i) shall indemnify any person who is made, or threatened to be
made, a party to an action, suit or proceeding, whether civil, criminal,
administrative, investigative, or otherwise (including an action, suit or
proceeding by or in the right of the Corporation), by reason of the fact that
the person is or was a director of the Corporation, and (ii) may indemnify any
person who is made, or threatened to be made, a party to an action, suit or
proceeding, whether civil, criminal, administrative, investigative, or otherwise
(including an action, suit or proceeding by or in the right of the Corporation),
by reason of the fact that the person is or was an officer, director, employee
or agent of the Corporation, or a fiduciary (within the meaning of the Employee
Retirement Income Security Act of 1974), with respect to any employee benefit
plan of the Corporation, or serves or served at the request of the Corporation
as a director, officer, employee or agent of, or as a fiduciary (as defined
above) of an employee benefit plan of, another corporation, partnership, joint
venture, trust or other enterprise. This Certificate shall not be deemed
exclusive of any other provision for the indemnification of directors, officers,
employees, or agents that may be included in any statute, bylaw, agreement,
resolution of shareholders or directors or otherwise, both as to action in any
official capacity and action in any other capacity while holding office, or
while an employee or agent of the Corporation.
ARTICLE VI
In furtherance of, and not in limitation of, the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the Corporation.
ARTICLE VII
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in any manner now or
hereafter prescribed by statute and all rights conferred upon stockholders
herein are granted subject to this reservation.
THREE: This Amended and Restated Certificate of Incorporation was duly
adopted by the Board of Directors of the Corporation in accordance with Section
242 of the General Corporation Law of the State of Delaware.
FOUR: This Amended and Restated Certificate of Incorporation was duly
adopted by the vote of the holders of a majority of the outstanding shares of
the Corporation entitled to vote thereon in accordance with Section 242 of the
General Corporation Law of the State of Delaware.
-25-
FIVE: This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with Sections 242 and 245 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be signed by Francis K. Ruotolo, its duly
authorized officer, this ___ day of May, 2003, and the foregoing facts stated
herein are true.
By: _____________________________________
Francis K. Ruotolo,
President and Chief Executive Officer
-26-
Annex B
ANTS SOFTWARE INC.
2000 STOCK OPTION PLAN
1. Purpose of the Plan. The purpose of this Stock Option Plan is to offer
certain Employees and Consultants of the Company and its Affiliates the
opportunity to acquire a proprietary interest in the Company by the grant of
options to purchase shares of Common Stock of the Company. Through the Plan, the
Company seeks to attract, motivate, and retain those highly competent persons
upon whose efforts the success of the Company depends. Options granted under the
Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined
by the Administrator at the time of grant of an option and subject to the
applicable provisions of Section 422 of the Code and the regulations promulgated
thereunder. Options granted under the Plan may be immediately exercisable, or
may be exercisable in installments, as determined by the Administrator at the
time of grant.
2. Definitions. As used herein, the following definitions shall apply.
"Administrator" means the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.
"Affiliate" means any parent or subsidiary (as defined in Section
424(e) and (f) of the Code) of the Company.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a committee appointed by the Board in accordance
with Section 4 of the Plan.
"Common Stock" means the common stock of the Company.
"Company" means ANTs software inc.
"Consultant" means any person other than an Employee who is engaged
by the Company or any Affiliate to render consulting or advisory services and is
compensated for such services, including a non-Employee director.
"Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship with the Company or any Affiliate is not
interrupted or terminated. For purposes of Incentive Stock Options, the term
"Continuous Status as an Employee or Consultant" means that the employment
relationship with the Company or any Affiliate is not interrupted or terminated.
Continuous Status as an Employee or Consultant shall not be considered
interrupted in the case of (i) any leave of absence approved by the Company or
an Affiliate or (ii) transfers between locations of the Company and its
Affiliates or between the Company and any Affiliate, or between Affiliates or
(iii) transfer between Employee and Consultant Status. If reemployment upon
expiration of a
-27-
leave of absence approved by the Company or an Affiliate is not guaranteed by
statute or contract, on the 181st day after such leave commences any Incentive
Stock Option held by the Optionee shall cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option. In the event of an Optionee's change in status from Consultant to
Employee or Employee to Consultant, an Optionee's Continuous Status as an
Employee or Consultant shall not automatically terminate solely as a result of
such change in status. However, in such event, an Incentive Stock Option held by
the Optionee shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option three months and one day
following such change of status.
"Corporate Transaction" means (i) a merger or acquisition in which
the Company is not the surviving entity, except for a transaction the principal
purpose of which is to change the state of the Company's incorporation, (ii) the
sale, transfer, or other disposition of all or substantially all of the assets
of the Company, or (iii) any reverse merger in which the Company remains the
surviving entity following its acquisition by another enterprise.
"Disability" means total and permanent mental or physical disability
as defined in Section 22(e)(3) of the Code.
"Employee" means any person, including officers and directors,
employed by the Company or any Affiliate. The payment of a director's fee by the
Company shall not be sufficient to constitute "employment" by the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid price, if no sales were reported) as quoted on such exchange or
system for the last market trading day prior to the time of determination, as
reported in The Wall Street Journal or such other source as the Administrator
deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, Fair Market Value shall
be the mean between the high bid and low asked prices for the Common Stock on
the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
"Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
"Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.
-28-
"Option" means a stock option granted pursuant to the Plan.
"Optioned Shares" means the shares of Common Stock subject to an
Option.
"Optionee" means an Employee or Consultant who receives an Option.
"Plan" means the ANTs software inc. 2000 Stock Option Plan.
"Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3.
"Service Provider" means an Employee or Consultant.
"Share" means a share of the Common Stock, as adjusted in accordance
with Section 11 below.
3. Stock Subject to the Plan. The maximum aggregate number of Shares which
may be optioned and sold under the Plan is 3,950,000, subject to adjustment in
accordance with Section 11 below. If an Option expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an option
exchange program authorized by the Administrator, the unpurchased Shares which
were subject thereto shall become available for future grant or sale under the
Plan (unless the Plan has terminated); unvested Shares repurchased by the
Company at their original purchase price shall become available for future grant
under the Plan.
4. Administration of the Plan.
(a) Initial Plan Procedure. Prior to the date, if any, upon which
the Company becomes subject to the Exchange Act, the Plan shall be administered
by the Board or a Committee appointed by the Board.
(b) Plan Procedure after the Date, if any, upon which the Company
becomes Subject to the Exchange Act.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of Service
Providers.
(ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
-29-
(iv) Other Administration. Other than as provided for above,
the Plan shall be administered by (A) the Board or (B) a Committee, which
Committee shall be constituted to satisfy applicable laws.
(c) Powers of the Administrator. Subject to the provisions of the
Plan and in the case of specific duties delegated by the Board to such
Committee, and subject to the approval of relevant authorities, including the
approval, if required, of any stock exchange or national market system upon
which the Common Stock is then listed, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock:
(ii) to select the Consultants and Employees to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of Shares to be covered by each
such Option granted hereunder;
(v) to approve the terms of Agreements used under the Plan;
(vi) to determine the terms and conditions not inconsistent
with the terms of the Plan, of any Option granted hereunder. Such terms and
conditions may include, but are not limited to, the exercise price, the time or
times when Options may be exercised, the vesting schedule, any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or the Shares relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, shall
determine;
(vii) to determine whether and under what circumstances an
Option may be settled in cash or Shares under Section 9(e) below;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stack covered
by such Option has declined since the date the Option was granted; and
(ix) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions,
determinations, and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
-30-
5. Eligibility.
(a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted to Employees and Consultants. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.
(b) Each Option shall be designated in the written Option Agreement
either as an Incentive Stock Option or as a Nonstatutory Stock Option.
(c) The Plan shall not confer upon any Optionee any right with
respect to the continuation of the Optionee's employment or consulting
relationship with the Company, nor shall it interfere in any way with the
Optionee's right or the Company's right to terminate the Optionee's employment
or consulting relationship at any time, with or without cause.
6. Term of the Plan. The Plan shall become effective upon its adoption by
the Board. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 13 below.
7. Term of Option. The term of each Option shall be the term stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Affiliate, the term of the Option shall
not exceed five years from the date of grant thereof.
8. Option Exercise Price and Consideration.
(a) The per Share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but in the case of:
(i) an Option granted to an Employee who, at the time of the
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Affiliate, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant.
(ii) an Incentive Stock Option granted to any Employee other
than an Employee described in the preceding paragraph, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(iii) a Nonstatutory Stock Option granted to any Consultant or
Employee, the per Share exercise price shall be no less than 85% of the Fair
Market Value per Share on the date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (i) cash, (ii)
check, (iii) other Shares which (A) in the case of Shares acquired upon exercise
of an Option have been owned by the Optionee for more than six months on the
date
-31-
of surrender and (B) have a Fair Market Value on the date of surrender equal to
the aggregate exercise price of the Shares as to which such Option shall be
exercised, (iv) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale proceeds required to pay the exercise price, or (v) any combination of
the foregoing methods of payment. In making its determination as to type the of
consideration to accept, the Administrator shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable and shall vest at such times and under
such conditions as determined by the Administrator, including performance
criteria with respect to the Company and/or the Optionee, and shall be
permissible under the terms of the Plan, but in no case shall an Option or the
Shares purchased thereunder vest at a rate of less than 20% per year. An Option
may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) above. Until
the issuance (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Shares,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such certificate promptly upon exercise of the Option. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the stock certificate is issued, except as provided in Section 11
below.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. Except as
provided in Section 9(e) below, upon termination of an Optionee's Continuous
Status as an Employee or Consultant, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option, but only within three
(3) months following the Optionee's termination, and only to the extent that the
Option was vested at the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Notice of Grant). To
the extent that Optionee is not vested in the Option at the date of termination,
or if the Option is not exercised within the time specified herein, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. In the event of termination of an
Optionee's Continuous Status as an Employee or Consultant as a result of his or
her Disability,
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the Optionee may, but only within twelve (12) months from the date of such
termination (and in no event later than the expiration date of the term of his
or her Option as set forth in the Notice of Grant), exercise the Option to the
extent the Option was vested on the date of such termination. To the extent the
Optionee is not entitled to exercise the Option on the date of termination, or
if the Optionee does not exercise the Option to the extent so entitled within
the time specified herein, the Option shall terminate, and the Shares covered by
the Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee
while an Employee or Consultant, the Option may be exercised at any time within
twelve (12) months following the date of death (but in no event later than the
expiration date of the term of his or her Option as set forth in the Notice of
Grant), by the Optionee's estate or by a person who has acquired the right to
exercise the Option by bequest or inheritance, but only to the extent that the
Option was vested at the date of death. To the extent that Optionee is not
vested in the Option at the date of death, or if the Option is not exercised
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(e) In the event of termination of an Optionee's Continuous Status
as an Employee or Consultant as a result of misconduct (including, but not
limited to, any act of dishonesty, willful misconduct, fraud or embezzlement) or
should the Optionee make or attempt to make any unauthorized use or disclosure
of material confidential information or trade secrets of the Company or any
Affiliate, then in any such event his or her option shall terminate and cease to
be exercisable immediately upon such termination of such Service Provider Status
or such unauthorized disclosure or use of confidential or secret information or
attempt thereat.
(f) Buyout Provision. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Non-Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
or Corporate Transactions.
(a) Changes in Capitalization. The number of Shares covered by each
outstanding Option, and the number of Shares which have been authorized for
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the exercise price per
share of Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock or any other
increase or decrease in the number of issued and outstanding Shares effected
without receipt of consideration by the
-33-
Company; provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration". Such adjustment shall be made by the Administrator, whose
determination in that respect shall be final, binding and conclusive.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
dissolution or liquidation. In such event, the Administrator, in its discretion,
may provide for an Optionee to fully vest in his or her Option and may provide
that any Company repurchase option applicable to any Shares purchased upon
exercise of an Option shall lapse as to any or all such Shares. To the extent it
has not been previously exercised, an Option will terminate immediately or the
consummation of such proposed dissolution or liquidation.
(c) Corporate Transaction. In the event of a Corporate Transaction,
each outstanding Option shall confer the right to purchase or receive, for each
Optioned Share subject to the Option immediately prior to such Corporate
Transaction, the consideration (whether stock, cash, or other securities or
property) received or receivable by holders of Common Stock in connection with
such Corporate Transaction. In the event that the successor corporation refuses
to confer such right, the Optionee shall fully vest in the Option. If an Option
becomes fully vested pursuant to the preceding sentence, the Administrator shall
notify the Optionee that the Option shall be fully vested for a period of time
not less than fifteen (15) days from the date of such notice, and the Option
shall terminate upon the expiration of such period.
(d) Deferred Distributions. To the extent permitted by the
Administrator, an Optionee may elect to defer distributions with respect to an
Option that is terminating due to a Corporate Transaction. To do so, the
Optionee must file a deferral election with the Administrator directing that his
or her Shares (or cash or other property in lieu of Shares if the shares are
unavailable due to such corporate Transaction) be distributed to the Optionee in
installments over a period of time not to exceed ten (10) years, commencing
within two (2) years following the closing of such Corporate Transaction. In the
event of such election, then the successor to the Company shall make
distributions in accordance with the Optionee's election. In the event that such
election is made less than 1 year before the closing of such Corporate
Transaction, a late election penalty may be imposed.
(e) Parachute Payment Limitation. Except as may be otherwise
provided in a Stock Option Agreement, the grant of a stock option shall be
subject to certain so-called parachute payment limitations. Any tax
determinations required under this section shall be made in writing by the
Company's independent accountants, whose determination shall be conclusive and
binding for all purposes on the Company and on any and all affected optionees.
If an optionee's stock option grant is impacted, the Company shall provide such
optionee with a detailed accounting of the underlying assumptions and
calculations.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as determined by the Administrator.
Notice of the determination
-34-
shall be given to each Employee or Consultant to whom an Option is so granted
within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would materially impair the
rights of any Optionee under any grant theretofore made without his or her
consent. In addition, to the extent necessary and desirable to comply with
Section 422 of the Code (or any other applicable law or regulation, including
the requirements of any stock exchange or national market system upon which the
Common Stock is then listed), the Company shall obtain shareholder approval of
any Plan amendment in such a manner and to such a degree as required.
(b) Effect of Amendment and Termination. Any such amendment or
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and requirements of any stock exchange or national market system
upon which the Common Stock is listed or traded, and shall be further subject to
the approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option so represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in opinion
of counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
15. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall have been obtained.
16. Agreements. Options shall be evidenced by written agreements in such
form as the Administrator shall approve from time to time.
17. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the date
the Plan is adopted. Such shareholder approval shall be obtained in the degree
and manner required under applicable
-35-
state and federal law and the rules of any stock exchange or national market
system upon which the Common Stock is then listed or traded.
18. Information to Optionees and Purchasers. The Company shall provide
each Optionee, not less frequently than annually, copies of the Company's annual
financial statements. The Company shall also provide such statements to each
individual who acquires Shares pursuant to the Plan while such individual owns
such Shares.
-36-
ANTs software inc.
801 MAHLER ROAD
SUITE G
BURLINGAME, CA 94010
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access the
web site. You will be prompted to enter your 12-digit Control Number which is
located below to obtain your records and to create an electronic voting
instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you call. You will be prompted to enter your 12-digit
Control Number which is located below and then follow the simple instructions
the Vote Voice provides you.
VOTE BY MAIL
Mark, sign, and date your proxy card and return it in the postage-paid envelope
we have provided or return it to ANTs software inc., c/o ADP, 51 Mercedes Way,
Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
ANTSF1 KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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ANTs software inc.
The Board recommends a vote FOR Items 1, 2, 3 and 4.
For Withhold For All To withhold authority to vote, mark "For All Except"
1. Election of Class 3 directors. All All Except and write the nominee's number on the line below.
Nominees:
01) Francis K. Ruotolo 02) John R. Gaulding [ ] [ ] [ ] __________________________________________________
For Against Abstain
Vote On Proposals
2. Proposal to approve an amendment to the Company's Amended and Restated Certificate of [ ] [ ] [ ]
Incorporation to authorize 50,000,000 shares of undesignated Preferred Stock, with a par value
of $0.0001 per share.
3. Proposal to approve an amendment to our 2000 Stock Option Plan to increase the shares reserved [ ] [ ] [ ]
under the plan by an additional 1,500,000 shares of Common Stock.
4. Proposal to ratify the selection of Burr, Pilger & Mayer, LLP, as independent accountants for [ ] [ ] [ ]
the Company for the year ending December 31, 2003.
If this proxy is properly executed and returned, the shares represented hereby will be voted in
the manner set forth herein. This proxy will be voted as the proxies deem advisable on such proper
business as may come before the meeting of the shareholders or pursuant to consent to act or
otherwise as provided by Delaware law.
Please mark and sign exactly as your name appears on your Share Certificate. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a
majority must sign. If shares are held by joint tenants or as community property, each person should
sign. If a corporation, this signature should be that of an authorized officer who should state his
or her title. If a partnership, this signature should be that of an authorized person who should
state his or her title.
For address changes and/or comments, please check [ ]
this box and write them on the back where indicated
Please indicate if you plan to attend this meeting [ ] [ ]
Yes No
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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ANTs software inc.
PROXY PROXY
The undersigned Shareholder of ANTs software inc., a Delaware corporation
(the "Company") hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement dated March ___, 2003, and appoints Kenneth
Ruotolo and Clifford Hersh, and each of them, attorney-in-fact and proxy of the
undersigned, each with power of substitution, to attend, vote and act, from time
to time, for the undersigned at the Meeting of Shareholders of ANTs software
inc. to be held at the Crowne Plaza Hotel, 1177 Airport Blvd., Burlingame,
California, on May 6, 2003, at 2:00 p.m., or at any other location, and any
adjournments or postponements thereof, according to the number of shares of
Common Stock of the Company which the undersigned may be entitled to vote, and
with all of the powers which the undersigned would possess if personally
present, hereby revoking any proxy to vote such shares heretofore given, and
hereby ratifying and confirming all that such attorneys and proxies, or any of
them, may lawfully do by virtue hereof.
This proxy, when properly executed will be voted in the manner directed
herein by the undersigned shareholder(s). If no direction is made, this proxy
will be voted FOR the nominees to the Board of directors in the manner described
in the Proxy Statement, and FOR proposals 2, 3, and 4. If this proxy is executed
in any manner so as not to withhold authority to vote for the election of the
nominees to the Board of directors, it shall be deemed to grant such authority.
IF VOTING BY MAIL, PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE. IF VOTING BY TELEPHONE OR INTERNET, PLEASE
USE INSTRUCTIONS ON REVERSE.
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Address Changes/Comments: _____________________________________________
________________________________________________________________________
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(If you noted any address changes/comments above,
please mark corresponding box on other side.)
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