AMENDED SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
NEOMEDIA TECHNOLOGIES, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
NEOMEDIA TECHNOLOGIES, INC.
2201 SECOND STREET, SUITE 402
FORT MYERS, FLORIDA 33901
Dear Shareholder:
You are cordially invited to attend the 2003 Annual Meeting of Shareholders of
NeoMedia Technologies, Inc. The annual meeting will be held at the office of
NeoMedia, 2201 Second Street, Suite 402, Fort Myers, Florida 33901, on September
24, 2003, beginning at 10:00 a.m., Eastern Daylight Savings Time.
Your vote is important and I urge you to vote your shares by proxy, whether or
not you plan to attend the meeting. After you read this proxy statement, please
indicate on the proxy card the manner in which you want to have your shares
voted. Then date, sign and mail the proxy card in the postage-paid envelope that
is provided. If you sign and return your proxy card without indicating your
choices, it will be understood that you wish to have your shares voted in
accordance with the recommendations of NeoMedia's Board of Directors.
We hope to see you at the meeting.
Sincerely,
/s/ Charles T. Jensen
President and Chief Executive Officer
August 18, 2003
NEOMEDIA TECHNOLOGIES, INC.
2201 SECOND STREET, SUITE 402
FORT MYERS, FLORIDA 33901
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO
BE HELD ON SEPTEMBER 24, 2003
--------------------------------------------------
NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders (the "ANNUAL
MEETING") of NeoMedia Technologies, Inc. will be held at the office of NeoMedia,
2201 Second Street, Suite 402, Fort Myers, Florida 33901, on September 24, 2003,
beginning at 10:00 a.m., Eastern Daylight Savings Time, for the following
purposes:
1. To elect five directors to hold office until the next annual meeting of
stockholders and the due election and qualification of their successors
(Item No. 1 on proxy card);
2. To approve an amendment to NeoMedia's Certificate of Incorporation to
increase the number of shares of authorized common stock, par value
$0.01, from 200,000,000 to 1,000,000,000 shares (Item No. 2 on proxy
card);
3. To approve the 2003 Stock Option Plan (Item No. 3 on proxy card); and
4. To consider such other business as may properly come before the meeting
or any postponements or adjournments thereof.
The Board of Directors has fixed the close of business on August 6,
2003, as the record date for determining the shareholders entitled to notice of
and to vote at the Annual Meeting or at any adjournment thereof. A complete list
of the shareholders entitled to vote at the Annual Meeting will be open for
examination by any shareholder during ordinary business hours for a period of
ten days prior to the Annual Meeting at the office of NeoMedia, 2201 Second
Street, Suite 402, Fort Myers, Florida 33901.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSALS.
IMPORTANT
You are cordially invited to attend the Annual Meeting in person. In
order to ensure your representation at the meeting, however, please promptly
complete, date, sign and return the enclosed proxy in the accompanying envelope.
If you should decide to attend the Annual Meeting and vote your shares in
person, you may revoke your proxy at that time.
--------------------------------------------------------------------------------
PLEASE NOTE THAT ATTENDANCE AT THE MEETING WILL BE LIMITED TO STOCKHOLDERS OF
NEOMEDIA AS OF THE RECORD DATE (OR THEIR AUTHORIZED REPRESENTATIVES) HOLDING
ADMISSION TICKETS OR OTHER EVIDENCE OF OWNERSHIP. THE ADMISSION TICKET IS
DETACHABLE FROM YOUR PROXY CARD. IF YOUR SHARES ARE HELD BY A BANK OR BROKER,
PLEASE BRING TO THE MEETING YOUR BANK OR BROKER STATEMENT EVIDENCING YOUR
BENEFICIAL OWNERSHIP OF NEOMEDIA STOCK TO GAIN ADMISSION TO THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
--------------------------------------------------------------------------------
/s/ William E. Fritz
August 18, 2003 ----------------------------
Fort Myers, Florida William E. Fritz, Secretary
2
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS OF
NEOMEDIA TECHNOLOGIES, INC.
TO BE HELD ON SEPTEMBER 24, 2003
TABLE OF CONTENTS
PAGE
----
ABOUT THE MEETING......................................................................................................1
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?...........................................................................1
WHO IS ENTITLED TO VOTE?.............................................................................................1
WHO CAN ATTEND THE ANNUAL MEETING?...................................................................................1
WHAT CONSTITUTES A QUORUM?...........................................................................................2
HOW DO I VOTE?.......................................................................................................2
WHAT IF I DO NOT SPECIFY HOW MY SHARES ARE TO BE VOTED?..............................................................2
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?...................................................................2
WHAT ARE THE BOARD'S RECOMMENDATIONS?................................................................................2
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?..........................................................................2
PRINCIPAL HOLDERS OF VOTING SECURITIES....................................................................................4
PROPOSAL ONE..............................................................................................................6
ELECTION OF DIRECTORS..................................................................................................6
DIRECTORS STANDING FOR ELECTION......................................................................................6
RECOMMENDATION OF THE BOARD OF DIRECTORS...............................................................................6
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES......................6
MEETINGS.............................................................................................................7
COMMITTEES OF THE BOARD OF DIRECTORS.................................................................................7
COMPENSATION OF DIRECTORS............................................................................................7
VOTE REQUIRED FOR ELECTION OF NOMINEES FOR DIRECTORS.................................................................7
MANAGEMENT.............................................................................................................8
EXECUTIVE COMPENSATION.................................................................................................8
EMPLOYMENT AGREEMENTS................................................................................................9
INCENTIVE PLAN FOR MANAGEMENT........................................................................................9
STOCK OPTION PLANS...................................................................................................9
401(K) PLAN..........................................................................................................9
OPTIONS AND WARRANTS GRANTED IN THE LAST FISCAL YEAR................................................................10
OPTION AND WARRANT EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES.........................................10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................................................10
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE...............................................................11
COMPENSATION COMMITTEE REPORT TO STOCKHOLDERS.........................................................................11
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION(1)..........................11
GENERAL COMPENSATION PHILOSOPHY.....................................................................................12
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION...........................................................13
REPORT OF THE AUDIT COMMITTEE.........................................................................................13
PROPOSAL TWO.............................................................................................................14
INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK...............................................................14
GENERAL INFORMATION.................................................................................................14
VOTE REQUIRED FOR AN INCREASE IN AUTHORIZED SHARES OF COMMON STOCK..................................................15
RECOMMENDATION OF THE BOARD OF DIRECTORS..............................................................................15
DESCRIPTION OF SECURITIES.............................................................................................16
COMMON STOCK........................................................................................................16
PREFERRED STOCK.....................................................................................................16
WARRANTS AND OPTIONS................................................................................................18
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION.............................................19
PROPOSAL THREE...........................................................................................................20
APPROVAL OF THE 2003 STOCK OPTION PLAN................................................................................20
GENERAL INFORMATION.................................................................................................20
THE PLAN AND PARTICIPANTS...........................................................................................20
OPTION TERMS AND GRANTS.............................................................................................21
FEDERAL TAX ASPECTS OF THE PLAN.....................................................................................21
VOTE REQUIRED FOR APPROVAL OF THE PLAN..............................................................................23
RECOMMENDATION OF THE BOARD OF DIRECTORS............................................................................23
AUDITORS.................................................................................................................24
AUDIT FEES..........................................................................................................24
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES........................................................24
OTHER FEES..........................................................................................................24
OTHER MATTERS TO BE ACTED UPON AT THE ANNUAL MEETING OF STOCKHOLDERS.....................................................24
ADDITIONAL INFORMATION...................................................................................................24
APPENDIX A................................................................................................................1
NEOMEDIA TECHNOLOGIES, INC. 2003 STOCK OPTION PLAN....................................................................1
APPENDIX B................................................................................................................1
ii
NEOMEDIA TECHNOLOGIES, INC.
2201 SECOND STREET, SUITE 402
FORT MYERS, FLORIDA 33901
-------------------------
PROXY STATEMENT
AUGUST 6, 2003
-------------------------
This proxy statement contains information related to the Annual
Stockholders Meeting (the "Annual Meeting") of NeoMedia Technologies, Inc., a
Delaware corporation ("NeoMedia" or the "Company"), to be held at the principal
executive offices of NeoMedia, 2201 Second Street, Suite 402, Fort Myers,
Florida 33901 on September 24, 2003, beginning at 10:00 a.m., and at any
postponements or adjournments thereof, for the purposes set forth herein. This
proxy statement, the enclosed proxy and a copy of NeoMedia's Annual Report to
Stockholders for the fiscal year ended December 31, 2002, are first being mailed
on or about August 22, 2003, to all stockholders entitled to vote. NeoMedia is
making this proxy solicitation.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At NeoMedia's annual meeting, shareholders will act upon the matters
outlined in the notice of meeting on the cover page of this proxy statement,
which relates to the election of directors, the approval of an amendment to
NeoMedia's Certificate of Incorporation to increase the authorized common stock
to 1,000,000,000 shares.
WHO IS ENTITLED TO VOTE?
Only shareholders of record on the close of business on the record
date, August 6, 2003, are entitled to receive notice of the annual meeting and
to vote the shares of common stock that they held on that date at the meeting,
or any postponements or adjournments of the meeting. Each outstanding share of
capital stock will be entitled to the number of votes set forth in the following
table on each matter to be voted upon at the meeting. The holders of common
stock vote together as a single class. See "Description of Securities."
DESCRIPTION OF CAPITAL STOCK NUMBER OF VOTES TOTAL VOTES
---------------------------- --------------- -----------
Common Stock One Vote Per Share 157,650,104
WHO CAN ATTEND THE ANNUAL MEETING?
All shareholders as of the record date, or their duly appointed
proxies, may attend the annual meeting, and each may be accompanied by one
guest. Seating, however, is limited. Admission to the meeting will be on a
first-come, first-serve basis. Registration will begin at 8:30 a.m., and seating
will begin at 8:45 a.m. Each shareholder may be asked to present valid picture
identification, such as a driver's license or passport. Cameras, recording
devices and other electronic devices will not be permitted at the meeting.
Please note that if you hold your shares in "street name" (that is,
through a broker or other nominee), you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the record date and check in at
the registration desk at the meeting.
1
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. As of the
record date, the shareholders held a total of 157,650,104 votes. As such,
holders of at least 78,825,053 shares (I.E., a majority) must be present at the
meeting, in person or by proxy, to obtain a quorum. Proxies received but marked
as abstentions and broker non-votes will be included in the calculation of the
number of shares considered to be present at the meeting.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and
return it to NeoMedia, then it will be voted as you direct. If you are a
registered shareholder and attend the meeting, then you may deliver your
completed proxy card in person or vote by ballot at the meeting. "Street name"
shareholders who wish to vote at the meeting will need to obtain a proxy form
from the institution that holds their shares.
WHAT IF I DO NOT SPECIFY HOW MY SHARES ARE TO BE VOTED?
If you submit a proxy but do not indicate any voting instructions, then
your shares will be voted in accordance with the Board's recommendations.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy card, you may change your
vote at any time before the proxy is exercised by filing with the Secretary of
NeoMedia either a notice of revocation or a duly executed proxy bearing a later
date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons
named as proxy holders on the proxy card will vote in accordance with the
recommendation of the Board of Directors. The Board's recommendation is set
forth together with the description of such item in this proxy statement. In
summary, the Board recommends a vote:
o FOR the election of the nominated slate of directors (see page
6);
o FOR the approval of an amendment to NeoMedia's Certificate of
Incorporation to increase the authorized shares of NeoMedia's
common stock to 1,000,000,000 shares (see page 14);
o FOR the approval of the 2003 Stock Option Plan (see page 19).
With respect to any other matter that properly comes before the
meeting, the proxy holders will vote as recommended by the Board of Directors
or, if no recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
ELECTION OF DIRECTORS. The affirmative vote of a plurality of the votes
cast at the meeting (regardless of the class or series of stock held) is
required for the election of directors. This means that the five nominees will
be elected if they receive more affirmative votes than any other person. A
properly executed proxy marked "Withheld" with respect to the election of any
director will not be voted with respect to such director indicated, although it
will be counted for purposes of determining whether there is a quorum.
2
INCREASE IN AUTHORIZED SHARES. For the approval of an amendment to
NeoMedia's Certificate of Incorporation to increase the authorized shares of
NeoMedia's common stock to 1,000,000,000 shares, the affirmative vote of the
holders of a majority of the outstanding shares (regardless of the class or
series of stock held) will be required for approval. A properly executed proxy
marked "Abstain" with respect to such matter will not be voted, although it will
be counted for purposes of determining whether there is a quorum. Accordingly,
an abstention will have the effect of a negative vote.
APPROVAL OF THE 2003 STOCK OPTION PLAN. For the approval of the 2003
Stock Option Plan, and any other item that properly comes before the meeting,
the affirmative vote of the holders of a majority of the outstanding shares
(regardless of the class or series of stock held) will be required for approval.
A properly executed proxy marked "Abstain" with respect to such matter will not
be voted, although it will be counted for purposes of determining whether there
is a quorum. Accordingly, an abstention will have the effect of a negative vote.
If you hold your shares in "street name" through a broker or other
nominee, your broker or nominee may not be permitted to exercise voting
discretion with respect to some of the matters to be acted upon. Thus, if you do
not give your broker or nominee specific instructions, your shares may not be
voted on those matters and will not be counted in determining the number of
shares necessary for approval. Shares represented by such "broker non-votes,"
however, will be counted in determining whether there is a quorum.
3
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table contains information about the beneficial ownership
of our common stock as of August 6, 2003, for:
(i) each person who beneficially owns more than five percent of
the common stock;
(ii) each of our directors;
(iii) the named executive officers; and
(iv) all directors and executive officers as a group.
MOUNT AND NATURE
OF BENEFICIAL PERCENT
A OWNERSHIP (1) OF CLASS (1)
----------------------------------
Charles W. Fritz (2)(3) 20,316,467 12.6%
William Fritz(2)(4) 55,674,776 34.7%
Charles T. Jensen(2)(5) 1,506,886 *
David A. Dodge(2)(6) 495,700 *
A. Hayes Barclay(2)(7) 269,000 *
James J. Keil(2)(8) 793,000 *
---------- ----
Officers and Directors as a Group (9 Persons)(9) 79,055,829 47.7%
========== ====
----------
* Indicates less than 1%.
(1) Applicable percentage of ownership is based on 157,650,104 shares of
common stock outstanding as of August 6, 2003, together with securities
exercisable or convertible into shares of common stock within 60 days
of August 6, 2003 for each stockholder. Beneficial ownership is
determined in accordance with the rules of the Commission and generally
includes voting or investment power with respect to securities. Shares
of common stock subject to securities exercisable or convertible into
shares of common stock that are currently exercisable or exercisable
within 60 days of August 6, 2003 are deemed to be beneficially owned by
the person holding such options for the purpose of computing the
percentage of ownership of such person, but are not treated as
outstanding for the purpose of computing the percentage ownership of
any other person.
(2) Address of the referenced individual is c/o NeoMedia Technologies,
Inc., 2201 Second Street, Suite 402, Fort Myers, FL, 33901.
(3) Shares beneficially owned include 100 shares owned by each of Mr.
Fritz's four minor children for an aggregate of 400 shares, 1,549,000
shares of common stock issuable upon exercise of options granted under
our 2002 and 1998 stock option plans, 1,510,000 shares issuable upon
exercise of stock warrants, 15,714,098 shares of common stock owned by
Mr. Charles W. Fritz directly, and 1,542,969 shares of common stock
held by the CW/LA II Family Limited Partnership, a family limited
partnership for the benefit of Mr. Fritz's family.
(4) William E. Fritz, NeoMedia's corporate secretary and a director, and
his wife, Edna Fritz, are the general partners of the Fritz Family
Limited Partnership and therefore each are deemed to be the beneficial
owners of the 1,511,742 shares held in the Fritz Family Partnership. As
trustee of each of the Chandler R. Fritz 1994 Trust, Charles W. Fritz
1994 Trust and Debra F. Schiafone 1994 Trust, William E. Fritz is
deemed to be the beneficial owner of the 165,467 shares of NeoMedia
held in these trusts. Additionally, Mr. Fritz is deemed to own:
51,172,567 shares held directly by Mr. Fritz or his spouse, 2,540,000
shares to be issued upon the exercise of warrants held by Mr. Fritz or
his spouse, and 285,000 shares to be issued upon the exercise of
options held by Mr. Fritz or his spouse. Mr. William E. Fritz may be
deemed to be a parent and promoter of NeoMedia, as those terms are
defined in the Securities Act.
(5) Includes 1,505,386 shares of common stock issuable upon exercise of
options granted under NeoMedia's 2002, 1998, and 1996 stock option
plans, and 1,500 shares owned by Mr. Jensen's son.
4
(6) Includes 495,700 shares of common stock issuable upon exercise of
options granted under NeoMedia's 2002 and 1998 stock option plans.
(7) Includes 264,000 shares of common stock issuable upon exercise of
options granted under NeoMedia's 2002, 1998, and 1996 stock option
plans, and 5,000 shares owned by Mr. Barclay directly.
(8) Includes 10,000 shares issuable upon exercise of warrants, and 783,000
shares owned by Mr. Keil directly.
(9) Includes an aggregate of 4,099,086 currently exercisable options to
purchase shares of common stock granted under NeoMedia's 2002, 1998,
and 1996 stock option plans, 4,060,000 currently exercisable warrants
to purchase shares of common stock, and 70,896,743 shares owned
directly by NeoMedia's officers and directors.
5
PROPOSAL ONE
ELECTION OF DIRECTORS
DIRECTORS STANDING FOR ELECTION
The Board of Directors of NeoMedia consists of 5 seats. Each director
holds office until the first annual meeting of shareholders following their
election or appointment and until their successors have been duly elected and
qualified.
The Board of Directors has nominated Charles W. Fritz, Charles T.
Jensen, William E. Fritz, James J. Keil and A Hayes Barclay for election as
directors. The accompanying proxy will be voted for the election of these
nominees, unless authority to vote for one or more nominees is withheld. In the
event that any of the nominees is unable or unwilling to serve as a director for
any reason (which is not anticipated), the proxy will be voted for the election
of any substitute nominee designated by the Board of Directors. The nominees for
directors have previously served as members of the Board of Directors of
NeoMedia and have consented to serve such term.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH
OF THE NOMINEES
DIRECTORS - PRESENT TERM EXPIRES AT THE ANNUAL MEETING
The following is information concerning nominees for election proposed
by the Board of Directors. None of the nominees are adverse parties in any legal
proceedings involving NeoMedia.
CHARLES W. FRITZ, age 47, is a founder of NeoMedia and has served as an
officer and as a Director of NeoMedia since our inception. On August 6, 1996,
Mr. Fritz was appointed Chief Executive Officer and Chairman of the Board of
Directors. On April 2, 2001, Mr. Fritz was appointed as President where he
served until June 2002. Mr. Fritz is currently a member of the Compensation
Committee. Prior to founding NeoMedia, Mr. Fritz was an account executive with
IBM Corporation from January 1986 to January 1988, and Director of Marketing and
Strategic Alliances for the information consulting group from February 1988 to
January 1989. Mr. Fritz holds an M.B.A. from Rollins College and a B.A. in
finance from the University of Florida. Mr. Fritz is the son of William E.
Fritz, a Director of NeoMedia.
CHARLES T. JENSEN, age 59, was Chief Financial Officer, Treasurer and
Vice-President of NeoMedia since May 1, 1996. Mr. Jensen has been a Director
since August 6, 1996, and currently is a member of the Compensation Committee.
During June 2002, Mr. Jensen was promoted to President, Chief Operating Officer,
and Acting Chief Executive Officer. Prior to joining NeoMedia in November 1995,
Mr. Jensen was Chief Financial Officer of Jack M. Berry, Inc., a Florida
corporation which grows and processes citrus products, from December 1994 to
October 1995, and at Viking Range Corporation, a Mississippi corporation which
manufactures gas ranges, from November 1993 to December 1994. From December 1992
to February 1994, Mr. Jensen was Treasurer of Lin Jensen, Inc., a Virginia
corporation specializing in ladies clothing and accessories. Prior to that, from
January 1982 to March 1993, Mr. Jensen was Controller and Vice-President of
Finance of The Pinkerton Tobacco Co., a tobacco manufacturer. Mr. Jensen holds a
B.B.A. in accounting from Western Michigan University and is a Certified Public
Accountant.
WILLIAM E. FRITZ, age 73, is a founder of NeoMedia and has served as
Secretary and Director of NeoMedia since our inception. Mr. Fritz also served as
Treasurer of NeoMedia from its inception until May 1, 1996. Since February 1981,
Mr. Fritz has been an officer and either the sole stockholder or a majority
stockholder of G.T. Enterprises, Inc. (formerly Gen-Tech, Inc.), D.M., Inc.
(formerly Dev-Mark, Inc.) and EDSCO, three railroad freight car equipment
manufacturing companies. Mr. Fritz holds a B.S.M.E. and a Bachelor of Naval
Science degree from the University of Wisconsin. Mr. Fritz is the father of
Charles W. Fritz, NeoMedia's former Chief Executive Officer and Chairman of the
Board of Directors.
JAMES J. KEIL, age 75, has been a Director of NeoMedia since August 6,
1996. Mr. Keil currently is a member of the Compensation Committee, the Stock
Option Committee and the Audit Committee. He is founder and President of Keil &
Keil Associates, a business and marketing consulting firm located in Washington,
D.C., specializing in marketing, sales, document application strategies,
recruiting and electronic commerce projects. Prior to forming Keil & Keil
Associates in 1990, Mr. Keil worked for 38 years at IBM Corporation and Xerox
Corporation in various marketing, sales and senior
6
executive positions. From 1989-1995, Mr. Keil was on the Board of Directors of
Elixir Technologies Corporation (a non-public corporation), and from 1990-1992
was the Chairman of its Board of Directors. From 1992-1996, Mr. Keil served on
the Board of Directors of Document Sciences Corporation. Mr. Keil holds a B.S.
degree from the University of Dayton and did Masters level studies at the
Harvard Business School and the University of Chicago in 1961/62.
A. HAYES BARCLAY, age 72, has been a Director of NeoMedia since August
6, 1996, and currently is a member of the Stock Option Committee and the Audit
Committee. Mr. Barclay has practiced law for approximately 37 years and, since
1967, has been an officer, owner and employee of the law firm of Barclay &
Damisch, Ltd. and its predecessor, with offices in Chicago, Wheaton and
Arlington Heights, Illinois. Mr. Barclay holds a B.A. degree from Wheaton
College, a B.S. from the University of Illinois and a J.D. from the Illinois
Institute of Technology - Chicago Kent College of Law.
NeoMedia's by-laws permit the Board of Directors to fill any vacancy
and such director may serve until the next annual meeting of shareholders and
the due election and qualification of his successor.
MEETINGS
During the year ended December 31, 2002, NeoMedia held 7 directors'
meetings and each incumbent director attended more than seventy-five percent of
the total of meetings of the Board of Directors and the Committees of which he
is a member.
COMMITTEES OF THE BOARD OF DIRECTORS
NeoMedia's Board of Directors has an Audit Committee, Compensation
Committee and a Stock Option Committee. The Board of Directors does not have a
standing Nominating Committee.
AUDIT COMMITTEE. The Audit Committee is responsible for nominating
NeoMedia's independent accountants for approval by the Board of Directors,
reviewing the scope, results and costs of the audit with NeoMedia's independent
accountants, and reviewing the financial statements, audit practices and
internal controls of NeoMedia. During 2002, members of the Audit Committee were
nonemployee directors James J. Keil and A. Hayes Barclay. During 2002, the Audit
Committee held one meeting.
COMPENSATION COMMITTEE. The Compensation Committee is responsible for
recommending compensation and benefits for the executive officers of NeoMedia to
the Board of Directors and for administering NeoMedia's Incentive Plan for
Management. Charles W. Fritz, Charles T. Jensen, A. Hayes Barclay, and James J.
Keil, were members of NeoMedia's Compensation Committee during 2002. This
Committee held one meeting during 2002.
STOCK OPTION COMMITTEE. The Stock Option Committee, which is comprised
of non-employee directors, is responsible for administering NeoMedia's Stock
Option Plans. A. Hayes Barclay and James J. Keil are the current members of
NeoMedia's Stock Option Committee. During 2002, this Committee held five
meetings.
COMPENSATION OF DIRECTORS
Each outside director will be granted 1,000,000 options at an exercise
price of $0.01 per share from the 2003 Stock Option Plan, pending approval of
such stock option plan. The last grant to outside directors was at NeoMedia's
previous annual meeting held on June 6, 2002, at which each outside director
received 100,000 options with an exercise price of $0.05 per share. NeoMedia
does not have a written compensation policy for its outside directors at this
time.
VOTE REQUIRED FOR ELECTION OF NOMINEES FOR DIRECTORS
Election of the nominees for director will require that the holders of
at least a plurality of the shares of Common Stock present or represented at the
meeting and entitled to vote thereon vote "FOR".
7
MANAGEMENT
As of August 6, 2003, NeoMedia's directors and executive officers were:
NAME AGE POSITION
---- --- --------
Charles W. Fritz 47 Chairman of the Board of Directors
Charles T. Jensen 59 President, Chief Operating Officer,
Acting Chief Executive Officer and
Director
David A. Dodge 28 Vice-President, Chief Financial
Officer and Controller
William E. Fritz 73 Secretary and Director
James J. Keil 75 Director
A. Hayes Barclay 72 Director
Below are biographies of our executive officers (who were not also
directors) as of August 6, 2003:
DAVID A. DODGE joined NeoMedia in 1999 as the Financial Reporting
Manager. Since then, Mr. Dodge has acted as NeoMedia's Director of Financial
Planning and Controller, and currently holds the title of Vice President, Chief
Financial Officer and Controller. Prior to joining NeoMedia in 1999, Mr. Dodge
was an auditor with Ernst & Young LLP for 2 years. Mr. Dodge holds a B.A. in
economics from Yale University and an M.S. in accounting from the University of
Hartford, and is also a Certified Public Accountant.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation paid during the years ended December 31, 2002, 2001, and 2000 to:
(i) NeoMedia's Chief Executive Officer and (ii) each of NeoMedia's other
executive officers as of December 31, 2002 who received aggregate cash
compensation during the year ended December 31, 2001 in excess of $100,000 for
services rendered to NeoMedia (collectively, "the Named Executive Officers"):
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING
COMPENS- STOCK OPTIONS/ LTIP ALL OTHER
NAME AND SALARY BONUS ATION AWARD(S) SARS (1) PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
------------------------------------------------------------------------------------------------------------------------------
Charles W. Fritz 2002 $ 144,583 $ -- $ -- $ -- 1,800,000 $ -- $ 4,470(3)
Chairman of the Board 2001 221,758 -- -- -- 400,000 -- 21,532(3),(4)
2000 250,000 148,800(2) -- -- 49,000 -- 22,502(3),(4)
Charles T. Jensen 2002 163,542 -- -- -- 800,000 -- 5,079(3)
Chief Operating Officer, 2001 144,239 -- -- -- 240,000 -- 17,794(3),(4)
President, Acting Chief 2000 150,000 87,860(2) -- -- 37,000 -- 29,767(3),(4)
Executive Officer
(1) Represents options granted under NeoMedia's 2002 and 1998 Stock Option
Plans and warrants granted at the discretion of NeoMedia's Board of
Directors.
(2) In June 2001, NeoMedia's Compensation Committee approved an adjustment,
relating to the Digital:Convergence patent license fees, to the Annual
Incentive Plan for Management that reduced the 2000 bonus payout by
approximately $1.1 million. The original amount recorded in 2000 and
reported on NeoMedia's Form 10-KSB for 2000 was $430,800 for Charles W.
Fritz and $193,860 for Charles T. Jensen. The adjusted amounts are
presented in the table above.
8
(3) Includes automobile expenses attributable to personal use and the
corresponding income tax effects.
(4) Includes life insurance premiums where policy benefits are payable to
beneficiary of the Named Executive Officer.
EMPLOYMENT AGREEMENTS
NeoMedia does not currently have any unexpired employment agreements
with any of its officers or employees.
INCENTIVE PLAN FOR MANAGEMENT
Effective as of January 1, 1996, NeoMedia adopted an Annual Incentive
Plan for Management ("Incentive Plan"), which provides for annual bonuses to
eligible employees based upon the attainment of certain corporate and/or
individual performance goals during the year. The Incentive Plan is designed to
provide additional incentive to NeoMedia's management to achieve these growth
and profitability goals. Participation in the Incentive Plan is limited to those
employees holding positions assigned to incentive eligible salary grades and
whose participation is authorized by NeoMedia's Compensation Committee which
administers the Incentive Plan, including determination of employees eligible
for participation or exclusion. The Board of Directors can amend, modify or
terminate the Incentive Plan for the next plan year at any time prior to the
commencement of such next plan year.
To be eligible for consideration for inclusion in the Incentive Plan,
an employee must be on NeoMedia's payroll for the last three months of the year
involved. Death, total and permanent disability or retirement are exceptions to
such minimum employment, and awards in such cases are granted on a pro-rata
basis. In addition, where employment is terminated due to job elimination, a pro
rata award may be considered. Employees who voluntarily terminate their
employment, or who are terminated by NeoMedia for unacceptable performance,
prior to the end of the year are not eligible to participate in the Incentive
Plan. All awards are subject to any governmental regulations in effect at the
time of payment.
Performance goals are determined for both NeoMedia's and/or the
employee's performance during the year, and if performance goals are attained,
eligible employees are entitled to an award based upon a specified percentage of
their base salary.
No incentive plan was in place for fiscal year 2002.
STOCK OPTION PLANS
Effective February 1, 1996 (and amended and restated effective July 18,
1996 and further amended through November 18, 1996), NeoMedia adopted its 1996
Stock Option Plan ("1996 Stock Option Plan"). The 1996 Stock Option Plan
provides for the granting of non-qualified stock options and "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended, and provides for the issuance of a maximum of 1,500,000 shares of
common stock.
Effective March 27, 1998, NeoMedia adopted its 1998 Stock Option Plan
("1998 Stock Option Plan"). The 1998 Stock Option Plan provides for the granting
of non-qualified stock options and provides for the issuance of a maximum of
8,000,000 shares of common stock.
Effective June 6, 2002, NeoMedia adopted its 2002 Stock Option Plan.
The 2002 Stock Option Plan provides for authority for the Board of Directors to
the grant non-qualified stock options with respect to a maximum of 10,000,000
shares of common stock.
401(K) PLAN
NeoMedia maintains a 401(k) Profit Sharing Plan and Trust (the "401(k)
Plan"). All employees of NeoMedia who are 21 years of age and who have completed
three months of service are eligible to participate in the 401(k) Plan. The
401(k) Plan provides that each participant may make elective contributions of up
to 20% of such participant's pre-tax salary (up to a statutorily prescribed
annual limit) to the 401(k) Plan, although the percentage elected by certain
highly compensated participants may be required to be lower. All amounts
contributed to the 401(k) Plan by employee participants and earnings on these
contributions are fully vested at all times. The 401(k) Plan also provides for
matching and discretionary contributions by NeoMedia. To date, NeoMedia has not
made any such contributions.
9
OPTIONS AND WARRANTS GRANTED IN THE LAST FISCAL YEAR
The following table contains information concerning the grant of
options, all of which are nonqualified, and warrants to the Named Executive
Officers during the year ended December 31, 2002:
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/ POTENTIAL REALIZABLE VALUE
UNDERLYING SARS AT ASSUMED ANNUAL RATES
OPTIONS GRANTED TO EXERCISE OR OF STOCK PRICE APPRECIATION
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION FOR OPTION TERM
NAME (#) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
---------------------------------------------------------------------------------------------------------------------------
Charles W. Fritz 50,000 0.3% $0.14 January 9, 2012 $4,245 $10,758
250,000 1.4% $0.05 June 6, 2012 $7,861 $19,922
1,500,000 8.7% $0.05 June 6, 2007 $20,721 $45,788
Charles T. Jensen 50,000 0.3% $0.14 January 9, 2012 $4,245 $10,758
250,000 1.4% $0.05 June 6, 2012 $7,861 $19,922
500,000 2.9% $0.05 June 6, 2012 $15,722 $39,844
OPTION AND WARRANT EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
The following table sets forth options exercised by NeoMedia Named
Executive Officers during fiscal 2002, and the number and value of all
unexercised options at fiscal year end.
NUMBER OF UNEXERCISED
SHARES SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-
ACQUIRED VALUE OPTIONS/SARS AT THE-MONEY OPTIONS/SARS AT
ON EXERCISE REALIZED DECEMBER 31, 2002 DECEMBER 31, 2002 (1)
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------------------------------------------------------------------------------------------------------------------
Charles W. Fritz 140,775 $1,408 2,829,400 219,600 -- --
Charles T. Jensen -- -- 1,400,586 104,800 -- --
(1) The value of the in the money options is calculated by the difference
between the market price of the stock at December 31, 2002 ($0.01) and
the exercise price of the options. No options held by the Named
Executive Officers were "In-the-money" as of December 31, 2002.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During February 2002, NeoMedia borrowed $10,000 from William E. Fritz
under a note payable bearing interest at 8% per annum with a term of 30 days.
The note was repaid during April 2003.
During March 2002, NeoMedia borrowed $190,000 from William E. Fritz
under a note payable bearing interest at 8% per annum with a term of 16 days.
The note was repaid during March 2002.
During April 2002, NeoMedia borrowed $11,000 from William E. Fritz
under a note payable bearing interest at 8% per annum with a term of 60 days.
The note was repaid during April 2003.
During November 2002, NeoMedia issued Convertible Secured Promissory
Notes with an aggregate face value of $60,000 to 3 separate parties, including
Charles W. Fritz, Chairman of the Board of Directors of NeoMedia; William E.
Fritz, an outside director; and James J. Keil, an outside director. The notes
bear interest at a rate of 15% per annum, and matured at the earlier of i.) four
months, or ii.) the date the shares underlying the Cornell Equity Line of Credit
are registered with the SEC. The notes were convertible, at the option of the
holder, into either cash or shares of our common stock at a 30% discount to
either market price upon closing, or upon conversion, whichever is lower.
NeoMedia also granted to the holders an additional 1,355,670 shares of its
common stock and 60,000 warrants to purchase shares of its common stock at $0.03
per share, with a term of three years. The warrants and shares were issued in
January 2003. In addition, since this debt is convertible into equity at the
option of the note holder at beneficial conversion rates, an embedded beneficial
conversion feature was recorded as a debt discount and amortized using the
effective interest rate over the life of the debt in accordance
10
with EITF 00-27. Total cost of beneficial conversion feature, fair value of the
stock and cost of warrants issued exceed the face value of the notes payable,
therefore, only $60,000, the face amount of the note, was recognizable as debt
discount, and amortized over the life of the notes payable. During March 2003,
two of the affiliated parties, Mr. William Fritz and Mr. Keil, agreed to extend
the maturity date due to the Company's capital constraints. The Company repaid
Charles Fritz's note in full during March 2003, and repaid James J. Keil's note
in full during April 2003. The Company paid $30,000 of the principal on William
Fritz's note during April 2003, and entered into a new note with Mr. Fritz for
the remaining $10,000. The new note bears interest at a rate of 10% per annum
and matures in April 2004. The new note also includes a provision under which,
as consideration for the loan, Mr. Fritz will receive a 3% royalty on all future
revenue generated from the Company's intellectual property.
During April 2003, the Board of Directors of NeoMedia approved the
payment in full of approximately $154,000 of liabilities owed by NeoMedia to
Charles W. Fritz, NeoMedia's Founder and Chairman of the Board of Directors,
through the issuance of 15,445,967 shares of common stock.
During April 2003, NeoMedia sold 25,000,000 shares of its common stock,
par value $0.01, in a private placement at a price of $0.01 per share. In
connection with the sale, NeoMedia also granted the purchaser 25,000,000
warrants to purchase shares of NeoMedia's common stock at an exercise price of
$0.01 per share. The purchaser was William E. Fritz, a member of NeoMedia's
Board of Directors. Proceeds to NeoMedia from sale of the shares were $250,000.
On August 6, 2003, Mr. Fritz exercised his warrants and purchased 25,000,000
additional shares of common stock at a price of $0.01 per share.
During July 2003, William E. Fritz lent NeoMedia $25,000. This amount
was added to the principal of the currently outstanding $10,000 note to William
Fritz maturing in April 2004, raising the total principal liability to $35,000.
As an inducement for Mr. Fritz to fund the loan, NeoMedia granted him 2,500,000
warrants to purchase shares of NeoMedia's common stock at an exercise price of
$0.01 per share.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
NeoMedia's officers and directors, and persons who own more than ten percent of
a registered class of NeoMedia's equity securities, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Officers,
directors and greater than ten-percent shareholders are required by SEC
regulation to furnish NeoMedia with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to NeoMedia,
NeoMedia believes that during 2002 all Section 16(a) filing requirements
applicable to NeoMedia's officers, directors and ten percent beneficial owners
were complied with.
COMPENSATION COMMITTEE REPORT TO STOCKHOLDERS
The Compensation Committee, which meets on a periodic basis, is
comprised of Messrs. Charles W. Fritz and Charles T. Jensen, officers of
NeoMedia and James J. Keil, a non-employee member of the Board of Directors. The
Compensation Committee formulates and administers compensation policies for the
President and Chief Executive Officer and all vice presidents of NeoMedia. (A
Stock Option Committee consisting of two non-employee Directors is responsible
for determining to whom and under what terms stock options should be granted,
other than options which are automatically granted to members of the Board of
Directors, under the Plan.)
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION(1)
The following is a report of the Compensation Committee of the Board of
Directors (the "Committee") describing the compensation policies applicable to
NeoMedia's executive officers during the fiscal year ended December 31, 2002.
The Committee is responsible for establishing and monitoring the
general compensation policies and compensation plans of NeoMedia, as well as the
specific compensation levels for executive officers.
11
GENERAL COMPENSATION PHILOSOPHY
Under the supervision of the Committee, NeoMedia's compensation policy
is designed to attract, motivate and retain qualified key executives critical to
NeoMedia's success. It is the objective of NeoMedia to have a portion of each
executive's compensation dependent upon NeoMedia's performance as well as upon
the executive's individual performance. Accordingly, each executive officer's
compensation package is comprised of three elements: (i) base salary which
reflects individual performance and expertise, (ii) variable bonus payable in
cash and tied to the achievement of certain annual performance goals and (iii)
stock options which are designed to align the long-term interests of the
executive officer with those of NeoMedia's stockholders. NeoMedia did not pay
any bonuses during 2001 or 2002.
The Committee considers the total compensation of each executive
officer in establishing each element of compensation, other than stock options
which are the responsibility of the Stock Option Committee. All incentive
compensation plans are reviewed at least annually to assure they meet the
current strategies and needs of NeoMedia.
The summary below describes in more detail the factors that the
Committee considers in establishing each of the three primary components of the
compensation package provided to the executive officers.
BASE SALARY
Base salary ranges are established based on benchmark data from
nationally recognized surveys of similar high-technology companies that compete
with NeoMedia for executive officers and NeoMedia's research of peer companies.
Each executive officer's base salary is established on the basis of the
individual's qualifications and relevant experience.
VARIABLE BONUS
The Committee believes that a substantial portion of the annual
compensation of each executive should be in the form of variable incentive pay
to reinforce the attainment of NeoMedia's goals. The Incentive Plan rewards
achievement of specified levels of corporate profitability. A pre- determined
formula, which takes into account profitability against the annual plan approved
by the Board of Directors, is used to determine the bonus award. The individual
executive officer's bonus award is based upon discretionary assessment of each
officer's performance during the prior fiscal year. NeoMedia did not pay any
bonuses during 2001 or 2002.
COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
Charles W. Fritz served as NeoMedia's Chairman of the Board and Chief
Executive Officer from August 1996 until June 2002. During June 2002, Mr. Fritz
resigned his duties as Chief Executive Officer, and Charles T. Jensen,
NeoMedia's former Chief Financial Officer, was elected president and Chief
Operating Officer, and also named acting CEO.
BASE SALARY: The Committee reviews the Chief Executive Officer's major
accomplishments and reported base salary information for the chief executive
officers of other companies in NeoMedia's peer group. Mr. Jensen's salary is
currently $175,00 per year. During the period from May 1, 2003 through July 15,
2003, Mr. Jensen's salary was reduced to $120,000 per year in an effort to
reduce costs. He is not under contract with NeoMedia.
CASH INCENTIVE: The Chief Executive Officer's incentive target is at
the discretion of the Committee. Achievement of the target is based on overall
company income versus annual Plan income. Neither Mr. Fritz nor Mr. Jensen
earned a bonus relating to fiscal 2002 or 2001. During June 2001, the Committee
approved an adjustment, relating to the Digital:Convergence patent license fees,
to the 2000 Incentive Plan that reduced the bonus payout by approximately $1.1
million. Mr. Fritz's incentive relating to fiscal 2000 was reduced from $430,800
to $148,800. The award was paid in April 2003 with shares of NeoMedia's common
stock. NeoMedia did not recognize or pay a bonus to any employees during fiscal
2001 or 2002.
COMPENSATION COMMITTEE
----------------------
Charles W. Fritz
Charles T. Jensen
James J. Keil
12
(1) This Section is not "soliciting material," is not deemed "filed" with
the SEC and is not to be incorporated by reference in any filing of
NeoMedia under the 1933 Act or the 1934 Act whether made before or
after the date hereof and irrespective of any general incorporation
language in any such filing.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors currently consists
of Messrs. Fritz, Jensen, and Keil. During the last fiscal year, no interlocking
relationship existed between NeoMedia's Board of Directors or Compensation
Committee and the board of directors or compensation committee of any other
company.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee for the last fiscal year consisted of two
nonemployee Directors. The Board of Directors has determined that none of the
members of the Audit Committee has a relationship to NeoMedia that may interfere
with his independence from NeoMedia and its management. The Audit Committee has
a written charter, a copy of which was filed as Appendix A to NeoMedia proxy
statement filed on May 23, 2001.
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing financial
reports and other financial information provided by NeoMedia to any governmental
body or the public, NeoMedia's systems of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board of
Directors have established, and NeoMedia's auditing, accounting and financial
processes generally. The Audit Committee annually recommends to the Board of
Directors the appointment of a firm of independent auditors to audit the
financial statements of NeoMedia and meets with such personnel of NeoMedia to
review the scope and the results of the annual audit, the amount of audit fees,
NeoMedia's internal accounting controls, NeoMedia's financial statements
contained in NeoMedia's Annual Report to Stockholders and other related matters.
The Audit Committee has reviewed and discussed with management the
financial statements for fiscal year 2002 audited by Stonefield Josephson, Inc.,
NeoMedia's independent auditors. The Audit Committee has discussed with
Stonefield Josephson, Inc. various matters related to the financial statements,
including those matters required to be discussed by SAS 61 (Codification of
Statements on Auditing Standards, AU ss. 380). The Audit Committee has also
received the written disclosures and the letter from Stonefield Josephson, Inc.
required by Independence Standards Board Standard No. 1 (Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees), and has
discussed with the firm its independence. Based upon such review and discussions
the Audit Committee recommended to the Board of Directors that the audited
financial statements be included in NeoMedia's Annual Report on Form 10-K for
the fiscal year ending December, 2002 for filing with the Securities and
Exchange Commission.
AUDIT COMMITTEE
-------------------
James J. Keil
A. Hayes Barclay
The report of the Audit Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that the filing
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
13
PROPOSAL TWO
INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
GENERAL INFORMATION
NeoMedia's Board of Directors has authorized an amendment to NeoMedia's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 200,000,000 to 1,000,000,000. As of August 6, 2003, there were
157,650,104 shares of Common Stock outstanding. In addition, 11,972,794
additional shares are reserved for issuance upon exercise of outstanding options
and warrants and 150,000,000 shares will be reserved for issuance under the 2003
Stock Option Plan if approved at the Annual Meeting. NeoMedia has previously
issued an aggregate of 452,489 shares of a Series A Convertible Preferred Stock,
which were subsequently converted into the same number of shares of Common
Stock, thereby reducing the shares of Preferred Stock that the Board of
Directors is authorized under the Certificate of Incorporation to issue to
24,547,511 shares.
The additional shares will be issuable for proper corporate purposes,
such as the issuance of Common Stock upon the exercise of options issued
pursuant to the terms of the 2002, 1998, and 1996 Stock Option Plans, and the
2003 Stock Option Plan, if approved, and outstanding warrants; for future
financing and acquisition transactions; and for dividends or splits. Stockholder
approval of the amendment to NeoMedia's Certificate of Incorporation to increase
the authorized shares of Common Stock will give NeoMedia greater flexibility by
permitting such stock to be issued without the delay of obtaining stockholder
approval. The Board of Directors believes it to be in the best interests of
NeoMedia to increase the number of authorized shares of Common Stock to ensure
that adequate shares are available for issuance if such issuance becomes
desirable.
Some of the additionally authorized shares may be used as part of a
merger contemplated by the Company with Loch Energy, Inc. ("Loch"). During the
first quarter of 2003, NeoMedia announced that that it had reached an agreement
in principle to acquire and merge with Loch, an oil and gas provider based in
Humble, Texas. Loch currently owns mineral and lease rights to five properties,
totaling approximately 130 acres, near Houston, Texas. Loch's portion of the
proven reserves on the five properties is estimated at 7,707,247 barrels. Loch's
portion of the probable reserves on the five properties is estimated at an
additional 5,963,748 barrels. Per the terms outlined in the Memorandum of Terms,
the merger would provide for one share of common stock of NeoMedia to be
exchanged for every four shares of Loch common stock on an adjusted basis, and
additional "earn out" shares to be issued to Loch shareholders based on actual
oil production in the first year after closing. Total shares to be issued to
Loch shareholders will not exceed 50% of NeoMedia outstanding shares. The merger
is subject to negotiations of definitive contracts, corporate filing
requirements, completion of due diligence and any required approval by the
Boards of Directors and shareholders of each company. It is anticipated that
closing would occur approximately 30 days after such conditions are satisfied.
Additionally, some of the shares may be used by the Company for the
potential purchase by the Company of Secure Source Technologies ("SST"). On July
28, 2003, the Company signed a binding letter of intent to purchase SST, a
provider of security solutions and covert security technology for the
manufacturing and financial services industries. Pending completion of due
diligence and required approvals, the planned acquisition and merger would be
completed through an exchange of common stock from NeoMedia to SST. SST owns
patents that compliment NeoMedia's existing intellectual property portfolio.
NeoMedia may issue additional shares of common stock under its Equity
Line of Credit Agreement with Cornell Capital Partners LP, as NeoMedia's cash
requirements dictate.
NeoMedia also plans to issue additional shares to vendors, in lieu of
cash, where it deems appropriate.
In addition to the reasons specified above, NeoMedia's Board of
Directors believes that it is desirable to have additional authorized shares of
common stock available for possible future financings, possible future
acquisition transactions and other general corporate purposes. Having such
additional authorized shares of common stock available for issuance in the
future would give our Company greater flexibility and may allow such shares to
be issued without the expense and delay of a special shareholders' meeting.
Although such issuance of additional shares with respect to future financings
and
14
acquisitions would dilute existing shareholders, management believes that such
transactions would increase the value of our Company to our shareholders.
Except the transactions described above, the Company is not currently
considering any other acquisition transactions, future financings or other
general corporate purposes that would require the issuance of shares of the
Company's common stock.
There are possible negative ramifications associated with authorizing
additional shares of common stock. These include the following:
o Dilution to the existing shareholders, including a decrease in
our net income per share in future periods. This could cause
the market price of our stock to decline.
o The issuance of authorized but unissued stock could be used to
deter a potential takeover of NeoMedia that may otherwise be
beneficial to shareholders by diluting the shares held by a
potential suitor or issuing shares to a shareholder that will
vote in accordance with NeoMedia's Board of Directors'
desires. A takeover may be beneficial to independent
shareholders because, among other reasons, a potential suitor
may offer such shareholders a premium for their shares of
stock compared to the then-existing market price. NeoMedia
does not have any plans or proposals to adopt provisions or
enter into agreements that may have material anti-takeover
consequences.
The additional shares of Common Stock authorized would become part of
NeoMedia's existing class of Common Stock and would have the same rights and
privileges as the shares of Common Stock presently outstanding. All outstanding
shares of Common Stock will continue to have one vote per share. There are no
preemptive rights with respect to NeoMedia's Common Stock. NeoMedia has no
present agreement or intent to issue any additional shares of Common Stock,
other than pursuant to the foregoing Stock Option Plans and outstanding
warrants.
The Board of Directors of NeoMedia has the authority to issue shares of
Preferred Stock authorized in one or more series and to fix the powers,
designations, rights, preferences and restrictions thereof, including
liquidation preferences and rights as to dividends, conversion, voting and
redemption, and the number of shares constituting each series, without any
further vote or action by NeoMedia's shareholders. The issuance of a series of
Preferred Stock in certain circumstances, based on its terms, may delay or
prevent a change in control of NeoMedia, may discourage bids for the Common
Stock at a premium over the market price of the Common Stock and may directly
affect the market price of and the voting and other rights of holders of Common
Stock. NeoMedia currently has no plans to issue any further series of Preferred
Stock.
If the amendment to our Company's Certificate of Incorporation is
adopted, an amendment to the Certificate of Incorporation of NeoMedia shall be
filed with the Delaware Secretary of State so that Article IV shall be as
follows:
"The total number of shares of capital stock that the Corporation is
authorized to issue is 1,025,000,000, which are to be divided into two classes
as follows: 1,000,000,000 shares of common stock, par value $.01 per share; and
25,000,000 shares of preferred stock, par value $.01 per share.
VOTE REQUIRED FOR AN INCREASE IN AUTHORIZED SHARES OF COMMON STOCK
Approval of an amendment to NeoMedia's Certificate of Incorporation to
increase the number of authorized shares of common stock will require that the
holders of at least a majority of the shares of common stock present or
represented at the meeting and entitled to vote thereon vote "FOR".
RECOMMENDATION OF THE BOARD OF DIRECTORS
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL
OF AN AMENDMENT TO OUR COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK, $0.01 PAR VALUE, FROM 200,000,000
TO1,000,000,000 SHARES.
15
DESCRIPTION OF SECURITIES
The following description of our capital stock and certain provisions
of our Certificate of Incorporation and By-Laws is a summary. For additional
information, please refer to our Certificate of Incorporation, as amended, and
By-Laws.
COMMON STOCK
Holders of common stock are entitled to one vote for each share held of
record on each matter submitted to a vote of stockholders. Holders of the common
stock do not have cumulative voting rights, which means that the holders of more
than one half of our outstanding shares of common stock, subject to the rights
of the holders of preferred stock, can elect all of our directors, if they
choose to do so. In this event, the holders of the remaining shares of common
stock would not be able to elect any directors. Subject to the prior rights of
any class or series of preferred stock which may from time to time be
outstanding, if any, holders of common stock are entitled to receive ratably,
dividends when, as, and if declared by the Board of Directors out of funds
legally available for that purpose and, upon our liquidation, dissolution, or
winding up, are entitled to share ratably in all assets remaining after payment
of liabilities and payment of accrued dividends and liquidation preferences on
the preferred stock, if any. Holders of common stock have no preemptive rights
and have no rights to convert their common stock into any other securities. The
outstanding common stock is duly authorized and validly issued, fully paid, and
nonassessable. In the event we were to elect to sell additional shares of common
stock following this offering, investors in this offering would have no right to
purchase additional shares. As a result, their percentage equity interest in us
would be diluted.
The shares of our common stock offered in this offering will be, when
issued and paid for, fully paid and not liable for further call and assessment.
Except as otherwise permitted by Delaware law, and subject to the rights of the
holders of preferred stock, all stockholder action is taken by the vote of a
majority of the outstanding shares of common stock voted as a single class
present at a meeting of stockholders at which a quorum consisting of a majority
of the outstanding shares of common stock is present in person or proxy.
PREFERRED STOCK
The Company may issue preferred stock in one or more series and having
the rights, privileges, and limitations, including voting rights, conversion
rights, liquidation preferences, dividend rights and preferences and redemption
rights, as may, from time to time, be determined by the Board of Directors.
Preferred stock may be issued in the future in connection with acquisitions,
financings, or other matters, as the Board of Directors deems appropriate. In
the event that the Company determines to issue any shares of preferred stock, a
certificate of designation containing the rights, privileges, and limitations of
this series of preferred stock shall be filed with the Secretary of State of the
State of Delaware. The effect of this preferred stock designation power is that
the Board of Directors alone, subject to Federal securities laws, applicable
blue sky laws, and Delaware law, may be able to authorize the issuance of
preferred stock which could have the effect of delaying, deferring, or
preventing a change in control of NeoMedia without further action by its
stockholders, and may adversely affect the voting and other rights of the
holders of the Company's common stock. The issuance of preferred stock with
voting and conversion rights may also adversely affect the voting power of the
holders of the Company's common stock, including the loss of voting control to
others.
During December 1999, the Board of Directors approved a Certificate of
Resolutions Designating Rights and Preferences of Preferred Stock, filed with
the Secretary of State of the State of Delaware on December 20, 1999. By this
approval and filing, 200,000 shares of Series A Preferred Stock were designated.
Series A Preferred carries the following rights:
o The right to receive mandatory cash dividends equal to the
greater of $0.001 per share or 100 times the amount of all
dividends (cash or non-cash, other than dividends of shares of
common stock) paid to holders of the common stock, which
dividend is payable 30 days after the conclusion of each
calendar quarter and immediately following the declaration of
a dividend on common stock;
o One hundred votes per each share of Series A Preferred on each
matter submitted to a vote of the Company's stockholders;
o The right to elect two directors at any meeting at which
directors are to be elected, and to fill any vacancy on the
Board of Directors previously filled by a director appointed
by the Series A Preferred holders;
16
o The right to receive an amount, in preference to the holders
of common stock, equal to the amount per share payable to
holders of common stock, plus all accrued and unpaid
dividends, and following payment of 1/100th of this
liquidation preference to the holders of each share of common
stock, an additional amount per share equal to 100 times the
per share amount paid to the holders of common stock.
o The right to exchange each share of Series A Preferred for 100
times the consideration received per share of common stock in
connection with any merger, consolidation, combination or
other transaction in which shares of common stock are
exchanged for or converted into cash, securities or other
property.
o The right to be redeemed in accordance with the Company's
stockholders rights plan.
While accrued mandatory dividends are unpaid, we may not declare or pay
dividends or distributions on, or redeem, repurchase or reacquire, shares of any
class or series of junior or parity stock.
The Series A Preferred was created to be issued in connection with the
Company's stockholders rights plan. No shares of Series A Preferred have been
issued to date.
On June 19, 2001, the Board of Directors approved a Certificate of
Designations to Create a Class of Series A Convertible Preferred Stock for
NeoMedia Technologies, Inc., filed with the Secretary of State of the State of
Delaware on June 20, 2001. By this approval and filing, 47,511 shares are
designated as Series A Convertible Preferred Stock. The Company's Series A
Convertible Preferred Stock, par value $0.01 per share, has the following
rights:
o Series A Convertible Preferred is convertible into shares of
common stock at a one-to-one ratio, subject to proportional
adjustments in the event of stock splits or combinations, and
dividends or distributions of shares of common stock, at the
option of the holder; shares are subject to automatic
conversion as determined in each agreement relating to the
purchase of shares of Series A Convertible Preferred;
o Each share of Series A Convertible Preferred is entitled to
receive a liquidation preference equal to the original
purchase price of such share in the event of liquidation,
dissolution, or winding up;
o Upon merger or consolidation, or the sale, lease or other
conveyance of all or substantially all of the Company's
assets, shares of Series A Convertible Preferred are
automatically convertible into the number of shares of stock
or other securities or property (including cash) to which the
common stock into which it is convertible would have been
entitled; o Shares of Series A Convertible Preferred are
entitled to one vote per share, and vote together with holders
of common stock.
In June 2001, 452,489 shares of Series A Convertible Preferred were
issued to About.com, Inc. pursuant to a certain Agreement for Payment in Common
Stock, in lieu of cash payment to About.com for online advertising services. On
January 2, 2002, such shares were converted into 452,489 shares of common stock.
On January 16, 2002, the Board of Directors approved a Certificate of
Designation, Preferences, Rights and Limitations of Series B 12% Convertible
Redeemable Preferred Stock of NeoMedia Technologies, Inc., filed with the
Secretary of State of the State of Delaware on February 28, 2002. By this
approval and filing, 100,000 shares were designated as Series B 12% Convertible
Redeemable Preferred Stock. The Company's Series B 12% Convertible Redeemable
Preferred Stock, par value $0.01 per share, has the following rights:
o Series B Preferred shares accrue dividends at a rate of 12%
per annum, or $1.20 per share, between the date of issuance
and the first anniversary of issuance;
o Series B Preferred is redeemed to the maximum extent permitted
by law (based on funds legally available for redemption) at a
price per share of $15.00, plus accrued dividends (a total of
$16.20 per share) on the first anniversary of issuance;
o Series B Preferred receive proceeds of $12.00 per share upon
the Company's liquidation, dissolution or winding up;
17
o To the extent, not redeemed on the first anniversary of
issuance, Series B Preferred is automatically convertible into
then existing general class of common stock on the first
anniversary of issuance at a price equal to $16.20 divided by
the greater of $0.20 and the lowest publicly-sold share price
during the 90 day period preceding the conversion date, but in
no event more than 19.9% of the Company's outstanding capital
stock as of the date immediately prior to conversion.
o Upon merger or consolidation, or the sale, lease or other
conveyance of all or substantially all of the Company's
assets, shares of Series B Preferred are automatically
convertible into the number of shares of stock or other
securities or property (including cash) to which the common
stock into which it is convertible would have been entitled;
and
o Shares of Series B Preferred are entitled to one vote per
share and vote with common stock, except where the proposed
action would adversely affect the Series B Preferred or where
the non-waivable provisions of applicable law mandate that the
Series B Preferred vote separately, in which case Series B
Preferred vote separately as a class, with one vote per share.
The Company's Preferred Stock is currently comprised of 25,000,000
shares, par value $0.01 per share, of which 200,000 shares are designated as
Series A Preferred Stock, none of which are issued or outstanding, and,
following the conversion into common stock of 452,489 shares of Series A
Convertible Preferred Stock issued to About.com, of which 47,511 shares are
designated as Series A Convertible Preferred Stock, none of which are issued and
outstanding, and of which 100,000 shares of Series B 12% Convertible Redeemable
Preferred Stock, none of which are issued and outstanding. We have no present
agreements relating to or requiring the designation or issuance of additional
shares of preferred stock.
WARRANTS AND OPTIONS
As of August 6, 2003 there were outstanding warrants and options to
purchase 6,195,000 and 5,777,794, shares of the Company's common stock,
respectively, with exercise prices ranging from $0.01 to $10.88. The number of
shares issuable upon exercise and the exercise prices of the warrants are
subject to adjustment in the event of certain events such as stock dividends,
splits and combinations, capital reorganization and with respect to certain
warrants, issuance of shares of common stock at prices below the then exercise
price of the warrants.
As of June 6, 2002, NeoMedia shareholders approved the 2002 Option
Plan. Under this plan, NeoMedia is authorized to grant to employees, directors,
and consultants up to 10,000,000 options to share of its common stock. As of
August 6, 2003, we had issued 10,000,000 options under the 2002 plan, of which
7,819,500 had been exercised.
In March 2002, the Company adopted a warrant repricing program. The
program entitled holders of up to 1.2 million warrants to exercise the warrants
within a period ending the earlier of September 19, 2002 or the expiration date
of the warrant at a price per share equal to the greater of $0.12 or 50% of the
closing sales per share price on the OTC Bulletin Board of the Company's common
stock on the trading date immediately preceding the date of exercise.
Approximately 0.4 million of the warrants placed in the program were exercised.
The Company recognized approximately $38,000 in expense relating to the program
during the first nine months of 2002.
During April 2002, the Company repriced 7.4 million common stock
options held by employees, consultants and advisors for a period of six months.
During the term of the option repricing program, participating holders were
entitled to exercise subject options at an exercise price per share equal to the
greater of (1) $0.12 or (2) 50% of the last sale price of shares of Common Stock
on the OTCBB, on the trading date immediately preceding the date of exercise.
Shortly after the announcement of the repricing program, the market price for
the Company's common stock fell below $0.12, and has not closed above $0.12
since. As a result, no options were exercised under the terms of the program and
we did not recognize any expense relating to the repricing program during the
first six months of 2002.
During May 2003, the Company re-priced approximately 8.0 million stock
options under a 6-month repricing program. Under the terms of the program, the
exercise price for outstanding options under the Company's 2002, 1998, and 1996
Stock Option Plans was restated to $0.01 per share for a period of 6 months. In
accordance with FASB Interpretation, FIN 44, Accounting for Certain Transactions
Involving Stock Transactions, the award has been accounted for as variable from
May 19, 2003 through the period ended June 30, 2002. Accordingly, approximately
$178,000 was recorded as compensation in general and administrative expense
during the three months ended June 30, 2003.
18
During April 2003, the Company repriced approximately 1.9 million
warrants held by Thornhill Capital LLC ("Thornhill"), an outside consultant to
the Company. Of the 1.9 million warrants, 1.5 million had an exercise price of
$0.05 per share, and approximately 0.4 million had an exercise price of $2.09
per share. All 1.9 million warrants were repriced to $0.00 per share. The
Company recognized an expense of approximately $26,000 related to this
transaction during the second quarter of 2003.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION
On December 10, 1999, the Board of Directors adopted a stockholders
rights plan and declared a non-taxable dividend of one right on each outstanding
share of the Company's common stock to stockholders of record on December 10,
1999 and each share of common stock issued prior to the rights plan trigger
date. The stockholder rights plan was adopted as an anti-takeover measure,
commonly referred to as a "poison pill." The stockholder rights plan was
designed to enable all stockholders to receive fair and equal treatment in any
proposed takeover of the corporation and to guard against partial or two-tiered
tender offers, open market accumulations and other hostile takeover tactics to
gain control of NeoMedia. The stockholders rights plan, which is similar to
plans adopted by many leading public companies, was not adopted in response to
any effort to acquire control of NeoMedia at the time of adoption. Certain of
the Company's directors, officers and principal stockholders, Charles W. Fritz,
William E. Fritz and The Fritz Family Limited Partnership and their holdings
were exempted from the triggering provisions of the Company's "poison pill"
plan, as a result of the fact that, as of the plans adoption, their holdings
might have otherwise triggered the "poison pill".
19
PROPOSAL THREE
APPROVAL OF THE 2003 STOCK OPTION PLAN
GENERAL INFORMATION
NeoMedia currently has in effect its 1996 Stock Option Plan (the "1996
Stock Option Plan"), 1998 Stock Option Plan (the "1998 Stock Option Plan"), and
2002 Stock Option Plan (the "2002 Stock Option Plan"), the purpose of which is
to retain the services of selected employees and to attract new employees,
consultants, advisors and directors by providing them with the opportunity to
acquire a proprietary interest in NeoMedia and thus share in its growth and
success. The 1996 Stock Option Plan provides for the granting of a maximum of
1,500,000 "incentive stock options" within the meaning of Section 422A of the
Internal Revenue Code of 1986, as amended ("Code"), and non-qualified (or
nonstatutory) stock options. As of August 6, 2003, 125,494 options, all
non-qualified, to purchase shares of Common Stock were outstanding under the
1996 Stock Option Plan. The 1998 Stock Option Plan provides for the granting of
a maximum of 8,000,000 incentive stock options, and non-qualified (or
nonstatutory) stock options. As of August 6, 2003, 3,166,800 options, all
non-qualified, to purchase shares of Common Stock were outstanding under the
1998 Stock Option Plan. The 2002 Stock Option Plan provides for the granting of
a maximum of 10,000,000 incentive stock options, and non-qualified (or
nonstatutory) stock options. As of August 6, 2003, 2,485,500 options, all
non-qualified, to purchase shares of Common Stock were outstandingunder the 2002
Stock Option Plan.
In the opinion of the Board of Directors, NeoMedia and its stockholders
have benefited substantially from being able to grant options under the its
Stock Option Plans in addition to its authority to grant warrants. Such options,
in the opinion of the Board of Directors, have been a highly effective incentive
to the employees, consultants and directors receiving them and have created a
commonality of purpose between NeoMedia's officers and other employees,
consultants, directors and its stockholders with respect to NeoMedia's
strategies for profitable growth and share-value appreciation. In the opinion of
the Board of Directors, NeoMedia's ability to provide additional stock options
to its officers, employees, consultants and directors in the future will benefit
NeoMedia's long-term performance. Accordingly, the Board of Directors has
adopted the 2003 Stock Option Plan (the "Plan") and believes it is in NeoMedia's
best interest for the shareholders to approve the Plan which will authorize the
Board of Directors to award stock options to its officers, other employees,
consultants and directors without further stockholder actions.
THE PLAN AND PARTICIPANTS
The Plan authorizes the grant of non-qualified options to purchase up
to an aggregate of 150,000,000 shares of NeoMedia's Common Stock, to (i)
officers and other full-time salaried employees of NeoMedia with managerial,
professional or supervisory responsibilities, (ii) consultants and advisors who
render bona fide services to NeoMedia, in each case, where the Committee of the
Board of Directors which will administer the Plan, determines that such officer,
employee, consultant or advisor has the capacity to make a substantial
contribution to the success of NeoMedia, and (iii) to NeoMedia's directors. As
used herein with respect to the Plan, references to NeoMedia include
subsidiaries of NeoMedia.
The purposes of the Plan are to enable NeoMedia to attract and retain
persons of ability as officers and other employees, to attract and retain able
directors and consultants, and to motivate such persons to use their best
efforts on behalf of NeoMedia by providing them with an equity participation in
NeoMedia. The full text of the Plan is set forth in Appendix A hereto, and the
following description is qualified in its entirety by reference to Appendix A.
The Plan will be administered by a Committee, which will be appointed
by NeoMedia's Board of Directors and must consist of two or more members of the
Board of Directors, each of whom must be a "disinterested" person within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934. The appointed
Committee will be the Stock Option committee, which is currently comprised of A.
Hayes Barclay and James J. Keil. Under the terms of the Plan, the Committee will
have the authority to determine, subject to the terms and conditions of the
Plan, the persons to whom options are granted, the number of options granted to
each optionee and the terms and conditions of each option, including its
duration.
The Plan can be amended, suspended, reinstated or terminated, in whole
or in part, by the Board of Directors; provided, however, that without approval
of NeoMedia's stockholders, no amendment shall be made which (i) increases the
maximum number of shares of Common Stock which may be subject to stock options
granted under the Plan, except for specified adjustment provisions, (ii) extends
the term of the Plan, (iii) increases the period during which a stock option may
20
be exercised beyond ten years from the date of the grant, (iv) materially
increases the benefits accruing to participants under the Plan, (v) materially
modifies the requirements as to eligibility for participation in the Plan, or
(vi) will cause stock options granted under the Plan to fail to meet the
requirements of Rule 16b-3. Unless previously terminated by the Board of
Directors, the Plan will terminate exactly ten (10) years from the date of its
approval by the Board of Directors, and no additional options may be granted
under the Plan after that date.
OPTION TERMS AND GRANTS
Stock options may be granted under the Plan to purchase Common Stock at
an exercise price determined by the Committee which may be less than the fair
market value of the shares on the date of grant but not less than the par value
of $0.01 per share. There is no limitation on the number of stock options that
may be granted to any optionee under the Plan.
Exercise of the options will be contingent on (a) the optionee's
employment or relationship with NeoMedia at the time of exercise and (b)
determination by the Committee no later than 30 days prior to exercise that
performance of an optionee merits such exercise.
The Plan provides that, if a stock option or portion thereof expires or
is terminated, canceled or surrendered for any reason without being exercised in
full, the unpurchased shares of Common Stock which were subject to such stock
option or portion thereof shall be available for future grants of stock options
under the Plan.
Under the terms of the Plan, the option price for all options must be
paid in cash, by check, bank draft or money order, or with Common Stock of
NeoMedia owned by the optionee and having a fair market value on the date of
exercise equal to the aggregate exercise price of the shares to be so purchased
(subject to limitations or conditions determined by the Committee in its
discretion), or a combination thereof.
Under its terms, the Plan becomes effective upon adoption by the Board
of Directors subject, however, to approval of the Plan by the stockholders.
Options may be granted from time to time following adoption of the Plan by the
Board of Directors and prior to approval by the stockholders; however, if the
Plan is not approved by the stockholders, then the Plan, and all options
previously granted under it, become null and void and of no effect.
Options granted under the Plan will not be assignable or transferable
except by will or the laws of intestate succession or pursuant to a qualified
domestic relations order. Options granted under the Plan may be exercised by the
optionee (or the optionee's legal representative) only while the optionee is
employed by NeoMedia, or within one year after termination of employment due to
a permanent disability, or within three months after termination of employment
due to retirement. The executor or administrator of a deceased optionee's estate
or the person or persons to whom the deceased optionee's rights thereunder have
passed by will or by the laws of descent or distribution shall be entitled to
exercise the option within one year after the death of the optionee.
Options expire immediately in the event that the employment or other
relationship of the relevant optionee with NeoMedia is terminated with or
without cause or expires; provided, however, in the event NeoMedia terminates
the employment of an optionee who at the time of such termination was an officer
of NeoMedia and had been continuously employed by NeoMedia during the two-year
period immediately preceding such termination, for any reason except "good
cause" (as defined in the Plan), each stock option held by such optionee (which
had not then previously lapsed or terminated and which had been held by such
optionee for more than six months prior to such termination) shall be
exercisable for a period of three months after such termination to the extent
otherwise exercisable during the period. Options granted to a non-employee
director who ceases to be a director are exercisable within one year after
termination of service. All of the aforementioned exercise periods set forth in
this paragraph are subject to the further limitation that an option shall not,
in any case, be exercisable beyond its stated expiration date.
The purchase price and the number and kind of shares that may be
purchased upon exercise of options granted under the Plan, and the number of
shares which may be granted under the Plan, are subject to adjustment in certain
events, including stock splits, recapitalizations and reorganizations. If any
portion of an option terminates or lapses without being exercised, the shares
which were subject to the unexercised portion will continue to be subject to the
Plan, and new options may be granted in respect of such shares in accordance
with the terms and conditions of the Plan.
FEDERAL TAX ASPECTS OF THE PLAN
Non-qualified options granted under the Plan are not intended to
qualify for the favorable income tax treatment accorded under the Code to
incentive stock options. Each such optionee should not recognize any income for
Federal income
21
tax purposes at the time of the grant of options under the Plan. Upon exercise,
(a) ordinary income is realized by such optionee in an amount equal to the
difference between the option price and the fair market value of the shares on
the date of exercise (NeoMedia may be required to withhold income tax on this
amount) and (b) generally NeoMedia will be entitled to a tax deduction for the
same amount. Upon disposition of the shares, appreciation or depreciation after
the date of exercise is treated as short-term or long-term capital gain or loss
and will not result in any additional deduction by NeoMedia. If such optionee
exercises a nonqualifed option by delivering shares of Common Stock to NeoMedia
in payment of the exercise price, special rules will apply.
On July 16, 2003, the Company's Board of Directors voted to authorize
the issuance of approximately 31.7 million stock options to employees, under the
2003 Stock Option Plan contingent upon the passage at the Company's annual
meeting on September 24, 2003, of a proposal to adopt the 2003 Stock Option
Plan. These options will be allocated to the individuals set forth in the table
below.
PENDING OPTION GRANT
On July 16, 2003, the Company's Board of Directors voted to authorize
the issuance of approximately 31.7 million stock options to employees, and 1.0
million options to each of the Company's three outside directors, under the 2003
Stock Option Plan, contingent upon the passage at the Company's annual meeting
on September 24, 2003, of a proposal to adopt the 2003 Stock Option Plan. These
options will only be issued upon approval by the shareholders of the 2003 Stock
Option Plan. These options will be allocated to the individuals set forth in the
table below.
NUMBER OF FAIR VALUE OF
OPTIONS (1) OPTIONS (2)
----------- -------------
Charles T. Jensen, President, COO, Acting CEO, and director (3) 10,000,000 $ 279,996
Charles W. Fritz, Chairman of the Board of Directors (4) 10,000,000 $ 279,996
David A. Dodge, Vice President and CFO 2,000,000 $ 55,999
Kevin Hunter, Chief Scientist (5) 2,000,000 $ 55,999
Executive Group (3 persons) 22,000,000 $ 615,991
Non-Executive Director Group (3 persons) 3,000,000 $ 83,999
Non-Executive Officer Employee Group (12 persons) 9,670,450 $ 270,769
(1) - All options were granted at an exercise price of $0.01 per
share, with a term of ten years from the date of grant.
Federal Income Tax Consequence: All options to be granted
under the 2003 Stock Option Plan, if approved, will be
non-qualified stock options. Each optionee should not
recognize any income for Federal income tax purposes at the
time of the grant of options under the Plan. Upon exercise,
(a) ordinary income is realized by the optionee in an amount
equal to the difference between the option price and the fair
market value of the shares on the date of exercise (NeoMedia
may be required to withhold income tax on this amount) and (b)
generally NeoMedia will be entitled to a tax deduction for the
same amount. Upon disposition of the shares, appreciation or
depreciation after the date of exercise is treated as
short-term or long-term capital gain or loss and will not
result in any additional deduction by NeoMedia. If such
optionee exercises a nonqualified option by delivering shares
of Common Stock to NeoMedia in payment of the exercise price,
special rules will apply.
(2) - Fair value is calculated using the Black/Scholes pricing
model, with the following assumptions: Risk free interest rate
of 4.5%, expected life of 10 years, no dividends, and
volatility of 264%.
(3) - Mr. Jensen became President, COO, and Acting CEO on June 6,
2002.
(4) - Mr. Fritz served as CEO until June 6, 2002.
22
(5) - Per Item 10(b)(2)(ii)(F), this non-executive received
greater than 5% of the options granted, and therefore is
disclosed separately
VOTE REQUIRED FOR APPROVAL OF THE PLAN
Approval of the Plan will require that the holders of at least a
majority of the shares of Common Stock present or represented at the meeting and
entitled to vote thereon vote "FOR".
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF NEOMEDIA RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE 2003 STOCK OPTION PLAN.
23
AUDITORS
Following the recommendation of the Audit Committee, the Board of
Directors has selected Stonefield Josephson, Inc. as the independent auditors of
the Corporation and its consolidated subsidiaries for the fiscal year ended
December 31, 2003.
AUDIT FEES
The aggregate fees billed by Stonefield Josephson, Inc. ("Stonefield")
for professional services rendered for the audit of NeoMedia's annual financial
statements for the fiscal year ended December 31, 2002 and for the review of the
financial statements included in NeoMedia's Reports on Form 10-Q for the
quarterly periods during 2002 were approximately $107,000. The aggregate fees
billed by Stonefield and Ernst & Young LLP relating to accounting services for
reviews and independent auditors' consents were approximately $58,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by Stonefield Josephson, Inc. and Arthur
Andersen LLP for financial information systems design and implementation
professional services for the year ended December 31, 2002.
OTHER FEES
There were no other fees billed Stonefield Josephson, Inc. or Arthur
Andersen LLP to NeoMedia for other fees for the year ended December 31, 2002.
OTHER MATTERS TO BE ACTED UPON
AT THE ANNUAL MEETING OF STOCKHOLDERS
The management of NeoMedia knows of no other matters to be presented at
the Annual Meeting. Should any matter requiring a vote of the stockholders other
than those listed in this Proxy Statement arise at the meeting, the persons
named in the proxy will vote the proxies in accordance with their best judgment.
ADDITIONAL INFORMATION
PROPOSALS OF SHAREHOLDERS FOR THE NEXT ANNUAL MEETING. Proposals of
shareholders intended for presentation at the 2004 annual meeting must be
received by NeoMedia on or before December 15, 2003, in order to be included in
the proxy statement and form of proxy for that meeting. Additionally, NeoMedia
must have notice of any shareholder proposal to be submitted at the 2004 Annual
Meeting (but not required to be included in the Proxy Statement) by March 18,
2004, or such proposal will be considered untimely pursuant to Rule 14a-4 and
Rule 14a-5(e) under the Exchange Act and persons named in the proxies solicited
by management may exercise discretionary voting authority with respect to such
proposal.
PROXY SOLICITATION COSTS. Our Company is soliciting the enclosed
proxies. The cost of soliciting proxies in the enclosed form will be borne by
our Company. Officers and regular employees of our Company may, but without
compensation other than their regular compensation, solicit proxies by further
mailing or personal conversations, or by telephone, telex, facsimile or
electronic means. Our Company will, upon request, reimburse brokerage firms for
their reasonable expenses in forwarding solicitation materials to the beneficial
owners of stock.
24
INCORPORATION BY REFERENCE. Certain financial and other information
required pursuant to Item 13 of the Proxy Rules is incorporated by reference to
NeoMedia's Annual Report on Form 10-K for the year ended December 31, 2002,
which are being delivered to the shareholders with this information statement.
In order to facilitate compliance with Rule 2-02(a) of Regulation S-X, one copy
of the definitive Information statement will include a manually signed copy of
the accountant's report.
August 18, 2003 /S/ WILLIAM E. FRITZ
---------------------------
Fort Myers, Florida William E. Fritz, Secretary
25
APPENDIX A
NEOMEDIA TECHNOLOGIES, INC.
2003 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
This Stock Option Plan (the "Plan") is intended as an incentive to key
employees, consultants and directors of NeoMedia Technologies, Inc. (the
"Company") and its subsidiaries. The purpose of the Plan is to assist the
Company in retaining its employees with a high degree of training, experience
and ability, to attract new employees and consultants whose services are
considered unusually valuable and to provide stock ownership opportunities to
the members of the Board of Directors of the Company who are not employees of
the Company or a subsidiary ("Nonemployee Directors").
2. GENERAL PROVISIONS
2.1 DEFINITIONS AS USED IN THE PLAN:
(a) "Board of Directors" means the Board of Directors of the
Company.
(b) "Code" means the Internal Revenue Code of 1986, including any
and all amendments thereto.
(c) "Committee" means the options committee appointed by the Board
of Directors from time to time to administer the Plan pursuant to Section 2.2.
(d) "Common Stock" means the Company's Common Stock, $.01 par
value.
(e) "Participant" means a person to whom a Stock Option has been
granted under the Plan.
(f) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended from time to time, or any successor rule.
(g) "Stock Option" means an option granted under the Plan.
(h) "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
the granting of the Stock Option, each of the corporations other than the last
corporation in the unbroken chain owns 50% or more of the total voting power of
all classes of stock in one of the other corporations in such chain.
2.2 ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Committee which shall at
all times consist of two (2) or more persons, each of whom shall be a member of
the Board of Directors. Each member of the Committee shall be a disinterested
person (as such term is defined in Rule 16b-3). The Board of Directors may from
time to time remove members from, or add members to, the Committee. Vacancies on
the Committee, howsoever caused, shall be filled by the Board of Directors. The
Committee shall select one of its members as Chairman, and shall hold meetings
at such times and places as it may determine.
(b) The Committee shall have the full power, subject to and within
the limits of the Plan, to: (i) interpret and administer the Plan, and Stock
Options granted under it; (ii) make and interpret rules and regulations for the
administration of the Plan and to make changes in and revoke such rules and
regulations (and in the exercise of this power, shall generally determine all
questions of policy and expediency that may arise and may correct any defect,
omission, or inconsistency in the Plan or any agreement evidencing the grant of
any Stock Option in a manner and to the extent it shall deem necessary to make
the Plan fully effective); (iii) determine those persons to whom Stock Options
shall be granted and the number of Stock Options to be granted to any person;
(iv) determine the terms of Stock Options granted under the Plan, consistent
with the provisions of the Plan; and (v) generally, exercise such powers and
perform such acts in connection with the Plan as are
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deemed necessary or expedient to promote the best interests of the Company. The
interpretation and construction by the Committee of any provision of the Plan or
of any Stock Option shall be final, binding and conclusive. Members of the
Committee shall be subject to any additional restrictions necessary to satisfy
the disinterested administration of the Plan as required in Rule 16b-3.
(c) The Committee may act only by a majority of its members then
in office; however, the Committee may authorize any one (1) or more of its
members or any officer of the Company to execute and deliver documents on behalf
of the Committee.
(d) No member of the Committee shall be liable for any action
taken or omitted to be taken or for any determination made by him or her in good
faith with respect to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee against any cost or expense (including
counsel fees) or liability (including any sum paid in settlement of a claim with
the approval of the Committee) arising out of any act or omission in connection
with the administration or interpretation of the Plan, unless arising out of
such person's own fraud or bad faith.
2.3 EFFECTIVE DATE
The Plan shall become effective upon its adoption by the Board of
Directors, and Stock Options may be granted upon such adoption and from time to
time thereafter, subject, however, to approval of the Plan by affirmative vote
of the holders of a majority of the shares of the Common Stock present in person
or by proxy and entitled to vote at an annual meeting of the shareholders of the
Company or at a special meeting of the shareholders of the Company expressly
called for such purposes, or any adjournments thereof, within 12 months after
the adoption of the Plan by the Board of Directors. If the Plan is not approved
at such annual or special meeting or at any adjournments thereof, this Plan and
all Stock Options previously granted thereunder shall become null and void.
2.4 DURATION
If approved by the shareholders of the Company, as provided in Section
2.3, unless sooner terminated by the Board of Directors, this Plan shall remain
in effect for a period of ten (10) years following its adoption by the Board of
Directors.
2.5 SHARES SUBJECT TO THE PLAN
The maximum number of shares of Common Stock which may be subject to
Stock Options granted under the Plan shall be 150,000,000. The Stock Options
shall be subject to adjustment in accordance with Section 5, as appropriate, and
shares to be issued upon exercise of Stock Options may be either authorized and
unissued shares of Common Stock or authorized and issued shares of Common Stock
purchased or acquired by the Company for any purpose. If a Stock Option or
portion thereof shall expire or is terminated, canceled or surrendered for any
reason without being exercised in full, the unpurchased shares of Common Stock
which were subject to such Stock Option or portion thereof shall be available
for future grants of Stock Options under the Plan.
2.6 AMENDMENTS
The Plan may be suspended, terminated or reinstated, in whole or in
part, at any time by the Board of Directors, provided however, that without the
approval of NeoMedia's stockholders, no amendment shall be made which (i)
increases the maximum number of shares of Common Stock which may be subject to
stock options granted under the Plan, except for specified adjustment
provisions, (ii) extends the term of the Plan, (iii) increases the period during
which a stock option may be exercised beyond ten years from the date of the
grant, (iv) materially increase the benefits accruing to participants under the
Plan, (v) materially modifies the requirements as to eligibility for
participation in the Plan, or (vi) will cause stock options granted under the
Plan to fail to meet the requirements of Rule 16b-3. The Board of Directors may
from time to time make such amendments to the Plan as it may deem advisable.
Except as otherwise provided herein, termination or amendment of the Plan shall
not, without the consent of a Participant, affect such Participant's rights
under any Stock Options previously granted to such Participant.
2.7 PARTICIPANTS AND GRANTS
Stock Options may be granted by the Committee to (i) directors,
officers and other full-time salaried employees of the Company and its
Subsidiaries with managerial, professional or supervisory responsibilities and
(ii) consultants and advisors who render bona fide services to the Company and
its Subsidiaries, in each case, where the Committee determines
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that such officer, employee, consultant or advisor has the capacity to make a
substantial contribution to the success of the Company. The Committee may grant
Stock Options to purchase such number of shares of Common Stock (subject to the
limitations of Sections 2.5) as the Committee may, in its sole discretion,
determine. In granting Stock Options under the Plan, the Committee, on an
individual basis, may vary the number of Stock Options as between Participants
and may grant Stock Options to a Participant in such amounts as the Committee
may determine in its sole discretion.
3. STOCK OPTIONS
3.1 GENERAL
All Stock Options granted under the Plan shall be evidenced by written
agreements executed by the Company and the Participant to whom granted, which
agreement shall state the number of shares of Common Stock which may be
purchased upon the exercise thereof and shall contain such investment
representations and other terms and conditions as the Committee may from time to
time determine.
3.2 PRICE
The purchase price per share of Common Stock subject to a Stock Option
shall be determined by the Committee which may be less than the fair market
value on the date of grant.
3.3 PERIOD
The duration or term of each Stock Option granted under the Plan shall
be for such period as the Committee shall determine but in no event more than
ten (10) years from the date of grant thereof.
3.4 EXERCISE
Stock Options may be exercisable at such time or times as the Committee
shall specify when granting the Stock Option subject to satisfaction of all
conditions for exercise recited herein and in the Option Agreement. Without
limiting the foregoing, the Stock Option may not be exercised unless the
Participant at the time of such exercise shall have been in continuous employ
of, or relationship with, the Company up to the date of exercise and unless the
Committee has provided to the Participant a written determination no more than
30 days prior to the exercise date that the individual job performance of the
Participant merits the Participant's right to exercise such Stock Option. The
Committee shall be entitled to act in its sole discretion and the decision of
the Committee as to the Participant's right to exercise the Participant's Stock
Option shall be final, binding and conclusive on the Participant. Failure of the
Committee to deliver the Participant such a written determination shall be
deemed a determination that the Participant is not entitled to exercise such
Stock Option.
Once exercisable, a Stock Option shall be exercisable, in whole or in
part, by delivery of a written notice of exercise to the Secretary of the
Company at the principal office of the Company specifying the number of shares
of Common Stock as to which the Stock Option is then being exercised together
with payment of the full purchase price for the shares being purchased upon such
exercise. Until the shares of Common Stock as to which a Stock Option is
exercised are issued, the Participant shall have none of the rights of a
shareholder of the Company with respect to such shares.
3.5 PAYMENT
The purchase price for shares of Common Stock as to which a Stock
Option has been exercised and any amount required to be withheld, as
contemplated by Section 6.1, may be paid:
(a) In United States dollars in cash, or by check, bank draft or
money order payable in United States dollars to the order of the Company; or
(b) By the delivery by the Participant to the Company of whole
shares of Common Stock having an aggregate fair market value on the date of
payment equal to the aggregate of the purchase price of Common Stock as to which
the Stock Option is then being exercised or by the withholding of whole shares
of Common Stock having such fair market value upon the exercise of such Stock
Option; or
(c) By a combination of both (a) and (b) above.
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The Committee may, in its discretion, impose limitations, conditions
and prohibitions on the use by a Participant of shares of Common Stock to pay
the purchase price payable by such Participant upon the exercise of a Stock
Option.
3.6 TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP
(a) In the event a Participant's employment by, or relationship
with, the Company shall terminate for any reason other than those reasons
specified in Sections 3.6(b), (c), (d), (e) or (g) hereof while such Participant
holds Stock Options granted under the Plan, then all rights of any kind under
any outstanding Option held by such Participant which shall not have previously
lapsed or terminated shall expire immediately.
(b) If a Participant's employment by, or relationship with, the
Company or its Subsidiaries shall terminate as a result of such Participant's
total disability, each Stock Option held by such Participant (which has not
previously lapsed or terminated) shall be exercisable by such Participant for a
period of one year after termination but only to the extent the Option is
otherwise exercisable during that period. For purposes of the foregoing
sentence, "total disability" shall mean permanent mental or physical disability
as determined by the Committee.
(c) In the event of the death of a Participant, each Stock Option
held by such Participant (which has not previously lapsed or terminated) shall
be exercisable by the executor or administrator of the Participant's estate or
by the person or persons to whom the deceased Participant's rights thereunder
shall have passed by will or by the laws of descent or distribution, for a
period of one year after such Participant's death but only to the extent the
Option is otherwise exercisable during that period.
(d) In the case of a Participant who is an employee of the
Company, if a Participant's employment by the Company shall terminate by reason
of such Participant's retirement in accordance with Company policies, each Stock
Option held by such Participant at the date of termination (which has not
previously lapsed or terminated) shall be exercisable for a period of three (3)
months after termination, but only to the extent the Option is otherwise
exercisable during that period.
(e) In the event the Company terminates the employment of a
Participant who at the time of such termination was an officer of the Company
and had been continuously employed by the Company during the two (2) year period
immediately preceding such termination, for any reason except "good cause"
(hereafter defined) and except upon such Participant's death, total disability
or retirement in accordance with Company policies, each Stock Option held by
such Participant (which has not previously lapsed or terminated and which has
been held by such Participant for more than six (6) months prior to such
termination) shall be exercisable for a period of three (3) months after such
termination, but only to the extent the Option is otherwise exercisable during
that period. A termination for "good cause" shall be deemed to have occurred
only if the Participant in question (i) is terminated by written notice for
dishonesty, because of his conviction of a felony, or because of his violation
of any material provision of any employment or other agreement, written or oral,
with the Company or any of its Subsidiaries, or (ii) shall voluntarily resign or
terminate his employment with the Company or any of its Subsidiaries under or
followed by such circumstances as would constitute a breach of any material
provision of any employment or other agreement between him and the Company or
any of its Subsidiaries, or (iii) shall have committed an act of dishonesty not
discovered by the Company or any of its Subsidiaries prior to the cessation of
his employment with the Company or any of its Subsidiaries, but which would have
resulted in his discharge if discovered prior to such date, or (iv) shall,
either before or after cessation of his employment with the Company or any of
its Subsidiaries, without the written consent of the Company or any of its
Subsidiaries, use (except for the benefit of the Company or any of its
Subsidiaries) or disclose to any other person any confidential information
relating to the continuation or proposed continuation of the business or any
trade secrets of the Company of any of its Subsidiaries obtained as a result of
or in connection with such employment.
(f) Notwithstanding the foregoing, if at any time after
termination a Participant engages in "detrimental activity" (as hereinafter
defined), the Committee in its discretion may cause the Participant's right to
exercise such option to be forfeited. If an allegation of detrimental activity
by a Participant is made to the Committee, the exercisability of the
Participant's options will be suspended for up to two months to permit the
investigation of such allegation. For purposes of this section, "detrimental
activity" means activity that is determined by the Committee in its sole and
absolute discretion to be detrimental to the interests of the Company or any of
its Subsidiaries, including but not limited to situations where such
Participant: (1) divulges trade secrets of the Company, proprietary data or
other confidential information relating to the Company or to the business of the
Company and any Subsidiaries, (2) enters into employment with a competitor under
circumstances suggesting that such Participant will be using unique or special
knowledge gained as a Company employee to compete with the Company, (3) is
convicted by a court of competent jurisdiction of any felony or a crime
involving moral turpitude, (4) uses information obtained during the course of
his or her employment for his or her own purposes, such as for the solicitation
of business, (5) is determined to have engaged (whether or not prior to
termination due to retirement) in either
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gross misconduct or criminal activity harmful to the Company, or (6)
takes any action that harms the business interests, reputation, or
goodwill of the Company and/or its subsidiaries.
(g) In the case of Stock Options granted to a nonemployee director
who ceases to be a member of the Board of Directors, such Stock Options then
held by such individual shall be exercisable within one year after such
termination of service.
3.7 EFFECT OF LEAVES OF ABSENCE
It shall not be considered a termination of employment when a
Participant is on military or sick leave or such other type leave of absence
which is considered as continuing intact the employment relationship of the
Participant with the Company or any of its Subsidiaries. In case of such leave
of absence, the employment relationship shall be deemed to have continued until
the later of (i) the date when such leave shall have lasted ninety (90) days in
duration, or (ii) the date as of which the Participant's right to employment
shall have no longer been guaranteed either by statute or contract.
4. ASSIGNABILITY OF STOCK OPTIONS
Stock Options granted under the Plan shall not be assignable or
otherwise transferable by the recipient except by will or the laws of intestate
succession, or pursuant to a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder. Otherwise, Stock Options granted under this Plan shall be
exercisable during the lifetime of the Participant only by the Participant for
his or her individual account, and no purported assignment or transfer of such
Stock Options thereunder, whether voluntary or involuntary, by operation of law
or otherwise, shall vest in the purported assignee or transferee any interest or
right therein whatsoever but immediately upon any such purported assignment or
transfer, or any attempt to make the same, such Stock Options thereunder shall
terminate and become of no further effect.
5. REORGANIZATION AND RECAPITALIZATION OF THE COMPANY
(a) The existence of this Plan and Stock Options granted hereunder
shall not affect in any way the right or power of the Company or its
stockholders to make or authorize any or all adjustments, recapitalization,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stocks ahead of or affecting the
Common Stock or the rights thereof, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise.
(b) Except as hereinafter provided, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon exercise of rights or warrants to subscribe therefore, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of shares of Common Stock subject to Stock
Options granted hereunder.
(c) If, and whenever, prior to the delivery by the Company or a
Subsidiary of all of the shares of Common Stock which are subject to the Stock
Options or rights granted hereunder, the Company shall effect a subdivision or
consolidation of shares or other capital readjustments, the payment of a stock
dividend or other increase or reduction of the number of shares of the Common
Stock outstanding without receiving compensation therefore in money, services or
property, the number of shares subject to the Plan shall be proportionately
adjusted and the number of shares with respect to which Stock Options granted
hereunder may thereafter be exercised shall: (i) in the event of an increase in
the number of outstanding shares, be proportionately increased, and the cash
consideration (if any) payable per share shall be proportionately reduced; and
(ii) in the event of a reduction in the number of outstanding shares, be
proportionately reduced, and the cash consideration (if any) payable per share
shall be proportionately increased.
(d) If the Company merges with one or more corporations, or
consolidates with one or more corporations and the Company shall be the
surviving corporation, thereafter, upon any exercise of Stock Options granted
hereunder, the Participant shall, at no additional cost (other than the option
price, if any) be entitled to receive (subject to any required action by
stockholders) in lieu of the number of shares as to which such Stock Options
shall then be exercisable the number and class of shares of stock or other
securities to which the Participant would have been entitled pursuant to the
terms of the agreement of merger or consolidation, if immediately prior to such
merger or consolidation the Participant had been the holder of record of the
number of shares of Common Stock of the Company equal to the number of shares as
to which such Stock Options shall be exercisable. Upon any reorganization,
merger or consolidation where the Company is not the
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surviving corporation, the Committee shall have the right to make all
outstanding options vest and be exercisable immediately, by giving notice to
each holder thereof or his or her personal representative and by permitting the
exercise for a period not to exceed ninety (90) days from the date of such
determination by the Committee. Upon liquidation or dissolution of the Company,
all outstanding options shall be cancelled.
6. MISCELLANEOUS PROVISIONS
6.1 WITHHOLDING
The Company's obligations under this Plan shall be subject to
applicable federal, state and local tax withholding requirements. Federal, state
and local withholding tax due at the time of a grant or upon the exercise of any
Stock Option may, in the discretion of the Committee, be paid in shares of
Common Stock already owned by the Participant or through the withholding of
shares otherwise issuable to such Participant, upon such terms and conditions as
the Committee shall determine. If the Participant shall fail to pay, or make
arrangements satisfactory to the Committee for the payment, to the Company of
all such federal, state and local taxes required to be withheld by the Company,
then the Company shall, to the extent permitted by law, have the right to deduct
from any payment of any kind otherwise due to such Participant an amount equal
to any federal, state or local taxes of any kind required to be withheld by the
Company.
6.2 COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Stock Option shall be exercisable and no shares will be delivered
under the Plan except in compliance with all applicable federal and state laws
and regulations including, without limitation, compliance with all federal and
state securities laws and withholding tax requirements and with the rules of the
NASDAQ Small Cap Market and of all other domestic stock exchanges on which the
Common Stock may be listed. Any share certificate issued to evidence shares for
which a Stock Option is exercised may bear legends and statements the Committee
shall deem advisable to assure compliance with federal and state laws and
regulations. No Stock Option shall be exercisable and no shares will be
delivered under the Plan, until the Company has obtained consent or approval
from regulatory bodies, federal or state, having jurisdiction over such matters
as the Committee may deem advisable. In the case of the exercise of a Stock
Option by a person or estate acquiring the right to exercise the Stock Option as
a result of the death of the Participant, the Committee may require reasonable
evidence as to the ownership of the Stock Option and may require consents and
releases of taxing authorities that it may deem advisable.
6.3 NO RIGHT TO EMPLOYMENT
Neither the adoption of the Plan nor its operation, nor any document
describing or referring to the Plan, or any part thereof, nor the granting of
any Stock Options hereunder, shall confer upon any Participant under the Plan
any right to continue in the employ of the Company or any Subsidiary, or shall
in any way affect the right and power of the Company or any Subsidiary to
terminate the employment of any Participant at any time with or without
assigning a reason therefore, to the same extent as might have been done if the
Plan had not been adopted.
6.4 EXCLUSION FROM PENSION COMPUTATIONS
By acceptance of a grant of a Stock Option under the Plan, the
Participant shall be deemed to agree that any income realized upon the receipt
or exercise thereof or upon the disposition of the shares received upon exercise
will not be taken into account as "base remuneration", "wages", "salary" or
"compensation" in determining the amount of any contribution to or payment or
any other benefit under any pension, retirement, incentive, profit-sharing or
deferred compensation plan of the Company or any Subsidiary.
6.5 ABANDONMENT OF OPTIONS
A Participant may at any time abandon a Stock Option prior to its
expiration date. The abandonment shall be evidenced in writing, in such form as
the Committee may from time to time prescribe. A Participant shall have no
further rights with respect to any Stock Option so abandoned.
6.6 SEVERABILITY AS TO RULE 16B-3
If any of the terms or provisions of the Plan conflict with the
requirements of Rule 16b-3, then such terms or provisions shall be deemed
inoperative to the extent they so conflict with the requirements of Rule 16b-3.
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6.7 INTERPRETATION OF THE PLAN
Headings are given to the Sections of the Plan solely as a convenience
to facilitate reference. Such headings, numbering and paragraphing shall not in
any case be deemed in any way material or relevant to the construction of the
Plan or any provision hereof. The use of the masculine gender shall also include
within its meaning the feminine. The use of the singular shall also include
within its meaning the plural and vice versa.
6.8 USE OF PROCEEDS
Funds received by the Company upon the exercise of Stock Options shall
be used for the general corporate purposes of the Company.
6.9 CONSTRUCTION OF PLAN
The place of administration of the Plan shall be in the State of
Florida, and the validity, construction, interpretation, administration and
effect of the Plan and of its rules and regulations, and rights relating to the
Plan, shall be determined solely in accordance with the laws of the State of
Florida.
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APPENDIX B
REVOCABLE PROXY
NEOMEDIA TECHNOLOGIES, INC.
The undersigned hereby appoints CHARLES W. FRITZ and CHARLES T. JENSEN
and WILLIAM E. FRITZ, or any of them individually, with full power of
substitution, to act as proxy and to represent the undersigned at the 2002
Annual Meeting of shareholders and to vote all shares of common stock of
NeoMedia Technologies, Inc. which the undersigned is entitled to vote if
personally present at said meeting to be held at the Company's Headquarters,
2201 Second Street, Suite 402, Fort Myers, Florida on September 24, 2003 at
10:00 a.m., and at all postponements or adjournments thereof upon all business
as may properly come before the meeting with all the powers the undersigned
would possess if then and there personally present.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS PROXY, WHEN
PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR ALL OF THE NOMINEES FOR DIRECTOR LISTED IN
PROPOSAL 1 AND FOR PROPOSALS 2 AND 3 LISTED ON THE REVERSE SIDE. PROXIES ARE
GRANTED THE DISCRETION TO VOTE UPON ALL OTHER MATTERS THAT MAY PROPERLY BE
BROUGHT BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERDSIGNED. IF NO DIRECTION IS MADE, THE SHARES WILL BE VOTED "FOR"
PROPOSALS ONE AND TWO. SUCH PROXY ALSO DELEGATES DISCRETIONARY AUTHORITY TO VOTE
WITH REPSECT TO ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
(CONTINUED, AND TO BE SIGNED ON REVERSE SIDE)
PLEASE RETAIN THIS ADMISSION TICKET
FOR THE
ANNUAL MEETING OF STOCKHOLDERS OF
NEOMEDIA TECHNOLOGIES, INC.
COMPANY HEADQUARTERS - 2201 SECOND STREET, SUITE 402.
FT. MYERS, FLORIDA 33901
SEPTEMBER 24, 2003
10:00 A.M., EASTERN DAYLIGHT SAVINGS TIME
PRESENT THIS TICKET TO A NEOMEDIA TECHNOLOGIES, INC. REPRESENTATIVE
AT THE ENTRANCE TO THE MEETING ROOM.
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 Neomedia Technologies, Inc., c/o ADP, 51
Mercedes Way, Edgewood, NY, 11717.
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THIS MEETING, WHETHER OR NOT
YOU ATTEND THE MEETING IN PERSON. TO MAKE SURE YOUR SHARES ARE REPRESENTED, WE
URGE YOU TO COMPLETE AND MAIL THE PROXY CARD BELOW.
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IF YOU PLAN TO ATTEND THE 2003 ANNUAL MEETING OF STOCKHOLDERS, PLEASE MARK THE
APPROPRIATE BOX ON THE PROXY CARD BELOW.
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
NEOMEDIA TECHNOLOGIES, INC.
o Vote on Directors
1. Election of directors - The election of the following nominees to
the Board of Directors unless otherwise indicated:
01) A. Hayes Barclay
02) Charles W. Fritz
03) William E. Fritz
04) Charles T. Jensen
05) James J. Keil
For All [ ] Withhold All [ ] For All Except [ ]
To withhold authority to vote for any particular nominee, mark "For All
Except" and write the nominee's number on the line
below_____________________________
VOTE ON PROPOSALS
2. To approve an amendment to NeoMedia's Certificate of Incorporation
to increase the number of authorized shares of Common Stock from 200,000,000 to
1,000,000,000. FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To approve the 2003 Stock Option Plan. FOR [ ] AGAINST [ ]
ABSTAIN [ ]
4. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING AND
PROXY STATEMENT OF THE COMPANY.
Please sign your name exactly as it appears on your stock certificate.
When signing as attorney-in-fact, executor, administrator, trustee or guardian,
please add your title as such. When signing as joint tenants, all parties in the
joint tenancy must sign. If signer is a corporation, please sign in full
corporate name by duly authorized officer or officers and affix the corporate
seal.
Please indicate if you plan to attend this meeting: Yes [ ] No [ ]
-------------------- --------- ------------------------- ---------
Signature Date Signature (Joint Owners) Date
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