UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------
SCHEDULE 14F-1
INFORMATION STATEMENT
PURSUANT TO SECTION 14(f) OF THE
SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER
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PERFECTDATA CORPORATION
(Exact Name of Registrant as Specified in its Charter)
0-12817
(Commission File Number)
DELAWARE
(State or Other Jurisdiction of Incorporation)
95-3087593
(I.R.S. Employer Identification Number)
1445 East Los Angeles Avenue, Suite 208
Simi Valley, CA 93065
(Address of Principal Executive Offices)
805-581-4006
(Registrant's Telephone Number
PERFECTDATA CORPORATION
1445 East Los Angeles Avenue, Suite 208
Simi Valley, CA 93065
INFORMATION STATEMENT
PURSUANT TO SECTION 14(f) OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER
March 31, 2005
INTRODUCTION
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
promulgated thereunder. Section 14(f) of the Exchange Act requires the mailing
of this Information Statement to the stockholders of PerfectData Corporation, a
Delaware corporation ("PerfectData"), not less than ten (10) days prior to a
contemplated change in a majority of its directors otherwise than at a meeting
of PerfectData's stockholders. This Information Statement is being furnished on
or about April 4, 2005 to all of the holders of record as of the close of
business on March 28, 2005 (the "Record Date") of the common stock, $.01 par
value (the "PerfectData Common Stock"), of PerfectData.
Please read this Information Statement carefully. It describes the terms of
the proposed transactions between PerfectData and Sona Mobile, Inc., a
Washington corporation ("Sona"), and the effect thereof on PerfectData and its
stockholders and contains biographical and other information concerning the
directors of PerfectData after the consummation of the proposed transactions who
are not currently serving PerfectData.
The Board of Directors of PerfectData and Sona currently contemplate that
the transaction effecting the change in the majority of the directors will occur
on April 15, 2005. However, because of the various conditions precedent to
closing (see the subsection captioned "Closing" of the section "Information
Regarding Merger Transaction" elsewhere in this Information Statement), the
closing may occur on a later date.
NO VOTE OR OTHER ACTION OF PERFECTDATA'S STOCKHOLDERS IS REQUIRED IN
CONNECTION WITH THIS INFORMATION STATEMENT. NO PROXIES OR CONSENTS ARE BEING
SOLICITED AND YOU ARE REQUESTED NOT TO SEND TO PERFECT DATA A PROXY OR CONSENT.
Information regarding merger transaction
Merger
As previously reported, on March 7, 2005, PerfectData, PerfectData
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of
PerfectData Corporation ("Merger Sub"), and Sona entered into an Agreement and
Plan of Merger dated as of such date (the "Merger Agreement"), pursuant to which
Sona will be merged (the "Merger") with and into Merger Sub, which shall be the
surviving corporation. At the closing of the Merger (the "Closing") Merger Sub
will change its name to "Sona Mobile, Inc." and, after PerfectData stockholder
approval is obtained subsequent to the Closing, PerfectData will change its name
to "Sona Mobile Holdings, Inc." or such other name as may be recommended by the
then Board of Directors of PerfectData. A copy of the Merger Agreement without
exhibits or schedules was filed as an exhibit to PerfectData's Current Report on
Form 8-K filed on March 11, 2005. A stockholder of PerfectData may request a
copy of the Merger Agreements by request to the Secretary of PerfectData at the
address shown in the heading to this Information Statement.
As previously reported, Sona, which was incorporated in 2003 and which is
headquartered in Toronto, Canada, develops and markets data applications for
mobile devices in the wireless data market place that enable its customers to:
(1) receive streamed data real-time on a continuous basis; (2) execute secure
transactions in real-time; (3) exchange data with corporate systems in
real-time; and (4) integrate customers' in-house information with publicly
available information of news services such as Telerate.
As previously reported, effective June 1, 2004, Spray Products Corporation
("Spray") had assumed full responsibility for managing the customers of
PerfectData, so that all revenues therefrom were going to Spray, and, after
obtaining shareholder consent, on November 29, 2004, the related assets of
PerfectData's operating business were sold to Spray. Also, as previously
reported, the Board of Directors of PerfectData had announced its intention not
to liquidate PerfectData, but to continue its search for a merger partner so as
to add business operations to PerfectData. Consummation of the Merger will add
such business operations to PerfectData.
Effect on Shares
If the Merger is consummated pursuant to the Merger Agreement, each issued
and outstanding share of the common stock, no par value, of Sona (the "Sona
Common Stock") and the Series A Redeemable Convertible Preferred Stock, no par
value, of Sona (the "Sona Series A Preferred Stock") shall be converted into
shares of a to-be-designated Series A Voting Convertible Preferred Stock, $.01
par value, of PerfectData (the "PerfectData Series A Preferred Stock") in such a
manner that the shares of PerfectData to be held by the pre-Merger holders of
the PerfectData Common Stock will equal approximately 20% of the issued and
outstanding shares of the PerfectData Common Stock (subject to adjustment as
provided below in the subsection captioned "Tangible Net Worth" of this section
"Information Regarding Merger Transaction"), on a fully diluted basis, excluding
any options or warrants reserved under the PerfectData Option Plan of 2000 (the
"PerfectData Option Plan") as to which options have not been granted and no
commitment for a grant given and the remaining 76,000 shares of the PerfectData
Common Stock currently reserved under an April 1, 1999 authorization of the
PerfectData Board of Directors (the "April 1999 Authorization"), for which no
options or
warrants have been granted and no commitment for a grant given. The PerfectData
Option Plan will continue in effect after the Merger, both as to the stock
options currently outstanding to purchase an aggregate of 314,000 shares of the
PerfectData Common Stock and as to stock options to be granted in the future to
purchase an aggregate of 1,686,000 shares of the PerfectData Common Stock
(assuming none of the outstanding options is cancelled prior to exercise). The
April 1999 Authorization will be cancelled by the PerfectData Board on or prior
to the date of the Closing (the "Closing Date").
The number of shares of the PerfectData Series A Preferred Stock to be
issued to the holders of the Sona Common Stock, and the Sona Series A Preferred
Stock, when converted into shares of the PerfectData Common Stock, and the
number of shares of the PerfectData Stock to be issued to the holders of any
options, warrants or other rights to purchase shares of the Sona Common Stock
other than the Sona Series A Preferred Stock when exercised, shall equal
approximately 80% of the issued and outstanding shares of the PerfectData Common
Stock (subject to adjustment as provided below in the subsection captioned
"Minimum Tangible Net Worth" of this section "Information Regarding Merger
Transaction") on a fully diluted basis. A portion of these shares, 5% of the
total number, will be issued to Colebrooke Capital, Inc., for providing advisory
services to Sona in connection with the Merger. (The foregoing holders shall
collectively be referred to herein as the "Sona Shareholders.")
The rights of the pre-Merger holders of the PerfectData Common Stock will
be materially affected by the Merger in the following two ways:
(1) Their voting percentage will be substantially reduced from 100% to
20% and perhaps, as indicated in the succeeding section captioned "Additional
Shares" of this section "Information Regarding Merger Transaction," to 15%.
(2) So long as any shares of the PerfectData Series A Preferred Stock
shall be outstanding the PerfectData Common Stock shall be junior to the Perfect
Data Series A Preferred Stock. (See below the subsection captioned "Series A
Preferred Stock" of this section "Information Regarding Merger Transaction").
The parties intend that the Merger qualify as reorganization within the
meaning of Section 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended
(the "Code"). PerfectData anticipates that there will be no tax consequences to
any of its pre-Merger stockholders as a result of the Merger.
Additional Shares
At the Closing, five percent of the issued and outstanding shares of the
PerfectData Common Stock, on a fully diluted basis, shall be reserved (such
shares shall hereinafter be referred to as the "Additional Shares"). Such shares
shall be distributed, or the reserve therefor cancelled, as follows:
(a) If, upon the receipt of a copy of the audited consolidated
financial statements for the fiscal year ending December 31, 2005 ("Fiscal
2005"), the then President of PerfectData (the "President") concludes, after his
review thereof, that PerfectData had, for Fiscal 2005, revenues of less than
$3,000,000 and/or a gross profit margin lower than 50%, he shall
take no action with respect to requesting issuance of the Additional Shares. If,
on the other hand, he concludes that PerfectData had, for Fiscal 2005, (i)
revenues of at least $3,000,000 and (ii) a gross profit margin of at least 50%
as reported in the statement of operations for Fiscal 2005 (the "2005 Statement
of Operations") included in such audited financial statements, he shall direct
the Transfer Agent for the PerfectData Common Stock to issue the Additional
Shares to the same persons and in the same proportions as the Sona Shareholders
received shares of the PerfectData Series A Preferred Stock as of the Closing
Date.
(b) In the event that PerfectData did not meet the requirements set
forth in (a) above for issuance of the Additional Shares, but, in the opinion of
the President, after he has reviewed the audited consolidated financial
statements for the fiscal year ending December 31, 2006 ("Fiscal 2006"),
PerfectData has (i) aggregate revenues for Fiscal 2005 and Fiscal 2006 of at
least $12,000,000 and (ii) an aggregate gross profit margin for Fiscal 2005 and
Fiscal 2006 of at least 50% based on the 2005 Statement of Operations and
PerfectData's statement of operations for the year ending December 31, 2006 (the
"2006 Statement of Operations") included in its audited financial statements for
Fiscal 2006, then, he shall direct the Transfer Agent to deliver the Additional
Shares to the same persons and in the same proportions as the Sona Shareholders
received their shares of the PerfectData Series A Preferred Stock as of the
Closing Date. If, on the other hand, the President concluded that PerfectData
did not have both (i) aggregate gross revenues for Fiscal 2005 and Fiscal 2006
of at least $12,000,000 and (ii) an aggregate gross profit margin for Fiscal
2005 and Fiscal 2006 of at least 50%, he shall direct the Transfer Agent for the
PerfectData Common Stock to cancel the reserve for the Additional Shares.
Minimum Tangible Net Worth
The Merger Agreement provides that if, on the Closing Date, PerfectData's
"Tangible Net Worth" (as defined) shall equal at least $1,100,000, there shall
be no adjustment to the percentages of shares to be held post-Merger as
described above in the subsection captioned "Effect on Shares" of this section
"Information Regarding Merger Transaction." "Tangible Net Worth" means
PerfectData's cash and cash equivalents and other tangible assets minus total
liabilities (both those liabilities reflected in a balance sheets and these
commitments and contingences that are not reflected in a balance sheet in
accordance with United States generally accepted accounting principles). If the
Closing occurs on or after April 15, 2005, PerfectData may increase its Tangible
Net Worth by the costs incurred by PerfectData in preparing and filing its
Annual Report on Form 10-KSB for its fiscal year ending March 31, 2005, which
costs shall not exceed $75,000. In addition, PerfectData may, subject to certain
limitations, sell shares of the PerfectData Common Stock to increase its
Tangible Net Worth as of the Closing Date.
If the Tangible Net Worth is less than $1,100,000, the number of shares
issuable to the Sona Shareholders shall be adjusted such that the percentage of
shares of the PerfectData Common Stock to be held by the pre-Merger holders of
the PerfectData Common Stock shall be reduced by an amount equal to: (a) the
product of (i) the amount of the reduction of the Tangible Net Worth below
$1,100,000 and (ii) 20 divided by (b) $2,000,000. As an example, if the amount
of reduction is $100,000, the percentage of shares to be held by the pre-Merger
holders of the PerfectData Common Stock would be reduced by one percent to 19%.
If the Tangible Net Worth is less than $750,000, either PerfectData or Sona
may terminate the Merger Agreement. However, in such event, PerfectData would
become obligated
to pay Sona the liquidated damages and the expense reimbursement described below
in the subsection captioned "Termination" of this section "Information Regarding
Merger Transaction."
Directors and Officers
Pursuant to the Merger Agreement, four of the five directors and each of
the two executive officers of PerfectData, and each of the directors and
officers of Merger Sub, shall resign at the Closing. Bryan Maizlish, currently a
PerfectData director, shall continue to serve as a director. The other
directors, to be elected by Mr. Maizlish at the Closing, all of whom are
designees of Sona, shall be Shawn Kreloff, John Bush and Nicholas H. Glinsman.
Sona has not designated who will fill the remaining vacancy on the PerfectData
Board of Directors caused by the four resignations. Such director may not be
named until after the Closing. The new officers shall be: Chairman of the Board:
Shawn Kreloff; President and Chief Executive Officer: John Bush; Secretary:
Nicholas Glinsman; and Senior Vice President and Chief Technology Officer: Lance
Yu. For information relating to these new directors-to-be and the
officers-to-be, see the section "Information Relating to Directors and Executive
Officers" elsewhere in the Information Statement. The four directors of
PerfectData who will resign at the Closing are: Harris A. Shapiro (who also
serves as Chairman of the Board and Chief Executive Officer), Timothy D. Morgan,
Tracie Savage and Corey P. Schlossmann. Irene J. Marino, who currently serves as
Vice President Finance, Chief Financial Officer, Chief Accounting Officer and
Secretary of PerfectData, is the other executive officer (who with Mr. Shapiro)
will resign at the Closing. A Chief Financial Officer will be determined.
The sole director of Merger Sub post-Merger shall be: John Bush. Its
officers shall be: President and Chief Executive Officer: John Bush; Secretary:
Nicholas Glinsman; and Senior Vice President and Chief Technology Officer: Lance
Yu. Currently, prior to the Merger, the sole director of Merger Sub is Harris A.
Shapiro, who also serves as its Chairman of the Board and Chief Executive
Officer. Its only other officer currently, prior to the Merger, is Irene J.
Marino who serves as its Vice President, Finance, Chief Financial Officer, Chief
Accounting Officer and Secretary.
Within three (3) months after the Closing, PerfectData is required,
pursuant to the Merger Agreement, to have three directors that will meet the
eligibility requirements imposed by The Nasdaq Stock Market, Inc. ("Nasdaq") for
service on an audit committee of a Nasdaq-listed company. PerfectData's current
members of the Audit Committee meet that requirement.
Closing
Pursuant to the Merger Agreement, the following will occur at or prior to
the Closing:
(a) Merger Sub and Sona will execute and file certificates of merger
with the Secretary of State of the State of Delaware and the Secretary of State
of the State of Washington and the Merger will become effective upon the filing
with the former (the "Effective Time");
(b) The certificate of incorporation and bylaws of Merger Sub as the
surviving corporation, as attached as exhibits to the Merger Agreement, shall
continue in full force and effect; and
(c) the Certificate of Designations to the Certificate of
Incorporation of PerfectData (the "Certificate of Designations"), creating the
PerfectData Series A Preferred Stock, shall be filed with the Secretary of State
of the State of Delaware; otherwise the Certificate of Incorporation and Bylaws
of PerfectData shall continue in full force and effect.
Effect on Financial Statements
If the Merger is consummated, for accounting purposes, Sona will be deemed
to be the acquirer in a reverse transaction and consequently the transaction
will be treated as a recapitalization of Sona. Sona's financial statements will
become the historical financial statements of the post-Merger entity. Because
Sona has a December 31 fiscal year, as compared with PerfectData's fiscal year
which ends March 31, PerfectData will change its fiscal year to December 31,
effective with the Effective Time.
Series A Preferred Stock
A copy of the Certificate of Designations as proposed to be filed was filed
as an exhibit to PerfectData's Current Report on Form 8-K filed on March 11,
2005. A stockholder of PerfectData may request a copy of the Certificate of
Designations by request to the Secretary of PerfectData at the address shown in
the heading to this Information Statement. The key terms of the PerfectData A
Preferred Stock are as follows:
(a) Dividends. The Board of Directors may, in its discretion, declare
a quarterly non-cumulative cash dividend at a rate of six percent per annum.
(b) Conversion. Each holder of the PerfectData Series A Preferred
Stock may, at any time and from time to time, convert each of his, her or its
shares of the PerfectData Series A Preferred Stock into a number of shares of
the PerfectData Common Stock determined in accordance with a conversion ratio of
47.2860516521 (the "Conversion Ratio").
The Conversion Ratio assumes that there is no change in the number of
issued and outstanding shares of PerfectData and Sona and no new options,
warrants or rights are granted or terminate prior to exercise by either between
the date of this Information Statement and the Closing Date. The Conversion
Ratio and the shares of the PerfectData Common Stock issuable upon conversion
are subject to adjustment upon the occurrence of stock splits, stock dividends
or similar events. The holders are also protected in the event of a subsequent
merger or consolidation of PerfectData where it is not the survivor or a sale of
substantially all of PerfectData's assets.
Each share of the PerfectData Series A Preferred Stock shall mandatorily
convert into shares of the PerfectData Common Stock either: (i) on the date on
which the PerfectData stockholders authorize an increase in the number of
authorized shares of the PerfectData Common Stock in order to permit the
conversion of all the shares of the PerfectData Series A Preferred Stock and the
issuance of the Additional Shares or (ii) five (5) years after the Closing Date.
The Merger Agreement obligates the Board of Directors of PerfectData, as soon as
practicable after the Effective Time, but not later than 90 days thereafter,
either to call the Annual Meeting of Shareholders, or to seek the consents of
the holders of at least a majority of
the outstanding shares of capital stock entitled to vote at a stockholder
meeting, to approve an amendment to PerfectData's Certificate of Incorporation
to increase the number of authorized shares of PerfectData from 10,000,000 to
such number as would permit, at a minimum, the conversion of all shares of the
PerfectData Series A Preferred Stock and the issuance of the Additional Shares.
As of the Record Date, there were 6,359,530 shares of the PerfectData Common
Stock issued and outstanding and an aggregate of 2,106,000 shares reserved for
issuance upon the exercise of options and warrants. Accordingly, the remaining
authorized 1,534,470 shares are insufficient to meet the requirements of the
Merger Agreement even if 1,762,00 shares of the 2,106,000 shares currently
reserved as to which no option or warrant was outstanding as of the Record Date
were cancelled. As a result of the mandatory conversion provision described in
this paragraph relating to adoption of an amendment to PerfectData's Certificate
of Incorporation increasing the authorized number of shares of the PerfectData
Common Stock, the PerfectData directors believe that the shares of the
PerfectData Series A Preferred Stock will remain outstanding only for a short
period after the Closing Date.
(c) No Fractional Shares. No fractional share of the PerfectData
Common Stock shall be issued, whether upon conversion of the PerfectData Series
A Preferred Stock or the distribution of the Additional Shares to the Sona
Shareholders. Instead what would have been a fractional share shall be rounded
up or down to the nearest whole share of the PerfectData Common Stock.
(d) Rank. Shares of the PerfectData Series A Preferred Stock shall
rank prior to shares of the PerfectData Common Stock and any series of capital
stock created after the Closing Date with respect to the distribution of assets
upon the liquidation, dissolution or winding up of PerfectData, whether
voluntary or involuntary, unless otherwise consented to by the holders of at
least 50% of the then outstanding shares of the PerfectData Series A Preferred
Stock.
(e) Liquidation Preference. Upon the bankruptcy or other liquidation,
dissolution or winding up of PerfectData, the holders of the PerfectData Series
A Preferred Stock shall be entitled to a preferential payment equal to the
following: $3,250,000 less the product of: (i) the Stated Value of the
previously converted shares of the PerfectData Series A Preferred Stock and (ii)
the number of shares of the PerfectData Series A Preferred Stock so converted,
divided by the number of shares of the PerfectData Series A Preferred Stock then
outstanding.
(f) Voting. Each holder of the PerfectData Series A Preferred Stock
shall be entitled to vote with the holders of the PerfectData Common Stock as a
single class on all matters submitted to a vote of the stockholders of
PerfectData and shall be entitled to the number of votes such holder would have
been entitled to had such holder converted his, her or its shares of the
PerfectData Series A Preferred Stock. In addition, the holders of the
PerfectData Series A Preferred Stock shall vote as a separate class on any
matter which adversely affect their rights or as to which their consent is
required. In such event each holder shall have one vote per share.
(g) Additional Protection Provisions. During such time as any shares
of the PerfectData Series A Preferred Stock are outstanding, PerfectData shall
not take any of the following actions without the prior written consent of the
holders of more than 50% of the then outstanding shares of the PerfectData
Series A Preferred Stock:
(i) change any rights, preferences or privileges of the
PerfectData Series A Preferred Stock;
(ii) change any rights, preferences or privileges of any capital
stock of PerfectData that would adversely affect the
PerfectData Series A Preferred Stock;
(iii)create or issue any class or series of capital stock that
ranks on a par with, or senior to, the PerfectData Series A
Preferred Stock, with respect to the distribution of assets
upon the liquidation, dissolution or winding up of
PerfectData;
(iv) increase or decrease the number of authorized shares of the
PerfectData Series A Preferred Stock;
(v) redeem or repurchase, or declare or pay any cash dividend on
any securities junior to the PerfectData Series A Preferred
Stock except in accordance with the Certificate of
Designations or for repurchases pursuant to an equity
incentive plan approved by PerfectData's Board of Directors
in good faith; or
(vii) amend PerfectData's Certificate of Incorporation or Bylaws.
Closing
The closing of the transactions contemplated by the Merger Agreement will
occur upon the occurrence of certain events and the fulfillment by the parties
thereto of certain conditions, unless waived (other than as to stockholder
approval as specified in (a) below), including, without limitation:
(a) the receipt of the requisite stockholders approvals from Sona and
Merger Sub;
(b) PerfectData having a Tangible Net Worth of at least $750,000;
(c) Sona has delivered to PerfectData true and correct copies of
Sona's audited consolidated balance sheets as of December 31, 2004 and December
31, 2003, and the related audited statements of operations, shareholders' equity
and cash flow, including all notes and schedules thereto, which financial
statements (i) are, in the reasonable opinion of PerfectData, not materially
inconsistent with the draft of such financial statements previously delivered to
PerfectData and (ii) are in the opinion of PerfectData's independent registered
public accounting firm acceptable for filing in a Current Report on Form 8-K.
(d) PerfectData having obtained a waiver and release by each of
Millennium Capital Corporation ("Millennium"), Corey P. Schlossmann and William
B. Wachtel as the Trustee of the Digital Trust of any obligations of PerfectData
to each of them pursuant to the Stock Purchase Agreement dated January 20, 2000
by and among PerfectData and the buyers named therein;
(e) the termination of the Consulting Agreement dated January 20, 2000
(the "Consulting Agreement") by and among PerfectData, Millennium and JDK
Associates, Inc. ("JDK") except with respect to the warrant expiring March 31,
2005 of each of Millennium and JDK to each purchase 10,000 shares of the
PerfectData Common Stock at $2.75 per share and the "piggyback" registration
rights granted to JDK or its designee with respect to 150,000 shares of the
PerfectData Common Stock issued as consideration to JDK for its consent to
termination of the Consulting Agreement;
(f) termination of the employment agreement dated September 1, 2000,
as amended, between PerfectData and Harris A. Shapiro, Chairman of the Board,
Chief Executive Officer and director of PerfectData, except with respect to
certain accrued vacation pay, accrued but unpaid director's fees, out-of pocket
expenses and options granted and outstanding under the PerfectData Option Plan;
and
(g) a release by Mr. Schlossmann, a director of PerfectData, of any
obligations by PerfectData to Mr. Schlossmann, except obligations relating to
stock options under the PerfectData Option Plan and accrued but unpaid directors
fees.
As previously reported in PerfectData's Current Report on Form 8-K filed on
March 3, 2005, the Consulting Agreement has been terminated.
Termination
The Merger Agreement may be terminated as follows:
(a) by the mutual written consent of Sona and PerfectData;
(b) by Sona or PerfectData if a court of competent jurisdiction or any
other governmental entity shall have issued an order enjoining the Merger
contemplated by the Merger Agreement;
(c) by either Sona or PerfectData if PerfectData's Tangible Net Worth
is less than $750,000;
(d) by either Sona or PerfectData if there is a material breach by the
other party of a representation, warranty, covenant or other obligation
contained in the Agreement that is incapable of being cured or is not cured
within 15 days of written notice by the non-breaching party;
(e) by either Sona or PerfectData if either of such parties receives a
proposal from a third party with respect to an acquisition, tender offer, merger
or any other transaction that the Board of Directors of such corporation
considers a "Superior Proposal" (as defined in the Merger Agreement);
(f) by PerfectData, if the audited consolidated financial statements
for the periods ending December 31, 2003 and 2004 to be delivered by Sona are,
in the reasonable opinion of PerfectData, materially different than the draft of
financial statements for such periods previously delivered to PerfectData; or
(g) by either PerfectData or Sona if the conditions contained in the
Merger Agreement have not been performed by the other party, and are not capable
of being performed by April 15, 2005 other than as a result of an action by the
other party.
In the event of a termination of the Merger Agreement by Sona as a result
of (c), (d), or (g) above, or if PerfectData accepts a Superior Proposal
pursuant to (e) above, PerfectData shall pay a "break-up" fee to Sona of
$250,000 and shall reimburse Sona for all out-of-pocket expenses incurred in
connection with the Merger.
In the event of a termination of the Merger Agreement by PerfectData as a
result of (d), (f), or (g) above, or if Sona accepts a Superior Proposal
pursuant to (e) above, Sona shall pay a "break-up" fee to PerfectData of
$250,000 and shall reimburse PerfectData for all PerfectData's out of pocket
expenses incurred in connection with the Merger.
If after the Closing, but prior to the issuance of the Additional Shares to
the former Sona Shareholders, either John Bush or Shawn Kreloff (currently
officers and directors of Sona who will assume the same positions in PerfectData
after the Merger) determine that PerfectData has materially breached any of its
representations or warranties in the Agreement, which breaches have resulted in
damages of at least $50,000 to Sona, or $25,000 with respect to the calculation
of the Tangible Net Worth, then either may direct that the Additional Shares be
issued to the former Sona Shareholders.
If after the Closing, but prior to the issuance of the Additional Shares to
the former Sona Shareholders, Mr. Shapiro determines that Sona had materially
breached any of its representations or warranties in the Agreement, which
breaches have resulted in damages of at least $50,000, Mr. Shapiro may request
that the Additional Shares be cancelled. In the event Mr. Shapiro is unable or
declines to act, Mr. Schlossmann may act in lieu thereof.
Voting Securities and Principal Holders Thereof
Outstanding Shares
As of the Record Date, there were 6,359,530 shares of the PerfectData
Common Stock issued, outstanding and entitled to vote. There is no other class
of capital stock currently issued and outstanding and, accordingly, entitled to
vote. Each shareholder of record is entitled to cast, in person or by proxy when
a stockholder vote is solicited, one vote for each share of the Common Stock
held by such stockholder. As indicated in the section "Introduction" elsewhere
in this Information Statement, NO VOTE OR OTHER ACTION OF PERFECTDATA'S
STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
Pre-Merger Ownership Table
The following table sets forth, as of the Record Date, certain information
with respect to (1) any person known to PerfectData who beneficially owned more
than 5% of PerfectData Common Stock, (2) each director of PerfectData, (3) the
Chief Executive Officer of PerfectData and (4) all directors and executive
officers as a group. Each beneficial owner who is a natural person has advised
PerfectData that he or she has sole voting and investment power as to the shares
of the PerfectData Common Stock, except that, until an option or a warrant is
exercised, there is no voting right and except as noted in Note (2) to the
table.
Number of Shares of PerfectData Percentage of PerfectData
Name and Address Common Common Stock
of Beneficial Owner Stock Beneficially Owned Beneficially Owned(1)
Joseph Mazin 788,997 (2) 12.41%
c/o Flamemaster Corporation
11120 Sherman Way
Sun Valley, CA 91252
StarBiz Corporation 537,997 (2) 8.45%
11120 Sherman Way
Sun Valley, CA 91252
William B. Wachtel, 427,873 6.73%
Trustee of Digital Trust (3)
c/o Wachtel & Masyr, LLP
110 East 59th Street
New York, NY 10022
Harris A. Shapiro (4) 317,832 (5) 4.97%
c/o PerfectData Corporation
1445 East Los Angeles Avenue
Simi Valley, CA 93065
Bryan Maizlish (6) 27,588 (7) less than 1%
9705 Conestoga Way
Potomac, MD 20854
Timothy D. Morgan (6) 28,788 (7) less than 1%
11734 Gladstone Circle
Fountain Valley, CA 92708
Tracie Savage (6) 37,888 (8) less than 1%
6212 Banner Avenue
Los Angeles, CA 90038
Corey P. Schlossmann (6) 228,091 (7) 3.57%
19654-A Roscoe Blvd.
Northridge, CA 91324
All directors and officers as a group 645,378 (9) 9.93%
(6 in number)
__________
(1) The percentages computed in the table are based upon 6,359,530
shares of the PerfectData Common Stock which were outstanding on
the Record Date. Effect is given, pursuant to Rule 13-d(1)(i)
under the Exchange Act, to shares issuable upon the exercise of
options or warrants currently exercisable or exercisable within
60 days of the Record Date.
(2) The shares of the PerfectData Common Stock reported in the table
include (a) 537,997 shares owned by StarBiz Corporation, or "Star
Biz," for which Mr. Mazin has voting power as the President,
Chairman and Chief Executive Officer of Star Biz; (b) 36,000
shares owned by the Flamemaster Corporation Employees' Profit
Sharing Plan for which Mr. Mazin is the fiduciary; and (c) 23,000
shares owned by Altius Investment Corporation, or "Altius," for
which Mr. Mazin has shared voting power as Chairman of the Board
of Altius. Certain of the shares reported in the table are owned
by Donna Mazin, his wife, or as to which shares she shares
dispositive and voting powers with Mr. Mazin.
(3) William B. Wachtel as the Trustee of the Digital Trust has, under
the trust agreement, sole voting and investment power with
respect to the shares reported in the table. Harris A. Shapiro,
currently the Chairman of the Board, the Chief Executive Officer
and a director of PerfectData, was the settler of the Digital
Trust and made an irrevocable grant to it of the assets which the
Digital Trust used to effect the purchase of the shares. The
beneficiaries of the Digital Trust are Mr. Shapiro's children and
grandchildren who survive him, although the Trustee, in his
absolute discretion, may pay or apply yearly income or the
principal of the Trust to any beneficiary. Because he made an
irrevocable grant and has no voting or investment power with
respect to the shares, Mr. Shapiro is not the beneficial owner of
the shares reported in the table as being owned of record by the
Digital Trust and beneficially by the Trustee.
(4) Mr. Shapiro is the Chairman of the Board, the Chief Executive
Officer and a director of PerfectData.
(5) The shares of the PerfectData Common Stock reported in the table
reflect (a) 284,500 shares owned by Millennium Capital
Corporation, or "Millennium," for which Mr. Shapiro has voting
power as its President; (b) 6,666 shares issuable upon the
exercise of an option expiring June 19, 2012 under the
PerfectData Option Plan; (c) 16,666 shares issuable upon the
exercise of an option expiring September 25, 2012 under the
PerfectData Option Plan; and (d) 10,000 shares issuable upon the
exercise by Millennium
of a warrant expiring March 30, 2005. The shares of the
PerfectData Common Stock reported in the table do not include (x)
3,334 shares issuable upon the exercise of the option described
in (b); (y) 8,334 shares issuable upon the exercise of the option
described in (c); and (z) 25,000 shares issuable upon the
exercise of an option expiring June 9, 2014 under the PerfectData
Option Plan, none of which options was exercisable as to such
shares on the Record Date or within 60 days thereafter.
(6) A director of PerfectData.
(7) The shares of the PerfectData Common Stock reported in the table
include (a) 6,666 shares issuable upon the exercise of an option
expiring June 19, 2012 under the PerfectData Option Plan and (b)
16,666 shares issuable upon the exercise of an option expiring
September 25, 2012 under the PerfectData Option Plan. The shares
of the PerfectData Common Stock reported in the table do not
include (x) 3,334 shares issuable upon the exercise of the option
described in (a); (y) 8,334 shares issuable upon the exercise of
the option described in (b); and (z) 25,000 shares issuable upon
the exercise of an option expiring June 9, 2014 under the
PerfectData Option Plan, none of which options was exercisable as
to such shares on the Record Date or within 60 days thereafter.
(8) The shares of the PerfectData Common Stock reported in the table
include (a) 10,000 shares issuable upon the exercise of an option
expiring July 20, 2005 under PerfectData's 1985 Stock Option
Plan; (b) 6,666 shares issuable upon the exercise of an option
expiring June 19, 2012 under the PerfectData Option Plan; and (c)
16,666 shares issuable upon the exercise of an option expiring
September 25, 2012 under the PerfectData Option Plan. The shares
of the PerfectData Common Stock reported in the table do not
include (x) 3,334 shares issuable upon the exercise of the option
described in (b); (y) 8,334 shares issuable upon the exercise of
the option described in (c); and (z) 25,000 shares issuable upon
the exercise of an option expiring June 9, 2014 under the
PerfectData Option Plan, none of which options was exercisable as
to such shares on the Record Date or within 60 days thereafter.
(9) The shares of the PerfectData Common Stock reported in the table
include (a) those shares indicated in the text to Notes 5, 7 and
8 and (b) 1,875 shares issuable to an executive officer upon the
exercise of an option expiring October 30, 2011 under the
PerfectData Option Plan. The shares of the PerfectData Common
Stock reported in the table do not include (x) 625 shares
issuable upon the exercise of the option described in (b) and (y)
10,000 shares issuable to the same executive officer upon the
exercise of an option expiring June 9, 2014 under the PerfectData
Option Plan, neither of which options was exercisable as to such
shares on the Record Date or within 60 days thereafter.
If the Merger is consummated, each of the then outstanding options granted
under the PerfectData Option Plan, including those described in the footnotes to
the preceding table, becomes immediately exercisable and its expiration date
becomes the third anniversary of the Effective Time.
Each of the proposed persons to be elected as a director and/or officer of
PerfectData if the Merger is consummated has advised PerfectData that he owns no
shares of the PerfectData Common Stock as of the Record Date. Each of the
persons in the preceding table has advised
PerfectData that he or she owns no shares of the capital stock of Sona and,
accordingly, will receive no shares of the PerfectData Series A Preferred Stock
upon the consummation of the Merger.
Post-Merger Ownership Table
The following table assumes that the Merger was consummated as of the
Record Date and, as a result, an aggregate of 565,370 shares of the PerfectData
Series A Preferred Stock to be issued upon consummation of the Merger were
converted into 26,734,120 shares of the PerfectData Common Stock as of the
Record Date. The following table sets forth certain information with respect to
(1) each person who, to the knowledge of PerfectData and Sona, would be the
beneficial owner of more than 5% of the PerfectData Common Stock post-Merger,
(2) each director of PerfectData post-Merger, (3) the Chief Executive Officer of
PerfectData post-Merger, (4) all directors and executive officers as a group
post-Merger and (5) the directors of PerfectData pre-Merger. Each beneficial
owner who is a natural person has advised PerfectData and Sona that he or she
will have sole voting and investment power as to the shares of the PerfectData
Common Stock, except that, until an option or a warrant is exercised, there is
no voting right. None of the stockholders which owned more than 5% of the
outstanding shares of the PerfectData Common Stock pre-Merger and who is listed
in the table in the subsection captioned "Pre-Merger Ownership Table" in this
section "Voting Securities and Principal Holders Thereof" is such a holder
post-Merger and, accordingly, is not included in the following table.
Number of Shares of PerfectData Percentage of PerfectData
Name and Address Common Common Stock
of Beneficial Owner Stock Beneficially Owned Beneficially Owned(1)
Shawn Kreloff (2) 3,893,221 (3) 11.65%
c/o Sona Mobile, Inc.
825 Third Avenue, 32nd Floor
New York, NY 10022
John Bush (4)
c/o Sona Mobile, Inc. 6,126,594 (5) 18.34%
825 Third Avenue, 32nd Floor
New York, NY 10022
Nicholas H. Glinsman (6) 2,364,303 (3) 7.08%
c/o Sona Mobile, Inc.
Victoria Tower
Suite 801
Toronto Ontario, M4C 14Y2
Canada
Bryan Maizlish (7) 64,256 (8) less than 1%
9705 Conestoga Way
Potomac, MD 20854
All directors and officers as a group 12,185,919 (9) 40.64%
9.93
(5 in number)
Harris A. Shapiro (10) 354,500 (11) less than 1%
245 East 63rd Street
New York, NY 10021
Timothy D. Morgan (12) 65,456 (8) less than 1%
11734 Gladstone Circle
Fountain Valley, CA 92708
Tracie Savage (12) 74,556 (13) less than 1%
6212 Banner Avenue
Los Angeles, CA 92708
Corey P. Schlossmann (12) 264,759 (8) less than 1%
19654-A Roscoe Blvd.
Northridge, CA 91324
__________________
(1) The percentages computed in the table are based upon the
assumption that (a) 6,359,530 shares of the PerfectData Common
Stock were outstanding as of the Record Date and (b) 565,370
shares of the Perfect Data Series A Preferred Stock issuable upon
the Merger were converted into 26,734,120 shares of the
PerfectData Common Stock as of the Record Date, or an aggregate
of 33,417,650 shares of the PerfectData Common Stock were
outstanding as of the Record Date. Effect is given, pursuant to
Rule 13-d(1)(i) under the Exchange Act, to shares issuable upon
the exercise of options or warrants currently exercisable or
exercisable within 60 days of the Record Date. As indicated in
the preceding subsection captioned "Pre-Merger Ownership Table"
of this section "Voting Securities and Principal Holders
Thereof," all of the options outstanding on the Closing Date
pursuant to the PerfectData Stock Option Plan will become
immediately exercisable as to all shares subject thereto when the
Merger is consummated.
(2) Mr. Kreloff will become the Chairman of the Board and a director
of PerfectData effective with the Merger.
(3) The shares of the PerfectData Common Stock reported in the table
reflect the shares issuable upon the conversion of shares of the
PerfectData Series A Preferred Stock.
(4) Mr. Bush will become the President, the Chief Executive Officer
and a director of PerfectData effective with the Merger
(5) The shares of the PerfectData Common Stock reported in the table
reflect (a) 6,047,782 shares issuable upon the conversion of
shares of the PerfectData Series A Preferred Stock to be owned by
Mr. Bush and (b) 78,812 shares issuable upon the conversion of
shares of the PerfectData Series A Preferred Stock to be owned by
his wife.
(6) He will become a director of PerfectData effective with the
Merger.
(7) Mr. Maizlish continues to serve as a director of PerfectData.
(8) The shares of the PerfectData Common Stock reported in the table
reflect or include (a) 10,000 shares issuable upon the exercise
of an option under the PerfectData Option Plan, (b) 25,000 shares
issuable upon the exercise of an option under the PerfectData
Option Plan and (c) 25,000 shares issuable upon the exercise of
an option under the PerfectData Option Plan. All these options
expire on the third anniversary of the Effective Time.
(9) The shares of the PerfectData Common Stock reported in the table
reflect (a) the shares indicated in the text to Notes 3, 5 and,
only as to Bryan Maizlish, 8 and (b) 1,158,508 shares issuable to
an executive officer upon conversion of shares of the PerfectData
Series A Preferred Stock.
(10) Mr. Shapiro served PerfectData prior to the Merger as its
Chairman of the Board, its Chief Executive Officer and a
director.
(11) The shares of the PerfectData Stock reported in the table reflect
(a) 284,500 shares owned by Millennium, for which Mr. Shapiro has
voting power as its President, (b) 10,000 shares issuable upon
the exercise of an option under the PerfectData Option Plan, (c)
25,000 shares issuable upon the exercise of an option under the
PerfectData Option Plan, (d) 25,000 shares issuable upon the
exercise of an option under the PerfectData Option Plan and (e)
10,000 shares issuable upon the exercise by Millennium of a
warrant expiring March 30, 2005. All three options expire on the
third anniversary of the Effective Time.
(12) He or she served PerfectData prior to the Merger as a director.
(13) The shares of the PerfectData Common Stock reported in the table
include (a) 10,000 shares issuable upon the exercise of an option
under the PerfectData's 1985 Stock Option Plan, (b) 10,000 shares
issuable upon the exercise of an option under the PerfectData
Option Plan, (c) 25,000 shares issuable upon the exercise of an
option under the PerfectData Option Plan and 25,000 shares
issuable upon the exercise of an option under the PerfectData
Option Plan. All four options expire on the third anniversary of
the Effective Time.
Change in Control
To the knowledge of PerfectData, no change in control has occurred since
the start of its last fiscal year on April 1, 2004. However, as indicated in the
section captioned "Information Regarding Merger Transaction" elsewhere in this
Information Statement, a change in control will occur as a result of the Merger.
INFORMATION RELATING TO New Directors and Executive Officers
Change in PerfectData Board of Directors
In accordance with the Merger Agreement, Messrs. Harris A. Shapiro, Timothy
D. Morgan and Corey P. Schlossmann and Ms. Tracie Savage will resign as
directors of the Company effective as of the Effective Time. Bryan Maizlish will
continue to serve as a director of PerfectData after the Effective Time. The
Merger Agreement provides that Mr. Maizlish will be nominated for re-election at
least at the first Annual Meeting of Stockholders following the Effective Time
and the other then directors will use their best efforts to solicit his
re-election. Messrs. Shawn Kreloff, John Bush and Nicholas H. Glinsman will be
elected by Mr. Maizlish as members of the PerfectData's Board of Directors to
serve until the next Annual Meeting of Stockholders and until then successors
are duly elected and qualify. Because Sona has not designated a fourth nominee
as yet, there will be a vacancy on the PerfectData Board of Directors after the
Closing. See also the subsection captioned "Directors and Officers" in the
section "Information Regarding Merger Transaction" elsewhere in this Information
Statement.
New Directors and Executive Officers
The following table sets forth the name and age of each of the prospective
new directors and each person who will become an executive officer as of the
Effective Time:
Name Age Position
Shawn Kreloff 42 Chairman of the Board and
Director
John Bush 41 President, Chief Executive
Officer and New Director
Nicholas H. Glinsman 44 Secretary and Director
Lance Yu 35 Senior Vice President - Chief
Technology Officer
Business History
Shawn Kreloff has been the Chairman of Sona since September 2004. At the
Effective Time, he will become the Chairman and a director of the PerfectData.
Since 1999, Mr. Kreloff has been a private investor. He was a founding investor
of Insight First, a company that provides analytics software, which was sold to
24/7 Real Media in 2003. He was also a founding investor, as well as executive
vice president of business development, of Gray Peak Technologies, Inc., a
network consulting firm that provided high end consulting to telecomm, financial
and other Fortune 1,000 companies and served as its Chairman and Chief Executive
Officer until it was sold to USWeb (Nasdaq: USWB) in 1998 for over $100 million.
From September 2002 to 2003, Mr. Kreloff was executive vice president of sales,
marketing and business development of Predictive Systems Corp., a network
infrastructure and security consulting company. Mr. Kreloff is a member of the
board of directors and, since September 2004, of the board of directors of
Secured Services, Inc., (OTCBB: SSVC.OB). Mr. Kreloff served on the board of
directors of Hudson Williams, a computer consulting firm, from 1999 through 2004
when it was acquired by Keynote Systems. (Nasdaq NM: KEYN).
John Bush has been the President and Chief Executive Officer of Sona since
December 2003. At the Effective Time, he will become the President and Chief
Executive Officer and a director of PerfectData. He has been a senior
telecommunications and technology executive for over 17 years. From November
2001 through December 2003, he was self-employed and a private investor. From
December 1998 through December 2001, he was Vice President - Enterprise
Marketing for Sprint Canada.
Nicholas H. Glinsman has been a member of the board of directors of Sona
since September 2004 and will become the Secretary and a director of PerfectData
at the Effective Time. Mr. Glinsman has over 17 years of experience in the
financial services industry. Since 2000 Mr. Glinsman has been the Chief
Executive Office of 1 EZcall, LLC, a private investment fund. Since 2001 Mr.
Glinsman has been a member of the board of directors of Braven Capital and
Mirebella Funds Services, which are also private investment funds. Prior to
2001, he held various senior management positions at Salomon Smith Barney, Inc.
and Merrill Lynch, Pierce, Tenner & Smith, Inc., including manager of the future
sales group for Europe and the Middle East. He also represented the trading
floor on the bank's European technology committee.
Lance Yu has been the Senior Vice President - Chief Technology Officer of
Sona since November 2004. From January 2002 through November 2004, he was the
Vice President - Technology of Sona Innovations, which was purchased by Sona
from Baldhead Systems in December 2003. From February 2000 through January 2002,
Mr. Lu was employed by Baldhead Systems, a professional services, web design and
business consulting organization based in Toronto, Canada, first as a Senior
Project Manager and then as Vice President - Technology.
Family Relationships
There are no family relationships among the new directors and executive
officers of PerfectData and Bryan Maizlish, the continuing director. No such
person has any family relationship with the outgoing directors and executive
officers of PerfectData.
Directorships on Other Public Companies
As disclosed above in the subsection captioned "Business History" of this
section "Information Relating to New Directors and Executive Officers," since
September 2004 Shawn Kreloff has served as a director of Secure D Services Inc.,
whose stock is traded on the OTC Bulletin Board.
No other new director serves as a director of a company with a class of
securities registered pursuant to Section 12 of the Exchange Act or any company
registered as an investment company under the Investment Company Act of 1940, as
amended (the "Investment Company Act").
Information Regarding the Continuing Director
Bryan Maizlish, 43, was elected as a director of PerfectData on March 31,
2000. Mr. Maizlish joined Lockheed Martin Corporation in August 2000 and had
held various managerial positions since then. He is currently serving as the
Chief Technology Officer/IT Program Director of the Integrated Systems and
Solutions Team NSGI of Lockheed Martin Corporation. From January 1998 to August
2000, he was employed by Magnet Interactive Inc., a private Internet
professional services company and its affiliate Noor Group Ltd., a full service
Internet solutions and infrastructure provided offering a full range of services
from networking, hosting, and Internet service provision to web-based services
and entertaining based in Cairo, Egypt, his last position at both companies
being Executive Vice President, Chief Strategy Officer and Chief Financial
Officer. Prior thereto, he held various managerial and consulting positions for
over a decade in the new media and entertainment industries, such as MCA Inc.,
Gulf Western Corporation and Gene Roddenberry's Norway Corporation.
Mr. Maizlish does not serve as a director of another company with a class
of securities registered pursuant to Section 12 of the Exchange Act or any
company registered as an investment company under the Investment Company Act.
Compliance with Section 16(a) of the Exchange Act
Based solely on a review of Forms 3 and 4 furnished to PerfectData under
Rule 16(a)-3 promulgated under the Exchange Act, with respect to fiscal 2005,
PerfectData is not aware of any director or executive officer of PerfectData who
failed to file on a timely basis, as disclosed in such forms, reports required
by Section 16(a) of the Exchange Act during fiscal 2005.
As of the Record Date, there were no beneficial owners of 10% or more of
the Common Stock known to PerfectData other than Joseph Mazin who was, until
July 27, 2000, the President and Chief Executive Officer of PerfectData and,
until March 31, 2000, a director of PerfectData, Mr. Mazin has advised
PerfectData that he timely filed all reports required by Section 16(a) of the
Exchange Act during fiscal 2005.
Code of Ethics
The Board of Directors of PerfectData had determined not to adopt a written
code of ethics because PerfectData (1) had only two executive officers, (2) had
agreed to sell, and subsequent did sell, PerfectData's current operations to an
unaffiliated company, and
(3) had been actively seeking a suitable acquisition or merger partner for
PerfectData. Instead the Board had counsel to PerfectData review with the two
officers the standards which would have been in a written code of ethics and
directed its Audit Committee to monitor closely the conduct of the two officers
on at least a quarterly basis.
After the Merger, the then Board of Directors will review the necessity for
a written code of ethics.
Board Committees
PerfectData has two standing committees: an Audit Committee and a
Compensation Committee; however, the Board has been acting in lieu of the
Compensation Committee.
PerfectData does not have a standing nominating committee or a committee
performing similar functions. Because the Board has been seeking, since March
31, 2000 when four of the five current directors took office, to obtain a
suitable acquisition candidate which, among other matters, would furnish new
directors, the directors did not believe it necessary or appropriate to set up a
formal nominating committee nor to adopt a charter for such a committee.
However, in its proxy statements, PerfectData included a statement that, if a
stockholder had a recommendation as to a nominee for election as a director,
such stockholder should make his, her or its recommendation in writing addressed
to Harris A. Shapiro, as the Chairman of the Board of PerfectData, at
PerfectData's address shown in the heading to the proxy statement, giving the
business history and other relevant biographical information as to the proposed
nominee and the reasons for suggesting such person as a director of PerfectData,
and the Board would then promptly review the recommendation and advise the
stockholder of its conclusion and, if a rejection, the reasons therefor. No
stockholder ever made a recommendation in response to PerfectData's statement in
its proxy statement.
Until the new directors take office, no decision has been made as to
restaffing the standing committees or adding a nominating committee. The Merger
Agreement provides that, within three months of the Closing Date, PerfectData
must have three directors that will meet the eligibility requirements imposed by
Nasdaq for service on an audit committee of a Nasdaq-listed company.
Sona Executive Compensation
Shawn Kreloff, Sona's Chairman, did not receive any compensation from Sona.
John Bush, a director, Chief Executive Officer and President of Sona, was paid a
consulting fee of CDN$120,000, CDN$84,000 and CDN$49,000 for the years ended
December 31, 2004, 2003 and 2002, respectively, by Sona. Since January 2005,
Nicholas H. Glinsman, a director and Secretary of Sona, has received a
consulting fee of $12,500 per month. Lance Yu, a Senior Vice President - Chief
Technology Officer of Sona, was paid a salary of CDN $59,166, CDN $50,153 and
CDN $25,691 for the years ended December 31, 2004, 2003 and 2002, respectively,
by Sona.
Sona Certain Relationships and Related Transactions
There were no transactions or proposed transactions during the last two
years to which Sona was or is to be a party, in which any director or officer of
Sona, any beneficial owner of record of more than five percent of any class of
voting securities of Sona or any of their immediate family members had or is to
have a direct or indirect material interest.
Sona Legal Proceedings
Sona is not aware of any legal proceedings in which any director, officer
or affiliate of Sona, any beneficial owner of record of more than five percent
of any class of voting securities of Sona, or any associate of any such
director, officer, affiliate of Sona, or security holder is a party adverse to
Sona or any of its subsidiaries or has a material interest adverse to Sona or
any of its subsidiaries or to PerfectData.
Compensation of Directors and Executive Officers
Summary Compensation Table
The following table provides certain summary information concerning the
compensation earned for services rendered in all capacities to PerfectData
during each of the last three fiscal years by PerfectData's Chief Executive
Officer through March 21, 2005 of the current fiscal year ending March 31, 2005.
No other executive officer of PerfectData earned in excess of $100,000:
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation Other
Name and Securities Underlying Compensation
Principal Position Year Salary Options ($)
($)
Harris A. Shapiro (1) 2005 71,250 25,000 1,750 (2)
Chief Executive Officer and 2004 150,000 - 2,500 (2)
Chairman of the Board 2003 150,000 35,000 2,250 (2)
(1) The Board designated Mr. Shapiro as the Chief Executive Officer
of PerfectData effective September 2000. PerfectData and Mr.
Shapiro entered into a one-year employment agreement in September
2000 providing for a base annual salary of $150,000. The Board
had, from time to time, extended the term of his contract at the
same salary. Effective April 1, 2004, the Board amended his
contract (a) to a base annual salary of $95,000 and (b) the
contract become terminable upon two weeks' prior notice by either
party. Effective January 1, 2005, Mr. Shapiro agreed to waive his
salary. As indicated in the subsection captioned "Closing" in the
section "Information Regarding Merger Transaction" elsewhere in
this Information Statement, a condition precedent in the Merger
Agreement to Sona closing is that PerfectData terminate Mr.
Shapiro's employment agreement.
(2) Mr. Shapiro was paid cash compensation for his services as a
director in accordance with the fee arrangements for directors as
described in the subsection captioned "Directors' Compensation"
in this section "Executive Compensation."
Option /SAR Grants in Last Fiscal Year
(1) PerfectData Option Plan
In May 2000, the Board of Directors of PerfectData adopted the PerfectData
Option Plan. In October 2000, the shareholders of PerfectData approved the
PerfectData Option Plan and ratified options previously granted thereunder.
PerfectData registered under the Securities Act of 1993, as amended (the
"Securities Act"), the shares issuable upon the exercise of options granted or
to be granted pursuant to the PerfectData Option Plan in a Registration
Statement on Form S-8, File No. 333-51744, filed on December 13, 2000. As a
result of this registration under the Securities Act, an optionee who is not an
affiliate may sell immediately upon exercise and an optionee who is an affiliate
(i.e., a director or executive officer) may sell pursuant to the exemption of
Rule 144 without compliance with any holding period under paragraph (d) of Rule
144 under the Securities Act. The PerfectData Option Plan provides for the grant
of options to purchase shares of the PerfectData Common Stock to directors,
officers, employees and consultants of PerfectData. Non-qualified stock options
may be granted to directors, officers, employees and consultants. Incentive
stock options, as such form is defined in Section 422 of the Code, may be
granted only to employees. The term of the PerfectData Option Plan is for ten
years and it provides for the grants of an aggregate of 2,000,000 shares of the
PerfectData Common Stock. The PerfectData Option Plan is currently administered
by the Board.
The PerfectData Option Plan, consistent with the provisions of the Code,
provides that the exercise price of an incentive stock option shall not be less
than the fair market value of the Common Stock on the date of grant, except
that, if the employee owns stock possessing more than 10% of the total combined
voting power of all classes of stock, the exercise price of the option must be
at least 110% of the fair market value of the PerfectData Common Stock on the
date of grant and the incentive stock option cannot be exercised after five
years from the date of grant. No stock option granted has, and no option to be
granted under the PerfectData Option Plan may have, a term in excess of ten
years. The exercise price of a non-statutory or nonqualified option may be less
than the fair market value on the date of grant.
The number of shares subject to an outstanding option and the exercise
price thereof are subject to adjustment in the event of a stock dividend, stock
split, reorganization, recapitalization, combination of shares, change in
corporate structure or similar events. No fractional shares will be issued upon
exercise and the PerfectData has no obligation to pay for such fractional share.
Options granted to date are not exercisable during the first year after the
date of grant and thereafter become exercisable in annual installments of 25%
(33-1/3% in the case of certain options to directors) each. It is expected that
future options, if any, will be granted on a similar basis. Some options to be
granted to employees may have performance goals as the condition precedent to
becoming exercisable. No performance option has been granted to date.
Options granted under the PerfectData Option Plan are non-transferable and
not immediately exercisable. Future options, if any, are expected to be granted
on the same basis.
If the optionee's employment will terminate for any reason other than his
or her death or disability, he or she may, for a period of up to three months,
exercise the option to the extent exercisable upon the date of termination. If
the optionee's employment terminates because of his or her total and permanent
disability (as defined in the Code), the optionee will have 12 months within
which to exercise the stock option to the extent it was exercisable upon the
date of termination. In the event of other disability causing termination, the
optionee may have six months (three months in the event the optionee wants
continuous treatment of the stock option as an incentive stock option) to
exercise the stock option to the extent exercisable upon the date of
termination. If the optionee dies, his estate may exercise the stock option to
the extent exercisable upon the date of death of the optionee, whether it
occurred during the initial term or during the three, six or 12-month periods
described in the three preceding sentences. In no event may a stock option be
exercised beyond its original expiration date. Similar provisions will be
applicable to optionees who are not employees.
In the event of a transaction similar to the Merger, all outstanding
options become immediately exercisable and the expiration date becomes the third
anniversary of the effective date of the transaction.
For a consultant to be eligible to receive a grant of a stock option under
the PerfectData Option Plan, the optionee must be a natural person and the
services rendered for PerfectData must be of a bona fide nature and not in
connection with the offer or sale of securities of PerfectData in a capital
raising transaction and do not directly or indirectly promote or maintain a
market for the PerfectData's securities.
At March 21, 2005, options covering a total of 314,000 shares of the
PerfectData Common Stock were outstanding under the PerfectData Option Plan at a
weighted average exercise price of $0.92 per share.
(2) Activity in Fiscal 2005
During fiscal 2005, each of the five directors, including Harris A.
Shapiro, the Chief Executive Officer of PerfectData, was granted a stock option
for 25,000 shares of the PerfectData Common Stock.
During fiscal 2005, an option for 10,000 shares of the PerfectData Common
Stock was granted to an executive officer of PerfectData.
During fiscal 2005, options aggregating 4,500 shares expired.
PerfectData has never granted any stock appreciation rights (SARs).
Option Grants, Exercises and Values
The following table provides certain summary information concerning the
granting of options during fiscal 2005 to the Chief Executive Officer who is the
sole executive officer named in the Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
% of Total
Options
Number of Granted to Exercise
Options Employees in Price per Expiration
Name Granted Fiscal Year Share Date
(#) ($)
Harris A. Shapiro 25,000 71% 0.52 6/09/14
The following table provides certain summary information concerning the
exercise of options during fiscal 2005 and unexercisable options held as of
March 21, 2005 by the Chief Executive Officer who is the sole executive officer
named in the Summary Compensation Table:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Shares Number of Value of
Acquired Unexercised Unexercised In-the-
On Value Options Held at Money Options
Name Exercise Realized March 21, 2005 at March 21,2005 (2)
(#) ($) (#) ($)
Exercisable Unexercisable
Harris A. Shapiro - - 60,000 (1) 5,666 23,334
______________
(1) As of March 21, 2005, options were exercisable to purchase 23,332
shares.
(2) Such value is based upon the market value of the PerfectData
Common Stock as of March 21 2005, less the exercise price payable
per share under such options. An option for 10,000 shares has
been excluded since the market value was less than the exercise
price.
Directors' Compensation
During fiscal 2005, each of the five current directors of PerfectData was
granted a stock option under the PerfectData Option Plan for 25,000 shares of
the PerfectData Common Stock. In addition, each director was eligible to receive
$500.00 for each meeting attended in person, plus reimbursement for
out-of-pocket expenses, and $250.00 for each meeting attended telephonically.
Sona currently has no compensation arrangements in effect for directors.
After the Merger
is effected, it is currently contemplated that: each outside director of
PerfectData will receive an annually director's fee of $5,000 and an option to
purchase 5,000 shares of the PerfectData Common Stock, which option will become
exercisable in for equal quarterly installments. All directors will receive
$250.00, plus reimbursement for actual out-of-pocket expenses, for each Board
meeting attended in person and $125.00 for each Board meeting attended
telephonically. The Chairperson of the Audit Committee will also receive an
annual fee of $1,000, payable in equal quarterly installments. Each member of
the Audit Committee, the Compensation Committee and, when created, the
Nominating Committee will receive $250.00, plus reimbursement for actual
out-of-pocket expenses, for each Committee meeting attended in person and
$125.00 for each Committee meeting attended telephonically, unless the Committee
meeting immediately precedes or follows a Board meeting, in which event the
Committee members will receive $150.00, for attending the Committee meeting in
person and $75.00 if they attend the Committee meeting telephonically.
There are no other relationships with respect to other entities that would
require disclosure here under Item 404 of Regulation S-K.
ADDITIONAL INFORMATION
Additional information about the Merger and the related transactions is
contained in PerfectData's Current Reports on Form 8-K filed on March 3, 2005
and March 11, 2005 pursuant to Section 13 of the Exchange Act. All of
PerfectData's periodic reports and proxy and information statements and the
exhibits thereto may be inspected without charge at the public reference section
of the Securities and Exchange Commission (the "Commission") at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549. Copies of this material also may
be obtained from the Commission at prescribed rates. The Commission also
maintains a website that contains reports, proxy and information statements and
other information regarding public companies that file reports with the
Commission. Copies of PerfectData's filings may be obtained from the
Commission's website at http://www.sec.gov.
By Order Of The Board Of Directors
/s/ Irene J. Marino
Irene J. Marino
Secretary
March 31, 2005