Preliminary Schedule 14C
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14C INFORMATION
Information
Statement Pursuant to Section 14(c) of the Securities Exchange Act of
1934
Check
the
appropriate box:
ý Preliminary
Information Statement
¨ Confidential,
for Use of the Commission Only (as permitted by Rule 14c-5(d)(2))
¨ Definitive
Information Statement
RED
MILE
ENTERTAINMENT, INC.
(Name
of
Registrant As Specified In Its Charter)
Payment
of Filing Fee (Check the Appropriate Box):
ý No
fee
required
¨ Fee
computed on table below per Exchange Act Rules 14c-5(g) 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
_________________________________________
4. Proposed
maximum aggregate value of transaction
_________________________________________
5. Total
fee
paid
_________________________________________
¨ Check
box
if any party 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.
RED
MILE
ENTERTAINMENT, INC.
4000
Bridgeway, Suite 101
Sausilito,
CA 94965
NOTICE
OF
STOCKHOLDER ACTION BY WRITTEN CONSENT
TO
ALL
STOCKHOLDERS OF RED MILE ENTERTAINMENT, INC.:
The
purpose of this letter is to inform you that our stockholders have given our
board of directors the authority to amend our 2005 Stock Option Plan (the
“Plan”) to increase the number of shares of common stock reserved for grant and
issuance thereunder from 666,666 shares to 2,500,000 shares.
The
holders of shares representing 54.7% of our voting power have executed a written
consent giving our board the authority to amend the Plan. The amendment to
the
Plan is described in greater detail in the information statement accompanying
this notice and the Plan is attached to the Information Statement as Appendix
A.
The consents that we have received constitute a majority of the stockholder
approval required for the amendment to the Plan under the Delaware Corporation
Law and our articles of incorporation and bylaws. We would not effect the
amendment before April 23, 2007, and our board may or may not elect to amend
the
Plan.
WE
ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
Because
the written consent of holders of a majority of our voting power satisfies
all
applicable stockholder voting requirements, we are not asking you for a proxy;
please do not send us one.
The
accompanying information statement is for information purposes only. Please
read
it carefully.
April
2,
2007
By
Order
of the Board of Directors
/s/
Chester Aldridge
Chester
Aldridge
President
and Chief Executive Officer
RED
MILE
ENTERTAINMENT, INC.
4000
Bridgeway, Suite 101
Sausilito,
CA 94965
INFORMATION
STATEMENT
April
2,
2007
WE
ARE
NOT ASKING YOU FOR A PROXY AND
YOU
ARE
REQUESTED NOT TO SEND US A PROXY.
This
information statement is being mailed on or about April 3, 2007, to the
stockholders of record of Red Mile Entertainment, Inc. at the close of business
on March 15, 2007. This information statement is being sent to you for
information purposes only. No action is requested or required on your part.
This
information statement constitutes notice to our stockholders of corporate action
by stockholders without a meeting, as required by Section 228 of the Delaware
Corporation Law.
At
the
request of our Board of Directors, we are sending this information statement
to
our stockholders to notify you about action taken by the holders of 54.7% of
our
outstanding voting capital stock (the “Majority Holders”), by written consent,
dated March 9, 2007, in lieu of a special meeting of the stockholders, in
accordance with the Delaware General Corporation Law. The action taken was
ratification and approval of an amendment to our 2005 Stock Option Plan (the
“Plan”) to increase the number of shares of common stock reserved for grant and
issuance thereunder from 666,666 to 2,500,000 shares. The amendment to the
Plan
will be effective not less than 20 calendar days after the initial mailing
of
this information statement.
As
of the
close of business on the record date, we had 100,000,000 shares of common stock
authorized, of which 9,661,740 shares
were outstanding, and 20,000,000 shares of preferred stock authorized with
no
shares of preferred stock outstanding. Each outstanding share of common stock
is
entitled to one vote per share.
We
will
bear the expenses relating to this information statement, including expenses
in
connection with preparing and mailing this information statement and all
documents that now accompany or may in the future supplement it. We contemplate
that brokerage houses, custodians, nominees, and fiduciaries will forward this
information statement to the beneficial owners of our common stock held of
record by these persons and we will reimburse them for their reasonable expenses
incurred in this process.
Only
one
information statement is being delivered to multiple stockholders sharing an
address, unless we have received contrary instructions from one or more of
the
stockholders. We will undertake to deliver promptly upon written or oral request
a separate copy of the information statement to a stockholder at a shared
address to which a single copy of the information statement was delivered.
You
may make a written or oral request by sending a written notification to our
principal executive offices stating your name, your shared address, and the
address to which we should direct the additional copy of the information
statement or by calling our principal executive offices. If multiple
stockholders sharing an address have received one copy of this information
statement and would prefer us to mail each stockholder a separate copy of future
mailings, you may send notification to or call our principal executive offices.
Additionally, if current stockholders with a shared address received multiple
copies of this information statement and would prefer us to mail one copy of
future mailings to stockholders at the shared address, notification of that
request may also be made by mail or telephone call to our principal executive
offices.
TABLE
OF CONTENTS
|
VOTING
SECURITIES
|
3
|
|
AMENDMENT
TO 2005 STOCK OPTION PLAN
|
3
|
|
DESCRIPTION
OF OUR CAPITAL STOCK
|
5
|
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
6
|
|
DISSENTERS’
RIGHT OF APPRAISAL
|
7
|
|
FORWARD-LOOKING
STATEMENTS
|
8
|
|
WHERE
YOU CAN FIND MORE INFORMATION
|
8
|
|
INCORPORATION
OF FINANCIAL INFORMATION
|
8
|
VOTING
SECURITIES
As
of
March 19, 2007, there were 9,661,740 shares of our common stock outstanding.
Each share of common stock entitles the holder to one vote on all matters to
be
voted on by stockholders. There were no shares of our preferred stock
outstanding.
AMENDMENT
TO OUR 2005 STOCK OPTION PLAN
As
of
March 15, 2007, our board of directors and stockholders holding a majority
of
our voting power voted to authorize our board of directors, at its discretion,
to amend our 2005 Stock Option Plan. Should the board of directors elect to
amend it, this amendment would take effect no sooner than April 23,
2007.
REASON
FOR THE AMENDMENT
The
reason for the amendment is to increase the number of shares of common stock
authorized for grant of options under the Plan. As of March 19, 2007, there
were
an aggregate of 1,138,744 options outstanding to purchase 1,138,744 shares
of
common stock. The 1,138,744 options have a weighted average exercise price
of
$1.14
We
believe that our ability to grant stock options plays an important role in
attracting and retaining our directors, officers, employees and consultants.
As
a small public company with limited cash resources, a stock option program
provides us with an additional component to our compensation arrangements,
while
allowing us to preserve our cash position. By providing talented personnel
the
opportunity for equity ownership through our common stock, we strengthen their
commitment to our success and promote the identity of interests between our
stockholders and such persons. We need to have a sufficient number of shares
available for future grant and issuance under the Plan in order for us to
provide this equity incentive.
PURPOSES
OF THE PLAN
The
purposes of the Plan are to provide incentives to selected directors, officers,
employees and other persons who perform services on our behalf and on behalf
of
any of our subsidiaries by giving them opportunities to purchase our common
stock pursuant to options granted thereunder. These options may qualify as
“incentive stock options” (“ISO”) under Section 422(b) of the Internal Revenue
Code of 1986, as amended (the “Code”), for certain employees (including
employee-directors); otherwise, for tax purposes the options would be classified
as Non-Qualified Options or “NQSOs.” Should any options terminate unexercised,
the underlying shares of common stock would be returned to the Plan and become
available for future grants.
ADMINISTRATION
The
Plan
is administered by the Compensation Committee of the board of directors, each
member of which is a Non-Employee Director within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, or by the whole Board of Directors.
Subject to specific provisions in the Plan, the Committee has the authority
(i)
to select the individuals (the “Optionees”) who are to be granted options from
among those eligible to participate in the Plan, (ii) to establish the number
of
shares which may be issued under each option, (iii) to determine when the
options may be granted, (iv) to determine the exercise price of shares subject
to each option, (v) to determine the time at which each option shall become
exercisable and the duration of the exercise period, (vi) to determine whether
restrictions are to be imposed on shares subject to options and the nature
of
such restrictions, if any, and (vii) to interpret the Plan and prescribe and
rescind rules and regulations relating to it.
ELIGIBILITY
OPTION
PRICE AND TERMS
The
option price of each share of common stock subject to an option is fixed by
the
Committee at the time of grant, but cannot be less than the fair market value
of
the common stock on the date of grant, defined as the mean between the closing
high bid and low quotations on the business day immediately preceding the date
of grant. The aggregate fair market value, determined at the time of grant,
of
the shares with respect to which ISO's are exercisable for the first time by
an
individual during any calendar year may not exceed $100,000. NQSOs are not
subject to this requirement. Certain adjustments in the option price and/or
option shares may be made for customary anti-dilution events. The Committee
determines the option period, provided it is not longer than five years in
the
case of ISOs granted to employees who hold 10% of our outstanding stock, 10
years in the case of ISOs generally, or 10 years, in the case of NQSOs, subject
to earlier termination, and also the vesting period, including any accelerated
vesting, and the payment terms. In the event of termination of employment,
the
Optionee may exercise his options at any time up to three months of the
termination, but in no event later than the expiration date of the option;
however, if the employee is terminated "for cause," the option would expire
immediately. All options would vest immediately upon a "change of control"
of
the Company. Upon exercise of an option, payment for shares may be made in
cash,
or, if the option agreement so provides, in shares of common stock calculated
based upon their fair market value as of the date of their delivery or a
combination of stock and cash.
TRANSFERABILITY
Options
granted under the Plan are not assignable or transferable by the Optionee
otherwise than (i) by will or the laws of descent and distribution, (ii)
pursuant to a qualified domestic relations order or Title I of the Employee
Retirement Income Security Act or (iii) with respect to NQSOs, to a spouse
or
lineal descendant of the Optionee. Options are exercisable during the lifetime
of the Optionee only by the Optionee or by the Optionee's guardian or legal
representative.
TERMINATION,
SUSPENSION OR MODIFICATION OF THE PLAN
The
board
of directors may terminate, suspend or modify the Plan at any time but may
not,
without authorization of our stockholders, effect any change which under Section
16(b) of the Exchange Act, applicable Delaware corporate law or tax law, or
the
rules of any national securities exchange or national quotation system on which
the common stock is then listed or traded requires the prior approval of
stockholders.
We
are
authorized to issue 100,000,000 shares of common stock and 20,000,000 shares
of
preferred stock. At the close of business on March 15, 2007, we had issued
and
outstanding 9,661,740 shares of common stock and no shares of preferred
stock.
Each
share of our common stock entitles the holder to one vote on all matters to
be
voted on by stockholders. There is no cumulative voting with respect to the
election of directors. The holders of shares of our common stock are entitled
to
dividends when and as declared by the board of directors from funds legally
available and upon liquidation they are entitled to share pro rata in any
distribution to holders of common stock, subject to the prior right of holders
of our outstanding preferred stock. No dividends have ever been declared by
the
board of directors on the common stock. Holders of our common stock have no
preemptive rights. There are no conversion rights or redemption or sinking
fund
provisions with respect to our common stock.
As
determined by our board of directors, and without any action by stockholders,
we
may issue preferred stock in one or more series having the rights, privileges,
and limitations, including voting rights, conversion rights, liquidation
preferences, dividend rights and redemption rights, as may, from time to time
be
determined by the board at time of
issuance. The 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 we determine to issue any shares of preferred
stock, a certificate of designation containing the rights, privileges and
limitations of this series of preferred stock will be filed with the Secretary
of State of the State of Delaware. The effect of this preferred stock
designation power is that our 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 without further action
by
our stockholders, and may adversely affect the voting and other rights of the
holders of our common stock.
The
following table indicates the number of shares of our common stock that were
beneficially owned as of March 19, 2007, by (1) each person known by us to
be
the owner of more than 5% of our outstanding shares of common stock, (2) our
directors, (3) our executive officers, and (4) our directors and executive
officers as a group. In general, “beneficial ownership” includes those shares a
director or executive officer has sole or shared power to vote or transfer
(whether or not owned directly) and rights to acquire common stock through
the
exercise of stock options or warrants that are exercisable currently or become
exercisable within 60 days. Except as indicated otherwise, the persons name
in
the table below have sole voting and investment power with respect to all shares
shown as beneficially owned by them. We based our calculation of the percentage
owned on 9,661,740 common shares outstanding on March 19, 2007. The address
of
each director and executive officer listed below is c/o Red Mile Entertainment,
Inc., 4000 Bridgeway, Suite 101, Sausalito, CA 94965.
|
Name
and Address
|
Number
of Shares
Beneficially
Owned
|
Percent
of Class
|
|
Chester
Aldridge
Director,
Chairman, President and CEO
|
|
245,233(1)
|
|
|
2.5%
|
|
|
Richard
Auchinleck
Director
|
|
67,917(2)
|
|
|
*
|
|
|
Kenny
Cheung
Director
|
|
2,426,546
(3)
|
|
|
22.9%
|
|
|
James
McCubbin
Director
|
|
3,125
(4)
|
|
|
*
|
|
|
Geoffrey
Heath
Director
|
|
28,333
(5)
|
|
|
*
|
|
|
Glenn
Wong
President
and Chief Operating Officer
|
|
14,583
(6)
|
|
|
*
|
|
|
Ben
Zadik
CFO,
Treasurer and Secretary
|
|
76,667
(7)
|
|
|
*
|
|
|
DMH
Family L.P.
|
|
1,617,034
( 8)
|
|
|
16.2
|
|
|
Fluent
Entertainment, Inc.
|
|
2,542,623
|
|
|
26.3
|
|
|
Joseph
Abrams
|
|
570,942
(9)
|
|
|
5.9
|
|
|
All
officers and directors as a group (10 persons)
|
|
2,862,404
|
|
|
26.5
|
|
| · |
Represents
less than 1%
|
(1) Includes
options to purchase 70,233 shares of common stock.
(2)
Includes warrants to purchase 26,667 shares of common stock and options to
purchase 14,583 shares of common stock.
(3) Includes
666,667 shares of common stock and 862,222 warrants held in the name of Metro
Crown Industries, of which Mr. Cheung is the sole shareholder; includes 830,990
shares of common stock held in the name of Tiger Paw Capital Corporation ,
of
which Mr. Cheung is the sole shareholder.
(4)
Includes options to purchase 3,125 shares of common stock.
(5) Includes
options to purchase 25,000 shares of common stock.
(6)
Includes options to purchase 14,583 shares of common stock.
(7)
Includes options to purchase 60,000 shares of common stock.
(8)
Includes warrants to purchase 353,726 shares of common stock.
(9)
Includes warrants to purchase 78,445 shares of common stock.
DISSENTERS’
RIGHT OF APPRAISAL
Under
Delaware law and our articles of incorporation and bylaws, no stockholder has
any right to dissent to the proposed amendment to the 2005 Stock Option Plan
and
is not entitled to appraisal of or payment for their shares of our
stock.
FORWARD-LOOKING
STATEMENTS
This
information statement may contain certain “forward-looking” statements (as that
term is defined in the Private Securities Litigation Reform Act of 1995 or
by
the U.S. Securities and Exchange Commission in its rules, regulations and
releases) representing our expectations or beliefs regarding our company. These
forward-looking statements include, but are not limited to, statements
concerning our operations, economic performance, financial condition, growth
and
acquisition strategies, investments, and future operational plans. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
generality of the foregoing, words such as “may,” “will,” “expect,” “believe,”
“anticipate,” “intend,” “could,” “estimate,” “might,” or “continue” or the
negative or other variations thereof or comparable terminology are intended
to
identify forward-looking statements. These statements, by their nature, involve
substantial risks and uncertainties, certain of which are beyond our control,
and actual results may differ materially depending on a variety of important
factors, discussed in this and other of our filings with the U.S. Securities
and
Exchange Commission.
WHERE
YOU CAN FIND MORE INFORMATION
We
are
subject to the information and reporting requirements of the Securities Exchange
Act of 1934, as amended, and in accordance with the Securities Exchange Act,
we
file periodic reports, documents, and other information with the Securities
and
Exchange Commission relating to our business, financial statements, and other
matters. These reports and other information may be inspected and are available
for copying at the offices of the Securities and Exchange Commission, 100 F
Street, N.E., Washington, DC 20549. Our SEC filings are also available to the
public on the SEC’s website at http://www.sec.gov.
INCORPORATION
OF FINANCIAL INFORMATION
We
“incorporate by reference” into this information statement the information in
certain documents we file with the SEC, which means that we can disclose
important information to you by referring you to those documents. We incorporate
by reference into this information statement the following documents we have
previously filed with the SEC: our annual report on Form 10-KSB for the fiscal
year ended March 31, 2006, and our quarterly report on Form 10-QSB for the
quarterly period ended December 31, 2006. You may request a copy of these
filings at no cost, by writing or telephoning us at the following
address:
Red
Mile
Entertainment, Inc.
4000
Bridgeway, Suite 101
Sausilito,
CA 94965
Telephone
(415) 339-4240
Facsimile
(415) 339-4249
As
we
obtained the requisite stockholder vote for the amendment of our 2005 Stock
Option Plan to increase the number of shares of common stock reserved for grant
and issuance thereunder from 1,000,000 to 2,500,000 shares described in this
information statement upon delivery of written consents from the holders of
a
majority of our outstanding shares of common stock, WE
ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
This
information statement is for informational purposes only. Please read this
information statement carefully.
Appendix
A
RED
MILE
ENTERTAINMENT, INC.
2005
STOCK OPTION PLAN
______________________________________
1. Purpose.
The
purpose of this Plan is to advance the interests of Red Mile Entertainment,
Inc., a Delaware corporation (the “Company”), by providing an additional
incentive to attract, retain and motivate highly qualified and competent persons
who are key to the Company, including key employees, consultants, independent
contractors, Officers and Directors, and upon whose efforts and judgment the
success of the Company and its Subsidiaries is largely dependent, by authorizing
the grant of options to purchase Common Stock of the Company and other related
benefits to persons who are eligible to participate hereunder, thereby
encouraging stock ownership in the Company by such persons, all upon and subject
to the terms and conditions of this Plan.
2. Definitions.
As used
herein, the following terms shall have the meanings indicated:
(a) “Board”
shall mean the Board of Directors of the Company.
(b) “Cause”
shall mean any of the following:
(i) a
determination by the Company that there has been a willful, reckless or grossly
negligent failure by the Optionee to perform his or her duties as an employee
of
the Company;
(ii) any
conduct by the Optionee that either results in his or her conviction of a felony
under the laws of the United States of America or any state thereof, or of
an
equivalent crime under the laws of any other jurisdiction;
(iii) a
determination by the Company that the Optionee has committed an act or acts
involving fraud, embezzlement, misappropriation, theft, breach of fiduciary
duty
or material dishonesty against the Company, its properties or
personnel;
(iv) any
act
by the Optionee that the Company determines to be in willful or wanton disregard
of the Company’s best interests, or which results, or is intended to result,
directly or indirectly, in improper gain or personal enrichment of the Optionee
at the expense of the Company;
(v) a
determination by the Company that there has been a willful, reckless or grossly
negligent failure by the Optionee to comply with any rules, regulations,
policies or procedures of the Company, or that the Optionee has engaged in
any
act, behavior or conduct demonstrating a deliberate and material violation
or
disregard of standards of behavior that the Company has a right to expect of
its
employees; or
(vi) if
the
Optionee, while employed by the Company and for two years thereafter, violates
a
confidentiality and/or noncompete agreement with the Company, or fails to
safeguard, divulges, communicates, uses to the detriment of the Company or
for
the benefit of any person or persons, or misuses in any way, any Confidential
Information; provided,
however,
that, if
the Optionee has entered into a written employment agreement with the Company
which remains effective and which expressly provides for a termination of such
Optionee’s employment for “cause,” the term “Cause” as used herein shall have
the meaning as set forth in the Optionee’s employment agreement in lieu of the
definition of “Cause” set forth in this Section 2(b).
(c) “Change
of Control” shall mean the acquisition by any person or group (as that term is
defined in the Exchange Act, and the rules promulgated pursuant to that act)
in
a single transaction or a series of transactions of fifty percent (50%) or
more
in voting power of the outstanding stock of the Company and a change of the
composition of the Board of Directors so that, within two years after the
acquisition took place, a majority of the members of the Board of Directors
of
the Company, or of any corporation with which the Company may be consolidated
or
merged, are persons who were not directors or officers of the Company or one
of
its Subsidiaries immediately prior to the acquisition, or to the first of a
series of transactions which resulted in the acquisition of fifty percent (50%)
or more in voting power of the outstanding stock of the Company.
(d) “Code”
shall mean the Internal Revenue Code of 1986, as amended.
(e) “Committee”
shall mean the compensation committee of the Board.
(f) “Common
Stock” shall mean the Company’s Common Stock, no par value per
share.
(g) “Director”
shall mean a member of the Board.
(h) “Employee”
shall mean any person, including officers, directors, consultants and
independent contractors employed by the Company or any parent or Subsidiary
of
the Company within the meaning of Section 3401(c) of the regulators promulgated
thereunder.
(i) “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.
(j) “Fair
Market Value” of a Share on any date of reference shall be the Closing Price of
a share of Common Stock on the business day immediately preceding such date,
unless the Committee in its sole discretion shall determine otherwise in a
fair
and uniform manner. For this purpose, the “Closing Price” of the Common Stock on
any business day shall be (i) if the Common Stock is listed or admitted for
trading on any United States national securities exchange, or if actual
transactions are otherwise reported on a consolidated transaction reporting
system, the last reported sale price of the Common Stock on such exchange or
reporting system, as reported in any newspaper of general circulation,
(ii) if the Common Stock is quoted on The Nasdaq Stock Market (“Nasdaq”),
or any similar system of automated dissemination of quotations of securities
prices in common use, the mean between the closing high bid and low asked
quotations for such day of the Common Stock on such system, or (iii) if
neither clause (i) nor (ii) is applicable, the mean between the high bid and
low
asked quotations for the Common Stock as reported by the National Quotation
Bureau, Incorporated if at least two securities dealers have inserted both
bid
and asked quotations for the Common Stock on at least five of the 10 preceding
days. If the information set forth in clauses (i) through (iii) above is
unavailable or inapplicable to the Company (e.g., if the Company’s Common Stock
is not then publicly traded or quoted), then the “Fair Market Value” of a Share
shall be the fair market value (i.e., the price at which a willing seller would
sell a Share to a willing buyer when neither is acting under compulsion and
when
both have reasonable knowledge of all relevant facts) of a share of the Common
Stock on the business day immediately preceding such date as the Committee
in
its sole and absolute discretion shall determine in a fair and uniform
manner.
(k) “Incentive
Stock Option” shall mean an incentive stock option as defined in Section 422 of
the Code.
(l) “Non-Statutory
Stock Option” or “Nonqualified Stock Option” shall mean an Option which is not
an Incentive Stock Option.
(m) “Officer”
shall mean the Company’s chairman, president, principal financial officer,
principal accounting officer (or, if there is no such accounting officer, the
controller), any vice-president of the Company in charge of a principal business
unit, division or function (such as sales, administration or finance), any
other
officer who performs a policy-making function, or any other person who performs
similar policy-making functions for the Company. Officers of Subsidiaries shall
be deemed Officers of the Company if they perform such policy-making functions
for the Company. As used in this paragraph, the phrase “policy-making function”
does not include policy-making functions that are not significant. Unless
specified otherwise in a resolution by the Board, an “executive officer”
pursuant to Item 401(b) of Regulation S-K (17 C.F.R. § 229.401(b)) shall be only
such person designated as an “Officer” pursuant to the foregoing provisions of
this paragraph.
(n) “Option”
(when capitalized) shall mean any stock option granted under this
Plan.
(o) “Optionee”
shall mean a person to whom an Option is granted under this Plan or any person
who succeeds to the rights of such person under this Plan by reason of the
death
of such person.
(p) “Plan”
shall mean this 2005 Stock Option Plan of the Company, which Plan shall be
effective upon approval by the Board, subject to approval, within 12 months
of
the date thereof by holders of a majority of the Company’s issued and
outstanding Common Stock of the Company.
(q) “Share”
or “Shares” shall mean a share or shares, as the case may be, of the Common
Stock, as adjusted in accordance with Section 10 of this Plan.
(r) “Subsidiary”
shall mean any corporation (other than the Company) in any unbroken chain of
corporations beginning with the Company if, at the time of the granting of
the
Option, each of the corporations other than the last corporation in the unbroken
chain owns stock possessing 50 percent or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
3. Shares
and Options.
Subject
to adjustment in accordance with Section 10 hereof, the Company may issue up
to
two million five hundred thousand (2,500,000) Shares from Shares held in the
Company’s treasury or from authorized and unissued Shares through the exercise
of Options issued pursuant to the provisions of this Plan. If any Option granted
under this Plan shall terminate, expire, or be canceled, forfeited or
surrendered as to any Shares, the Shares relating to such lapsed Option shall
be
available for issuance pursuant to new Options subsequently granted under this
Plan. Upon the grant of any Option hereunder, the authorized and unissued Shares
to which such Option relates shall be reserved for issuance to permit exercise
under this Plan. Subject to the provisions of Section 14 hereof, an Option
granted hereunder shall be either an Incentive Stock Option or a Non-Statutory
Stock Option as determined by the Committee at the time of grant of such Option
and shall clearly state whether it is an Incentive Stock Option or Non-Statutory
Stock Option. All Incentive Stock Options shall be granted within 10 years
from
the effective date of this Plan.
4. Limitations.
Options
otherwise qualifying as Incentive Stock Options hereunder will not be treated
as
Incentive Stock Options to the extent that the aggregate Fair Market Value
(determined at the time the Option is granted) of the Shares, with respect
to
which Options meeting the requirements of Code Sec-tion 422(b) are
exercisable for the first time by any individual during any calendar year (under
all stock option or similar plans of the Company and any Subsidiary), exceeds
$100,000.
5. Conditions
for Grant of Options.
(a) Each
Option shall be evidenced by an option agreement that may contain any term
deemed necessary or desirable by the Committee, provided such terms are not
inconsistent with this Plan or any applicable law. Optionees shall be those
persons selected by the Committee from the class of all regular Employees of
the
Company or its Subsidiaries, including Employee Directors and Officers who
are
regular or former regular employees of the Company, Directors who are not
regular employees of the Company, as well as consultants to the Company. Any
person who files with the Committee, in a form satisfactory to the Committee,
a
written waiver of eligibility to receive any Option under this Plan shall not
be
eligible to receive any Option under this Plan for the duration of such
waiver.
(b) In
granting Options, the Committee shall take into consideration the contribution
the person has made, or is expected to make, to the success of the Company
or
its Subsidiaries and such other factors as the Committee shall determine. The
Committee shall also have the authority to consult with and receive
recommendations from Officers and other personnel of the Company and its
Subsidiaries with regard to these matters. The Committee may from time to time
in granting Options under this Plan prescribe such terms and conditions
concerning such Options as it deems appropriate, provided that such terms and
conditions are not more favorable to an Optionee than those expressly permitted
herein; provided further, however, that to the extent not cancelled pursuant
to
Section 9(b) hereof, upon a Change in Control, any Options that have not yet
vested, may, in the sole discretion of the Committee, vest upon such Change
in
Control.
(c) The
Options granted to employees under this Plan shall be in addition to regular
salaries, pension, life insurance or other benefits related to their employment
with the Company or its Subsidiaries. Neither this Plan nor any Option granted
under this Plan shall confer upon any person any right to employment or
continuance of employment (or related salary and benefits) by the Company or
its
Subsidiaries.
6. Price.
The
exercise price per Share of any Option shall be any price determined by the
Committee but in no event shall the exercise price per Share of any Option
be
less than the Fair Market Value of the Shares underlying such Option on the
date
such Option is granted and, in the case of an Incentive Stock Option granted
to
a 10% stockholder, the per Share exercise price will not be less than 110%
of
the Fair Market Value. Re-granted Options, or Options which are canceled and
then re-granted covering such canceled Options, will, for purposes of this
Section 6, be deemed to have been granted on the date of the
re-granting.
7. Exercise
of Options.
(a) An
Option
shall be deemed exercised when (i) the Company has received written notice
of such exercise in accordance with the terms of the Option, (ii) full
payment of the aggregate option price of the Shares as to which the Option
is
exercised has been made, (iii) the Optionee has agreed to be bound by the
terms, provisions and conditions of any applicable stockholders’ agree-ment, and
(iv) arrangements that are satisfactory to the Committee in its sole
discretion have been made for the Optionee’s payment to the Company of the
amount that is necessary for the Company or the Subsidiary employing the
Optionee to withhold in accordance with applicable Federal or state tax
withholding requirements. Unless further limited by the Committee in any Option,
the exercise price of any Shares purchased pursuant to the exercise of such
Option shall be paid in cash, by certified or official bank check, by money
order, with Shares or by a combination of the above; provided, however, that
the
Committee in its sole discretion may accept a personal check in full or partial
payment of any Shares. The Company in its sole discretion may, on an individual
basis or pursuant to a general program established by the Committee in
connection with this Plan, lend money to an Optionee to exercise all or a
portion of the Option granted hereunder. If the exercise price is paid in whole
or part with the Optionee’s promissory note, such note shall (i) provide
for full recourse to the maker, (ii) be collateralized by the pledge of the
Shares that the Optionee purchases upon exercise of such Option, (iii) bear
interest at a rate no less than the rate of interest payable by the Company
to
its principal lender, and (iv) contain such other terms as the Committee in
its sole discretion shall require.
(b) No
Optionee shall be deemed to be a holder of any Shares subject to an Option
unless and until a stock certificate or certificates for such Shares are issued
to such person(s) under the terms of this Plan. No adjustment shall be made
for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior
to
the date such stock certificate is issued, except as expressly provided in
Section 10 hereof.
(c) Any
Option may, in the discretion of the Committee, be exercised pursuant to a
“cashless” or “net issue” exercise. In
lieu
of exercising the Option as specified in subsection (a) above, the Optionee
may
pay in whole or in part with Shares, the number of which shall be determined
by
dividing (a) the aggregate Fair Value of such Shares otherwise issuable upon
exercise of the Option minus the aggregate Exercise Price of such Option by
(b)
the Fair Value of one such Share, or the Optionee may pay in whole or in part
through a reduction in the number of Shares received through the exercise of
the
Option equal to the quotient of the (a) aggregate Fair Value of all the Shares
issuable upon exercise of the Option minus the aggregate Exercise Price of
such
Option (b) divided by the Fair Value of one such share. If
the
exercise price is paid in whole or in part with Shares, the value of the Shares
surrendered shall be their Fair Market Value on the date the Option is
exercised.
8. Exercisability
of Options.
Any
Option shall become exercisable in such amounts, at such intervals, upon such
events or occurrences and upon such other terms and conditions as shall be
provided in an individual Option agreement evidencing such Option, except as
otherwise provided in Section 5(b) or this Section 8.
(a) The
expiration date(s) of an Option shall be determined by the Committee at the
time
of grant, but in no event shall an Option be exercisable after the expiration
of
10 years from the date of grant of the Option.
(b) Unless
otherwise expressly provided in any Option as approved by the Committee,
notwithstanding the exercise schedule set forth in any Option, each outstanding
Option, may, in the sole discretion of the Committee, become fully exercisable
upon the date of the occurrence of any Change of Control, but, unless otherwise
expressly provided in any Option, no earlier than six months after the date
of
grant, and if and only if Optionee is in the employ of the Company on such
date.
(c) The
Committee may in its sole discretion accelerate the date on which any Option
may
be exercised and may accelerate the vesting of any Shares subject to any Option
or previously acquired by the exercise of any Option.
| 9. |
Termination
of Option Period.
|
(a) Unless
otherwise expressly provided in any Option, the unexercised portion of any
Option shall automatically and without notice immediately terminate and become
forfeited, null and void at the time of the earliest to occur of the
following:
(i) three
months after the date on which the Optionee’s employment is terminated for any
reason other than by reason of (A) Cause, (B) a mental or physical
disability (within the meaning of Section 22(e) of the Code) as determined
by a
medical doctor satisfactory to the Committee, or (C) death;
(ii) immediately
upon the termination by the Company of the Optionee’s employment for
Cause;
(iii) one
year
after the date on which the Optionee’s employment is terminated by reason of a
mental or physical disability (within the meaning of Code Section 22(e)) as
determined by a medical doctor satisfactory to the Committee or the later of
three months after the date on which the Optionee shall die if such death shall
occur during the one-year period specified herein; or
(iv) the
later
of (a) one year after the date of termination of the Optionee’s employment by
reason of death of the employee, or (b) three months after the date on which
the
Optionee shall die if such death shall occur during the one year period
specified in Subsection 9(a)(iii) hereof.
(b) The
Committee in its sole discretion may, by giving written notice (“cancellation
notice”), cancel effective upon the date of the consummation of any corporate
transaction described in Sub-sec-tion 10(d) hereof, any Option that remains
unexercised on such date. Such cancellation notice shall be given a reasonable
period of time prior to the proposed date of such cancellation and may be given
either before or after approval of such corporate transaction.
(c) Upon
termination of Optionee’s employment as described in this Section 9, or
otherwise, any Option (or portion thereof) not previously vested or not yet
exercisable pursuant to Section 8 of this Plan or the vesting schedule set
forth
in such Option shall be immediately canceled.
| 10. |
Adjustment
of Shares.
|
(a) If
at any
time while this Plan is in effect or unexercised Options are outstanding, there
shall be any increase or decrease in the number of issued and outstanding Shares
through the declaration of a stock dividend or through any recapitalization
resulting in a stock split, combination or exchange of Shares (other than any
such exchange or issuance of Shares through which Shares are issued to effect
an
acquisition of another business or entity or the Company’s purchase of Shares to
exercise a “call” purchase option), then and in such event:
(i) appropriate
adjustment shall be made in the maximum number of Shares available for grant
under this Plan, so that the same percentage of the Company’s issued and
outstanding Shares shall continue to be subject to being so
optioned;
(ii) appropriate
adjustment shall be made in the number of Shares and the exercise price per
Share thereof then subject to any outstanding Option, so that the same
percentage of the Company’s issued and outstanding Shares shall remain subject
to purchase at the same aggregate exercise price; and
(iii) such
adjustments shall be made by the Committee, whose determination in that respect
shall be final, binding and conclusive.
(b) Subject
to the specific terms of any Option, the Committee may change the terms of
Options outstanding under this Plan, with respect to the option price or the
number of Shares subject to the Options, or both, when, in the Committee’s sole
discretion, such adjustments become appropriate by reason of a corporate
transaction described in Subsection 10(d) hereof, or otherwise.
(c) Except
as
otherwise expressly provided herein, the issuance by the Company of shares
of
its capital stock of any class, or securities convertible into or exchangeable
for shares of its capital stock of any class, either in connection with a direct
or underwritten sale, or upon the exercise of rights or warrants to subscribe
therefor or purchase such Shares, or upon conversion of obligations of the
Company into such Shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number of or
exercise price of Shares then subject to outstanding Options granted under
this
Plan.
(d) Without
limiting the generality of the foregoing, the existence of outstanding Options
granted under this Plan shall not affect in any manner the right or power of
the
Company to make, authorize or consummate (i) any or all adjustments,
reclassifications, recapitalizations, reorganizations or other changes in the
Company’s capital structure or its business; (ii) any merger or
consolidation of the Company or to which the Company is a party; (iii) any
issuance by the Company of debt securities, or preferred or preference stock
that would rank senior to or above the Shares subject to outstanding Options;
(iv) any purchase or issuance by the Company of Shares or other classes of
common stock or common equity securities; (v) the dissolution or
liquidation of the Company; (vi) any sale, transfer, encumbrance, pledge or
assignment of all or any part of the assets or business of the Company; or
(vii) any other corporate act or proceeding, whether of a similar character
or otherwise.
(e) The
Optionee shall receive written notice within a reasonable time prior to the
consummation of such action advising the Optionee of any of the foregoing.
The
Committee may, in the exercise of its sole discretion, in such instances declare
that any Option shall terminate as of a date fixed by the Board and give each
Optionee the right to exercise his or her Option.
11. Transferability.
No
Option or stock appreciation right granted hereunder shall be sold, pledged,
assigned, hypothecated, disposed or otherwise transferred by the Optionee other
than by will or the laws of descent and distribution, unless otherwise
authorized by the Board, and no Option or stock appreciation right shall be
exercisable during the Optionee’s lifetime by any person other than the
Optionee.
12. Issuance
of Shares.
As a
condition of any sale or issuance of Shares upon exercise of any Option, the
Committee may require such agreements or undertakings, if any, as the Committee
may deem necessary or advisable to assure compliance with any such law or
regulation including, but not limited to, the following:
(i) a
representation and warranty by the Optionee to the Company, at the time any
Option is exercised, that he is acquiring the Shares to be issued to him for
investment and not with a view to, or for sale in connection with, the
distribution of any such Shares; and
(ii) an
agreement and undertaking to comply with all of the terms, restrictions and
provisions set forth in any then applicable stockholders’ agreement relating to
the Shares, including, without limitation, any restrictions on transferability,
any rights of first refusal and any option of the Company to “call” or purchase
such Shares under then applicable agreements, and
(iii) any
restrictive legend or legends, to be embossed or imprinted on Share
certificates, that are, in the discretion of the Committee, necessary or
appropriate to comply with the provisions of any securities law or other
restriction applicable to the issuance of the Shares.
13. Stock
Appreciation Rights.
The
Committee may grant stock appreciation rights to Employees, either or tandem
with Options that have been or are granted under the Plan or with respect to
a
number of Shares on which an Option is not granted. A stock appreciation right
shall entitle the holder to receive, with respect to each Share as to which
the
right is exercised, payment in an amount equal to the excess of the Share’s Fair
Market Value on the date the right is exercised over its Fair Market Value
on
the date the right was granted. Such payment may be made in cash or in Shares
valued at the Fair Market Value as of the date of surrender, or partly in cash
and partly in Shares, as determined by the Committee in its sole discretion.
The
Committee may establish a maximum appreciation value payable for stock
appreciation rights.
14. Restricted
Stock Awards.
The
Committee may grant restricted stock awards under the Plan in Shares or
denominated in units of Shares. The Committee, in its sole discretion, may
make
such awards subject to conditions and restrictions, as set forth in the
instrument evidencing the award, which may be based on continuous service with
the Company or the attainment of certain performance goals related to profits,
profit growth, cash-flow or shareholder returns, where such goals may be stated
in absolute terms or relative to comparison companies or indices to be achieved
during a period of time.
15. Administration
of this Plan.
(a) This
Plan
shall be administered by the Committee, which shall consist of not less than
two
Directors. The Committee shall have all of the powers of the Board with respect
to this Plan. Any member of the Committee may be removed at any time, with
or
without cause, by resolution of the Board and any vacancy occurring in the
membership of the Committee may be filled by appointment by the
Board.
(b) Subject
to the provisions of this Plan, the Committee shall have the authority, in
its
sole discretion, to: (i) grant Options, (ii) determine the
exercise price per Share at which Options may be exercised, (iii) determine
the Optionees to whom, and time or times at which, Options shall be granted,
(iv) determine the number of Shares to be represented by each Option,
(v) determine the terms, conditions and provisions of each Option granted
(which need not be identical) and, with the consent of the holder thereof,
modify or amend each Option, (vi) defer (with the consent of the Optionee)
or accelerate the exercise date of any Option, and (vii) make all other
determinations deemed necessary or advisable for the administration of this
Plan, including re-pricing, canceling and regranting Options.
(c) The
Committee, from time to time, may adopt rules and regulations for carrying
out
the purposes of this Plan. The Committee’s determinations and its interpretation
and construction of any provision of this Plan shall be final, conclusive and
binding upon all Optionees and any holders of any Options granted under this
Plan.
(d) Any
and
all decisions or determinations of the Committee shall be made either (i) by
a
majority vote of the members of the Committee at a meeting of the Committee
or
(ii) without a meeting by the unanimous written approval of the members of
the
Committee.
(e) No
member
of the Committee, or any Officer or Director of the Company or its Subsidiaries,
shall be personally liable for any act or omission made in good faith in
connection with this Plan.
16. Incentive
Options for 10% Stockholders.
Notwithstanding any other provisions of this Plan to the contrary, an Incentive
Stock Option shall not be granted to any person owning directly or indirectly
(through attribution under Section 424(d) of the Code) at the date of grant,
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company (or of its Subsidiary) at the date of grant unless
the
exercise price of such Option is at least 110% of the Fair Market Value of
the
Shares subject to such Option on the date the Option is granted, and such Option
by its terms is not exercisable after the expiration of 10 years from the date
such Option is granted.
17. Interpretation.
(a) This
Plan
shall be administered and interpreted so that all Incentive Stock Options
granted under this Plan will qualify as Incentive Stock Options under Section
422 of the Code. If any provision of this Plan should be held invalid for the
granting of Incentive Stock Options or illegal for any reason, such
determination shall not affect the remaining provisions hereof, and this Plan
shall be construed and enforced as if such provision had never been included
in
this Plan.
(b) This
Plan
shall be governed by the laws of the State of Delaware.
(c) Headings
contained in this Plan are for convenience only and shall in no manner be
construed as part of this Plan or affect the meaning or interpretation of any
part of this Plan.
(d) Any
reference to the masculine, feminine, or neuter gender shall be a reference
to
such other gender as is appropriate.
(e) Time
shall be of the essence with respect to all time periods specified for the
giving of notices to the company hereunder, as well as all time periods for
the
expiration and termination of Options in accordance with Section 9 hereof (or
as
otherwise set forth in an option agreement).
18. Amendment
and Discontinuation of this Plan.
Either
the Board or the Com-mittee may from time to time amend this Plan or any Option
without the consent or approval of the stockholders of the Company; provided,
however, that, except to the extent provided in Section 9, no amendment or
suspension of this Plan or any Option issued hereunder shall substantially
impair any Option previously granted to any Optionee without the consent of
such
Optionee.
19. Termination
Date.
This
Plan shall terminate ten years after the date of adoption by the
Board.