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Statement Pursuant to Section 14(c) of the Securities Exchange Act of
1934
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Tricell,
Inc.
(Name
of
Registrant As Specified In Its Charter)
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TRICELL,
INC.
33
LAWTON STREET
CONGLETON,
CHESHIRE CW12 1RU
UNITED
KINGDOM
NOTICE
OF ACTION BY WRITTEN CONSENT OF STOCKHOLDERS
NOTICE
IS
HEREBY GIVEN that the holders of more than a majority of the outstanding common
stock of Tricell, Inc., a Nevada corporation, have approved the following
actions without a meeting of stockholders in accordance with Section 78.320
of
the Nevada Revised Statutes:
(1)
The
election of the following six directors to the board of directors to
serve until the next annual meeting of stockholders and until their
successors are elected and qualified: James E. Reed, Neil A. Pursell,
Melvyn S. Langley, Ian M. Herman, Raymond Pirtle, Jr. and John E.
Boyd.
(2)
The
approval of the restated articles of
incorporation.
(3)
The
approval of the 2006 Long-Term Incentive
Plan.
The
action will become effective on the 20th
day
after this information statement is mailed to our stockholders.
The
enclosed information statement contains information pertaining to the matters
acted upon.
WE
ARE NOT ASKING YOU FOR A PROXY,
AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
THIS
IS NOT A NOTICE OF A MEETING OF STOCKHOLDERS AND NO STOCKHOLDER MEETING WILL
BE
HELD TO CONSIDER ANY MATTER WHICH DESCRIBED HEREIN.
This
information statement is being furnished in connection with the action by
written consent of stockholders taken without a meeting of a proposal to approve
the actions described in this information statement. We are mailing this
information statement to our stockholders on or about December 5,2006.
What
action was taken by written consent?
We
obtained stockholder consent to the following action:
·
The
election of the following six directors to the board of directors to
serve until the next annual meeting of stockholders and until their
successors are elected and qualified: James E. Reed, Neil A. Pursell,
Melvyn S. Langley, Ian M. Herman, Raymond Pirtle, Jr. and John E.
Boyd.
·
The
approval of our restated articles of
incorporation.
·
The
approval of our 2006 Long-Term Incentive Plan.
How
many shares of common stock were outstanding on November 22,2006?
On
November 22, 2006, the date we received the consent of the holders of more
than
a majority of the outstanding shares, there were 340,545,877 shares of common
stock outstanding.
What
vote was obtained is required to elect directors and to approve the other
proposals described in this information statement?
We
obtained the approval of the holders of 217,000,000 shares of common stock,
representing more than 63% of our outstanding shares of common stock that were
entitled to give such consent. James
E.
Reed, Neil A. Pursell, John
Sumnall and Neil Proctor, each of whom owns 54,250,000
shares
of common stock, or 15.9% of the outstanding common stock on the date consent
was given.
Who
is paying the cost of this information statement?
We
will
pay for preparing, printing and mailing this information statement. Our costs
are estimated at $15,000.
ELECTION
OF DIRECTORS
Our
directors are elected annually by the stockholders to serve until the next
annual meeting of stockholders and until their respective successors are duly
elected. Our bylaws provide that the number of directors comprising the whole
board shall fixed by action of our stockholders or directors from time to time.
The size of the board for the ensuing year is six directors.
None
of
our directors were elected at a meeting for which we solicited proxies. All
of
our directors were elected by the board of directors without stockholder
approval.
The
following table sets forth certain information concerning our
directors:
Name
Age
Position
with Us
Director
Since
James
E. Reed
36
Chief
executive officer and director
November
2005
Neil
A. Pursell
42
Chief
financial officer and director
November
2005
Melyvn
S. Langley
58
Chairman
of the board and director
August
2006
Ian
M. Herman
55
Director
August
2006
Raymond
Pirtle, Jr.
48
Director
September
2006
John E.
Boyd
64
Director
November
2006
Mr.
Reed
has been with us since 2003. Since August 2006, Mr. Reed has served as our
chief
executive officer and a director. From November 2005 to the August 2006, Mr.
Reed served as our president and a director. Since April 2003, Mr. Reed has
served as a director of Ace Telecom, Ace Trading Telecom and N2J. From 1999
to
April 2003, Mr. Reed was the chief operating officer of the Starcom One Group,
an independent distributor of mobile phone handsets. Prior to joining Starcom
One in 1999, Mr. Reed was the United Kingdom Sales Manager for Cellstar UK.
Mr.
Reed has served as a director of Peach plc group, information technology
hardware and software company since November 2004.
Mr.
Pursell has been with us since 2003. Since November 2005, Mr. Pursell has served
as our chief financial officer and a director. Since April 2003, Mr. Pursell
has
served as a director of Ace Telecom, Ace Trading Telecom and N2J. From June
2001
to May 2003, Mr. Pursell was the chief financial officer of the Starcom One
Group. Prior to joining Starcom in May 2001, Mr. Pursell was a partner in the
accounting firm Barringtons of Staffordshire, UK. Mr. Pursell is a chartered
accountant. Mr. Pursell has served as a director of Peach plc group since
November 2004.
Mr.
Langley has served as a principal in MSL Consultants, a firm that provides
management accounting, business advisory, tax consulting and turnaround services
since 2003. From 1993 to 2003, Mr. Langley was the senior partner of Langley
and
Partners, chartered certified accountants. From 1973 to 1993, Mr. Langley served
as the main resident tax and insolvency partner at Sorskys. Mr. Langley is
a
chartered certified accountant
Mr.
Herman has served as chairman, director and chief executive officer of Global
Aircraft Solutions and Hamilton Aerospace Technologies, an aircraft
refurbishment company, from 2002 to the present. From 1995 to 2000, Mr. Herman
served as chairman of the Department of Trade and Industry London and Southeast
Development Board for the British government. From to 1988 to 1990, Mr. Herman
served as chairman and chief executive officer of British World Airlines. Mr.
Herman is a chartered accountant.
-2-
Mr.
Pirtle has served as President of Claridge Company, LLC, an investment services
company, since May 2005. From May 2001 to May 2005, Mr. Pirtle served as
managing director of Avondale Partners, LLC, an investment banking company.
From
1989 to 2001, Mr. Pirtle served as a director and co-head of institutional
sales
at Equitable Securities Corp., later known as SunTrust Equitable. Mr. Pirtle
is
a member of the board of directors of the following public companies: Premiere
Global Services, Inc., a business communications and data solutions company,
eNucleus, Inc., a supply chain management applications company, and IceWeb,
Inc., a customized internet portal solutions company.
Mr.
Boyd
has served as president and chief executive officer of EUR Systems, a billings
and revenue management company since April 2001. From December 1997 until 2001,
Mr. Boyd was president and chief executive officer of Con Edison Solutions,
an
unregulated energy services company and subsidiary of Consolidated Edison,
Inc.
Mr. Boyd received his B.A. in English from Iona College and his M.S. in
advanced management, from Pace University. He is also the founding chairman
of
the Telecommunications Industry Association and a post governor of the
Electronic Industries Association.
Our
directors are elected for a term of one year.
We
are
incorporated in Nevada and are subject to the provisions of the Nevada General
Corporation Law. Our articles of incorporation provide that we will indemnify
and hold harmless our officers and directors to the fullest extent permitted
by
Chapter 78 of the Nevada Revised Statutes.
Section
78.138 of the Nevada Revised Statutes (“NRS”) provides that, with certain
specified exceptions, or unless the articles of incorporation or an amendment
thereto, in each case filed on or after October 1, 2003, provide for greater
individual liability, a director or officer is not individually liable to the
corporation or its stockholders or creditors for any damages as a result of
any
act or failure to act in his capacity as a director or officer unless it is
proven that his act or failure to act constituted a breach of his fiduciary
duties as a director or officer; and his breach of those duties involved
intentional misconduct, fraud or a knowing violation of law.
Directors’
Compensation
Each
independent director receives compensation of $24,000 per year plus $1,000
for
each day that the director attends a meeting of per meeting of the board and
each committee. In addition, Mr. Langley has a one-year consulting contract
for
which he receives compensation of $36,000 per year.
Pursuant
to our 2006 long-term incentive plan, each newly elected independent director
receives at the time of his election, 100,000 shares of common stock (12,500
shares after giving effect to the reverse split), which vest seven months from
the date of grant, or, in the case of directors who were independent directors
on the date the board approved the plan, a stock grant for 100,000 shares of
common stock (12,500 shares after giving effect to the reverse split), which
vests on June 30, 2007. In addition, each independent director receives an
annual grant of such number of shares of common stock as has a value equal
to
$25,000, on the first trading date of April, commencing in April 2007, which
vests one year from the date of grant. The independent director forfeits
unvested shares if he ceases to be a director for any reason other than his
or
her death or disability or a change of control. Any unvested shares become
immediately vested upon a directors’ death or the termination of his or her
status as a director as a result of a disability (including a decision not
to
run for re-election as a result of a disability). All unvested shares also
become fully vested upon a change of control, as defined in the plan.
Board
of Directors and Committee Meetings
Our
business, property and affairs are managed by or under the direction of the
board of directors. Members of the board are kept informed of our business
through discussion with the chief executive and financial officers and other
officers, by reviewing materials provided to them and by participating at
meetings of the board and its committees.
-3-
Prior
to
August 2006, we did not have independent directors. Since August 22, 2006,
when
two of our independent directors were elected to the board, we had two
committees - the audit committee and the compensation committee. The audit
and
compensation committees are comprised of Melyvn S. Langley, Ian M. Herman and
Raymond Pirtle, Jr., with Mr. Langley as chairman.
Our
audit
committee will be involved in discussions with our independent auditor with
respect to the scope and results of our year-end audit, our quarterly results
of
operations, our internal accounting controls and the professional services
furnished by the independent auditor. Our board of directors has adopted a
written charter for the audit committee which the audit committee reviews and
reassesses for adequacy on an annual basis. Our audit committee also approves
any transactions between us and related parties. A copy of the audit committee’s
current charter is attached to this information statement as Appendix A.
The
compensation committee serves as the committee under our options and long-term
incentive plans and it reviews and approves any employment agreements with
management and changes in compensation for our executive officers.
Communications
with our Board of Directors
Any
stockholder who wishes to send a communication to our board of directors should
address the communication either to the board of directors or to the individual
director c/o Mr. Neil Pursell, Chief Financial Officer, Tricell, Inc., 33 Lawton
Street, Congleton, Cheshire CW12 1RU, United Kingdom Mr. Pursell will forward
the communication either to all of the directors, if the communication is
addressed to the board, or to the individual director, if the communication
is
directed to a director.
Compliance
with Section 16(a) of the Securities Exchange Act
Section
16(a) of the Securities Exchange Act of 1934, requires our directors, executive
officers and persons who own more than 10% of our common stock to file with
the
SEC initial reports of ownership and reports of changes in ownership of common
stock and other of our equity securities. To our knowledge, during the calendar
year ended December 31, 2005, no officer, director or 10% stockholder engaged
in
any transactions for which a Form 4 was required.
Nominees
for Director
Any
stockholder who wants to nominate a candidate for election to the board must
deliver timely notice to our secretary at our principal executive offices.
In
order to be timely, the notice must be delivered
·
in
the case of an annual meeting, not less than 120 days prior to the
anniversary date of the immediately preceding annual meeting of
stockholders, although if we did not hold an annual meeting or the
annual
meeting is called for a date that is not within 30 days of the anniversary
date of the prior year’s annual meeting, the notice must be received a
reasonable time before we begin to print and mail our proxy materials;
and
·
in
the case of a special meeting of stockholders called for the purpose
of
electing directors, the notice must be received a reasonable time
before
we begin to print and mail our proxy
materials.
-4-
The
stockholder’s notice to the secretary must set forth:
·
as
to each person whom the stockholder proposes to nominate for election
as a
director (a) his name, age, business address and residence address,
(b)
his principal occupation and employment, (c) the number of shares
of our
common stock are owned beneficially or of record by him and (d) any
other
information relating to the nominee that would be required to be
disclosed
in a proxy statement or other filings required to be made in connection
with solicitations of proxies for election of directors pursuant
to
Section 14 of the Exchange Act, and the rules and regulations of
the
Commission thereunder; and
·
as
to the stockholder giving the notice (a) his name and record address,
(b)
the number of shares of common stock of the corporation which are
owned
beneficially or of record by him, (c) a description of all arrangements
or
understandings between the stockholder and each proposed nominee
and any
other person or persons (including their names) pursuant to which
the
nomination(s) are to be made by the stockholder, (d) a representation
by
him that he is a holder of record of our stock entitled to vote at
such
meeting and that he intends to appear in person or by proxy at the
meeting
to nominate the person or persons named in his notice and (e) any
other
information relating to the stockholder that would be required to
be
disclosed in a proxy statement or other filings required to be made
in
connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
of the Commission thereunder.
The
notice delivered by a stockholder must be accompanied by a written consent
of
each proposed nominee to being named as a nominee and to serve as a director
if
elected. The stockholder must be a stockholder of record on the date on which
he
gives the notice described above and on the record date for the determination
of
stockholders entitled to vote at the meeting.
Any
person who desires to nominate a candidate for director at our 2007 annual
meeting should provide the information required not later than December 31,2006.
In
August
2006, we sold to Barron Partners LP for $1,700,000 (a) 8,500,000 shares of
series A convertible preferred stock, par value $0.001 per share, (b) warrants
to purchase up to 120,000,000 shares of common stock at $0.20 per share, (c)
warrants to purchase up to 10,000,000 shares of common stock at $0.35 per share,
(d) warrants to purchase up to 10,000,000 shares of common stock at $0.45 per
share, (e) warrants to purchase up to 20,000,000 shares of common stock at
$0.65
per share, and (f) warrants to purchase up to 20,000,000 shares of common stock
at $1.00 per share.
Pursuant
to the agreement with Barron Partners, we are required to amend our articles
of
incorporation to provide for an authorized capitalization of 120,000,000 shares
of capital stock, of which 10,000,000 will be shares of preferred stock and
110,000,000 will be shares of common stock and to effect a one-for-eight reverse
split of our common stock.
Our
board
of directors has proposed that we adopt the restated articles of incorporation,
and we obtained consent of the holders of a majority of our outstanding stock
to
the adoption of the restated articles of incorporation. The restated certificate
of incorporation will be filed with the Secretary of State of the State of
Nevada on or about, but not earlier than, 20 days after the definitive
information statement is mailed to our stockholders.
The
following discussion is a summary of the key changes affected by the restated
articles of incorporation, but this summary is qualified in its entirety by
reference to the full text of the restated articles of incorporation, a copy
of
which is included as Appendix B to this information statement.
Our
restated articles of incorporation provide for a one-for-eight reverse split
of
our common stock. As a result of the reverse split, each share of common stock
outstanding at the effective time of the reverse split, will, without any action
on the part of the holder thereof, become one-eighth share of common stock.
The
par value of the common stock will not be affected by the reverse split. For
purposes of this proposal, the common stock, as presently constituted, is
referred to as the “old common stock” and the common stock resulting from the
reverse split is referred to as the “new common stock.”
The
reverse split will become effective upon the filing with the Secretary of State
of the State of Nevada of the restated articles of incorporation, which states
that, upon the filing of the restated articles of incorporation, each share
of
common stock then issued and outstanding would automatically become and be
converted into one-eighth share of common stock.
Principal
Effects of the Reverse Split
The
principal effects of the reverse split will be as follows:
1.
Based
upon the 340,545,877 shares of common stock outstanding on the Record
Date, the reverse split would decrease the outstanding shares of
common
stock by 87½%, and, upon the effectiveness of the reverse split,
approximately 42,568,235 shares of new common stock would be
outstanding.
2.
Each
warrant or option to purchase one share of old common stock will
become a
warrant or option to purchase one-eighth of a shares at an exercise
price
per share equal to eight times the former exercise price. Thus, for
example, a warrant to purchase 120,000,000 shares of old common stock
at
$.20 per share will become a warrant to purchase 15,000,000
shares of new common stock at an exercise price of $1.60 per share.
3.
The
conversion ratio of our series A preferred stock will change from
one to
one-eighth. Thus, the series A preferred stock, which is convertible
into
8,500,000 shares of old common stock will become convertible into
1,062,500 shares of new common
stock.
In
addition, our officers hold options to purchase an aggregate of 8,000,000,
of
which options to purchase 2,000,000 share are held by each of the officers.
These options vest cumulative as to 50% of the options on each of November29,2006 and 2007. The exercise price of the options has not yet been determined,
and will be the average market price for the 30 days prior to the vesting date.
As a result of the reverse split, the number of shares subject to these options
will be reduced to 1,000,000 shares, with each officer holding an option to
purchase 250,000 shares.
We
will
obtain new CUSIP numbers for the new common stock effective at the time of
the
reverse split. Following the effectiveness of the reverse split, we will provide
each record holder of old common stock with information to enable the holder
to
obtain a certificate for new common stock.
Subject
to the provisions for elimination of fractional shares, as described below,
consummation of the reverse split will not result in a change in the relative
equity position or voting power of the holders of old common stock.
-6-
The
restated articles of incorporation will be filed with the Secretary of State
of
Nevada on or about, but not earlier than, the 20th
day
after this information statement is mailed to our stockholders. The reverse
split would become effective as of the date of such filing.
Purposes
of the Reverse Stock Split
The
reverse split would decrease the number of shares of old common stock
outstanding and presumably increase the per share market price for the new
common stock. Theoretically, the number of shares outstanding should not, by
itself, affect the marketability of the stock, the type of investor who acquires
it, or our reputation in the financial community, but in practice this is not
necessarily the case, as many investors look upon a stock trading in the range
of $1.00 per share as unduly speculative in nature and, as a matter of policy,
avoid investment in such stocks.
The
common stock is currently traded on the OTC Bulletin Board. Many leading
brokerage firms are reluctant to recommend lower-priced securities to their
clients and a variety of brokerage house policies and practices currently tend
to discourage individual brokers within firms from dealing in lower-priced
stocks. Some of those policies and practices pertain to the payment of brokers’
commissions and to time consuming procedures that make the handling of lower
priced stocks unattractive to brokers from an economic standpoint. In addition,
the structure of trading commissions also tends to have an adverse impact upon
holders of lower priced stocks because the brokerage commission on a sale of
a
lower priced stock generally represents a higher percentage of the sales price
than the commission on a relatively higher priced issue.
The
Board
of Directors believes that the reverse split is in the best interest of the
Company and its stockholders. The price of the old common stock during
the 52 weeks ending on November 21, 2006 ranged from a low closing price of
$0.06 to a high closing price of $0.39. On November 21, 2006, the closing price
of the old common stock was $0.27 per share.
We
may
require additional capital for our operations or for expansion and we do not
believe that we will be able to raise the necessary capital unless the price
of
the common stock is higher than the current common stock price levels. In
addition, we do not believe that investors are interested in our stock if it
is
less than $1.00. However, we cannot assure you that the reverse split will
result in any increase in the common stock price or that we will be able to
complete any financing following the reverse split.
Exchange
of Certificate and Elimination of Fractional Share Interests
On
the
effective date, each eight shares of old common stock will automatically be
combined and changed into one share of new common stock. No additional action
on
our part or on the part of any stockholder will be required in order to effect
the reverse split. Stockholders will be requested to exchange their certificates
representing shares of old common stock for new certificates representing shares
of new common stock. Stockholders will be furnished the necessary materials
and
instructions to effect the exchange promptly following the effective date.
Certificates representing shares of old common stock subsequently presented
for
transfer will not be transferred on our books and records but will be returned
for the applicable number of shares of new common stock. Stockholders should
not
submit any certificates until requested to do so. In the event any certificate
representing shares of old common stock is not presented for exchange upon
request by us, any dividends that may be declared after the effective date
of
the reverse split with respect to the common stock represented by such
certificate will be withheld by us until the certificate for the shares of
old
common stock has been properly presented for exchange, at which time all such
withheld dividends which have not yet been paid to a public official pursuant
to
relevant abandoned property laws will be paid to the holder thereof or his
designee, without interest.
-7-
No
fractional shares of new common stock will be issued to any stockholder.
Accordingly, stockholders of record who would otherwise be entitled to receive
fractional shares of new common stock, will, upon surrender of their
certificates representing shares of old common stock, receive such additional
fractional share as will be necessary to issue to the holder a whole number
of
shares of new common stock.
Federal
Income Tax Consequences of the Reverse Split
The
combination of each eight shares of the old common stock into one share of
new
common stock should be a tax-free transaction under the Internal Revenue Code
of
1986, as amended, and the holding period and tax basis of the old common stock
will be transferred to the new common stock received in exchange
therefor.
A
Stockholder who receives an additional fractional share in order to round up
the
number of shares owned by him or her to a whole number of shares would allocate
his or her basis among all of the shares of new common stock (including the
additional fractional share used in rounding) that are issued in the reverse
split.
This
discussion should not be considered as tax or investment advice, and the tax
consequences of the reverse split may not be the same for all stockholders.
Stockholders should consult their own tax advisors to know their individual
federal, state, local and foreign tax consequences.
Change
in Authorized Capital Stock
We
are
presently authorized to issue 500,000,000 shares of common stock, par value
$.001 per share, and 100,000,000 shares of preferred stock, par value $.001
per
share. The restated articles of incorporation provide for an authorized capital
stock of 120,000,000 shares, of which 10,000,000 shares are shares of preferred
stock, par value $.001 per share, and 110,000,000 shares are shares of common
stock, par value $.001 per share. Our board of directors has broad rights to
set
the rights, preferences, privileges, limitation and restrictions for one or
more
series of preferred stock, including the following:
(i) the
designation of such series;
(ii) the
dividend rate of such series, the conditions and dates upon which such dividends
shall be payable, the preference or relation which such dividends shall bear
to
the dividends payable on any other class or classes or of any other series
of
capital stock, whether such dividends shall be cumulative or noncumulative,
and
whether such dividends may be paid in shares of any class or series of capital
stock or other securities of the Corporation;
(iii) whether
the shares of such series shall be subject to redemption by the Corporation,
and, if made subject to such redemption, the times, prices and other terms
and
conditions of such redemption;
(iv) the
terms
and amount of any sinking fund provided for the purchase or redemption of the
shares of such series;
(v) whether
or not the shares of such series shall be convertible into or exchangeable
for
shares of any other class or classes or series of capital stock or other
securities of the Corporation, and, if provision be made for conversion or
exchange, the times, prices, rates, adjustment and other terms and conditions
of
such conversion or exchange;
-8-
(vi) the
extent, if any, to which the holders of the shares of such series shall be
entitled to vote, as a class or otherwise, with respect to the election of
the
directors or otherwise, and the number of votes to which the holder of each
share of such series shall be entitled;
(vii) the
restrictions, if any, on the issue or reissue of any additional shares or series
of Preferred Stock; and
(viii) the
rights of the holders of the shares of such series upon the dissolution of,
or
upon the distribution of assets of, the Corporation.
Pursuant
to the securities purchase agreement relating to our private placement in August
2006, we created a series of preferred stock, designated as the series A
convertible preferred stock. The rights, preferences, privileges and limitations
applicable to the series A preferred stock will not be affected by our restated
articles of incorporation.
There
are
presently 340,545,877 shares of common stock outstanding. In addition, we have
obligations to issue up to a total of 212,925,000 shares of common stock as
follows:
·
8,500,000
shares of old common stock (1,062,500 shares of new common stock)
issuable
upon conversion of the series A preferred
stock.
·
120,000,000
shares of old common stock (15,000,000 shares of new common stock)
issuable upon exercise of the Class A
Warrants.
·
10,000,000
shares of old common stock (1,250,000 shares of new common stock)
issuable
upon exercise of the Class B
Warrants.
·
10,000,000
shares of old common stock (1,250,000 shares of new common stock)
issuable
upon exercise of the Class C
Warrants.
·
20,000,000
shares of old common stock (2,500,000 shares of new common stock)
issuable
upon exercise of the Class D
Warrants.
·
20,000,000
shares of old common stock (2,500,000 shares of new common stock)
issuable
upon exercise of the Class E
Warrants.
·
16,000,000
shares issuable of old common stock (2,000,000 shares of new common
stock)
issuable pursuant to the 2006 long-term incentive
plan
·
425,000
shares of old common stock (53,125 shares of new common stock) issuable
upon exercise of outstanding warrants issued to a broker in connection
with the Barron Partners financing.
·
8,000,000
shares of old common stock (1,000,000 shares of new common stock)
issuable
upon exercise of outstanding options not listed
above.
We
are
presently committed to issue more shares of common stock than are authorized
by
our articles of incorporation. As a result, it is necessary for us to increase
the authorized number of shares of common stock. The reverse split combined
with
the change in the number of authorized shares of common stock will result in
a
reduction in the number of shares of common stock outstanding to 42,568,235
shares and a reduction in the maximum number of shares of common stock issuable
upon conversion prefered stock and exercise of options and warrants and
pursuant to our 2006 long-term incentive plan to 26,615,625 shares. This
combined total of 69,183,860 shares is significantly less than the
110,000,000 authorized shares of common stock set forth in the restated articles
of incorporation and provides us with the ability to issue additional shares
if
the need should arise. We currently have no plans which contemplate the issuance
of additional shares of common stock or securities convertible into common
stock.
-9-
Elimination
of Liability and Indemnification
The
restated articles add a provision which eliminates liability of directors for
monetary damages to the fullest extent permitted by Nevada law. Under Nevada
law, with certain limited exception and unless the articles of incorporation
provide for greater individual liability, a director or officer is not
individually liable to the corporation or its stockholders or creditors for
any
damages as a result of any act or failure to act in his capacity as a director
or officer unless it is proven that (a) his or her act or failure to act
constituted a breach of fiduciary duties as a director or officer; and (b)
his
or her breach of those duties involved intentional misconduct, fraud or a
knowing violation of law.
The
restated articles provide that our officers and directors shall be indemnified
to the fullest extent authorized by Nevada law, and that such right is a
contract right. They also expressly permit us to carry officers’ and directors’
liability insurance that provides coverage whether or not we would have the
power to indemnify such persons under Nevada law. Nevada law has broad
provisions for the indemnification of officers and directors pursuant to
sections NRS Sections 78.7502, 78.751 and 78.752.
Provision
to Permit Limitation on Exercise or Conversion of Convertible
Securities
The
restated articles add the following provision to our present certificate of
incorporation.
“The
terms
and conditions of any rights, options and warrants approved by the Board of
Directors may provide that any or all of such terms and conditions may not
be
waived or amended or may be waived or amended only with the consent of the
holders of a designated percentage of a designated class or classes of capital
stock of the Corporation (or a designated group or groups of holders within
such
class or classes, including but not limited to disinterested holders), and
the
applicable terms and conditions of any such rights, options or warrants so
conditioned may not be waived or amended or may not be waived or amended absent
such consent.”
The
adoption of this provision is required by the securities purchase agreement
dated August 24, 2006, as amended, between us and Barron Partners. Pursuant
to
that agreement, we issued 8,500,000 shares of series A preferred stock and
warrants to purchase an aggregate of 180,000,000 shares of common stock. Unless
expressly provided in the certificate of designation or the warrants,
no
investor shall be entitled to convert the series A preferred stock
into
shares of common stock or to exercise the Warrants to the extent that such
conversion or exercise would result in beneficial ownership by the investor
and
its affiliates of more than 4.9% of
our
outstanding stock. The securities purchase agreement provides that this
provision may not be amended. Beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.
The
amendment expressly gives us the authority to grant rights, warrants and options
which provide that they cannot be amended without the consent a specified
percentage of stockholders or classes or groups of stockholders, and such
provisions would be prohibit us from amending the rights, warrants and options
except as permitted by this provision, if at all. With respect to the warrants
that were issued pursuant to the purchase agreement with Barron Partners, the
amendment would expressly prohibit us from amending the warrants to remove
the
4.9% limitation. The warrants, by their terms, prevent such
amendment.
-10-
APPROVAL
OF 2006 LONG-TERM INCENTIVE PLAN
The
board
of directors believes that in order to attract and retain the services of
executive and other key employees, it is necessary for us to have the ability
and flexibility to provide a compensation package which compares favorably
with
those offered by other companies. Accordingly, in October 2006, the Board
adopted, and in November 2006, the stockholders approved by written consent,
the
2006 long-term incentive plan, covering 16,000,000 shares of common stock,
which
will become 2,000,000 upon the effectiveness of the one-for-eight reverse split.
Set forth below is a summary of the 2006 plan, as amended, but this summary
is
qualified in its entirety by reference to the full text of the 2006 plan, a
copy
of which is included as Appendix C to this information statement.
The
2006
plan provides for the grant of incentive and non-qualified options, stock
grants, stock appreciation rights and other equity-based incentives to
employees, including officers, and consultants. The 2006 plan is to be
administered by a committee of not less than two directors each of which is
to
be an independent director. In the absence of a committee, the plan is
administered by the board of directors. Independent directors are not eligible
for discretionary options. However, each newly elected independent director
receives at the time of his election, 100,000 shares of common stock (12,500
shares after giving effect to the reverse split), which vest seven months from
the date of grant, or, in the case of directors who were independent directors
on the date the board approved the plan, a stock grant for 100,000 shares of
common stock (12,500 shares after giving effect to the reverse split), which
vests on June 30, 2007. In addition, each independent director receives an
annual grant of such number of shares of common stock as has a value equal
to
$25,000, based on the last reported trading price on such date, of, if the
stock
is not traded on that date, the closing bid price on that date, on the first
trading date of April, commencing in April 2007, which vests one year from
the
date of grant. The independent director forfeits unvested shares if he ceases
to
be a director for any reason other than his or her death, disability or change
of control. Any unvested shares become immediately vested upon a directors’
death or the termination of his or her status as a director as a result of
a
disability (including a decision not to run for re-election as a result of
a
disability). All unvested shares become fully vested upon a change of control,
as defined in the plan. Pursuant to this provision, upon the effectiveness
of
stockholder approval of the 2006 plan, the present independent directors (Melyvn
S. Langley, Ian M. Herman, Raymond Pirtle, Jr. and John E. Boyd) will each
automatically receive 100,000 of common stock (12,500 shares after giving effect
to the reverse split). No options were granted and no other stock grants were
issued under the plan as of the date of this information statement.
Options
intended to be incentive stock options must be granted at an exercise price
per
share which is not less than the fair market value of the common stock on the
date of grant and may have a term which is not longer than ten years. If the
option holder holds 10% of our common stock, the exercise price must be at
least
110% of the fair market value on the date of grant and the term of the option
cannot exceed five years.
Federal
Income Tax Consequences
The
following is a brief summary of the federal income tax consequences as of the
date hereof with respect to awards under the 2006 plan for participants who
are
both citizens and residents of the United States. This description of the
federal income tax consequences is based upon law and Treasury interpretations
in effect on the date of this information statement (including proposed and
temporary regulations which may be changed when finalized), and it should be
understood that this summary is not exhaustive, that the law may change and
further that special rules may apply with respect to situations not specifically
discussed herein, including federal employment taxes, foreign, state and local
taxes and estate or inheritance taxes. Accordingly, participants are urged
to
consult with their own qualified tax advisors.
-11-
Non-Qualified
Options
No
taxable income will be realized by the participant upon the grant of a
non-qualified option. On exercise, the excess of the fair market value of the
stock at the time of exercise over the option price of such stock will be
compensation and (i) will be taxable at ordinary income tax rates in the year
of
exercise, (ii) will be subject to withholding for federal income tax purposes
and (iii) generally will be an allowable income tax deduction to us. The
participant’s tax basis for stock acquired upon exercise of a non-qualified
option will be equal to the option price paid for the stock, plus any amounts
included in income as compensation. If the participant pays the exercise price
of an option in whole or in part with previously-owned shares of common stock,
the participant’s tax basis and holding period for the newly-acquired shares is
determined as follows: As to a number of newly-acquired shares equal to the
number of previously-owned shares used by the participant to pay the exercise
price, no gain or loss will be recognized by the participant on the date of
exercise and the participant’s tax basis and holding period for the
previously-owned shares will carry over to the newly-acquired shares on a
share-for-share basis, thereby deferring any gain inherent in the
previously-owned shares. As to each remaining newly acquired share, the
participant’s tax basis will equal the fair market value of the share on the
date of exercise and the participant’s holding period will begin on the day
after the exercise date. The participant’s compensation income and our deduction
will not be affected by whether the exercise price is paid in cash or in shares
of common stock. Special rules, discussed below under “Incentive Stock Options -
Disposition of Incentive Option Shares,” will apply if a participant surrenders
previously-owned shares acquired upon the exercise of an incentive option that
have not satisfied certain holding period requirements in payment of any or
all
of the exercise price of a non-qualified option.
Disposition
of Option Shares
When
a
sale of the acquired shares occurs, a participant will recognize capital gain
or
loss equal to the difference between the sales proceeds and the tax basis of
the
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets. The capital gain or loss will be long-term capital gain
or
loss treatment if the shares have been held for more than twelve months. There
will be no tax consequences to us in connection with a sale of shares acquired
under an option.
Incentive
Stock Options
The
grant
of an ISO will not result in any federal income tax to a participant. Upon
the
exercise of an incentive option, a participant normally will not recognize
any
income for federal income tax purposes. However, the excess of the fair market
value of the shares transferred upon the exercise over the exercise price of
such shares (the “spread”) generally will constitute an adjustment to income for
purposes of calculating the alternative minimum tax of the participant for
the
year in which the option is exercised. As a result of the exercise a
participant’s federal income tax liability may be increased. If the holder of an
incentive stock option pays the exercise price, in full or in part, with shares
of previously acquired common stock, the exchange should not affect the
incentive stock option tax treatment of the exercise. No gain or loss should
be
recognized on the exchange and the shares received by the participant, equal
in
number to the previously acquired shares exchanged therefor, will have the
same
basis and holding period as the previously acquired shares. The participant
will
not, however, be able to utilize the old holding period for the purpose of
satisfying the incentive stock option holding period requirements described
below. Shares received in excess of the number of previously acquired shares
will have a basis of zero and a holding period, which commences as of the date
the common stock is issued to the participant upon exercise of the incentive
option. If an exercise is effected using shares previously acquired through
the
exercise of an incentive stock option, the exchange of the previously acquired
shares will be considered a disposition of such shares for the purpose of
determining whether a disqualifying disposition has occurred.
-12-
Disposition
of Incentive Option Shares.
If the
incentive option holder disposes of the stock acquired upon the exercise of
an
incentive stock option (including the transfer of acquired stock in payment
of
the exercise price of another incentive stock option) either within two years
from the date of grant or within one year from the date of exercise, the option
holder will recognize ordinary income at the time of such disqualifying
disposition to the extent of the difference between the exercise price and
the
lesser of the fair market value of the stock on the date the incentive option
is
exercised or the amount realized on such disqualifying disposition. Any
remaining gain or loss is treated as a short-term or long-term capital gain
or
loss, depending on how long the shares were held prior to the disqualifying
disposition. In the event of such disqualifying disposition, the incentive
stock
option alternative minimum tax treatment described above may not apply
(although, where the disqualifying disposition occurs subsequent to the year
the
incentive stock option is exercised, it may be necessary for the participant
to
amend his return to eliminate the tax preference item previously
reported).
Our
Deduction.
We are
not entitled to a tax deduction upon either exercise of an incentive option
or
disposition of stock acquired pursuant to such an exercise, except to the extent
that the option holder recognized ordinary income in a disqualifying
disposition.
Stock
Grants
A
participant who receives a stock grant under the 2006 plan generally will be
taxed at ordinary income rates on the fair market value of shares when they
vest, if subject to vesting or other restrictions, or, otherwise, when received.
However, a participant who, within 30 days after receiving such shares, makes
an
election under Section 83(b) of the Code, will recognize ordinary income on
the
date of issuance of the stock equal to the fair market value of the shares
on
that date. If a Section 83(b) election is made, the holding period for the
shares will commence on the day after the shares are received and no additional
taxable income will be recognized by the participant at the time the shares
vest. However, if shares subject to a Section 83(b) election are forfeited,
no
tax deduction is allowable to the participant for the forfeited shares. Taxes
are required to be withheld from the participant at the time and on the amount
of ordinary income recognized by the participant. We will be entitled to a
deduction at the same time and in the same amount as the participant recognizes
income.
Stock
Appreciation Rights
The
grant
of stock appreciation rights will not result in any federal income tax to a
participant. Upon the exercise of a stock appreciation or phantom stock right,
a
participant will recognize ordinary income in an amount equal to the cash or
the
fair market value of the stock, if any, received by the participant. At such
time, we will be entitled to a tax deduction for the amount of income recognized
by the participant. To date, we have not granted stock appreciation rights
under
any of our plans.
-13-
New
Plan Benefits
The
following table sets forth information relating to the benefits that will be
received by the following classes of persons.
Name
and Position
Dollar
Value
Number
of Units
Officers
named in the summary compensation table
—
—
Executive
officers, as a group
—
—
Non-executive
directors, as a group
$
112,000
400,000
Non-executive
officers employee group
—
—
The
dollar value of the stock granted to the independent directors is based on
a
market price of $.28 per share. The actual dollar value will be based on the
market price on the effective date of grant.
BENEFICIAL
OWNERSHIP OF SECURITIES AND SECURITY OWNERSHIP OF
MANAGEMENT
The
following table provides information about shares of common stock beneficially
owned as of November 22, 2006 by:
·
each
director;
·
each
officer named in the summary compensation
table;
·
each
person owning of record or known by us, based on information provided
to
us by the persons named below, to own beneficially at least 5% of
our
common stock; and
·
all
directors and executive officers as a group.
Name
Shares
of Common Stock Beneficially Owned
Percentage
James
E. Reed
55,250,000
16.2%
Neil
A. Pursell
55,250,000
16.2%
John
Sumnall
55,250,000
16.2%
Neil
Proctor
55,250,000
16.2%
Andre
Salt
24,225,000
7.1%
Melyvn
S. Langley
—
—
Ian
M. Herman
—
—
Raymond
Pirtle, Jr.
—
—
John
E. Boyd
—
—
All
officers and directors as a group (four individuals beneficially
owning
stock)
221,000,000
64.1%
Except
as
otherwise indicated each person has the sole power to vote and dispose of all
shares of common stock listed opposite his name. Each person is deemed to own
beneficially shares of common stock which are issuable upon exercise or warrants
or options or upon conversion of convertible securities if they are exercisable
or convertible within 60 days of November 22, 2006.
Upon
the
effectiveness of the 2006 long-term incentive plan, Mr. Langley, Mr. Herman,
Mr.
Pirtle and Mr Boyd will each own 100,000 shares of common stock.
The
shares beneficially owned by each of Mr. Reed, Mr. Pursell, Mr. Sumnall and
Mr.
Proctor include 1,000,000 shares issuable upon exercise of an option which
vests
in November 2006. In connection with our acquisition of NJJ Holdings Limited
from Mr. Reed, Mr. Pursell, Mr. Sumnall and Mr. Proctor, who were the sole
stockholders of NJJ, on August 24, 2006, we issued to each of them a total
of
52,500,000 shares of common stock, of which 30,000,000 shares are held by
us in
escrow. We have an obligation to purchase those shares from the former NJJ
stockholders based on the net profit before taxes of N2J, a subsidiary of
NJJ,
during the year following the closing. The number of shares being purchased
is
determined by dividing 70% of N2J’s net profit before taxes by $.20 per share
($1.60 after giving effect to the reverse split). The maximum payment is
$24,000,000, or $6,000,000 per former NJJ stockholder. To the extent that
we do
not purchase all of the shares pursuant to the formula, the remaining shares
will be conveyed to us without payment of additional consideration. See “Certain
Relationships and Related Transactions.”
-14-
Barron
Partners owns series A preferred stock and Warrants which, if fully converted
and exercised, would result in the ownership of more than 5% of our outstanding
common stock. However, the series A preferred stock, by their terms, may not
be
converted and the warrants may not be exercised if such conversion or exercise
would result in Barron Partners owning more than 4.9% of our outstanding common
stock. This limitation may not be waived. Barron Partners also 9,131,515
outstanding shares (1,141,440 shares after giving effect to the reverse split)
of common stock and 19,000,000 shares (2,375,000 shares after giving effect
to
the reverse split) issuable upon exercise of options granted to Barron Partners.
These options also have a 4.9% limitation.
Executive
Officers
The
following table sets forth certain information with respect to our directors
and
executive officers.
Name
Age
Position
James
E. Reed
36
Chief
executive officer and president
Neil
A. Pursell
42
Chief
financial officer
John
Sumnall
36
Senior
vice president
Neil
Proctor
46
Senior
vice president
Information
concerning Mr. Reed and Mr. Pursell, who are also directors, is included under
“Election of Directors.”
Mr.
Sumnall has been with us since 2005, and he served as a director from November
2005 until August 22, 2006. Since November 2005, Mr. Sumnall has been our senior
vice president. Since April 2003, Mr. Sumnall has served as an officer and
director of Ace Telecom, Ace Trading Telecom and N2J. From January 2001 to
April
2003, Mr. Sumnall was international sales manager for Starcom One.
Mr.
Proctor has been with us since 2005, and he served as a director from November
2005 until August 22, 2006. Since November 2005, Mr. Proctor has served as
our
senior vice president. Since April 2003, Mr. Proctor has served as a director
and director of Ace Telecom, Ace Trading Telecom and N2J. From January 2001
to
April 2003, Mr. Proctor was United Kingdom purchasing manager for Starcom One
Group.
Compensation
Summary
Compensation Table
The
following table summarizes compensation information for the last fiscal year
for
(i) our chief executive officer and (ii) each of our four executive officers
other than the Chief Executive Officer who were serving as executive officers
of
our Company at the end of the fiscal year (collectively, the “Named Executive
Officers”).
Annual
Compensation
Long-Term
Compensation
Name
and Position
Year
Salary
Bonus
Other
Compensation
Securities
Underlying Options
Andre
Salt, chief executive officer
2005
$
454,512
$
121,204
—
2004
454,512
—
—
James
E. Reed, president
2005
136,354
326,052
—
2,000,000
Neil
A. Pursell, chief financial officer
2005
136,354
326,052
—
2,000,000
John
Sumnall, senior vice president
2005
136,354
326,052
—
2,000,000
Neil
Proctor, senior vice president
2005
136,354
326,052
—
2,000,000
-15-
The
compensation payable to our officers is payable in Sterling. The compensation
information contained in this information statement reflects the conversion
of
Sterling into United States dollars at the exchange rate of ₤.55004
per United States dollar. The description of the employment agreements with
the
named executive officers reflects the conversion of Sterling into United States
dollars using the same conversion rate. The actual compensation payable pursuant
to the agreements may be different from the amounts reflected in the description
of the employment agreements as a result of changes in the conversion
rates.
The
long-term options to each of Messrs. Reed, Pursell, Sumnall and Proctor,
represent options to purchase 2,000,000 shares granted pursuant to their
employment agreements. In January 2006, each of these officers received and
a grant of 500,000 shares of common stock shares which was issued in lieu of
the
grant of a performance-based option.
Employment
and Consulting Agreements
We
have
employment agreements with James E. Reed, Neil A. Pursell, Neil Proctor and
John
Sumnall. Pursuant to these employment agreements, Mr. Reed serves as our chief
executive officer and president, Mr. Pursell as our chief financial officer
and
Mr. Sumnall and Mr. Proctor as senior vice presidents.
Each
of
the agreements provides for a base salary at the annual rate of $277,500, which
salary constitutes a continuation of salary they received from Ace Telecom
Limited prior to its acquisition by us. We agreed to conduct a review of the
compensation one year after the date of the agreement. If Ace Telecom generates
gross profits of $125,000 during any month during the term of the agreement
each
of the officers will be paid $23,125 at the end of that month as a bonus. Each
of the officers is entitled to annual bonuses as determined by the Board of
Directors. As compensation for the first year we issued to each of the officers
1,000,000 shares of our common stock. As compensation for the second and third
years, each of them shall be granted an option to purchase 1,000,000 shares
of
common stock if they are continuing in office on November 29, 2006, and an
option to purchase an additional 1,000,000 shares of common stock if he
continues to serve in office on November 29, 2007. These option shall have
an
exercise price equal to the average closing trading price of our common stock
for the 30 business days prior to November 29, 2006 and November 29, 2007,
respectively. At the time of the acquisition of Ace Telecom, we agreed that
each
of the officers would receive options to purchase 500,000 shares of common
stock
if the net profits after taxes of Ace Telecom are at least $1,100,000 at the
end
of the first full year. However, based on the performance of Ace Telecom, we
issued 500,000 shares of our common stock to each of the officers in lieu of
options. The employment agreement provides that the agreement may be terminated
at any time, for cause, at the sole option of the Company or by either party,
upon thirty day advance notice.
We
have a
consulting arrangement with Mr. Langley pursuant to which
he performs consulting services for us for which we pay him $3,000.00 per
month for one-year period commencing September 1, 2006. The agreement has term
of one year.
-16-
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Repayment
to Andre Salt
During
2003, the Company made several payments to Andre Salt in repayment of a loan
from Mr. Salt to us to provide us with short term working capital. Mr. Salt
was
We paid him $271,123 more than we owned him. At December 31, 2004, the balance
of this receivable was $59,534. During 2005, this was repaid and as of
December 31, 2005 there was a balance payable to Mr. Salt of $69,173.
Ace
Telecom Limited
On
June30, 2005, we acquired all of the issued and outstanding capital stock of Ace
Telecom Limited in exchange for 1,000,000 shares of common stock. The former
stockholders were James E. Reed, Neil A. Pursell, John Sumnall and Neil Proctor,
each of whom owned a 25% interest in Ace Telecom. At the time of the
acquisition, the four Ace Telecom stockholders owed us $275,704. This obligation
was paid in part during 2005 and as of December 31, 2005, the balance
receivable from the shareholders was $135,784, divided equally between the
four
shareholders. In connection with the acquisition of Ace Telecom, we entered
into
the employment agreement with each of the four former stockholders of Ace
Telecom.
Ace
Telecom’s offices are located in a building in Congleton, Cheshire in United
Kingdom pursuant to a ten-year lease. The building is owned by James E. Reed,
Neil A. Pursell, John Sumnall and Neil Proctor. As part of the acquisition
of
Ace Telecom, we acquired this building. One of the closing conditions of the
agreement was that Ace Telecom dispose of the building. The contract to sell
the
building was negotiated prior to the closing although the sale of the building
did not occur until after the acquisition of Ace Telecom was completed. Pursuant
to the contract, in august 2005, Ace Telecom sold the building to its former
stockholders for approximately $525,000, and it entered into a ten-year lease
for the building at an annual rental of approximately $55,000, subject to
standard escalation provisions. The annual rental is based on an independent
valuation. The building was subject to a $232,000 mortgage.
NJJ
Agreement
On
August24, 2006, pursuant to a stock purchase agreement, we purchased all of the stock
of NJJ Holdings from its stockholders, James E. Reed, Neil A. Pursell, John
Sumnall and Neil Proctor. In consideration for the NJJ stock, we paid $1,400,000
and issued 210,000,000 shares (26,250,000 after giving effect to the reverse
split) of common stock, of which 90,000,000 shares (11,250,000 after giving
effect to the reverse split) of common stock (the “initial shares”) were issued
to the four former NJJ stockholders outright and 120,000,000 shares (15,000,000
after giving effect to the reverse split) of common stock (the “escrow shares”)
were issued in the name of the former NJJ stockholders and held by us in escrow.
The cash and shares were equally divided among the four former NJJ stockholders.
Each of the four former NJJ stockholders is an officer and Mr. Reed and Mr.
Pursell are also directors. Mr. Sumnall and Mr. Proctor were directors from
November 2205 until August 22, 2006.
The
former NJJ stockholders have the right to sell or otherwise transfer their
initial shares, cumulatively, in the following manner: 25% of each his initial
shares may be sold commencing June 24, 2007, an additional 25% commencing June24, 2008, an additional 25% of commencing June 24, 2009, and all initial shares
may be sold commencing June 24, 2010.
We
are
determine our net profit for the each quarter commencing with the quarter ended
September 30, 2006 through the quarter ending September 30, 2007, but only
for
the one-year period following the date of the NJJ agreement, which was August24, 2006. Thus, the quarter ended September 30, 2006 is the period from August24, 2006 to September 30, 2006. We are required to purchase escrow shares from
the NJJ stockholders at a purchase price per share equal to $0.20 per share,
subject to adjustment. The number of escrow shares being purchased shall be
determined by dividing the payment amount by the purchase price per share,
which
is $.20. The payment amount is the lesser or (i) 70% of net profit before
taxes for the applicable period; or (y) the amount by which $24,000,000 exceeds
all payments previous made for the purchase of such escrow shares. In no event
shall the total of the payments for the purchase of the escrow shares exceed
$24,000,000. In November 2006, the agreement was amended to provided that any
shares that are not purchased pursuant to the formula in the purchase
agreement shall be returned to us for no additional
consideration.
-17-
The
first
payment due with respect to our purchase of escrow shares shall be deposited
into escrow and held in escrow until February 25, 2007, at which time each
NJJ Shareholder will be entitled to his 25% share of the amount held in escrow.
Our obligation to purchase any escrow shares shall be limited to the extent
that
we may not purchase escrow shares pursuant to applicable law. For the period
from August 24, 2006 through September 30, 2006, N2J’s net profits were
$3,148,433, as a result of which we owe the former NJJ stockholders $2,203,903
for the purchase of 11,019,516 of the escrow shares.
Subsequent
to the closing, NJJ is to distribute to the NJJ Shareholders, in equal shares,
the net profit of N2J which shall have accrued through the day preceding the
closing date. Such net profits are to be paid from the proceeds of the accounts
receivable generated through the August 23, 2006, which was the day preceding
the closing date. Net profits shall mean the income before income taxes of
N2J,
determined in accordance with generally accepted accounting principles as in
effect in the United Kingdom; provided, however, that in the event that N2J,
NJJ
or the Company shall incur an income, gross receipts, excise or other tax for
a
period subsequent to the August 24, 2006 closing date on any of the profits
that
are payable to the former NJJ stockholders on or after the closing date, then
such taxes shall be deducted in determining the net profit of N2J for the period
ended August 23, 2006. The determination of N2J’s net profits shall be made on a
quarterly basis in connection with the preparation of the Company’s Form 10-Q or
Form 10-K, as the case may be, and shall be approved by the Company’s audit
committee, and, if the audit committee deems it necessary, by an independent
accounting firm engaged by the audit committee for such purpose. Pursuant to
this provision, there is a balance due to the former NJJ stockholders of
$13,860,014.
Prior
to
our purchase of the NJJ stock, NJJ had other subsidiaries that were engaged
in
the construction business. As required by the purchase agreement, these
subsidiaries were transferred to the former NJJ stockholders immediately prior
to our purchase of the NJJ stock.
INTEREST
OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Our
independent directors receive stock grants pursuant to the 2006 long-term
incentive plan. The reverse split and amendment to our articles of incorporation
affect our officers and directors and their affiliates and our principal
stockholders, to the extent that they own stock, options or warrants, in the
same manner as all other stockholders. Except as stated in the previous
sentence, none of our directors, executive officers, associates of any director
or executive officer, or any other person with a substantial interest, direct
or
indirect, by security holdings or otherwise has any interest in any matter
which
is approved by the stockholders.
-18-
OTHER
MATTERS
Deadline
for Submission of Stockholder Proposals for the 2007 Annual
Meeting
Proposals
of stockholders intended to be presented at the 2007 Annual Meeting of
Stockholders pursuant to SEC Rule 14a-8 must be received at our principal office
not later than January 15, 2007 to be included in the proxy statement for that
meeting.
In
addition, in order for a stockholder proposal to be presented at our meeting
without it being included in our proxy materials, notice of such proposal must
be delivered to the Secretary of our company at our principal offices no later
than January 31, 2007. If notice of any stockholder proposal is received after
January 31, 2007, then the notice will be considered untimely and we are not
required to present such proposal at the 2007 annual meeting. If the board
of
directors chooses to present a proposal submitted after January 31, 2007, at
the
2007 annual meeting, then the persons named in proxies solicited by the board
of
directors for the 2007 annual meeting may exercise discretionary voting power
with respect to such proposal.
ADDITIONAL
INFORMATION
The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and in accordance therewith files
reports, proxy statements and other information including annual and quarterly
reports on Form 10-K and 10-Q with the Securities and Exchange Commission.
Reports and other information filed by the Company can be inspected and copied
at the public reference facilities maintained at the Commission at 100 F Street,
N.E., Washington, DC 20549. Copies of such material can be obtained upon written
request addressed to the Commission, Public Reference Section, 100 F Street,
N.E., Washington, D.C. 20549, at prescribed rates. The Commission maintains
a
web site on the Internet (http://www.sec.gov) that contains reports, proxy
and
information statements and other information regarding issuers that file
electronically with the Commission through the Electronic Data Gathering,
Analysis and Retrieval System (“EDGAR”).
INCORPORATION
BY REFERENCE
We
are
incorporating by reference our annual report on Form 10-K for the year ended
December 31, 2005 and our Form 10-Q for the quarter ended September 30,2006, and a copy of each of such reports, without exhibits, either accompanies
or was delivered in advance of the mailing of this information statement. We
will provide additional copies at no charge upon request by writing to Mr.
Neil
Pursell, chief financial officer, Tricell, Inc., 33 Lawton Street, Congleton,
Cheshire CW12 1RU, United Kingdom. Exhibits will be furnished upon request
and
upon payment of a handling charge of $.25 per page, which represents our
reasonable cost of furnishing such exhibits.
You
should rely only on the information provided in this Information Statement.
The
Company has not authorized any person to provide information other than that
provided here. The Company has not authorized anyone to provide you with
different information. You should not assume that the information in this
Information Statement is accurate as of any date other than the date on the
front of the document.
The
Audit
Committee is appointed by the Board of Directors (the “Board”) of Tricell, Inc.
(the “Company”) to: (1) assist the Board in monitoring (a) the integrity of the
financial reporting process, systems of internal controls and financial
statements and reports of the Company, (b) the performance of the Company’s
internal audit function, and (c) the compliance by the Company with legal
and
regulatory requirements; and (2) be directly responsible for the appointment,
compensation and oversight of the Company’s independent auditor employed by the
Company for the purpose of preparing or issuing an audit report or related
work
(the “Outside Auditor”).
Committee
Membership
The
Audit
Committee shall consist of no fewer than three members, as determined annually
by the Board; provided, however, that in the event the Company has less than
three independent directors, as hereinafter defined, the Audit Committee
shall
have such number of members as equals the number of independent directors.
Notwithstanding the foregoing, if the Company is a small business company
and
its stock is not listed or traded on a market or exchange that requires that
the
audit committee consist of three members, the Board may appoint an Audit
Committee of not less than two members. The members of the Audit Committee
shall
meet the independence and expertise requirements of the principal stock exchange
or market on which the Company’s securities are traded and Section 10A(m)(3) of
the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules and
regulations of the Securities and Exchange Commission (the “Commission”);
provided, however, that if the Company’s securities are not traded on an
exchange or market which has a definition of independence, then independence
shall be determined in accordance with the rules of the Nasdaq Stock Market.
Audit Committee members shall not serve simultaneously on the audit committees
of more than two other public companies without the approval of the full
Board.
The
members of the Audit Committee shall be appointed annually by the Board.
Audit
Committee members may be replaced by the Board at any time. The Board shall
designate the Chairman or Chairwoman (“Chairperson”) of the Audit
Committee.
Committee
Authority and Responsibilities
The
basic
responsibility of the members of the Audit Committee is to exercise their
business judgment to act in what they reasonably believe to be in the best
interests of the Company and its stockholders. In discharging that obligation,
members should be entitled to rely on the honesty and integrity of the Company’s
senior executives and its outside advisors and auditors, to the fullest extent
permitted by law.
The
Audit
Committee shall prepare any report which required by the rules of the Commission
to be included in the Company’s proxy statement for its annual
meeting.
A-1
The
Audit
Committee shall be responsible directly for the appointment (subject, if
applicable, to stockholder ratification), retention, termination, compensation
and terms of engagement, evaluation, and oversight of the work of the Outside
Auditor (including resolution of disagreements between management and the
Outside Auditor regarding financial reporting). The Outside Auditor shall
report
directly to the Audit Committee.
The
Audit
Committee shall oversee the integrity of the audit process, financial reporting
and internal accounting controls of the Company, oversee the work of the
Company’s management, internal auditors (the “Internal Auditors”) and the
Outside Auditor in these areas, oversee management’s development of, and
adherence to, a sound system of internal accounting and financial controls,
review whether the Internal Auditors and the Outside Auditor objectively
assess
the Company’s financial reporting, accounting practices and internal controls,
and provide an open avenue of communication among the Outside Auditor, the
Internal Auditors and the Board. It is the responsibility of:
•
management
of the Company and the Outside Auditor, under the oversight of the
Audit
Committee and the Board, to plan and conduct financial audits and
to
determine that the Company’s financial statements and disclosures are
complete and accurate in accordance with generally accepted accounting
principles (“GAAP”) and applicable rules and regulations and fairly
present, in all material respects, the financial condition of the
Company;
•
management
of the Company, under the oversight of the Audit Committee and the
Board,
to assure compliance by the Company with applicable legal and regulatory
requirements; and
•
the
Internal Auditors, under the oversight of the Audit Committee and
the
Board, to review the Company’s internal transactions and accounting which
do not require involvement in the detailed presentation of the Company’s
financial statements.
The
Audit
Committee shall pre-approve all audit services and non-audit services (including
the fees and terms thereof) to be performed for the Company by the Outside
Auditor to the extent required by and in a manner consistent with applicable
law.
The
Audit
Committee shall meet as often as it determines necessary or appropriate,
but not
less frequently than quarterly. The Chairperson shall preside at each meeting
and, in the absence of the Chairperson, one of the other members of the Audit
Committee shall be designated as the acting chair of the meeting. The
Chairperson (or acting chair) may direct appropriate members of management
and
staff to prepare draft agendas and related background information for each
Audit
Committee meeting. To the extent practical, any background materials, together
with the agenda for the meeting, should be distributed to the Audit Committee
members in advance of the meeting. All meetings of the Audit Committee shall
be
held pursuant to the by-laws of the Company with regard to notice and waiver
thereof, and written minutes of each meeting, in the form approved by the
Audit
Committee, shall be duly filed in the Company records. Reports of meetings
of
the Audit Committee shall be made to the Board at its next regularly scheduled
meeting following the Audit Committee meeting accompanied by any recommendations
to the Board approved by the Audit Committee.
The
Audit
Committee may form and delegate authority to subcommittees consisting of
one or
more members when appropriate.
A-2
The
Audit
Committee shall have the authority, to the extent it deems necessary or
appropriate, to retain independent legal, accounting or other advisers. The
Company shall provide for appropriate funding, as determined by the Audit
Committee, for payment of compensation to the Outside Auditor for the purpose
of
rendering or issuing an audit report and to any advisers employed by the
Audit
Committee, subject only to any limitations imposed by applicable rules and
regulations. The Audit Committee may request any officer or associate of
the
Company or the Company’s outside counsel or Outside Auditor to attend a meeting
of the Audit Committee or to meet with any members of, or consultants to,
the
Audit Committee. The Audit Committee shall meet with management, the Internal
Auditors and the Outside Auditor in separate executive sessions at least
quarterly to discuss matters for which the Audit Committee has
responsibility.
The
Audit
Committee shall make regular reports to the Board. The Audit Committee shall
review and reassess the adequacy of this Charter annually and recommend any
proposed changes to the Board for approval. The Audit Committee shall annually
review its own performance.
In
performing its functions, the Audit Committee shall undertake those tasks
and
responsibilities that, in its judgment, would contribute most effectively
to and
implement the purposes of the Audit Committee. In addition to the general
tasks
and responsibilities noted above, the following are the specific functions
of
the Audit Committee:
Financial
Statement and Disclosure Matters
1.
Review
and discuss with management, and to the extent the Audit Committee
deems
necessary or appropriate, the Internal Auditors and the Outside Auditor,
the Company’s disclosure controls and procedures that are designed to
ensure that the reports the Company files with the Commission comply
with
the Commission’s rules and forms.
2.
Review
and discuss with management, the Internal Auditors and the Outside
Auditor
the annual audited financial statements, including disclosures made
in
management’s discussion and analysis, and recommend to the Board whether
the audited financial statements should be included in the Company’s Form
10-K.
3.
Review
and discuss with management, the Internal Auditors and the Outside
Auditor
the Company’s quarterly financial statements, including disclosures made
in management’s discussion and analysis, prior to the filing of its Form
10-Q, including the results of the Outside Auditor’s reviews of the
quarterly financial statements.
4.
Review
and discuss quarterly reports from the Outside Auditor
on:
(a)
All
critical accounting policies and practices to be
used;
(b)
All
alternative treatments within GAAP for policies and practices related
to
material items that have been discussed with management, including
ramifications of the use of such alternative disclosures and treatments,
and the treatment preferred by the Outside
Auditor;
(c)
The
internal controls adhered to by the Company, management, and the
Company’s
financial, accounting and internal auditing personnel, and the impact
of
each on the quality and reliability of the Company’s financial reporting;
and
(d)
Other
material written communications between the Outside Auditor and
management, such as any management letter or schedule of unadjusted
differences.
A-3
5.
Discuss
in advance with management the Company’s practice with respect to the
types of information to be disclosed and the types of presentations
to be
made in earnings press releases, including the use, if any, of “pro forma”
or “adjusted” non-GAAP information, as well as financial information and
earnings guidance provided to analysts and rating
agencies.
6.
Review
and discuss with management, the Internal Auditors and the Outside
Auditor:
(a)
Significant
financial reporting issues and judgments made in connection with
the
preparation of the Company’s financial
statements;
(b)
The
clarity of the financial disclosures made by the
Company;
(c)
The
development, selection and disclosure of critical accounting estimates
and
the analyses of alternative assumptions or estimates, and the effect
of
such estimates on the Company’s financial
statements;
(d)
Potential
changes in GAAP and the effect such changes would have on the Company’s
financial statements;
(e)
Significant
changes in accounting principles, financial reporting policies and
internal controls implemented by the
Company;
(f)
Significant
litigation, contingencies and claims against the Company and material
accounting issues that require disclosure in the Company’s financial
statements;
(g)
Information
regarding any “second” opinions sought by management from an independent
auditor with respect to the accounting treatment of a particular
event or
transaction;
(h)
Management’s
compliance with the Company’s processes, procedures and internal
controls;
(i)
The
adequacy and effectiveness of the Company’s internal accounting and
financial controls and the recommendations of management, the Internal
Auditors and the Outside Auditor for the improvement of accounting
practices and internal controls; and
(j)
Any
difficulties encountered by the Outside Auditor or the Internal Auditors
in the course of their audit work, including any restrictions on
the scope
of activities or access to requested information, and any significant
disagreements with management.
7.
Discuss
with management and the Outside Auditor the effect of regulatory
and
accounting initiatives as well as off balance sheet structures and
aggregate contractual obligations on the Company’s financial
statements.
8.
Discuss
with management the Company’s major financial risk exposures and the steps
management has taken to monitor and control such exposures, including
the
Company’s risk assessment and risk management
policies.
A-4
9.
Discuss
with the Outside Auditor the matters required to be discussed by
Statement
on Auditing Standards (“SAS”) No. 61 relating to the conduct of the audit.
In particular, discuss:
(a)
The
adoption of, or changes to, the Company’s significant internal auditing
and accounting principles and practices as suggested by the Outside
Auditor, Internal Auditors or management;
and
(b)
The
management letter provided by the Outside Auditor and the Company’s
response to that letter.
10.
Receive
and review disclosures made to the Audit Committee by the Company’s Chief
Executive Officer and Chief Financial Officer during their certification
process for the Company’s Form 10-K and Form 10-Q, to the extent required
to be included in the certification process, about (a) any significant
deficiencies in the design or operation of internal controls or material
weakness therein, (b) any fraud involving management or other associates
who have a significant role in the Company’s internal controls and (c) any
significant changes in internal controls or in other factors that
could
significantly affect internal controls subsequent to the date of
their
evaluation.
Oversight
of the Company’s Relationship with the Outside Auditor
11.
Review
the experience and qualifications of the senior members of the Outside
Auditor team.
12.
Obtain
and review a report from the Outside Auditor at least annually regarding
(a) the Outside Auditor’s internal quality-control procedures, (b) any
material issues raised by the most recent internal quality-control
review,
or peer review, of the firm, or by any inquiry or investigation by
governmental or professional authorities, within the preceding five
years
respecting one or more independent audits carried out by the firm,
(c) any
steps taken to deal with any such issues, and (d) all relationships
between the Outside Auditor and the Company, including the written
disclosures and the letter required by Independence Standards Board
Standard 1, as that standard may be modified or supplemented from
time to
time.
13.
Evaluate
the qualifications, performance and independence of the Outside Auditor,
including considering whether the Outside Auditor’s quality controls are
adequate and the provision of non-audit services is compatible with
maintaining the Outside Auditor’s independence, and taking into account
the opinions of management and the Internal Auditor. The Audit Committee
shall present its conclusions to the
Board.
14.
Oversee
the rotation of the lead (or coordinating) audit partner having primary
responsibility for the audit and the audit partner responsible for
reviewing the audit to the extent that rotation is required under
the
rules of the Commission, and oversee the rotation of other audit
partners,
in accordance with the rules of the
Commission.
15.
Recommend
to the Board policies for the Company’s hiring of present and former
associates of the Outside Auditor who have participated in any capacity
in
the audit of the Company, in accordance with the rules of the
Commission.
A-5
16.
To
the extent the Audit Committee deems necessary or appropriate, discuss
with the national office of the Outside Auditor issues on which they
were
consulted by the Company’s audit team and matters of audit quality and
consistency.
17.
Discuss
with management, the Internal Auditors and the Outside Auditor any
accounting adjustments that were noted or proposed by the Outside
Auditor,
but were not adopted or reflected.
18.
Meet
with management, the Internal Auditors and the Outside Auditor prior
to
the audit to discuss and review the scope, planning and staffing
of the
audit.
19.
Obtain
from the Outside Auditor the information required to be disclosed
to the
Company by generally accepted auditing standards in connection with
the
conduct of an audit.
20.
Require
the Outside Auditor to review the financial information included
in the
Company’s Form 10-Q in accordance with the rules of the Commission prior
to the Company filing such reports with the Commission and to provide
to
the Company for inclusion in the Company’s Form 10-Q any reports of the
Outside Auditor required by such rules.
Oversight
of the Company’s Internal Audit Function
21.
Take
such steps to reasonably ensure that the Company has an internal
audit
function.
22.
Review
and concur in the appointment, replacement, reassignment or dismissal
of
the senior internal auditing executive, and the compensation package
for
such person.
23.
Review
the significant reports to management prepared by the internal auditing
department and management’s responses.
24.
Communicate
with management and the Internal Auditors to obtain information concerning
internal audits, accounting principles adopted by the Company, internal
controls of the Company, management, and the Company’s financial and
accounting personnel, and review the impact of each on the quality
and
reliability of the Company’s financial
statements.
25.
Evaluate
the internal auditing department and its impact on the accounting
practices, internal controls and financial reporting of the
Company.
26.
Discuss
with the Outside Auditor the internal audit department’s responsibilities,
budget and staffing and any recommended changes in the planned scope
of
the internal audit.
Compliance
Oversight Responsibilities
27.
Obtain
from the Outside Auditor the reports required to be furnished to
the Audit
Committee under Section 10A of the Exchange Act and obtain from the
Outside Auditor any information with respect to illegal acts in accordance
with Section 10A.
28.
Obtain
reports from management, the Company’s senior internal auditing executive
and the Outside Auditor concerning whether the Company and its
subsidiary/foreign affiliated entities are in compliance with applicable
legal requirements and the any applicable code of
ethics.
A-6
29.
Obtain
and review reports and disclosures of insider and affiliated party
transactions. Advise the Board with respect to the Company’s policies and
procedures regarding compliance with applicable laws and regulations
and
the applicable code of ethics.
30.
Establish
procedures for (a) the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting
controls
or auditing matters, and (b) the confidential, anonymous submission
by
associates of the Company of concerns regarding questionable accounting
or
auditing matters.
31.
Discuss
with management and the Outside Auditor any correspondence between
the
Company and regulators or governmental agencies and any associate
complaints or published reports that raise material issues regarding
the
Company’s financial statements or accounting
policies.
32.
Discuss
with the Company’s counsel legal matters that may have a material impact
on the financial statements or the Company’s compliance
policies.
Additional
Responsibilities
33.
If
required by the rules of the Commission or the regulations of the
principal stock exchange or market on which the Company’s securities are
traded, prepare annually a report for inclusion in the Company’s proxy
statement relating to its annual stockholders meeting.
34.
Conduct
or authorize investigations into any matters within the Audit Committee’s
scope of responsibilities.
35.
Review
the Company’s Related-Party Transaction Policy and recommend any changes
to the Compensation Committee and then to the Board for approval.
Review
and determine whether to approve or ratify transactions covered by
such
policy, as appropriate.
Tricell,
Inc., a corporation organized and existing under the Laws of the State of
Nevada, (the “Corporation”), pursuant to NRS 78.403, does hereby adopt the
following as its Articles of Incorporation, replacing in their entirety,
the
Corporation’s present Articles of Incorporation.
1. The
Corporation’s Articles of Incorporation of the Corporation are hereby amended
and restated in its entirety to read as follows:
FIRST:
The name of the Corporation is Tricell, Inc. (the “Corporation”).
SECOND:
The purpose of the Corporation is to engage in any lawful act or activity
for
which corporations may be organized under the general corporation law of
the
State of Nevada.
THIRD: (a) The
total
number of shares of capital stock which this Corporation is authorized to
issue
is one hundred twenty million (120,000,000) shares, of which:
(i) ten
million (10,000,000) shares shall be designated as Preferred Stock, and shall
have a par value of $.001 per share; and
(ii) one
hundred and ten million (110,000,000) shares shall be designated as Common
Stock, and shall have a par value of $.001 per share.
(b) The
Board
of Directors is expressly authorized at any time, and from time to time,
to
provide for the issuance of shares of Preferred Stock in one or more series,
with such voting powers, full or limited, or without voting powers and with
such
designations, preferences and relative, participating, optional or other
special
rights, qualifications, limitations or restrictions thereof, as shall be
stated
and expressed in the resolution or resolutions providing for the issue thereof
adopted by the Board of Directors and as are not stated and expressed in
these
Articles of Incorporation, or any amendment thereto, including (but without
limiting the generality of the foregoing) the following:
(i) the
designation of such series;
(ii) the
dividend rate of such series, the conditions and dates upon which such dividends
shall be payable, the preference or relation which such dividends shall bear
to
the dividends payable on any other class or classes or of any other series
of
capital stock, whether such dividends shall be cumulative or noncumulative,
and
whether such dividends may be paid in shares of any class or series of capital
stock or other securities of the Corporation;
(iii) whether
the shares of such series shall be subject to redemption by the Corporation,
and, if made subject to such redemption, the times, prices and other terms
and
conditions of such redemption;
B-1
(iv) the
terms
and amount of any sinking fund provided for the purchase or redemption of
the
shares of such series;
(v) whether
or not the shares of such series shall be convertible into or exchangeable
for
shares of any other class or classes or series of capital stock or other
securities of the Corporation, and, if provision be made for conversion or
exchange, the times, prices, rates, adjustment and other terms and conditions
of
such conversion or exchange;
(vi) the
extent, if any, to which the holders of the shares of such series shall be
entitled to vote, as a class or otherwise, with respect to the election of
the
directors or otherwise, and the number of votes to which the holder of each
share of such series shall be entitled;
(vii) the
restrictions, if any, on the issue or reissue of any additional shares or
series
of Preferred Stock; and
(viii) the
rights of the holders of the shares of such series upon the dissolution of,
or
upon the distribution of assets of, the Corporation.
(c) No
holder
of any stock of the Corporation of any class or series now or hereafter
authorized, shall, as such holder, be entitled as of right to purchase or
subscribe for any shares of stock of the Corporation of any class or any
series
now or hereafter authorized, or any securities convertible into or exchangeable
for any such shares, or any warrants, options, rights or other instruments
evidencing rights to subscribe for, or purchase, any such shares, whether
such
shares, securities, warrants, options, rights or other instruments be unissued
or issued and thereafter acquired by the Corporation.
FOURTH:
The terms and conditions of any rights, options and warrants approved by
the
Board of Directors may provide that any or all of such terms and conditions
may
not be waived or amended or may be waived or amended only with the consent
of
the holders of a designated percentage of a designated class or classes of
capital stock of the Corporation (or a designated group or groups of holders
within such class or classes, including but not limited to disinterested
holders), and the applicable terms and conditions of any such rights, options
or
warrants so conditioned may not be waived or amended or may not be waived
or
amended absent such consent.
FIFTH:
The liability of the directors of the corporation for monetary
damages
shall
be
eliminated to the fullest extent permissible under Nevada law.
SIXTH: (a)Right
to Indemnification.
Each
person who was or is made a party or is threatened to be made a party to
or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter, a “proceeding”), by reason of the
fact that he or she, or a person of whom he or she is the legal representative,
is or was a director or officer of the Corporation or is or was serving at
the
request of the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis
of
such proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Chapter 78 of the Nevada
Revised Statutes, as the same exists or may hereafter be amended (but, in
the
case of any such amendment, only to the extent that such amendment permits
the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys’ fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, the Corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors of the Corporation.
The right to indemnification conferred in this Article SIXTH shall be a contract
right and shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition;
provided, however, that, if Chapter 78 of the Nevada Revised Statutes requires,
the payment of such expenses incurred by a director or officer in his or
her
capacity as a director of officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery
to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that
such
director or officer is not entitled to be indemnified under this Article
SIXTH
or otherwise. The Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation with the same
scope
and effect as the foregoing indemnification of directors and
officers.
B-2
(b)Non-Exclusivity
of Rights.
The
right to indemnification and the payment of expenses incurred in defending
a
proceeding in advance of its final disposition conferred in this Article
SIXTH
shall not be exclusive of any other right which any person may have or
hereafter
acquire under any statute, provision of the Articles of Incorporation,
by-law,
agreement, vote of stockholders or disinterested directors or
otherwise.
(c)Insurance.
The
Corporation may maintain insurance, at its expense, to protect itself and
any
director, officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the Chapter
78 of the Nevada Revised Statutes.
SEVENTH:
In furtherance and not in limitation of the powers conferred upon the Board
of
Directors by law, the Board of Directors shall have power to make, adopt,
alter,
amend or repeal from time to time By-laws of the Corporation, subject to
the
right of the stockholders entitled to vote with respect thereto to alter
and
repeal By-laws made by the Board of Directors and subject to the provisions
of
any By-law limiting the right of the Board of Directors to make certain
modifications to the By-laws.
2. This
Restated Certificate of Incorporation has been duly adopted in accordance
with
the provisions of NRS 78.390 and 78.403.
3. The
capital of the Corporation will not be reduced under or by reason of any
amendment herein certified.
IN
WITNESS WHEREOF, the Corporation has caused these Amended and Restated Articles
of Incorporation to be signed by its chief executive officer this ___ day
of
November, 2006.
James Reed, Chief Executive Officer
B-3
Appendix
C
TRICELL,
INC.
2006
Long-Term Incentive Plan
1.Purpose;
Definitions.
The
purpose of the Tricell, Inc. 2006 Long-Term Incentive Plan (the “Plan”) is to
enable Tricell, Inc. (the “Company”) to attract, retain and reward key employees
of the Company and its Subsidiaries and Affiliates, and others who provide
services to the Company and its Subsidiaries and Affiliates, and strengthen
the
mutuality of interests between such key employees and such other persons
and the
Company’s stockholders, by offering such key employees and such other persons
incentives and/or other equity interests or equity-based incentives in
the
Company, as well as performance-based incentives payable in cash.
For
purposes of the Plan, the following terms shall be defined as set forth
below:
(a)“Affiliate”
means any corporation, partnership, limited liability company, joint venture
or
other entity, other than the Company and its Subsidiaries, that is designated
by
the Board as a participating employer under the Plan, provided that the
Company
directly or indirectly owns at least 20% of the combined voting power of
all
classes of stock of such entity or at least 20% of the ownership interests
in
such entity.
(b)“Board”
means the Board of Directors of the Company.
(c)“Book
Value” means, as of any given date, on a per share basis (i) the stockholders’
equity in the Company as of the last day of the immediately preceding fiscal
year as reflected in the Company’s consolidated balance sheet, subject to such
adjustments as the Committee shall specify at or after grant, divided by
(ii)
the number of then outstanding shares of Stock as of such year-end date,
as
adjusted by the Committee for subsequent events.
(d)“Cause”
means a felony conviction of a participant, or the failure of a participant
to
contest prosecution for a felony, or a participant’s willful misconduct or
dishonesty, or breach of trust or other action by which the participant
obtains
personal gain at the expense of or to the detriment of the Company or conduct
which results in civil or criminal liability or penalties, including penalties
pursuant to a consent decree, order or agreement, on the part of the Company;
provided, however, that if the participant has an Employment Agreement
with the
Company, a Subsidiary or Affiliate which includes a definition of “cause,” then
“cause” shall have the meaning as defined in such Employment
Agreement.
(e)“Code”
means the Internal Revenue Code of 1986, as amended from time to time,
and any
successor thereto.
(f)“Commission”
means the Securities and Exchange Commission or any successor
thereto.
(g)“Committee”
means the Committee referred to in Section 2 of the Plan. If at any time
no
Committee shall be in office, then the functions of the Committee specified
in
the Plan shall be exercised by the Board.
(h)“Company”
means Tricell, Inc., a Nevada corporation, or any successor
corporation.
(i)“Deferred
Stock” means an award made pursuant to Section 8 of the Plan of the right to
receive Stock at the end of a specified deferral period.
(j)“Disability”
means disability as determined under procedures established by the Committee
for
purposes of the Plan; provided that if the participant has an Employment
Agreement with the Company, a Subsidiary or Affiliate which includes a
definition of “disability,” then “disability” shall have the meaning as defined
in such Employment Agreement.
(k)“Early
Retirement” means retirement, with the express consent for purposes of the Plan
of the Company at or before the time of such retirement, from active employment
with the Company and any Subsidiary or Affiliate pursuant to the early
retirement provisions of the applicable pension plan of such
entity.
C-1
(l)“Employment
Agreement” shall mean an employment or consulting agreement or other agreement
pursuant to which the participant performs services for the Company or
a
Subsidiary or Affiliate.
(m)“Exchange
Act” means the Securities Exchange Act of 1934, as amended, from time to time,
and any successor thereto.
(n)“Fair
Market Value” means, as of any given date, the market price of the Stock as
determined by or in accordance with the policies established by the Committee
in
good faith; provided, that, in the case of an Incentive Stock Option, the
Fair
Market Value shall be determined in accordance with the Code and the Treasury
regulations under the Code.
(o)“Incentive
Stock Option” means any Stock Option intended to be and designated as an
“Incentive Stock Option” within the meaning of Section 422 of the
Code.
(p)“Independent
Director” shall mean a “non-employee director” as set forth in Rule 16b-3 of the
Commission pursuant to the Exchange Act or any successor definition adopted
by
the Commission; provided that in the event that said rule (or successor
rule)
shall not have such a definition, the term Independent Director shall mean
a
director of the Company who is not otherwise employed by the Company or
any
Subsidiary or Affiliate; provided, however, an Independent Director shall
also
be an independent director as determined by the rules or regulations of
the
principal stock exchange or market on which the Stock is traded or, if
the Stock
is not listed or traded on such exchange, as defined under the rules of
the
Nasdaq Stock Market.
(q)“Non-Qualified
Stock Option” means any Stock Option that is not an Incentive Stock
Option.
(r)“Normal
Retirement” means retirement from active employment with the Company and any
Subsidiary or Affiliate on or after age 65 or such other age as is designated
by
the Company, Subsidiary or Affiliate as the normal retirement age.
(s)“Other
Stock-Based Award” means an award under Section 10 of the Plan that is valued in
whole or in part by reference to, or is otherwise based on, Stock.
(t)“Plan”
means this Tricell, Inc. 2005 Long-Term Incentive Plan, as hereinafter
amended
from time to time.
(u)“Restricted
Stock” means an award of shares of Stock that is subject to restrictions under
Section 7 of the Plan.
(v)“Retirement”
means Normal Retirement or Early Retirement.
(w)“Stock”
means the common stock, par value $.0001 per share, of the Company or any
class
of common stock into which such common stock may hereafter be converted
or for
which such common stock may be exchanged pursuant to the Company’s certificate
of incorporation or as part of a recapitalization, reorganization or similar
transaction.
(x)“Stock
Appreciation Right” means the right pursuant to an award granted under Section 6
of the Plan to surrender to the Company all (or a portion) of a Stock Option
in
exchange for an amount equal to the difference between (i) the Fair Market
Value, as of the date such award or Stock Option (or such portion thereof)
is
surrendered, of the shares of Stock covered by such Stock Option (or such
portion thereof), subject, where applicable, to the pricing provisions
in
Section 6(b)(ii) of the Plan and (ii) the aggregate exercise price of such
Stock
Option or base price with respect to such award (or the portion thereof
which is
surrendered).
(y)“Stock
Option” or “Option” means any option to purchase shares of Stock (including
Restricted Stock and Deferred Stock, if the Committee so determines) granted
pursuant to Section 5 of the Plan.
(z)“Stock
Purchase Right” means the right to purchase Stock pursuant to Section 9 of the
Plan.
(aa)“Subsidiary”
means any corporation or other business association, including a partnership
(other than the Company) in an unbroken chain of corporations or other
business
associations beginning with the Company if each of the corporations or
other
business associations (other than the last corporation in the unbroken
chain)
owns equity interests (including stock or partnership interests) possessing
50%
or more of the total combined voting power of all classes of equity in
one of
the other corporations or other business associations in the chain. The
Board
may elect to treat as a Subsidiary an entity in which the Company possesses
less
than 50% of the total combined voting power of all classes of equity if,
under
generally accepted accounting principles, the Company may include the financial
statements of such entity as part of the Company’s consolidated financial
statements (other than as a minority interest or other single line
item).
C-2
In
addition, the terms “Change in Control,”“Potential Change in Control” and
“Change in Control Price” shall have meanings set forth, respectively, in
Sections 11(b), (c) and (d) of the Plan.
2.Administration.
(a) The
Plan
shall be administered by a Committee of not less than two directors all
of whom
shall be Independent Directors, who shall be appointed by the Board and
who
shall serve at the pleasure of the Board. If and to the extent that no
Committee
exists which has the authority to administer the Plan, the functions of
the
Committee specified in the Plan shall be exercised by the Board.
(b) The
Committee shall have full authority to grant, pursuant to the terms of
the Plan,
to officers and other persons eligible under Section 4 of the Plan, provided
that Independent Directors shall not be eligible for options or other benefits
pursuant to the Plan other than as provided in Sections 4(b) and 4(c) of
the
Plan: Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred
Stock, Stock Purchase Rights and/or Other Stock-Based Awards. In particular,
the
Committee shall have the authority:
(i)
to
select
the officers and other eligible persons to whom Stock Options, Stock
Appreciation Rights, Restricted Stock, Deferred Stock, Stock Purchase Rights
and/or Other Stock-Based Awards may from time to time be granted pursuant
to the
Plan;
(ii)
to
determine whether and to what extent Incentive Stock Options, Non-Qualified
Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock,
Stock Purchase Rights and/or Other Stock-Based Awards, or any combination
thereof, are to be granted pursuant to the Plan, to one or more eligible
persons;
(iii)
to
determine the number of shares to be covered by each such award granted
pursuant
to the Plan;
(iv)
to
determine the terms and conditions, not inconsistent with the terms of
the Plan,
of any award granted under the Plan, including, but not limited to, the
share
price or exercise price and any restriction or limitation, or any vesting,
acceleration or waiver of forfeiture restrictions regarding any Stock Option
or
other award and/or the shares of Stock relating thereto, based in each
case on
such factors as the Committee shall, in its sole discretion,
determine;
(v)
to
determine whether, to what extent and under what circumstances a Stock
Option
may be settled in cash, Restricted Stock and/or Deferred Stock under Section
5(b)(x) or (xi) of the Plan, as applicable, instead of Stock;
(vi)
to
determine whether, to what extent and under what circumstances Option grants
and/or other awards under the Plan and/or other cash awards made by the
Company
are to be made, and operate, on a tandem basis with other awards under
the Plan
and/or cash awards made outside of the Plan in a manner whereby the exercise
of
one award precludes, in whole or in part, the exercise of another award,
or on
an additive basis;
(vii)
to
determine whether, to what extent and under what circumstances Stock and
other
amounts payable with respect to an award under this Plan shall be deferred
either automatically or at the election of the participant, including any
provision for any determination or method of determination of the amount
(if
any) deemed be earned on any deferred amount during any deferral
period;
(viii)
to
determine the terms and restrictions applicable to Stock Purchase Rights
and the
Stock purchased by exercising such Rights; and
(ix)
to
determine an aggregate number of awards and the type of awards to be granted
to
eligible persons employed or engaged by the Company and/or any specific
Subsidiary, Affiliate or division and grant to management the authority
to grant
such awards, provided that no awards to any person subject to the reporting
and
short-swing profit provisions of Section 16 of the Exchange Act may be
granted
awards except by the Committee.
C-3
(c) In
the
event that any officers or other participants have Employment Agreements
with
the Company which provide for the grant of options to such participants,
unless
the Committee or the Board otherwise determines, the options shall be treated
for all purposes as if they were granted pursuant to this Plan as long
as there
is a sufficient number of shares available for grant pursuant to this Plan.
(d) The
Committee shall have the authority to adopt, alter and repeal such rules,
guidelines and practices governing the Plan as it shall, from time to time,
deem
advisable; to interpret the terms and provisions of the Plan and any award
issued under the Plan and any agreements relating thereto, and otherwise
to
supervise the administration of the Plan.
(e) All
decisions made by the Committee pursuant to the provisions of the Plan
shall be
made in the Committee’s sole discretion and shall be final and binding on all
persons, including the Company and Plan participants.
3.Stock
Subject to Plan.
(a) The
total
number of shares of Stock reserved and available for distribution under
the Plan
shall be sixteen million (16,000,000) shares of Stock. In the event that
awards
are granted in tandem such that the exercise of one award precludes the
exercise
of another award then, for the purpose of determining the number of shares
of
Stock as to which awards shall have been granted, the maximum number of
shares
of Stock issuable pursuant to such tandem awards shall be used.
(b) Subject
to Section 6(b)(v) of the Plan, if any shares of Stock that have been optioned
cease to be subject to a Stock Option, or if any such shares of Stock that
are
subject to any Restricted Stock or Deferred Stock award, Stock Purchase
Right or
Other Stock-Based Award granted under the Plan are forfeited or any such
award
otherwise terminates without a payment being made to the participant in
the form
of Stock, such shares shall again be available for distribution in connection
with future awards under the Plan.
(c) In
the
event of any merger, reorganization, consolidation, recapitalization, stock
dividend, stock split, stock distribution, reverse split, combination of
shares
or other change in corporate structure affecting the Stock, such substitution
or
adjustment shall be made in the aggregate number of shares reserved for
issuance
under the Plan, in the base number of shares, in the number and option
price of
shares subject to outstanding Options granted under the Plan, in the number
and
purchase price of shares subject to outstanding Stock Purchase Rights under
the
Plan, and in the number of shares subject to other outstanding awards granted
under the Plan as may be determined to be appropriate by the Committee,
in its
sole discretion, provided that the number of shares subject to any award
shall
always be a whole number, and provided that the treatment of such options
and
rights shall be consistent with the nature of the event. Such adjusted
option
price shall also be used to determine the amount payable by the Company
upon the
exercise of any Stock Appreciation Right associated with any Stock
Option.
4.Eligibility.
(a) Officers
and other key employees and directors of, and consultants and independent
contractors to, the Company and its Subsidiaries and Affiliates (but excluding,
except as to Sections 4(b) and 4(c) of the Plan, Independent Directors)
who are
responsible for or contribute to the management, growth and/or profitability
of
the business of the Company and/or its Subsidiaries and Affiliates are
eligible
to be granted awards under the Plan.
(b) On
each
the first trading day in April of each year, commencing in 2007, each person
who
is a Independent Director on such date shall automatically receive a stock
grant
for such number of shares of Stock as is determined by dividing twenty
five
thousand dollars ($25,000) by the last reported trading price of the Stock
on
such date, of, if the Stock is not traded on that date, the closing bid
price on
that date, on the principal stock exchange or market on which the Stock
is
traded. Such shares vest one year from the date of grant, except that in
the
event of the director’s death or termination of his or her status as a director
as a result of a disability (including a decision not to run for re-election
as
a result of a disability) or in the event of a Change of Control, the right
to
the unvested Shares shall vest immediately. If there is not a sufficient
number
of shares under this Plan or other similar plans, to enable the Company
to issue
the number of shares of Stock provided in this Section 4(b), the Company
shall
divide the number of available shares by the number of Independent Directors.
The provisions of this Section 4(b) and said Section 4(c) may not be amended
more than one (1) time in any six (6) month period other than to comply
with
changes in the Code or the Employee Retirement Income Security Act (“ERISA”) or
the rules thereunder.
C-4
(c) At
the
time an Independent Director is first elected to the Board, such person
shall
automatically be granted one hundred thousand (100,000) shares of Stock
(or such
lesser number of shares of Stock as are available for grant at such date
under
the Plan, divided by the number of Independent Directors who are elected
as
directors at such date); provided, however, that the Independent Directors
who
are elected before stockholder approval of this Plan becomes effective
shall
receive such Shares at such time as stockholder approval of this Plan becomes
effective. The shares issued pursuant to this Section 4(c) shall vest seven
months from the date of grant, except that the shares issued to the Independent
Directors who are elected before stockholder approval of the Plan shall
vest on
June 30, 2007. The number of shares issuable pursuant to this Section 4(c)
shall
be subject to adjustment in the event of any stock dividend, distribution,
split, reverse split, combination of shares of similar
recapitalization.
5.Stock
Options.
(a)Administration.
Stock
Options may be granted alone, in addition to or in tandem with other awards
granted under the Plan and/or cash awards made outside of the Plan. Any
Stock
Option granted under the Plan shall be in such form as the Committee may
from
time to time approve. Stock Options granted under the Plan may be of two
types:
(i) Incentive Stock Options and (ii) Non-Qualified Stock Options. The Committee
shall have the authority to grant to any optionee Incentive Stock Options,
Non-Qualified Stock Options, or both types of Stock Options (in each case
with
or without Stock Appreciation Rights).
(b)Option
Grants.
Options
granted under the Plan shall be subject to the following terms and conditions
and shall contain such additional terms and conditions, not inconsistent
with
the terms of the Plan, as the Committee, in its sole discretion, shall
deem
desirable:
(i)
Option
Price.
The
option price per share of Stock purchasable under a Stock Option shall
be
determined by the Committee at the time of grant.
(ii)
Option
Term.
The
term of each Stock Option shall be fixed by the Committee, but no Stock
Option
shall be exercisable more than ten (10) years after the date the Option
is
granted.
(iii)
Exercisability.
Stock
Options shall be exercisable at such time or times and subject to such
terms and
conditions as shall be determined by the Committee at or after grant. If
the
Committee provides, in its sole discretion, that any Stock Option is exercisable
only in installments, the Committee may waive such installment exercise
provisions at any time at or after grant in whole or in part, based on
such
factors as the Committee shall, in its sole discretion, determine.
(iv)
Method
of Exercise.
(A) Subject
to whatever installment exercise provisions apply under Section 5(b)(iii)
of the
Plan, Stock Options may be exercised in whole or in part at any time during
the
option period, by giving written notice of exercise to the Company specifying
the number of shares to be purchased. Such notice shall be accompanied
by
payment in full of the purchase price, either by check, note or such other
instrument, securities or property as the Committee may accept. As and
to the
extent determined by the Committee, in its sole discretion, at or after
grant,
payments in full or in part may also be made in the form of Stock already
owned
by the optionee or, in the case of the exercise of a Non-Qualified Stock
Option,
Restricted Stock or Deferred Stock subject to an award hereunder (based,
in each
case, on the Fair Market Value of the Stock on the date the option is exercised,
as determined by the Committee).
(B) If
payment of the option exercise price of a Non-Qualified Stock Option is
made in
whole or in part in the form of Restricted Stock or Deferred Stock, the
Stock
issuable upon such exercise (and any replacement shares relating thereto)
shall
remain (or be) restricted or deferred, as the case may be, in accordance
with
the original terms of the Restricted Stock award or Deferred Stock award
in
question, and any additional Stock received upon the exercise shall be
subject
to the same forfeiture restrictions or deferral limitations, unless otherwise
determined by the Committee, in its sole discretion, at or after
grant.
C-5
(C) No
shares
of Stock shall be issued until full payment therefor has been received
by the
Company. In the event of any exercise by note or other instrument, the
shares of
Stock shall not be issued until such note or other instrument shall have
been
paid in full, and the exercising optionee shall have no rights as a stockholder
until such payment is made.
(D) Subject
to Section 5(b)(iv)(C) of the Plan, an optionee shall generally have the
rights
to dividends or other rights of a stockholder with respect to shares subject
to
the Option when the optionee has given written notice of exercise, has
paid in
full for such shares, and, if requested, has given the representation described
in Section 14(a) of the Plan.
(v)
Non-Transferability
of Options.
No
Stock Option shall be transferable by the optionee otherwise than by will
or by
the laws of descent and distribution, and all Stock Options shall be
exercisable, during the optionee’s lifetime, only by the optionee.
(vi)
Termination
by Death.
Subject
to Section 5(b)(ix) of the Plan with respect to Incentive Stock Options,
if an
optionee’s employment by the Company and any Subsidiary or Affiliate terminates
by reason of death, any Stock Option held by such optionee may thereafter
be
exercised, to the extent such option was exercisable at the time of death
or on
such accelerated basis as the Committee may determine at or after grant
(or as
may be determined in accordance with procedures established by the Committee),
by the legal representative of the estate or by the legatee of the optionee
under the will of the optionee, for a period of one year (or such other
period
as the Committee may specify at grant) from the date of such death or until
the
expiration of the stated term of such Stock Option, whichever period is
the
shorter.
(vii)
Termination
by Reason of Disability or Retirement.
Subject
to Section 5(b)(ix) of the Plan with respect to Incentive Stock Options,
if an
optionee’s employment by the Company and any Subsidiary or Affiliate terminates
by reason of a Disability or Normal or Early Retirement, any Stock Option
held
by such optionee may thereafter be exercised by the optionee, to the extent
it
was exercisable at the time of termination or on such accelerated basis
as the
Committee may determine at or after grant (or as may be determined in accordance
with procedures established by the Committee), for a period of one year
(or such
other period as the Committee may specify at grant) from the date of such
termination of employment or until the expiration of the stated term of
such
Stock Option, whichever period is the shorter; provided, however, that,
if the
optionee dies within such one-year period (or such other period as the
Committee
shall specify at grant), any unexercised Stock Option held by such optionee
shall thereafter be exercisable to the extent to which it was exercisable
at the
time of death for a period of one year from the date of such death or until
the
expiration of the stated term of such Stock Option, whichever period is
the
shorter. In the event of termination of employment by reason of Disability
or
Normal or Early Retirement, if an Incentive Stock Option is exercised after
the
expiration of the exercise periods that apply for purposes of Section 422
of the
Code, such Stock Option will thereafter be treated as a Non-Qualified Stock
Option.
(viii)
Other
Termination.
Unless
otherwise determined by the Committee (or pursuant to procedures established
by
the Committee) at or after grant, if an optionee’s employment by the Company and
any Subsidiary or Affiliate terminates for any reason other than death,
Disability or Normal or Early Retirement, the Stock Option shall thereupon
terminate; provided, however, that if the optionee is involuntarily terminated
by the Company or any Subsidiary or Affiliate without Cause, including
a
termination resulting from the Subsidiary, Affiliate or division in which
the
optionee is employed or engaged, ceasing, for any reason, to be a Subsidiary,
Affiliate or division of the Company, such Stock Option may be exercised,
to the
extent otherwise exercisable on the date of termination, for a period of
three
months (or seven months in the case of a person subject to the reporting
and
short-swing profit provisions of Section 16 of the Exchange Act) from the
date
of such termination or until the expiration of the stated term of such
Stock
Option, whichever is shorter.
(ix)
Incentive
Stock Options.
(A) Anything
in the Plan to the contrary notwithstanding, no term of the Plan relating
to
Incentive Stock Options shall be interpreted, amended or altered, nor shall
any
discretion or authority granted under the Plan be so exercised, so as to
disqualify the Plan under Section 422 of the Code, or, without the consent
of
the optionee(s) affected, to disqualify any Incentive Stock Option under
such
Section 422.
C-6
(B) To
the
extent required for “incentive stock option” status under Section 422(d) of the
Code (taking into account applicable Treasury regulations and pronouncements),
the Plan shall be deemed to provide that the aggregate Fair Market Value
(determined as of the time of grant) of the Stock with respect to which
Incentive Stock Options are exercisable for the first time by the optionee
during any calendar year under the Plan and/or any other stock option plan
of
the Company or any Subsidiary or parent corporation (within the meaning
of
Section 425 of the Code) shall not exceed $100,000. If Section 422 is hereafter
amended to delete the requirement now in Section 422(d) that the plan text
expressly provide for the $100,000 limitation set forth in Section 422(d),
then
this Section 5(b)(ix)(B) shall no longer be operative and the Committee
may
accelerate the dates on which the incentive stock option may be
exercised.
(C) To
the
extent permitted under Section 422 of the Code or the applicable regulations
thereunder or any applicable Internal Revenue Service
pronouncement:
(I)
If
(x) a
participant’s employment is terminated by reason of death, Disability or
Retirement and (y) the portion of any Incentive Stock Option that is otherwise
exercisable during the post-termination period specified under Sections
5(b)(vi)
and (vii) of the Plan, applied without regard to the $100,000 limitation
contained in Section 422(d) of the Code, is greater than the portion of
such
option that is immediately exercisable as an “incentive stock option” during
such post-termination period under Section 422, such excess shall be treated
as
a Non-Qualified Stock Option; and
(II)
if
the
exercise of an Incentive Stock Option is accelerated by reason of a Change
in
Control, any portion of such option that is not exercisable as an Incentive
Stock Option by reason of the $100,000 limitation contained in Section
422(d) of
the Code shall be treated as a Non-Qualified Stock Option.
(x)
Buyout
Provisions.
The
Committee may at any time offer to buy out for a payment in cash, Stock,
Deferred Stock or Restricted Stock an option previously granted, based
on such
terms and conditions as the Committee shall establish and communicate to
the
optionee at the time that such offer is made.
(xi)
Settlement
Provisions.
If the
option agreement so provides at grant or is amended after grant and prior
to
exercise to so provide (with the optionee’s consent), the Committee may require
that all or part of the shares to be issued with respect to the spread
value of
an exercised Option take the form of Deferred or Restricted Stock which
shall be
valued on the date of exercise on the basis of the Fair Market Value (as
determined by the Committee) of such Deferred or Restricted Stock determined
without regard to the deferral limitations and/or forfeiture restrictions
involved.
6.Stock
Appreciation Rights.
(a)Grant
and Exercise.
(i)
Stock
Appreciation Rights may be granted in conjunction with all or part of any
Stock
Option granted under the Plan. In the case of a Non-Qualified Stock Option,
such
rights may be granted either at or after the time of the grant of such
Stock
Option. In the case of an Incentive Stock Option, such rights may be granted
only at the time of the grant of such Stock Option.
(ii)
A
Stock
Appreciation Right or applicable portion thereof granted with respect to
a given
Stock Option shall terminate and no longer be exercisable upon the termination
or exercise of the related Stock Option, subject to such provisions as
the
Committee may specify at grant where a Stock Appreciation Right is granted
with
respect to less than the full number of shares covered by a related Stock
Option.
(iii)
A
Stock
Appreciation Right may be exercised by an optionee, subject to Section
6(b) of
the Plan, in accordance with the procedures established by the Committee
for
such purpose. Upon such exercise, the optionee shall be entitled to receive
an
amount determined in the manner prescribed in said Section 6(b). Stock
Options
relating to exercised Stock Appreciation Rights shall no longer be exercisable
to the extent that the related Stock Appreciation Rights have been
exercised.
C-7
(b)Terms
and Conditions.
Stock
Appreciation Rights shall be subject to such terms and conditions, not
inconsistent with the provisions of the Plan, as shall be determined from
time
to time by the Committee, including the following:
(i)
Stock
Appreciation Rights shall be exercisable only at such time or times and
to the
extent that the Stock Options to which they relate shall be exercisable
in
accordance with the provisions of this Section 6 and Section 5 of the Plan;
provided, however, that any Stock Appreciation Right granted to an optionee
subject to Section 16(b) of the Exchange Act subsequent to the grant of
the
related Stock Option shall not be exercisable during the first six months
of its
term, except that this special limitation shall not apply in the event
of death
or Disability of the optionee prior to the expiration of the six-month
period.
The exercise of Stock Appreciation Rights held by optionees who are subject
to
Section 16(b) of the Exchange Act shall comply with Rule 16b-3 thereunder
to the
extent applicable.
(ii)
Upon
the
exercise of a Stock Appreciation Right, an optionee shall be entitled to
receive
an amount in cash and/or shares of Stock equal in value to the excess of
the
Fair Market Value of one share of Stock over the option price per share
specified in the related Stock Option multiplied by the number of shares
in
respect of which the Stock Appreciation Right shall have been exercised,
with
the Committee having the right to determine the form of payment. When payment
is
to be made in shares of Stock, the number of shares to be paid shall be
calculated on the basis of the Fair Market Value of the shares on the date
of
exercise. When payment is to be made in cash, such amount shall be based
upon
the Fair Market Value of the Stock on the date of exercise, determined
in a
manner not inconsistent with Section 16(b) of the Exchange Act and the
rules of
the Commission thereunder.
(iii)
Stock
Appreciation Rights shall be transferable only when and to the extent that
the
underlying Stock Option would be transferable under Section 5(b)(v) of
the
Plan.
(iv)
Upon
the
exercise of a Stock Appreciation Right, the Stock Option or part thereof
to
which such Stock Appreciation Right is related shall be deemed to have
been
exercised only to the extent of the number of shares issued under the Stock
Appreciation Right at the time of exercise based on the value of the Stock
Appreciation Right at such time.
(v)
In
its
sole discretion, the Committee may grant Stock Appreciation Rights that
become
exercisable only in the event of a Change in Control and/or a Potential
Change
in Control, subject to such terms and conditions as the Committee may specify
at
grant; provided that any such Stock Appreciation Rights shall be settled
solely
in cash.
(vi)
The
Committee, in its sole discretion, may also provide that, in the event
of a
Change in Control and/or a Potential Change in Control, the amount to be
paid
upon the exercise of a Stock Appreciation Right shall be based on the Change
in
Control Price, subject to such terms and conditions as the Committee may
specify
at grant.
7.Restricted
Stock.
(a)Administration.
Shares
of Restricted Stock may be issued either alone, in addition to or in tandem
with
other awards granted under the Plan and/or cash awards made outside of
the Plan.
The Committee shall determine the eligible persons to whom, and the time
or
times at which, grants of Restricted Stock will be made, the number of
shares to
be awarded, the price (if any) to be paid by the recipient of Restricted
Stock,
subject to Section 7(b) of the Plan, the time or times within which such
awards
may be subject to forfeiture, and all other terms and conditions of the
awards.
The Committee may condition the grant of Restricted Stock upon the attainment
of
specified performance goals or such other factors as the Committee may,
in its
sole discretion, determine. The provisions of Restricted Stock awards need
not
be the same with respect to each recipient.
(b)Awards
and Certificates.
(i)
The
prospective recipient of a Restricted Stock award shall not have any rights
with
respect to such award unless and until such recipient has executed an agreement
evidencing the award and has delivered a fully executed copy thereof to
the
Company, and has otherwise complied with the applicable terms and conditions
of
such award.
C-8
(ii)
The
purchase price for shares of Restricted Stock may be equal to or less than
their
par value and may be zero.
(iii)
Awards
of
Restricted Stock must be accepted within a period of 60 days (or such shorter
period as the Committee may specify at grant) after the award date, by
executing
a Restricted Stock Award Agreement and paying the price, if any, required
under
Section 7(b)(ii).
(iv)
Each
participant receiving a Restricted Stock award shall be issued a stock
certificate in respect of such shares of Restricted Stock. Such certificate
shall be registered in the name of such participant, and shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such award.
(v)
The
Committee shall require that (A) the stock certificates evidencing shares
of
Restricted Stock be held in the custody of the Company until the restrictions
thereon shall have lapsed, and (B) as a condition of any Restricted Stock
award,
the participant shall have delivered a stock power, endorsed in blank,
relating
to the Restricted Stock covered by such award.
(c)Restrictions
and Conditions.
The
shares of Restricted Stock awarded pursuant to this Section 7 shall be
subject
to the following restrictions and conditions:
(i)
Subject
to the provisions of the Plan and the award agreement, during a period
set by
the Committee commencing with the date of such award (the “Restriction Period”),
the participant shall not be permitted to sell, transfer, pledge or assign
shares of Restricted Stock awarded under the Plan. Within these limits,
the
Committee, in its sole discretion, may provide for the lapse of such
restrictions in installments and may accelerate or waive such restrictions
in
whole or in part, based on service, performance and/or such other factors
or
criteria as the Committee may determine, in its sole discretion.
(ii)
Except
as
provided in this Section 7(c)(ii) and Section 7(c)(i) of the Plan, the
participant shall have, with respect to the shares of Restricted Stock,
all of
the rights of a stockholder of the Company, including the right to vote
the
shares and the right to receive any regular cash dividends paid out of
current
earnings. The Committee, in its sole discretion, as determined at the time
of
award, may permit or require the payment of cash dividends to be deferred
and,
if the Committee so determines, reinvested, subject to Section 14(e) of
the
Plan, in additional Restricted Stock to the extent shares are available
under
Section 3 of the Plan, or otherwise reinvested. Stock dividends, splits
and
distributions issued with respect to Restricted Stock shall be treated
as
additional shares of Restricted Stock that are subject to the same restrictions
and other terms and conditions that apply to the shares with respect to
which
such dividends are issued, and the Committee may require the participant
to
deliver an additional stock power covering the shares issuable pursuant
to such
stock dividend, split or distribution. Any other dividends or property
distributed with regard to Restricted Stock, other than regular dividends
payable and paid out of current earnings, shall be held by the Company
subject
to the same restrictions as the Restricted Stock.
(iii)
Subject
to the applicable provisions of the award agreement and this Section 7,
upon
termination of a participant’s employment or other services with the Company and
any Subsidiary or Affiliate for any reason during the Restriction Period,
all
shares still subject to restriction will vest, or be forfeited, in accordance
with the terms and conditions established by the Committee at or after
grant.
(iv)
If
and
when the Restriction Period expires without a prior forfeiture of the Restricted
Stock subject to such Restriction Period, certificates for an appropriate
number
of unrestricted shares, and other property held by the Company with respect
to
such Restricted Shares, shall be delivered to the participant
promptly.
(d)Minimum
Value Provisions.
In
order to better ensure that award payments actually reflect the performance
of
the Company and service of the participant, the Committee may provide,
in its
sole discretion, for a tandem Stock Option or performance-based or other
award
designed to guarantee a minimum value, payable in cash or Stock to the
recipient
of a Restricted Stock award, subject to such performance, future service,
deferral and other terms and conditions as may be specified by the
Committee.
8.Deferred
Stock.
(a)Administration.
Deferred Stock may be awarded either alone, in addition to or in tandem
with
other awards granted under the Plan and/or cash awards made outside of
the Plan.
The Committee shall determine the eligible persons to whom and the time
or times
at which Deferred Stock shall be awarded, the number of shares of Deferred
Stock
to be awarded to any person, the duration of the period (the “Deferral Period”)
during which, and the conditions under which, receipt of the Stock will
be
deferred, and the other terms and conditions of the award in addition to
those
set forth in Section 8(b). The Committee may condition the grant of Deferred
Stock upon the attainment of specified performance goals or such other
factors
or criteria as the Committee shall, in its sole discretion, determine.
The
provisions of Deferred Stock awards need not be the same with respect to
each
recipient.
C-9
(b)Terms
and Conditions.
The
shares of Deferred Stock awarded pursuant to this Section 8 shall be subject
to
the following terms and conditions:
(i)
Subject
to the provisions of the Plan and the award agreement referred to in Section
8(b)(vi) of the Plan, Deferred Stock awards may not be sold, assigned,
transferred, pledged or otherwise encumbered during the Deferral Period.
At the
expiration of the Deferral Period (or the Elective Deferral Period referred
to
in Section 8(b)(v) of the Plan, where applicable), share certificates
representing the shares covered by the Deferred Stock award shall be delivered
to the participant or his legal representative.
(ii)
Unless
otherwise determined by the Committee at grant, amounts equal to any dividends
declared during the Deferral Period with respect to the number of shares
covered
by a Deferred Stock award will be paid to the participant currently, or
deferred
and deemed to be reinvested in additional Deferred Stock, or otherwise
reinvested, all as determined at or after the time of the award by the
Committee, in its sole discretion.
(iii)
Subject
to the provisions of the award agreement and this Section 8, upon termination
of
a participant’s employment with the Company and any Subsidiary or Affiliate for
any reason during the Deferral Period for a given award, the Deferred Stock
in
question will vest, or be forfeited, in accordance with the terms and conditions
established by the Committee at or after grant.
(iv)
Based
on
service, performance and/or such other factors or criteria as the Committee
may
determine, the Committee may, at or after grant, accelerate the vesting
of all
or any part of any Deferred Stock award and/or waive the deferral limitations
for all or any part of such award.
(v)
A
participant may elect to further defer receipt of an award (or an installment
of
an award) for a specified period or until a specified event (the “Elective
Deferral Period”), subject in each case to the Committee’s approval and to such
terms as are determined by the Committee, all in its sole discretion. Subject
to
any exceptions adopted by the Committee, such election must generally be
made at
least twelve months prior to completion of the Deferral Period for such
Deferred
Stock award (or such installment).
(vi)
Each
award shall be confirmed by, and subject to the terms of, a Deferred Stock
agreement executed by the Company and the participant.
(c)Minimum
Value Provisions.
In
order to better ensure that award payments actually reflect the performance
of
the Company and service of the participant, the Committee may provide,
in its
sole discretion, for a tandem Stock Option or performance-based or other
award
designed to guarantee a minimum value, payable in cash or Stock to the
recipient
of a deferred stock award, subject to such performance, future service,
deferral
and other terms and conditions as may be specified by the
Committee.
9.Stock
Purchase Rights.
(a)Awards
and Administration.
The
Committee may grant eligible participants Stock Purchase Rights which shall
enable such participants to purchase Stock (including Deferred Stock and
Restricted Stock):
(i)
at
its
Fair Market Value on the date of grant;
(ii)
at
a
percentage of such Fair Market Value on such date, such percentage to be
determined by the Committee in its sole discretion;
(iii)
at
an
amount equal to Book Value on such date; or
(iv)
at
an
amount equal to the par value of such Stock on such date.
C-10
The
Committee shall also impose such deferral, forfeiture and/or other terms
and
conditions as it shall determine, in its sole discretion, on such Stock
Purchase
Rights or the exercise thereof. The terms of Stock Purchase Rights awards
need
not be the same with respect to each participant. Each Stock Purchase Right
award shall be confirmed by, and be subject to the terms of, a Stock Purchase
Rights Agreement.
(b)Exercisability.
Stock
Purchase Rights shall generally be exercisable for such period after grant
as is
determined by the Committee not to exceed sixty (60) days. However, the
Committee may provide, in its sole discretion, that the Stock Purchase
Rights of
persons potentially subject to Section 16(b) of the Exchange Act shall
not
become exercisable until six months and one day after the grant date, and
shall
then be exercisable for ten trading days at the purchase price specified
by the
Committee in accordance with Section 9(a) of the Plan.
10.Other
Stock-Based Awards.
(a)Administration.
(i)
Other
awards of Stock and other awards that are valued in whole or in part by
reference to, or are otherwise based on, Stock (“Other Stock-Based Awards”),
including, without limitation, performance shares, convertible preferred
stock
(to the extent a series of preferred stock has been or may be created by,
or in
accordance with a procedure set forth in, the Company’s certificate of
incorporation), convertible debentures, warrants, exchangeable securities
and
Stock awards or options valued by reference to Fair Market Value, Book
Value or
performance of the Company or any Subsidiary, Affiliate or division, may
be
granted either alone or in addition to or in tandem with Stock Options,
Stock
Appreciation Rights, Restricted Stock, Deferred Stock or Stock Purchase
Rights
granted under the Plan and/or cash awards made outside of the Plan.
(ii)
Subject
to the provisions of the Plan, the Committee shall have authority to determine
the persons to whom and the time or times at which such award shall be
made, the
number of shares of Stock to be awarded pursuant to such awards, and all
other
conditions of the awards. The Committee may also provide for the grant
of Stock
upon the completion of a specified performance period. The provisions of
Other
Stock-Based Awards need not be the same with respect to each
recipient.
(b)Terms
and Conditions.
Other
Stock-Based Awards made pursuant to this Section 10 shall be subject to
the
following terms and conditions:
(i)
Subject
to the provisions of the Plan and the award agreement referred to in Section
10(b)(v) of the Plan, shares of Stock subject to awards made under this
Section
10 may not be sold, assigned, transferred, pledged or otherwise encumbered
prior
to the date on which the shares are issued, or, if later, the date on which
any
applicable restriction, performance or deferral period lapses.
(ii)
Subject
to the provisions of the Plan and the award agreement and unless otherwise
determined by the Committee at grant, the recipient of an award under this
Section 10 shall be entitled to receive, currently or on a deferred basis,
interest or dividends or interest or dividend equivalents with respect
to the
number of shares covered by the award, as determined at the time of the
award by
the Committee, in its sole discretion, and the Committee may provide that
such
amounts (if any) shall be deemed to have been reinvested in additional
Stock or
otherwise reinvested.
(iii)
Any
award
under Section 10 and any Stock covered by any such award shall vest or
be
forfeited to the extent so provided in the award agreement, as determined
by the
Committee, in its sole discretion.
(iv)
In
the
event of the participant’s Retirement, Disability or death, or in cases of
special circumstances, the Committee may, in its sole discretion, waive
in whole
or in part any or all of the remaining limitations (if any) imposed with
respect
to any or all of an award pursuant to this Section 10.
(v)
Each
award under this Section 10 shall be confirmed by, and subject to the terms
of,
an agreement or other instrument by the Company and by the
participant.
(vi)
Stock
(including securities convertible into Stock) issued on a bonus basis under
this
Section 10 may be issued for no cash consideration.
C-11
11.Change
in Control Provisions.
(a)Impact
of Event.
In the
event of a “Change in Control,” as defined in Section 11(b) of the Plan, or a
“Potential Change in Control,” as defined in Section 11(c) of the Plan, except
to the extent otherwise determined by the Committee or the Board at or
after
grant (subject to any right of approval expressly reserved by the Committee
or
the Board at the time of such determination), the following acceleration
and
valuation provisions shall apply:
(i)
Any
Stock
Appreciation Rights outstanding for at least six months and any Stock Options
awarded under the Plan not previously exercisable and vested shall become
fully
exercisable and vested and any Incentive Stock Options may, with the consent
of
the holders thereof, be treated as Non-Qualified Stock Options.
(ii)
The
restrictions and deferral limitations applicable to any Restricted Stock,
Deferred Stock, Stock Purchase rights and Other Stock-Based Awards, in
each case
to the extent not already vested under the Plan, shall lapse and such shares
and
awards shall be deemed fully vested.
(iii)
The
value
of all outstanding Stock Options, Stock Appreciation Rights, Restricted
Stock,
Deferred Stock, Stock Purchase Rights and Other Stock-Based Awards, in
each case
to the extent vested (including such rights which shall have become vested
pursuant to Sections 11(a)(i) and (ii) of the Plan), shall be purchased
by the
Company (“cashout”) in a manner determined by the Committee, in its sole
discretion, on the basis of the “Change in Control Price” as defined in Section
11(d) of the Plan as of the date such Change in Control or such Potential
Change
in Control is determined to have occurred or such other date as the Committee
may determine prior to the Change in Control, unless the Committee shall,
contemporaneously with or prior to any particular Change of Control or
Potential
Change of Control, determine that this Section 11(a)(iii) shall not be
applicable to such Change in Control or Potential Change in
Control.
(b)Definition
of “Change in Control.”
For
purposes of Section 11(a) of the Plan, a “Change in Control” means the happening
of any of the following after the date this Plan is adopted by the
Board:
(i)
When
any
“person” (as defined in Section 3(a)(9) of the Exchange Act and as used in
Sections 13(d) and 14(d) of the Exchange Act, including a “group” as defined in
Section 13(d) of the Exchange Act, but excluding the Company and any Subsidiary
and any employee benefit plan sponsored or maintained by the Company or
any
Subsidiary and any trustee of such plan acting as trustee) directly or
indirectly becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act, as amended from time to time), of securities of the Company
representing thirty percent (30%) or more of the combined voting power
of the
Company’s then outstanding securities; provided, however, that a Change of
Control shall not arise if such acquisition is approved by the board of
directors or if the board of directors or the Committee determines that
such
acquisition is not a Change of Control or if the board of directors authorizes
the issuance of the shares of Stock (or securities convertible into Stock
or
upon the exercise of which shares of Stock may be issued) to such persons;
or
(ii)
When,
during any period of twenty-four consecutive months during the existence
of the
Plan, the individuals who, at the beginning of such period, constitute
the Board
(the “Incumbent Directors”) cease for any reason other than death, Disability or
Retirement to constitute at least a majority thereof, provided, however,
that a
director who was not a director at the beginning of such 24-month period
shall
be deemed to have satisfied such 24-month requirement (and be an Incumbent
Director) if such director was elected by, or on the recommendation of,
or with
the approval of, at least two-thirds of the directors who then qualified
as
Incumbent Directors either actually (because they were directors at the
beginning of such 24-month period) or by prior operation of this Section
11(b)(ii); provided, however, that all directors who are elected to the
board
not later than six months after the Acquisition Effective Date shall be
deemed
to be an Incumbent Director and shall be deemed to have satisfied the 24-month
requirement set forth in this Section 11(b)(ii); or
(iii)
The
occurrence of a transaction requiring stockholder approval for the acquisition
of the Company by an entity other than the Company or a Subsidiary through
purchase of assets, or by merger, or otherwise unless approved by a majority
of
Incumbent Directors.
C-12
(c)Definition
of Potential Change in Control.
For
purposes of Section 11(a) of the Plan, a “Potential Change in Control” means the
happening of any one of the following:
(i)
The
approval by stockholders of an agreement by the Company, the consummation
of
which would result in a Change in Control of the Company as defined in
Section
11(b) of the Plan; or
(ii)
The
acquisition of beneficial ownership, directly or indirectly, by any entity,
person or group (other than the Company or a Subsidiary or any Company
employee
benefit plan or any trustee of such plan acting as such trustee) of securities
of the Company representing five percent or more of the combined voting
power of
the Company’s outstanding securities and the adoption by the Board of Directors
of a resolution to the effect that a Potential Change in Control of the
Company
has occurred for purposes of the Plan.
(d)Change
in Control Price.
For
purposes of this Section 11, “Change in Control Price” means the highest price
per share paid in any transaction reported on the principal stock exchange
on
which the Stock is traded or the average of the highest bid and asked prices
as
reported by the principal stock exchange or market on which the Stock is
traded,
or paid or offered in any bona fide transaction related to a Potential
or actual
Change in Control of the Company at any time during the sixty-day period
immediately preceding the occurrence of the Change in Control (or, where
applicable, the occurrence of the Potential Change in Control event), in
each
case as determined by the Committee except that, in the case of Incentive
Stock
Options and Stock Appreciation Rights relating to Incentive Stock Options,
such
price shall be based only on transactions reported for the date on which
the
optionee exercises such Stock Appreciation Rights, Incentive Stock Options
or,
where applicable, the date on which a cashout occurs under Section
11(a)(iii).
12.Amendments
and Termination.
(a) The
Board
may amend, alter, or discontinue the Plan, but no amendment, alteration,
or
discontinuation shall be made which would impair the rights of an optionee
or
participant under a Stock Option, Stock Appreciation Right, Restricted
or
Deferred Stock award, Stock Purchase Right or Other Stock-Based Award
theretofore granted, without the optionee’s or participant’s consent, and no
amendment will be made without approval of the stockholders if such amendment
requires stockholder approval under state law or if stockholder approval
is
necessary in order that the Plan comply with Rule 16b-3 of the Commission
under
the Exchange Act or any substitute or successor rule or if stockholder
approval
is necessary in order to enable the grant pursuant to the Plan of options
or
other awards intended to confer tax benefits upon the recipients
thereof.
(b) The
Committee may amend the terms of any Stock Option or other award theretofore
granted, prospectively or retroactively, but no such amendment shall impair
the
rights or any holder without the holder’s consent. The Committee may also
substitute new Stock Options for previously granted Stock Options (on a
one for
one or other basis), including previously granted Stock Options having
higher
option exercise prices.
(c) Subject
to the provisions of Sections 12(a) and (b) of the Plan, the Board shall
have
broad authority to amend the Plan to take into account changes in applicable
securities and tax laws and accounting rules, as well as other developments,
and, in particular, without limiting in any way the generality of the foregoing,
to eliminate any provisions which are not required to included as a result
of
any amendment to Rule 16b-3 of the Commission pursuant to the Exchange
Act.
13.Unfunded
Status of Plan.
The
Plan
is intended to constitute an “unfunded” plan for incentive and deferred
compensation. With respect to any payments not yet made to a participant
or
optionee by the Company, nothing contained in this Plan shall give any
such
participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize
the
creation of trusts or other arrangements to meet the obligations created
under
the Plan to deliver Stock or payments in lieu of or with respect to awards
under
this Plan; provided, however, that, unless the Committee otherwise determines
with the consent of the affected participant, the existence of such trusts
or
other arrangements shall be consistent with the “unfunded” status of the
Plan.
14.General
Provisions.
(a) The
Committee may require each person purchasing shares pursuant to a Stock
Option
or other award under the Plan to represent to and agree with the Company
in
writing that the optionee or participant is acquiring the shares without
a view
to distribution thereof. The certificates for such shares may include any
legend
which the Committee deems appropriate to reflect any restrictions on transfer.
All certificates or shares of Stock or other securities delivered under
the Plan
shall be subject to such stock-transfer orders and other restrictions as
the
Committee may deem advisable under the rules, regulations, and other
requirements of the Commission, any stock exchange upon which the Stock
is then
listed, and any applicable Federal or state securities law, and the Committee
may cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
C-13
(b) Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, subject to stockholder approval if such approval
is
required; and such arrangements may be either generally applicable or applicable
only in specific cases.
(c) Neither
the adoption of the Plan nor the grant of any award pursuant to the Plan
shall
confer upon any employee of the Company or any Subsidiary or Affiliate
any right
to continued employment with the Company or a Subsidiary or Affiliate,
as the
case may be, nor shall it interfere in any way with the right of the Company
or
a Subsidiary or Affiliate to terminate the employment of any of its employees
at
any time.
(d) No
later
than the date as of which an amount first becomes includible in the gross
income
of the participant for Federal income tax purposes with respect to any
award
under the Plan, the participant shall pay to the Company, or make arrangements
satisfactory to the Committee regarding the payment of, any Federal, state,
or
local taxes of any kind required by law to be withheld with respect to
such
amount. Unless otherwise determined by the Committee, withholding obligations
may be settled with Stock, including Stock that is part of the award that
gives
rise to the withholding requirement. The obligations of the Company under
the
Plan shall be conditional on such payment or arrangements and the Company
and
its Subsidiaries or Affiliates shall, to the extent permitted by law, have
the
right to deduct any such taxes from any payment of any kind otherwise due
to the
participant.
(e) The
actual or deemed reinvestment of dividends or dividend equivalents in additional
Restricted Stock (or in Deferred Stock or other types of Plan awards) at
the
time of any dividend payment shall only be permissible if sufficient shares
of
Stock are available under Section 3 of the Plan for such reinvestment (taking
into account then outstanding Stock Options, Stock Purchase Rights and
other
Plan awards).
15.Effective
Date of Plan.
The
Plan
shall be effective as of the date the Plan is approved by the Board, subject
to
the approval of the Plan by a majority of the votes cast by the holders
of the
Company’s Stock at the next annual or special meeting of stockholders. Any
grants made under the Plan prior to such approval shall be effective when
made
(unless otherwise specified by the Committee at the time of grant), but
shall be
conditioned on, and subject to, such approval of the Plan by such
stockholders.
16.Term
of Plan.
Stock
Option, Stock Appreciation Right, Restricted Stock award, Deferred Stock
award,
Stock Purchase Right or Other Stock-Based Award may be granted pursuant
to the
Plan, until ten (10) years from the date the Plan was approved by the Board,
unless the Plan shall be terminated by the Board, in its discretion, prior
to
such date, but awards granted prior to such termination may extend beyond
that
date.
C-14
Dates Referenced Herein and Documents Incorporated by Reference