UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14C
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE
SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
[X] Preliminary Information Statement
[_] Confidential, For Use of the Commission
only (as permitted by Rule 14c-5(d)(2))
[_] Definitive Information Statement
RELATIONSERVE MEDIA, INC.
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[_] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
- ------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- ------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ------------------------------------------------------------------------------
(5) Total fee paid:
- ------------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- ------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- ------------------------------------------------------------------------------
(3) Filing Party:
- ------------------------------------------------------------------------------
(4) Date Filed:
================================================================================
RELATIONSERVE MEDIA, INC.
877 Executive Center Drive West
St. Petersburg, Florida 33702
----------------------------------
INFORMATION STATEMENT
----------------------------------
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
This Information Statement is first being mailed on or about April 3,
2006, to the holders of record of the common stock of RelationServe Media, Inc.
as of the close of business on March 31, 2006 (the "Record Date"). This
Information Statement relates to certain actions taken by the written consent of
the holders of a majority of our outstanding common stock, dated March ___, 2006
(the "Written Consent").
The Written Consent authorized, effective upon the twentieth day
following the mailing of this Information Statement to the stockholders of the
Company, (i) an amendment to our certificate of incorporation increasing the
number of authorized shares of common stock, par value $0.001 per share (the
"Common Stock"), to 190,000,000 shares from 90,000,000 shares, (ii) an amendment
to our certificate of incorporation changing the Company's corporate name to
SendTec, Inc. from RelationServe Media, Inc., and (iii) the adoption of our 2006
Incentive Stock Plan (the "Plan").
The Written Consent constitutes the consent of a majority of our voting
securities and is sufficient under the Delaware General Corporation Law and our
Bylaws to approve the increase in authorized common stock, the change in our
corporate name and the Plan. Accordingly, these corporate actions will not be
submitted to our other stockholders for a vote.
This Information Statement is being furnished to you to provide you
with material information concerning the actions taken by Written Consent in
accordance with the requirements of the Securities Exchange Act of 1934 (the
"1934 Act"), as amended, and the regulations promulgated thereunder, including
Regulation 14C. This Information Statement also constitutes notice under Section
228 of the Delaware General Corporation Law of the action taken by Written
Consent.
By Order of the Board of Directors,
- ----------------------------
Paul Soltoff
Chief Executive Officer
******************************
GENERAL INFORMATION
This Information Statement is being first mailed on or about April 3,
2006, to our stockholders by the board of directors to provide material
information regarding corporate actions that have been taken by us through the
Written Consent.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
Only one Information Statement is being delivered to two or more
security holders who share an address unless we have received contrary
instruction from one or more of the security holders. We will promptly deliver
upon written or oral request a separate copy of the Information Statement to a
security holder at a shared address to which a single copy of the document was
delivered. If you would like to request additional copies of the Information
Statement, or if in the future you would like to receive multiple copies of
information or proxy statements, or annual reports, or, if you are currently
receiving multiple copies of these documents and would, in the future, like to
receive only a single copy, please so instruct Donald Gould, our Secretary, by
writing to him at 877 Executive Center Drive West, Suite 300, St. Petersburg,
Florida 33702, or calling him at (727) 576-6630.
The Record Date has been fixed as the date for the determination of
stockholders entitled to receive this Information Statement. As of the Record
Date, there were 40,791,920 shares of Common Stock issued and outstanding and
entitled to vote.
INFORMATION ON CONSENTING STOCKHOLDERS
Pursuant to the our bylaws and the Delaware General Corporation Law, a
vote by the holders of at least a majority of the outstanding shares of the
Company entitled to vote (the "Voting Shares") is required to effect the action
described herein. Our Certificate of Incorporation does not authorize cumulative
voting for these corporate actions. As of the record date, the Company had
40,791,920 voting shares of common stock issued and outstanding. The consenting
stockholders are the record and beneficial owners of [ ] shares of the Company's
common stock, which represents approximately [ ]% of the total number of Voting
Shares. Pursuant to Section 228(a) of the Delaware General Corporation Law, the
consenting stockholders voted in favor of the actions described herein in a
written consent, dated March __, 2006. No consideration was paid for the consent
of the consenting stockholders. The consenting stockholders' names, affiliations
with us and their beneficial holdings are as follows:
- --------------------------------------------------------------------------------
NAME AFFILIATION VOTING SHARES PERCENTAGE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL
- --------------------------------------------------------------------------------
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information regarding beneficial ownership of our Common Stock has
been presented in accordance with the rules of the SEC. Under these rules, a
person or entity may be deemed to beneficially own any shares as to which such
person or entity, directly or indirectly, has or shares voting power or
investment power, or has the right to acquire voting or investment power within
60 days through the exercise of any stock option or other right. The percentage
of beneficial ownership as to any person as of a particular date is calculated
by dividing (a) (i) the number of shares beneficially owned by such person, plus
(ii) the number of shares as to which such person has the right to acquire
voting or investment power within 60 days, by (b) the total number of shares
outstanding as of such date, plus any shares that such person has the right to
acquire from us within 60 days. Including those shares in the tables does not,
however, constitute an admission that the named stockholder is a direct or
indirect beneficial owner of those shares.
Based solely upon information available to us, the following table sets
forth certain information regarding beneficial ownership of our Common Stock as
of March __, 2006 by (i) each person or entity known by us to own beneficially
more than 5% of our outstanding Common Stock, (ii) each of our directors and
Named Executive Officers (as hereafter defined), and (iii) all directors and
executive officers as a group. Except as otherwise indicated, each of the
stockholders named below has sole voting and investment power with respect to
such shares of Common Stock:
Percentage
Name and Address of Number of Shares Beneficially
Beneficial Owner(1) Beneficially Owned Owned
- ------------------------------------ -------------------------- --------------
Paul Soltoff 3,341,276(2) 8.2%
Donald Gould 2,248,013(3) 5.5%
Eric Obeck 2,788,487(4) 6.8%
Michael Brauser 100,000(5) *
LB I Group Inc. 3,034,795(6) 7.3%
MHB Trust 5,392,500(7) 12.4%
Leslie T. Altavilla Revocable Trust 3,200,000(8) 7.9%
Shawn McNamara 43,334(9) *
Adam Wasserman 0 0
Danielle Karp 100,000(10) *
Ohad Jehassi 125,000(11) *
Mandee Heller Adler 200,000(12) *
Scott Young 0 0
- --------------------
* Represents less than 1%.
(1) Unless otherwise indicated, the address of each stockholder listed
above is c/o the executive offices of Relationserve
(2) Based on a Schedule 13D filed on March 1, 2006. Mr. Soltoff's business
address is c/o SendTec Acquisition Corp., 877 Executive Center Drive
West, Suite 300, St. Petersburg, Florida 33702.
3
(3) Based on a Schedule 13D filed on March 1, 2006. Mr. Gould's business
address is c/o SendTec Acquisition Corp., 877 Executive Center Drive
West, Suite 300, St. Petersburg, Florida 33702.
(4) Based on a Schedule 13D filed on March 1, 2006. Mr. Obeck's business
address is c/o SendTec Acquisition Corp., 877 Executive Center Drive
West, Suite 300, St. Petersburg, Florida 33702.
(5) Consists of presently exercisable warrants to purchase 100,000 shares
of Common Stock held by DIG Investment Trust, an entity in which the
wife of Mr. Brauser is the trustee of a trust for the benefit of their
children. Mr. Brauser disclaims beneficial ownership of the warrants
and the shares of Common Stock underlying the warrants.
(6) Based on a Schedule 13G filed on February 15, 2006, LB I Group Inc.
beneficially owns 3,034,795 shares of Common Stock. Such shares include
a warrant to purchase 1,037,985 shares of Common Stock exercisable
within 60 days. Lehman Brothers Inc. is the parent company of LB I
Group. Lehman Brothers Holdings Inc., a public reporting company, is
the parent company of Lehman Brothers Inc. The address for LB I Group
is c/o Lehman Brothers Inc., 399 Park Avenue, New York, New York 10022,
Attn: Eric Salzman and Will Yelsits. Lehman Brothers Inc. is a
registered broker-dealer.
(7) Includes immediately exercisable warrant to purchase 2,792,500 shares
of Common Stock. MHB Trust's address is c/o Southpac Trust Limited, ANZ
House, Main Road, Avara, Raratongo, Cook Islands. Mr. Brauser disclaims
beneficial ownership of any shares of Common Stock or Warrants owned
MHB Trust.
(8) The business address for the trust is 14300 Clay Terrace Blvd., Ste.
269, Carmel, IN 46037.
(9) Consists of an option to purchase 33,334 shares of Common Stock
exercisable within 60 days and 10,000 shares of restricted Common Stock
granted under the 2005 Plan. Such restrictions lapse as to 1/3 of such
shares on the six month, one year and two year anniversaries of the
date of grant.
(10) Consists of immediately exercisable option to purchase 100,000 shares
of Common Stock.
(11) Consists of an immediately exercisable option to purchase 25,000 shares
of Common Stock and 80,000 shares of restricted Common Stock granted
under the 2005 Plan.
(12) Includes immediately exercisable option to purchase 100,000 shares of
Common Stock granted under the 2005 Incentive Plan.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
4
NOTICE TO STOCKHOLDERS OF ACTION TAKEN BY CONSENT OF STOCKHOLDERS
The following actions were taken by the written consent of the majority of our
stockholders:
ACTION 1
INCREASE IN OUR AUTHORIZED CAPITAL
The consenting stockholders have adopted and approved an amendment to
our Certificate of Incorporation to increase the number of authorized shares of
Common Stock to 190,000,000 from 90,000,000 shares (the "Authorized Share
Amendment"), without affecting the par value per share or amount of shares
outstanding.
The Authorized Share Amendment will be implemented by filing a
Certificate of Amendment with the Secretary of State of the State of Delaware, a
form of which is attached hereto as ANNEX A. Under Federal Securities laws, we
cannot file the Certificate of Amendment until at least 20 days after the
mailing of this Information Statement. As of the record date, the authorized
number of shares of our Common Stock is 90,000,000, of which 40,791,200 shares
are outstanding. We also have (i) outstanding warrants and option exercisable
into an aggregate of 20,115,214 shares of Common Stock, (ii) outstanding
Debentures convertible into 23,300,000 shares of Common Stock, (iii) 5,852,000
shares reserved for issuance if the Debenture holders exercise their right to
purchase additional Debentures, and (iv) 8,000,000 shares reserved for issuance
under stock option plans. In addition, the terms of our Securities Purchase
Agreement with our Debenture holders requires us to register an amount equal to
130% of the shares of common stock that they either currently hold or are
entitled upon the exercise or conversion of all warrants or Debentures that they
currently hold. Accordingly, we need to increase our authorized capital stock to
ensure that we are not in breach of the Debentures and the Securities Purchase
Agreement relating to the Debentures. In addition, we believe that additional
authorized shares are needed to provide for potential conversions of outstanding
securities that are convertible into shares of our Common Stock, and to provide
us adequate flexibility to engage in future capital raising transactions,
acquisitions or other transactions that might require the issuance of our Common
Stock.
Although this action is not intended to have any anti-takeover effect
and is not part of any series of anti-takeover measures contained in any debt
instruments or the Certificate of Incorporation or our Bylaws in effect on the
date of this Information Statement, our stockholders should note that the
availability of additional authorized and unissued shares of common stock could
make any attempt to gain control of our company or the board of directors more
difficult or time consuming and that the availability of additional authorized
and unissued shares might make it more difficult to remove management. Although
the board of directors currently has no intention of doing so, shares of common
stock could be issued by the board of directors to dilute the percentage of
common stock owned by a significant stockholder and increase the cost of, or the
number of, voting shares necessary to acquire control of the board of directors
or to meet the voting requirements imposed by Delaware law with respect to a
merger or other business combination involving our company.
5
ACTION 2
CHANGE OF OUR CORPORATE NAME
On August 9, 2005, we entered into an asset purchase agreement, (as
subsequently amended, the "Agreement") with theglobe.com, inc. for the purchase
of the business and substantially all of the assets of SendTec, Inc.
("SendTec"). The purchase price for SendTec under the Agreement was $37,500,000,
subject to adjustment, and the assumption of certain liabilities. On October 31,
2005 we assigned its rights under the Agreement to an affiliated company,
SendTec Acquisition Corp. ("STAC") and entered into certain agreements providing
for financing of the transactions. As a result of requirements under the
acquisition financing arrangements described herein, from October 31, 2005 (the
"Acquisition Date") through February 3, 2006 (the "Consolidation Date") STAC
operated independently and as a minority-owned affiliate of the Company prior to
the Consolidation Date. Following the Consolidation Date, STAC became a
wholly-owned subsidiary of the Company in connection with a series of
transactions that took place on the Consolidation Date (the "Consolidation").
As a result of the Consolidation, the business of STAC became our
primary business. Accordingly, on March 17, 2006, our board of directors
authorized that our name be changed to SendTec, Inc. (the "Name Change"). The
consenting stockholders adopted and approved the Name Change. Our board of
directors and our consenting stockholders believe that the Name Change is in our
best interest because it better reflects our current operations and business
strategy.
The Name Change will be implemented by filing a Certificate of
Amendment with the Secretary of State of the State of Delaware, a form of which
is attached hereto as ANNEX A. Under Federal Securities laws, we cannot file the
Certificate of Amendment until at least 20 days after the mailing of this
Information Statement.
ACTION 3
APPROVAL OF THE 2006 INCENTIVE STOCK PLAN
The 2006 Incentive Stock Plan (the "Plan") was adopted by the Board of
Directors on March 3, 2006 and approved by the written consent of the consenting
stockholders. The reasons for adopting the Plan and the purpose of the Plan are
as follows:
o to provide an incentive to retain in the employ of and as
directors, officers, consultants, advisors, and employees of our
company, persons of training, experience, and ability;
o to attract new directors, officers, consultants, advisors, and
employees whose services are considered valuable;
o to encourage the sense of proprietorship and to stimulate the
active interest of such persons into our development and financial
success.
Accordingly, our board of directors developed the Plan, which provides for
grants of options and restricted stock. We intend that certain options granted
pursuant to the Plan shall constitute incentive stock options within the meaning
6
of Section 422 of the Internal Revenue Code while certain other options granted
pursuant to the plan shall be nonqualified stock options. The board of directors
believes that the Plan will allow us better retain and recruit the best possible
personnel.
A summary of the Plan is set forth below, and its full text is attached
hereto as ANNEX B. The following discussion is qualified in its entirety by
reference to ANNEX B.
ADMINISTRATION OF THE PLAN
The board of directors shall appoint and maintain as administrator of
the plan a Committee consisting of "Non-Employee Directors" (as such term is
defined in Rule 16b-3 of the Securities Exchange Act of 1934, as amended) and
"Outside Directors" (as such term is defined in Section 162(m) of the Internal
Revenue Code), which shall serve at the pleasure of the board of directors. The
Committee, subject to certain restrictive provisions of the Plan, shall have
full power and authority to designate recipients of options and restricted stock
agreements and to interpret provisions and supervise the administration of the
plan. Until such time as the board of directors appoints the Committee, the
board of directors shall administer the Plan.
The board of directors is authorized to amend, suspend, or terminate
the Plan, except that no amendment shall be, which without the approval of our
stockholders would: (a) increase the number of shares issuable under the Plan;
(b) materially increase the benefits accruing to option holders under the Plan;
(c) materially modify Plan eligibility requirements; (d) decrease the exercise
price of an option to less than 100% of the underlying stock's fair market value
or (e) extend the term of any option beyond that provided in Section 5(b) of the
Plan.
The Plan will expire on March 1, 2016.
COMMON STOCK SUBJECT TO THE PLAN
The Plan provides that options and restricted stock may be granted with
respect to 2,700,000 shares of our Common Stock. The maximum number of shares of
Common Stock that can be subject to options granted under the Plan to any
individual shall not exceed 1,000,000 shares. The shares of Common Stock subject
to the Plan shall consist of unissued shares, treasury shares or previously
issued shares held by any subsidiary of the Company. Should any option or
restricted stock expire ore be canceled prior to its exercise or vesting in full
or should the number of shares of Common Stock to be delivered upon the exercise
or vesting in full of an option or restricted stock be reduced for any reasons,
the shares of Common Stock subject to such option or restricted stock may be
subject to future options or restricted stock, except where such reissuance is
inconsistent with the provisions of Section 162(m) of the Internal Revenue Code.
PARTICIPATION
Any director, officer, employee, consultant, vendor, joint venture
partners or advisors to the Company or any of its subsidiaries shall be eligible
to receive options or restricted stock under the Plan. However, only employees
of the Company or its subsidiaries can receive incentive stock options.
7
In selecting participants, and in determining the number of shares to
be covered by each option or share of restricted stock granted to participants,
the Committee may consider any factor it deems relevant, including without
limitation, the office or position held by the participant, the participant's
relationship to the Company, the participant's degree of responsibility for and
contribution to the growth and success of our business, the participant's length
or service, promotions and potential.
OPTION PRICE
The purchase price of each share of our Common Stock purchasable under
an incentive option or a nonqualified option shall be determined by the
Committee at the time that the option is granted, but shall be no less than 100%
of the Fair Market Value (as defined in the plan) of the underlying common
stock. If an incentive stock option is granted to an employee who owns more than
10% of the total combined voting power of all classes of stock of the Company or
of any subsidiary, the purchase price per share of common stock shall be at
least 110% of the Fair Market Value pre share of Common Stock on the date of
grant.
OPTION TERM
The term of each option shall be fixed by the Committee, but no option
shall be exercisable more than ten years after the date such option is granted.
If an incentive stock option is granted to an employee, who at the time of the
grant owns more than 10% of the total combined voting power of all classes of
the Company's Common Stock or of any subsidiary, no such incentive stock option
shall be exercisable more than five years after the date of grant.
EXERCISABILITY
Options shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Committee at the time of
grant. In the absence of any option vesting periods designated by the Committee
at the time of grant, options shall vest and become exercisable as to one-third
of the total amount of shares subject to the option on each of the first, second
and third anniversaries of the date of grant. In addition, the Plan provides
that no options shall be exercisable until such time as any vesting limitation
required by Section 16 of the Securities Exchange Act of 1934 and related rules,
shall be satisfied if such limitation shall be required for continued validity
of the exemption provided under Rule 16b-3(d)(3).
In the event of a Change of Control (as defined in the Plan), the
Committee may accelerate the vesting and exercisability of outstanding options.
In its sole discretion, the Committee may also determine that, upon the
occurrence of a Change of Control, each outstanding option shall terminate
within a specified number of days after notice to the participant, and each such
participant shall receive, with respect to each share of Common Stock subject to
such option, an amount equal to the excess of the Fair Market Value of such
shares immediately prior to the Change in Control over the exercise price per
share of such option; such amount shall be payable in cash or other property.
Options are not transferable and may be exercised solely by the
participant during her or his lifetime of after her or his death by the person
or persons entitled to such option under her or his will or laws of descent and
distribution.
8
REGISTRATION OF STOCK
Notwithstanding any other provision in the Plan, no option may be
exercised unless and until the shares of Common Stock to be issued upon exercise
of the option have been registered under the Securities Act of 1933 and
applicable state securities laws, or are, in the opinion of the Company's
counsel exempt from such registration.
The Company is under no obligation to register under federal or state
securities laws any shares of Common Stock to be issued upon the exercise of
options in order to permit the exercise of an option, although the Company may
in its sole discretion register such shares of Common Stock at such time as the
Company shall determine. If the Company chooses to comply with any exemption
from registration, the shares of Common Stock issued under the Plan, may at the
direction of the Committee, bear an appropriate restrictive legend restricting
the transfer or pledge of the shares, and the Committee may also give
appropriate stop transfer instructions with respect to such shares to the
Company's transfer agent.
TAX TREATMENT OF INCENTIVE STOCK OPTIONS
In general, no taxable income for federal income tax purposes will be
recognized by an option holder upon receipt or exercise of an incentive stock
option, and the Company will not then be entitled to any tax deduction. Assuming
that the option holder does not dispose of the option shares before the later of
(i) two years after the date of grant or (ii) one year after the exercise of the
option, upon any such disposition, the option holder will recognize capital gain
equal to the difference between the sale price on disposition and the exercise
price.
If, however, the option holder disposes of his option shares prior to
the expiration of the required holding period, he will recognize ordinary income
for federal income tax purposes in the year of disposition equal to the lesser
of (i) the difference between the fair market value of the shares at the date of
exercise and the exercise price, or (ii) the difference between the sale price
upon disposition and the exercise price. Any additional gain on such
disqualifying disposition will be treated as capital gain. In addition, if such
a disqualifying disposition is made by the option holder, the Company will be
entitled to a deduction equal to the amount of ordinary income recognized by the
option holder provided that such amount constitutes an ordinary and reasonable
expense of ours.
TAX TREATMENT OF NONQUALIFIED STOCK OPTIONS
No taxable income will be recognized by an option holder upon receipt
of a nonqualified stock option, and the Company will not be entitled to a tax
deduction for such grant.
Upon the exercise of a nonqualified stock option, the option holder
will generally include in taxable income, for federal income tax purposes, the
excess in value on the date of exercise of the shares acquired pursuant to the
nonqualified stock option over the exercise price. Upon a subsequent sale of the
shares, the option holder will derive short-term or long-term gain or loss,
depending upon the option holder's holding period for the shares, commencing
upon the exercise of the option, and upon the subsequent appreciation or
depreciation in the value of the shares.
9
The Company generally will be entitled to a corresponding deduction at
the time that the participant is required to include the value of the shares in
his income.
WITHHOLDING OF TAX
The Company is permitted to deduct and withhold amounts required to
satisfy our withholding tax liabilities with respect to
our employees.
RESTRICTED STOCK GRANTS
Restricted stock may be granted under this Plan aside from, or in
association with, any other award. A participant shall have no rights to an
award of restricted stock unless and until the participant accepts the award,
and if the Committee shall deem it desirable, makes payments to the Company of
cash, or by check. After acceptance and the issuance of a stock certificate, the
participant shall have all the rights of a stockholder with respect to the
restricted stock.
The Company shall issue in the participant's name a certificate for the
shares of Common Stock associated with the award of restricted stock; however,
unless otherwise provided, the certificate shall not be delivered to the
participant until such shares are free of any restrictions specified by the
Committee at the time of grant. Shares of restricted stock are forfeitable until
the terms of the restricted stock grant have been satisfied, and shares of
restricted stock may not be transferred until all restrictions have lapsed. Upon
a Change of Control, the Committee may accelerate the vesting of outstanding
restricted stock, in its sole discretion.
TAX TREATMENT OF RESTRICTED STOCK GRANTS
Except as discussed below, upon the grant of restricted stock, no
income is realized by a participant, and the Company is not allowed a deduction
at that time. When the restricted stock vests and is no longer subject to a
substantial risk of forfeiture for income tax purposes, the participant realizes
taxable ordinary income in an amount equal to the Fair Market Value at the time
of vesting of the shares of Restricted Stock which have vested (less the
purchase price therefor, if any), and, subject to the limitations of Section
162(m) of the Internal Revenue Code, the Company is entitled to a corresponding
deduction at such time.
If a participant makes a timely election under Section 83(b) of the
Internal Revenue Code, the participant recognizes taxable ordinary income in an
amount equal to the Fair Market Value at the time of grant of the restricted
stock (less the purchase price therefor, if any), and, subject to the
limitations of Section 162(m) of the Internal Revenue Code, the Company is
entitled to a corresponding deduction at such time.
OPTION AND RESTRICTED STOCK GRANTS
Options to purchase shares of the Company's Common Stock or restricted
stock have not yet been granted pursuant to the Plan, although it is anticipated
that options will be granted in the near future. The following table sets forth
the number of options currently held by each of the Company's current Executive
Officers, all Executives as a group, Non-Executive Directors as a group and
Non-Executive Officer Employees as a group.
10
OPTIONS HELD AS OF MARCH 22, 2006
Name and Position Number of Options Restricted Stock Award
- ----------------- ----------------- ----------------------
1. Paul Soltoff 0 0
2. Donald Gould 0 0
3. Eric Obeck 0 0
4. Shawn McNamara 100,000 10,000
5. Adam Wasserman 0 0
6. Executive Group 100,000 0
7. Non-Executive Director Group 0 0
8. Non-Executive Employee Group [ ] [ ]
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
DIRECTORS AND EXECUTIVE OFFICERS
Directors and Executive Officers
Our directors and executive officers as of the date of this report are
as follows:
YEAR
BECAME
A PRINCIPAL OCCUPATION FOR THE PAST FIVE
NAME AGE DIRECTOR YEARS AND CURRENT PUBLIC DIRECTORSHIPS
Paul Soltoff 51 2005 CHIEF EXECUTIVE OFFICER AND DIRECTOR OF
THE COMPANY SINCE FEBRUARY 2006. Chief
Executive Officer of STAC since February
2006 and Chairman of the Board and Chief
Executive Officer of SendTec since its
inception in February 2000. Mr. Soltoff
is a director of Health Benefits Direct
Corporation, an online insurance
marketplace that enables consumers to
shop online for individual health and
life insurance and obtain insurance
company- sponsored quotes for such
coverage.
Eric Obeck 41 - PRESIDENT OF THE COMPANY SINCE FEBRUARY
2006. President of STAC since February
2006 and President of SendTec since July
2003. Chief Operating Officer of SendTec
from August 2000 through June 2003.
Donald Gould 42 - CHIEF FINANCIAL OFFICER OF THE COMPANY
SINCE FEBRUARY 2006. Chief Financial
Officer of STAC since February 2006 and
of SendTec since 2000.
Michael Brauser 50 2005 CHAIRMAN OF THE BOARD OF DIRECTORS OF
THE COMPANY SINCE OCTOBER 2005. Founder,
President and CEO of Marlin Capital
Partners, a private investment company,
since 2003. President and Chief
Executive Officer of Naviant, Inc.
(eDirect, Inc), an internet marketing
company, from 1999 through 2002.
Director and Founder of Seisint Inc.
(eData.com, Inc), from 1999 through
2003.
Shawn McNamara 40 - PRINCIPAL EXECUTIVE OFFICER AND SENIOR
VICE PRESIDENT OF THE COMPANY SINCE
NOVEMBER 2005. Interim Chief Executive
Officer from November 2005 through the
present. From 2004 to October 2005, Mr.
McNamara was President of Marketlink,
Inc., an internet marketing company.
From 2001 to 2003, Mr. McNamara was
President of Optinic.com, an internet
marketing company. From 1998 through
2001, Mr. McNamara was President and COO
for worldwideweb.com, a publicly-traded
company and an internet marketing
company.
Adam C. 41 - PRINCIPAL FINANCIAL OFFICER OF THE
Wasserman COMPANY SINCE AUGUST 2005. Interim Chief
Financial Officer since August 2005,
Chief Executive Officer of CFO Oncall,
Inc., a provider of consultant
accounting services specializing in SEC
financial reporting, outsourced chief
financial officer services, audit
preparation service, accounting,
automated systems, and internal
controls, since November 1999.
Each director holds office until the next annual meeting of
stockholders or until his or her successor has been duly elected and qualified.
Executive officers are elected annually and serve at the discretion of our
Board.
12
The Company's purchase of SendTec's assets was financed by the issuance
of Debentures to several holders including LB I Group Inc., which is an
affiliated entity of Lehman Brothers Holdings Inc. and Lehman Brothers Inc. In
conjunction with this issuance, on October 31, 2005, effective upon the
Consolidation, the Company, Lehman Brothers Inc. and LB I Group Inc. entered
into a letter agreement, pursuant to which the parties agreed to certain matters
relating to the composition of the Company's board of directors and its
independent registered public accounting firm.
There are no family relationships between any of our directors or
executive officers.
NOMINATING COMMITTEE
The board of directors does not have a nominating committee, the
customary functions of which are performed by the entire board of directors. The
board of directors has determined that it is appropriate not to have a
nominating committee because of the relatively small size of the board of
directors, and because the entire board of directors effectively functions in
the capacity of a nominating committee.
The board of directors considers recommendations for director nominees
from a wide variety of sources, including business contacts, community leaders
and members of management. The board of directors also considers shareholder
recommendations for director nominees that are properly received in accordance
with the Company's Bylaws and applicable rules and regulations of the SEC. The
board of directors does not evaluate director candidates recommended by
shareholders differently than director candidates recommended from other
sources.
The board of directors believes that all of its directors should have
the highest personal integrity and have a record of exceptional ability and
judgment. The board of directors also believes that its directors should ideally
reflect a mix of experience and other qualifications. There is no firm
requirement of minimum qualifications or skills that candidates must possess.
The board of directors evaluates director candidates based on a number of
qualifications, including their independence, judgment, leadership ability,
expertise in the industry, experience developing and analyzing business
strategies, financial literacy, risk management skills, and, for incumbent
directors, his or her past performance.
The board of directors initially evaluates a prospective nominee on the
basis of his or her resume and other background information that has been made
available to them. A member of the board of directors will contact for further
review those candidates who they believes are qualified, who may fulfill a
specific board of directors need and who would otherwise best make a
contribution to the board of directors.
AUDIT COMMITTEE
Our Board of Directors has determined that Michael Brauser is the
financial expert serving on our Audit Committee and as of December 31, 2005 was
independent as such term is used in Item 7(d)(3)(iv) of Schedule 14A under the
Exchange Act.
13
CODE OF ETHICS
We adopted a Code of Ethics that applies to our officers, directors and
employees, including our chief executive officer and chief financial officer. A
copy of such Code of Ethics is attached as Exhibit 14 to the Company's Current
Report on Form 8-K dated July 13, 2005.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
On December 30, 2005 the Company became subject to Section 16(a) of the
Exchange Act, which requires executive officers and directors, and persons who
beneficially own more than ten percent of the common stock of a company with a
class of securities registered under the Exchange Act, to file initial reports
of ownership and reports of changes in ownership with the Securities and
Exchange Commission. MHB Trust, a Cook Island Trust, which the Company believes
is a more than ten percent owner of the Company's Common Stock, has not
currently filed a Form 3 stating such ownership percentage. The MHB Trust was
established during 2005 by our Chairman of the Board Michael Brauser, as
settler.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information for the three most recently
completed fiscal years concerning the compensation of (i) the Chief Executive
Officer and (ii) all other executive officers who earned in excess of $100,000
in salary and bonus in the fiscal year ended December 31, 2005 (the "Named
Executive Officers"). Such information excludes for the periods stated all
compensation and awards to any STAC officers and directors inasmuch as the date
of the consolidation was in February 2006.
14
Long Term Compensation
---------------------------------------
Annual
Compensation
-------------------
Restricted Securities
Stock Underlying All Other
Salary Award(s) Options Compensation
Name and Principal Position Year ($) ($) (#) ($)(3)
- ------------------------------------------------------ ----------- ----------- ------------- -------------
Shawn McNamara 2005 40,502 10,000 100,000 0
(Principal Executive Officer from 2004 0 0 0 0
November 16, 2005 through 2003 0 0 0 0
present)
Adam Wasserman 2005 40,610 0 0 0
(Principal Financial Officer from 2004 0 0 0 0
August 9, 2005 through present) 2003 0 0 0 0
Danielle Karp(1)(2) 2005 68,270 0 100,000 0
(President from June 13, 2005 2004 64,214 0 0 0
through February 3, 2006) 2003 0 0 0 0
Ohad Jehassi(2) 2005 82,958 80,000 100,000 0
(COO from July 13, 2005) 2004 0 0 0 0
2003 0 0 0 0
Mandee Heller Adler(2) 2005 73,077 100,000 100,000 0
(CEO from June 21, 2005 through 2004 0 0 0 0
November 11, 2005) 2003 0 0 0 0
Scott Young(2) 2005 0 0 0 0
(President and CFO from inception 2004 0 0 0 0
through June 13, 2005) 2003 0 0 0 0
- ----------------------------
(1) The Company was formed in May 2005. Amounts for periods prior to 2005
reflect compensation received from an entity that sold its assets to
the Company.
(2) Former officer and/or director of the Company.
(3) As to Named Executive Officers, perquisites and other personal
benefits, securities, or property received by each Named Executive
Officer did not exceed the lesser of $50,000 or 10% of such Named
Executive Officer's annual salary and bonus.
OPTION GRANTS TABLE FOR FISCAL 2005
The following table contains information concerning the grant of stock
options to our executive officers during the fiscal year. No stock appreciation
rights were granted during the year.
15
Number of
Securities Percent of Total
Underlying Options/SARs Granted Exercise Or
Options/SARs to Employees in Fiscal Base Price
Name Granted (#) Year(%)(1) ($/Sh) Expiration Date
- --------------------- ----------------- ---------------------- ---------------- ------------------
Shawn McNamara 100,000 5.9 3.85 November 30, 2010
Adam Wasserman 0 0 0 None
Danielle Karp 100,000 5.9 3.85 July 13, 2015
Ohad Jehassi 100,000 5.9 3.85 July 13, 2015
Mandee Heller Adler 100,000 5.9 3.85 July 13, 2015
Scott Young 0 0 0 None
- ----------------------------------
(1) Based on number of options granted and not forfeited as of December 31,
2005. Does not include options granted to the Company's non-employee
Chairman of the Board of Directors.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding the exercise of
stock options during the last fiscal year by the named officers in the Summary
Compensation Table above and the fiscal year-end value of unexercised options.
Number of Securities
Underlying Unexercised Value Of Unexercised
Options/SARs At FY-End In-The-Money Options/SARs
(#) Exercisable/ At FY-End ($) (1)
Name Unexercisable Exercisable/Unexercisable
- ------------------------------- ------------------------------- ----------------------------------
Shawn McNamara 0/100,000 0/0
Adam Wasserman 0/0 0/0
Danielle Karp 0/100,000 0/0
Ohad Jehassi 0/100,000 0/0
Mandee Heller Adler 0/100,000 0/0
Scott Young 0/0 0/0
EQUITY COMPENSATION PLAN INFORMATION
In addition to the 2006 Incentive Stock Plan, we have two other equity
compensation plans as described below.
16
2005 INCENTIVE STOCK PLAN
An aggregate of 3,300,000 shares of Common Stock have been reserved for
issuance under the 2005 Incentive Plan. The purpose of the 2005 Incentive Plan
is to provide an incentive to retain in the employ and as directors, officers,
consultants, advisors and employees of the Company, persons of training,
experience, and ability, to attract new directors, officers, consultants,
advisors and employees whose services are considered valuable, to encourage the
sense of proprietorship, and to stimulate the active interest of such persons in
our development and financial success. Under the 2005 Incentive Plan, we are
authorized to issue incentive stock options intended to qualify under Section
422 of the Code, non-qualified stock options, and restricted stock. The 2005
Incentive Plan is administered by the board of directors or a compensation
committee designated be the board of directors of at least two directors (the
"Compensation Committee").
Options and restricted Common Stock granted under the 2005 Incentive
Plan have a maximum term of ten years. Unless otherwise determined by the board
of directors or Compensation Committee at the time of grant, options will be
subject to a vesting period of three years. Upon a change in control, the
vesting and exercisability of outstanding options and vesting of outstanding
restricted common stock may accelerate. The 2005 Incentive Plan permits
"cashless exercise" of outstanding options. As of the date of this Information
Statement, options to purchase 2,948,500 shares of Common Stock (intended to
qualify as incentive stock options) and 282,100 shares of restricted Common
Stock have been granted under the 2005 Incentive Plan.
DIRECTORS' PLAN
The Directors Plan provides for the grant of non-qualified stock
options to non-employee directors of the Company and its subsidiaries. 2,000,000
shares of Common Stock have been reserved for issuance under the Directors Plan,
provided that awards to the Chairman of the board of directors are limited to
1,000,000 shares. The Directors Plan provides that each non-employee director
who is newly-elected or appointed Chairman of the Board shall receive an option
to purchase 1,000,000 shares of common stock exercisable on the six-month
anniversary of the approval of the Directors Plan by the stockholders, each
newly elected or appointed non-employee director (other than the Chairman) shall
be granted an option to purchase 50,000 shares of common stock, exercisable as
to 50% of such shares on the date which is one year from the date of grant and
50% on the date which is two years from the date of grant. The Directors Plan
permits "cashless exercise" of outstanding options. In addition, each
non-employee director shall be granted an option to purchase 50,000 shares of
common stock on the second anniversary of such director's initial election or
appointment, exercisable as to 50% on the date which is one year from the date
of grant and 50% on the date which is two years from the date of grant. All such
options shall be exercisable at the fair market value on the date of grant. As
of the date of this Information Statement, 1,000,000 options to purchase Common
Stock were granted to the Company's former Chairman of the Board.
17
EMPLOYMENT AGREEMENTS
Paul Soltoff became Chief Executive Officer of STAC pursuant to an
Employment Agreement dated October 31, 2005 and of the Company on February 3,
2006. The Agreement provides that Mr. Soltoff will serve as Chief Executive
Officer for an initial five year term, which will be renewed for additional one
year terms thereafter, unless written notice is provided by either party. The
agreement provides for an annual base salary of no less than $400,000, as well
as such incentive compensation and bonuses as the Board of Directors may
determine and to which he may become entitled pursuant to an incentive
compensation or bonus program.
Donald Gould became Chief Financial Officer of STAC pursuant to an
Employment Agreement dated October 31, 2005 and of the Company on February 3,
2006. The Agreement provides that Mr. Gould will serve as Chief Financial
Officer for an initial five year term, which will be renewed for additional one
year terms thereafter, unless written notice is provided by either party. The
agreement provides for an annual base salary of no less than $225,000, as well
as such incentive compensation and bonuses as the board of directors may
determine and to which he may become entitled to pursuant to an incentive
compensation or bonus program.
Eric Obeck became President of STAC pursuant to an Employment Agreement
dated October 31, 2005 and of the Company on February 3, 2006. The Agreement
provides that Mr. Obeck will serve as President for an initial five year term,
which will be renewed for additional one year terms thereafter, unless written
notice is provided by either party. The agreement provides for an annual base
salary of no less than $325,000, as well as such incentive compensation and
bonuses as the Board of Directors may determine and to which he may become
entitled to pursuant to an incentive compensation or bonus program.
Shawn McNamara became Vice President of the Company pursuant to an
Employment Agreement dated November 30, 2005. The Agreement provides that Mr.
McNamara will serve as the Vice President for an initial one-year term, which
will be renewed for additional one-year terms thereafter, unless written notice
is provided by either party. The agreement provides for a signing bonus of
$30,000 and an annual base salary of $180,000. In addition, pursuant to the
agreement, Mr. McNamara received five-year options to purchase 100,000 shares of
the Company's Common Stock, exercisable at $3.85 per share, subject to exercise
upon his continued employment as to one third (1/3) of such shares on each of
the six month, first, and second year anniversaries of the date of grant. Mr.
McNamara also received 10,000 shares of unregistered Common Stock.
COMPENSATION OF DIRECTORS
Each non-employee director who is newly elected or appointed Chairman
of the Board is granted an option to purchase up to 1,000,000 shares of Common
Stock. Each person (other than the Chairman) who is newly elected or appointed
as a non-employee director is granted an option to purchase fifty thousand
shares of Common Stock. Each person who remains a non-employee director for a
period of two consecutive years following the date of initial election or
appointment is granted an option to purchase fifty thousand (50,000) shares of
Common Stock.
18
In addition, the current Chairman of the Board of Directors received a
$200,000 payment in connection with his services and a $100,000 expense
reimbursement in connection with the closing of the acquisition of SendTec.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
19
FORWARD-LOOKING STATEMENTS
This Information Statement may contain certain "forward-looking"
statements as such term is defined in the Private Securities Litigation Reform
Act of 1995 or by the U.S. Securities and Exchange Commission in its rules,
regulations and releases, which represent Enclaves' expectations or beliefs,
including but not limited to, statements concerning Enclaves' operations,
economic performance, financial condition, growth and acquisition strategies,
investments, and future operational plans. For this purpose, any statements
contained herein that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may," "will," "expect," "believe," "anticipate," "intend,"
"could," "estimate," "might," or "continue" or the negative or other variations
thereof or comparable terminology are intended to identify forward-looking
statements. These statements, by their nature, involve substantial risks and
uncertainties, certain of which are beyond Enclaves' control, and actual results
may differ materially depending on a variety of important factors, including
uncertainty related to acquisitions, governmental regulation, managing and
maintaining growth, volatility of stock prices and any other factors discussed
in this and other of Enclaves' filings with the Securities and Exchange
Commission.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended, and in accordance with this act, we
file periodic reports, documents and other information with the Securities and
Exchange Commission relating to our business, financial statements and other
matters. These reports and other information may be inspected and are available
for copying at the offices of the Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, DC 20549. Our Securities and Exchange Commission
filings are also available to the public from the Securities and Exchange
Commission's website at http://www.sec.gov.
By Order of the Board of Directors,
- ----------------------------
Paul Soltoff
Chief Executive Officer
March ___, 2006
20
ANNEX A
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RELATIONSERVE MEDIA, INC.
UNDER SECTION 242 OF THE DELAWARE GENERAL CORPORATION LAW
----------------------
It is hereby certified that:
1. The name of the corporation is RelationServe Media, Inc.
2. The Amended and Restated Certificate of Incorporation of the
Corporation is hereby amended by amending and restating Article FIRST thereof as
follows:
FIRST: The name of this corporation is SendTec, Inc.
3. The Amended and Restated Certificate of Incorporation of the
Corporation is hereby amended by amending and restating Article FOURTH thereof
as follows:
FOURTH: A. CLASSES AND NUMBERS OF SHARES. The total
number of shares of stock which the Corporation shall
have authority to issue is two-hundred million
(200,000,000). The Classes and aggregate number of
shares of each class which the Corporation shall have
authority to issue are as follows:
1. One Hundred Ninety Million (190,000,000)
shares of Common Stock, par value $0.001 per share
(the "Common Stock"); and
2. Ten Million (10,000,000) shares of
Preferred Stock, par value $0.001 per share (the
"Preferred Stock"); and
B. BLANK CHECK POWERS. The Corporation may issue any
class of the Preferred Stock in any series. The Board
of Directors shall have authority to establish and
designate series, and to fix the number of shares
included in each such series and the variations in the
A-1
relative rights, preferences and limitations as
between series, provided that, if the stated dividends
and amounts payable on liquidation are not paid in
full, the shares of all series of the same class shall
share ratably in the payment of dividends including
accumulations, if any, in accordance with the sums
which would be payable on such shares if all dividends
were declared and paid in full, and in any
distribution of assets other than by way of dividends
in accordance with the sums which would be payable on
such distribution if all sums payable were discharged
in full.
Shares of each such series when issued shall be
designated to distinguish the shares of each series
from shares of all other series.
4. The amendment of the Certificate of Incorporation herein certified has
been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware pursuant to a resolution
adopted by the Corporation's Board of Directors and by the affirmative vote of
the holders of a majority of the capital stock of the Corporation at a meeting
duly noticed and conducted in accordance with Section 222 of the General
Corporation Law of the State of Delaware and the By-Laws of the Corporation.
IN WITNESS WHEREOF, said RelationServe Media, Inc. has caused this
Certificate to be signed by Paul Soltoff, its Chief Executive Officer, and
attested by Donald Gould, its Secretary this __ day of April, 2006.
RELATIONSERVE MEDIA, INC.
By:
--------------------------------
Name: Paul Soltoff
Title: Chief Executive Officer
ATTEST:
By:
-------------------------------------
Name: Donald Gould
Title: Secretary
A-2
ANNEX B
RELATIONSERVE MEDIA, INC.
2006 INCENTIVE STOCK PLAN
1. Purpose of the Plan.
This 2006 Incentive Stock Plan (the "Plan") is intended as an
incentive, to retain in the employ of and as directors, officers, consultants,
advisors and employees to RelationServe Media, Inc., a Delaware corporation (the
"Company"), and any Subsidiary of the Company, within the meaning of Section
424(f) of the United States Internal Revenue Code of 1986, as amended (the
"Code"), persons of training, experience and ability, to attract new directors,
officers, consultants, advisors and employees whose services are considered
valuable, to encourage the sense of proprietorship and to stimulate the active
interest of such persons in the development and financial success of the Company
and its Subsidiaries.
It is further intended that certain options granted pursuant to the
Plan shall constitute incentive stock options within the meaning of Section 422
of the Code (the "Incentive Options") while certain other options granted
pursuant to the Plan shall be nonqualified stock options (the "Nonqualified
Options"). Incentive Options and Nonqualified Options are hereinafter referred
to collectively as "Options."
The Company intends that the Plan meet the requirements of Rule 16b-3
("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and that transactions of the type specified in
subparagraphs (c) to (f) inclusive of Rule 16b-3 by officers and directors of
the Company pursuant to the Plan will be exempt from the operation of Section
16(b) of the Exchange Act. Further, the Plan is intended to satisfy the
performance-based compensation exception to the limitation on the Company's tax
deductions imposed by Section 162(m) of the Code with respect to those Options
for which qualification for such exception is intended. In all cases, the terms,
provisions, conditions and limitations of the Plan shall be construed and
interpreted consistent with the Company's intent as stated in this Section 1.
2. Administration of the Plan.
The Board of Directors of the Company (the "Board") shall appoint and
maintain as administrator of the Plan a Committee (the "Committee") consisting
of two or more directors who are "Non-Employee Directors" (as such term is
defined in Rule 16b-3) and "Outside Directors" (as such term is defined in
Section 162(m) of the Code), which shall serve at the pleasure of the Board. The
Committee, subject to Sections 3, 5 and 6 hereof, shall have full power and
authority to designate recipients of Options and restricted stock ("Restricted
Stock") and to determine the terms and conditions of the respective Option and
Restricted Stock agreements (which need not be identical) and to interpret the
provisions and supervise the administration of the Plan. The Committee shall
B-1
have the authority, without limitation, to designate which Options granted under
the Plan shall be Incentive Options and which shall be Nonqualified Options. To
the extent any Option does not qualify as an Incentive Option, it shall
constitute a separate Nonqualified Option.
Subject to the provisions of the Plan, the Committee shall interpret
the Plan and all Options and Restricted Stock granted under the Plan, shall make
such rules as it deems necessary for the proper administration of the Plan,
shall make all other determinations necessary or advisable for the
administration of the Plan and shall correct any defects or supply any omission
or reconcile any inconsistency in the Plan or in any Options or Restricted Stock
granted under the Plan in the manner and to the extent that the Committee deems
desirable to carry into effect the Plan or any Options or Restricted Stock. The
act or determination of a majority of the Committee shall be the act or
determination of the Committee and any decision reduced to writing and signed by
all of the members of the Committee shall be fully effective as if it had been
made by a majority at a meeting duly held. Subject to the provisions of the
Plan, any action taken or determination made by the Committee pursuant to this
and the other Sections of the Plan shall be conclusive on all parties.
In the event that for any reason the Committee is unable to act or if
the Committee at the time of any grant, award or other acquisition under the
Plan does not consist of two or more Non-Employee Directors, or if there shall
be no such Committee, then the Plan shall be administered by the Board, and
references herein to the Committee (except in the proviso to this sentence)
shall be deemed to be references to the Board, and any such grant, award or
other acquisition may be approved or ratified in any other manner contemplated
by subparagraph (d) of Rule 16b-3; provided, however, that grants to the
Company's Chief Executive Officer or to any of the Company's other four most
highly compensated officers that are intended to qualify as performance-based
compensation under Section 162(m) of the Code may only be granted by the
Committee.
3. Designation of Optionees and Grantees.
The persons eligible for participation in the Plan as recipients of
Options (the "Optionees") or Restricted Stock (the "Grantees" and together with
Optionees, the "Participants") shall include directors, officers and employees
of, and subject to their meeting the eligibility requirements of Rule 701
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
consultants, vendors, joint venture partners, and advisors to, the Company or
any Subsidiary; provided that Incentive Options may only be granted to employees
of the Company and any Subsidiary. In selecting Participants, and in determining
the number of shares to be covered by each Option or share of Restricted Stock
granted to Participants, the Committee may consider any factors it deems
relevant, including without limitation, the office or position held by the
Participant or the Participant's relationship to the Company, the Participant's
degree of responsibility for and contribution to the growth and success of the
Company or any Subsidiary, the Participant's length of service, promotions and
potential. A Participant who has been granted an Option or Restricted Stock
hereunder may be granted an additional Option or Options, or Restricted Stock if
the Committee shall so determine.
B-2
4. Stock Reserved for the Plan.
Subject to adjustment as provided in Section 8 hereof, a total of
2,700,000 shares of the Company's Common Stock, par value $0.001 per share (the
"Stock"), shall be subject to the Plan. The maximum number of shares of Stock
that may be subject to Options granted under the Plan to any individual in any
calendar year shall not exceed 1,000,000 shares and the method of counting such
shares shall conform to any requirements applicable to performance-based
compensation under Section 162(m) of the Code, if qualification as
performance-based compensation under Section 162(m) of the Code is intended. The
shares of Stock subject to the Plan shall consist of unissued shares, treasury
shares or previously issued shares held by any Subsidiary of the Company, and
such amount of shares of Stock shall be and is hereby reserved for such purpose.
Any of such shares of Stock that may remain unsold and that are not subject to
outstanding Options at the termination of the Plan shall cease to be reserved
for the purposes of the Plan, but until termination of the Plan the Company
shall at all times reserve a sufficient number of shares of Stock to meet the
requirements of the Plan. Should any Option or Restricted Stock expire or be
canceled prior to its exercise or vesting in full or should the number of shares
of Stock to be delivered upon the exercise or vesting in full of an Option or
Restricted Stock be reduced for any reason, the shares of Stock theretofore
subject to such Option or Restricted Stock may be subject to future Options or
Restricted Stock under the Plan, except where such reissuance is inconsistent
with the provisions of Section 162(m) of the Code where qualification as
performance-based compensation under Section 162(m) of the Code is intended.
5. Terms and Conditions of Options.
Options granted under the Plan shall be subject to the following
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) OPTION PRICE. The purchase price of each share of Stock
purchasable under an Incentive Option shall be determined by the Committee at
the time of grant, but shall not be less than 100% of the Fair Market Value (as
defined below) of such share of Stock on the date the Option is granted;
provided, however, that with respect to an Optionee who, at the time such
Incentive Option is granted, owns (within the meaning of Section 424(d) of the
Code) more than 10% of the total combined voting power of all classes of stock
of the Company or of any Subsidiary, the purchase price per share of Stock shall
be at least 110% of the Fair Market Value per share of Stock on the date of
grant. The purchase price of each share of Stock purchasable under a
Nonqualified Option shall not be less than 100% of the Fair Market Value of such
share of Stock on the date the Option is granted. The exercise price for each
Option shall be subject to adjustment as provided in Section 8 below. "Fair
Market Value" means the closing price on the final trading day immediately prior
to the grant of publicly traded shares of Stock on the principal securities
exchange on which shares of Stock are listed (if the shares of Stock are so
listed), or on the NASDAQ Stock Market (if the shares of Stock are regularly
quoted on the NASDAQ Stock Market), or, if not so listed or regularly quoted,
the mean between the closing bid and asked prices of publicly traded shares of
Stock in the over the counter market, or, if such bid and asked prices shall not
be available, as reported by any nationally recognized quotation service
selected by the Company, or as determined by the Committee in a manner
consistent with the provisions of the Code. Anything in this Section 5(a) to the
B-3
contrary notwithstanding, in no event shall the purchase price of a share of
Stock be less than the minimum price permitted under the rules and policies of
any national securities exchange on which the shares of Stock are listed.
(b) OPTION TERM. The term of each Option shall be fixed by the
Committee, but no Option shall be exercisable more than ten years after the date
such Option is granted and in the case of an Incentive Option granted to an
Optionee who, at the time such Incentive Option is granted, owns (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or of any Subsidiary, no
such Incentive Option shall be exercisable more than five years after the date
such Incentive Option is granted.
(c) EXERCISABILITY. Subject to Section 5(j) hereof, Options shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee at the time of grant; provided, however,
that in the absence of any Option vesting periods designated by the Committee at
the time of grant, Options shall vest and become exercisable as to one-third of
the total amount of shares subject to the Option on each of the first, second
and third anniversaries of the date of grant; and provided further that no
Options shall be exercisable until such time as any vesting limitation required
by Section 16 of the Exchange Act, and related rules, shall be satisfied if such
limitation shall be required for continued validity of the exemption provided
under Rule 16b-3(d)(3).
Upon the occurrence of a "Change in Control" (as hereinafter defined),
the Committee may accelerate the vesting and exercisability of outstanding
Options, in whole or in part, as determined by the Committee in its sole
discretion. In its sole discretion, the Committee may also determine that, upon
the occurrence of a Change in Control, each outstanding Option shall terminate
within a specified number of days after notice to the Optionee thereunder, and
each such Optionee shall receive, with respect to each share of Company Stock
subject to such Option, an amount equal to the excess of the Fair Market Value
of such shares immediately prior to such Change in Control over the exercise
price per share of such Option; such amount shall be payable in cash, in one or
more kinds of property (including the property, if any, payable in the
transaction) or a combination thereof, as the Committee shall determine in its
sole discretion.
For purposes of the Plan, a Change in Control shall be deemed to have
occurred if:
(i) a tender offer (or series of related offers) shall be
made and consummated for the ownership of 50% or more of the
outstanding voting securities of the Company, unless as a result of
such tender offer more than 50% of the outstanding voting securities
of the surviving or resulting corporation shall be owned in the
aggregate by the stockholders of the Company (as of the time
immediately prior to the commencement of such offer), any employee
benefit plan of the Company or its Subsidiaries, and their affiliates;
(ii) the Company shall be merged or consolidated with another
corporation, unless as a result of such merger or consolidation more
than 50% of the outstanding voting securities of the surviving or
resulting corporation shall be owned in the aggregate by the
stockholders of the Company (as of the time immediately prior to such
B-4
transaction), any employee benefit plan of the Company or its
Subsidiaries, and their affiliates;
(iii) the Company shall sell substantially all of its assets to
another corporation that is not wholly owned by the Company, unless as
a result of such sale more than 50% of such assets shall be owned in
the aggregate by the stockholders of the Company (as of the time
immediately prior to such transaction), any employee benefit plan of
the Company or its Subsidiaries and their affiliates; or
(iv) a Person (as defined below) shall acquire 50% or more of
the outstanding voting securities of the Company (whether directly,
indirectly, beneficially or of record), unless as a result of such
acquisition more than 50% of the outstanding voting securities of the
surviving or resulting corporation shall be owned in the aggregate by
the stockholders of the Company (as of the time immediately prior to
the first acquisition of such securities by such Person), any employee
benefit plan of the Company or its Subsidiaries, and their affiliates.
For purposes of this Section 5(c), ownership of voting securities
shall take into account and shall include ownership as determined by applying
the provisions of Rule 13d-3(d)(I)(i) (as in effect on the date hereof) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In
addition, for such purposes, "Person" shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person shall not include (A) the Company or any of its
Subsidiaries; (B) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Subsidiaries; (C) an
underwriter temporarily holding securities pursuant to an offering of such
securities; or (D) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportion as their
ownership of stock of the Company.
(d) METHOD OF EXERCISE. Options to the extent then exercisable may be
exercised in whole or in part at any time during the option period, by giving
written notice to the Company specifying the number of shares of Stock to be
purchased, accompanied by payment in full of the purchase price, in cash, or by
check or such other instrument as may be acceptable to the Committee. As
determined by the Committee, in its sole discretion, at or after grant, payment
in full or in part may be made at the election of the Optionee (i) in the form
of Stock owned by the Optionee (based on the Fair Market Value of the Stock
which is not the subject of any pledge or security interest, (ii) in the form of
shares of Stock withheld by the Company from the shares of Stock otherwise to be
received with such withheld shares of Stock having a Fair Market Value equal to
the exercise price of the Option, or (iii) by a combination of the foregoing,
such Fair Market Value determined by applying the principles set forth in
Section 5(a), provided that the combined value of all cash and cash equivalents
and the Fair Market Value of any shares surrendered to the Company is at least
equal to such exercise price and except with respect to (ii) above, such method
of payment will not cause a disqualifying disposition of all or a portion of the
Stock received upon exercise of an Incentive Option. An Optionee shall have the
right to dividends and other rights of a stockholder with respect to shares of
Stock purchased upon exercise of an Option at such time as the Optionee (i) has
B-5
given written notice of exercise and has paid in full for such shares, and (ii)
has satisfied such conditions that may be imposed by the Company with respect to
the withholding of taxes.
(e) NON-TRANSFERABILITY OF OPTIONS. Options are not transferable and
may be exercised solely by the Optionee during his lifetime or after his death
by the person or persons entitled thereto under his will or the laws of descent
and distribution. The Committee, in its sole discretion, may permit a transfer
of a Nonqualified Option to (i) a trust for the benefit of the Optionee, (ii) a
member of the Optionee's immediate family (or a trust for his or her benefit) or
(iii) pursuant to a domestic relations order. Any attempt to transfer, assign,
pledge or otherwise dispose of, or to subject to execution, attachment or
similar process, any Option contrary to the provisions hereof shall be void and
ineffective and shall give no right to the purported transferee.
(f) TERMINATION BY DEATH. Unless otherwise determined by the
Committee, if any Optionee's employment with or service to the Company or any
Subsidiary terminates by reason of death, the Option may thereafter be
exercised, to the extent then exercisable (or on such accelerated basis as the
Committee shall determine at or after grant), 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 (1) year after the date of such death (or, if later, such time as
the Option may be exercised pursuant to Section 14(d) hereof) or until the
expiration of the stated term of such Option as provided under the Plan,
whichever period is shorter.
(g) TERMINATION BY REASON OF DISABILITY. Unless otherwise determined
by the Committee, if any Optionee's employment with or service to the Company or
any Subsidiary terminates by reason of total and permanent disability, any
Option held by such Optionee may thereafter be exercised, to the extent it was
exercisable at the time of termination due to disability (or on such accelerated
basis as the Committee shall determine at or after grant), but may not be
exercised after ninety (90) days after the date of such termination of
employment or service (or, if later, such time as the Option may be exercised
pursuant to Section 14(d) hereof) or the expiration of the stated term of such
Option, whichever period is shorter; PROVIDED, HOWEVER, that, if the Optionee
dies within such ninety (90) day period, any unexercised 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 (1) year after the date of
such death (or, if later, such time as the Option may be exercised pursuant to
Section 14(d) hereof) or for the stated term of such Option, whichever period is
shorter.
(h) TERMINATION BY REASON OF RETIREMENT. Unless otherwise determined
by the Committee, if any Optionee's employment with or service to the Company or
any Subsidiary terminates by reason of Normal or Early Retirement (as such terms
are defined below), any Option held by such Optionee may thereafter be exercised
to the extent it was exercisable at the time of such Retirement (or on such
accelerated basis as the Committee shall determine at or after grant), but may
not be exercised after ninety (90) days after the date of such termination of
employment or service (or, if later, such time as the Option may be exercised
pursuant to Section 14(d) hereof) or the expiration of the stated term of such
Option, whichever date is earlier; provided, however, that, if the Optionee dies
within such ninety (90) day period, any unexercised 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 (1) year after the date of such death
B-6
(or, if later, such time as the Option may be exercised pursuant to Section
14(d) hereof) or for the stated term of such Option, whichever period is
shorter.
For purposes of this paragraph (h), "Normal Retirement" shall mean
retirement from active employment with the Company or any Subsidiary on or after
the normal retirement date specified in the applicable Company or Subsidiary
pension plan or if no such pension plan, age 65, and "Early Retirement" shall
mean retirement from active employment with the Company or any Subsidiary
pursuant to the early retirement provisions of the applicable Company or
Subsidiary pension plan or if no such pension plan, age 55.
(i) OTHER TERMINATION. Unless otherwise determined by the Committee
and except as is provided below, if any Optionee's employment with or service to
the Company or any Subsidiary terminates for any reason other than death,
disability or Normal or Early Retirement, the Option shall thereupon terminate,
except that the portion of any Option that was exercisable on the date of such
termination of employment or service may be exercised for the lesser of ninety
(90) days after the date of termination (or, if later, such time as to Option
may be exercised pursuant to Section 14(d) hereof) or the balance of such
Option's term, which ever period is shorter. The transfer of an Optionee from
the employ of or service to the Company to the employ of or service to a
Subsidiary, or vice versa, or from one Subsidiary to another, shall not be
deemed to constitute a termination of employment or service for purposes of the
Plan.
(i) In the event that the Optionee's employment or service
with the Company or any Subsidiary is terminated by the Company or
such Subsidiary for "cause" any unexercised portion of any Option
shall immediately terminate in its entirety. For purposes hereof,
"Cause" shall exist upon a good-faith determination by the Board,
following a hearing before the Board at which an Optionee was
represented by counsel and given an opportunity to be heard, that such
Optionee has been accused of fraud, dishonesty or act detrimental to
the interests of the Company or any Subsidiary of Company or that such
Optionee has been accused of or convicted of an act of willful and
material embezzlement or fraud against the Company or of a felony
under any state or federal statute; provided, however, that it is
specifically understood that "Cause" shall not include any act of
commission or omission in the good-faith exercise of such Optionee's
business judgment as a director, officer or employee of the Company,
as the case may be, of the Company, or upon the advice of counsel to
the Company.
(ii) In the event that an Optionee is removed as a director,
officer or employee by the Company at any time other than for "Cause"
or resigns as a director, officer or employee for "Good Reason" the
Option granted to such Optionee may be exercised by the Optionee, to
the extent the Option was exercisable on the date such Optionee ceases
to be a director, officer or employee. Such Option may be exercised at
any time within one (1) year after the date the Optionee ceases to be
a director, officer or employee (or, if later, such time as to Option
may be exercised pursuant to Section 14(d) hereof), or the date on
which the Option otherwise expires by its terms; which ever period is
shorter, at which time the Option shall terminate; provided, however,
if the Optionee dies before the Options are forfeited and no longer
B-7
exercisable, the terms and provisions of Section 5(f) shall control.
For purposes of this Section 5(i) Good Reason shall exist upon the
occurrence of the following:
(a) the assignment of Optionee of any duties inconsistent
with the position in the Company that Optionee held
immediately prior to the assignment;
(b) a Change of Control resulting in a significant adverse
alteration in the status or conditions of Optionee's
participation with the Company or other nature of
Optionee's responsibilities from those in effect prior to
such Change of Control, including any significant
alteration in Optionee's responsibilities immediately
prior to such Change in Control; and
(c) the failure by the Company to continue to provide
Optionee with benefits substantially similar to those
enjoyed by Optionee prior to such failure.
(j) LIMIT ON VALUE OF INCENTIVE OPTION. The aggregate Fair Market
Value, determined as of the date the Incentive Option is granted, of Stock for
which Incentive Options are exercisable for the first time by any Optionee
during any calendar year under the Plan (and/or any other stock option plans of
the Company or any Subsidiary) shall not exceed $100,000.
6. Terms and Conditions of Restricted Stock.
Restricted Stock may be granted under this Plan aside from, or in
association with, any other award and shall be subject to the following
conditions and shall contain such additional terms and conditions (including
provisions relating to the acceleration of vesting of Restricted Stock upon a
Change of Control), not inconsistent with the terms of the Plan, as the
Committee shall deem desirable:
(a) GRANTEE RIGHTS. A Grantee shall have no rights to an award of
Restricted Stock unless and until Grantee accepts the award within the period
prescribed by the Committee and, if the Committee shall deem desirable, makes
payment to the Company in cash, or by check or such other instrument as may be
acceptable to the Committee. After acceptance and issuance of a certificate or
certificates, as provided for below, the Grantee shall have the rights of a
stockholder with respect to Restricted Stock subject to the non-transferability
and forfeiture restrictions described in Section 6(d) below.
(b) ISSUANCE OF CERTIFICATES. The Company shall issue in the
Grantee's name a certificate or certificates for the shares of Common Stock
associated with the award promptly after the Grantee accepts such award.
(c) DELIVERY OF CERTIFICATES. Unless otherwise provided, any
certificate or certificates issued evidencing shares of Restricted Stock shall
not be delivered to the Grantee until such shares are free of any restrictions
specified by the Committee at the time of grant.
B-8
(d) FORFEITABILITY, NON-TRANSFERABILITY OF RESTRICTED STOCK. Shares
of Restricted Stock are forfeitable until the terms of the Restricted Stock
grant have been satisfied. Shares of Restricted Stock are not transferable until
the date on which the Committee has specified such restrictions have lapsed.
Unless otherwise provided by the Committee at or after grant, distributions in
the form of dividends or otherwise of additional shares or property in respect
of shares of Restricted Stock shall be subject to the same restrictions as such
shares of Restricted Stock.
(e) CHANGE OF CONTROL. Upon the occurrence of a Change in Control as
defined in Section 5(c), the Committee may accelerate the vesting of outstanding
Restricted Stock, in whole or in part, as determined by the Committee, in its
sole discretion.
(f) TERMINATION OF EMPLOYMENT. Unless otherwise determined by the
Committee at or after grant, in the event the Grantee ceases to be an employee
or otherwise associated with the Company for any other reason, all shares of
Restricted Stock theretofore awarded to him which are still subject to
restrictions shall be forfeited and the Company shall have the right to complete
the blank stock power. The Committee may provide (on or after grant) that
restrictions or forfeiture conditions relating to shares of Restricted Stock
will be waived in whole or in part in the event of termination resulting from
specified causes, and the Committee may in other cases waive in whole or in part
restrictions or forfeiture conditions relating to Restricted Stock.
7. Term of Plan.
No Option or Restricted Stock shall be granted pursuant to the Plan on
the date which is ten years from the effective date of the Plan, but Options
theretofore granted may extend beyond that date.
8. Capital Change of the Company.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares reserved for issuance under the Plan
and in the number and option price of shares subject to outstanding Options
granted under the Plan, to the end that after such event each Optionee's
proportionate interest shall be maintained (to the extent possible) as
immediately before the occurrence of such event. The Committee shall, to the
extent feasible, make such other adjustments as may be required under the tax
laws so that any Incentive Options previously granted shall not be deemed
modified within the meaning of Section 424(h) of the Code. Appropriate
adjustments shall also be made in the case of outstanding Restricted Stock
granted under the Plan.
The adjustments described above will be made only to the extent
consistent with continued qualification of the Option under Section 422 of the
Code (in the case of an Incentive Option) and Section 409A of the Code.
B-9
9. Purchase for Investment/Conditions.
Unless the Options and shares covered by the Plan have been registered
under the Securities Act, or the Company has determined that such registration
is unnecessary, each person exercising or receiving Options or Restricted Stock
under the Plan may be required by the Company to give a representation in
writing that he is acquiring the securities for his own account for investment
and not with a view to, or for sale in connection with, the distribution of any
part thereof. The Committee may impose any additional or further restrictions on
awards of Options or Restricted Stock as shall be determined by the Committee at
the time of award.
10. Taxes.
(a) The Company may make such provisions as it may deem appropriate,
consistent with applicable law, in connection with any Options or Restricted
Stock granted under the Plan with respect to the withholding of any taxes
(including income or employment taxes) or any other tax matters.
(b) If any Grantee, in connection with the acquisition of Restricted
Stock, makes the election permitted under Section 83(b) of the Code (that is, an
election to include in gross income in the year of transfer the amounts
specified in Section 83(b)), such Grantee shall notify the Company of the
election with the Internal Revenue Service pursuant to regulations issued under
the authority of Code Section 83(b).
(c) If any Grantee shall make any disposition of shares of Stock
issued pursuant to the exercise of an Incentive Option under the circumstances
described in Section 421(b) of the Code (relating to certain disqualifying
dispositions), such Grantee shall notify the Company of such disposition within
ten (10) days hereof.
11. Effective Date of Plan.
The Plan shall be effective on March 2, 2006; provided, however, that
if, and only if, certain options are intended to qualify as Incentive Stock
Options, the Plan must subsequently be approved by majority vote of the
Company's stockholders no later than March 2, 2007, and further, that in the
event certain Option grants hereunder are intended to qualify as
performance-based compensation within the meaning of Section 162(m) of the Code,
the requirements as to shareholder approval set forth in Section 162(m) of the
Code are satisfied.
12. Amendment and Termination.
The Board may amend, suspend, or terminate the Plan, except that no
amendment shall be made that would impair the rights of any Participant under
any Option or Restricted Stock theretofore granted without the Participant's
consent, and except that no amendment shall be made which, without the approval
of the stockholders of the Company would:
(a) materially increase the number of shares that may be issued under
the Plan, except as is provided in Section 8;
(b) materially increase the benefits accruing to the Participants
under the Plan;
B-10
(c) materially modify the requirements as to eligibility for
participation in the Plan;
(d) decrease the exercise price of an Incentive Option to less than
100% of the Fair Market Value per share of Stock on the date of grant thereof or
the exercise price of a Nonqualified Option to less than 100% of the Fair Market
Value per share of Stock on the date of grant thereof; or
(e) extend the term of any Option beyond that provided for in Section
5(b).
The Committee may at any time or times amend the Plan or any
outstanding award for any purpose which may at the time be permitted by law, or
may at any time terminate the Plan as to any further grants of awards, provided
that (except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for the
Plan to continue to qualify for the award of Incentive Options under Section 422
of the Code.
It is the intention of the Board that the Plan comply strictly with
the provisions of Section 409A of the Code and Treasury Regulations and other
Internal Revenue Service guidance promulgated thereunder (the "Section 409A
Rules") and the Committee shall exercise its discretion in granting awards
hereunder (and the terms of such awards), accordingly. The Plan and any grant of
an award hereunder may be amended from time to time (without, in the case of an
award, the consent of the Participant) as may be necessary or appropriate to
comply with the Section 409A Rules.
13. Government Regulations.
The Plan, and the grant and exercise of Options or Restricted Stock
hereunder, and the obligation of the Company to sell and deliver shares under
such Options and Restricted Stock shall be subject to all applicable laws, rules
and regulations, and to such approvals by any governmental agencies, national
securities exchanges and interdealer quotation systems as may be required.
14. General Provisions.
(a) CERTIFICATES. All certificates for shares of Stock delivered
under the Plan shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations
and other requirements of the Securities and Exchange Commission, or other
securities commission having jurisdiction, any applicable Federal or state
securities law, any stock exchange or interdealer quotation system upon which
the Stock is then listed or traded and the Committee may cause a legend or
legends to be placed on any such certificates to make appropriate reference to
such restrictions.
(b) EMPLOYMENT MATTERS. Neither the adoption of the Plan nor any
grant or award under the Plan shall confer upon any Participant who is an
employee of the Company or any Subsidiary any right to continued employment or,
in the case of a Participant who is a director, continued service as a director,
with the Company or a Subsidiary, as the case may be, nor shall it interfere in
any way with the right of the Company or any Subsidiary to terminate the
B-11
employment of any of its employees, the service of any of its directors or the
retention of any of its consultants or advisors at any time.
(c) LIMITATION OF LIABILITY. No member of the Committee, or any
officer or employee of the Company acting on behalf of the Committee, shall be
personally liable for any action, determination or interpretation taken or made
in good faith with respect to the Plan, and all members of the Committee and
each and any officer or employee of the Company acting on their behalf shall, to
the extent permitted by law, be fully indemnified and protected by the Company
in respect of any such action, determination or interpretation.
(d) REGISTRATION OF STOCK. Notwithstanding any other provision in the
Plan, no Option may be exercised unless and until the Stock to be issued upon
the exercise thereof has been registered under the Securities Act and applicable
state securities laws, or are, in the opinion of counsel to the Company, exempt
from such registration in the United States. The Company shall not be under any
obligation to register under applicable federal or state securities laws any
Stock to be issued upon the exercise of an Option granted hereunder in order to
permit the exercise of an Option and the issuance and sale of the Stock subject
to such Option, although the Company may in its sole discretion register such
Stock at such time as the Company shall determine. If the Company chooses to
comply with such an exemption from registration, the Stock issued under the Plan
may, at the direction of the Committee, bear an appropriate restrictive legend
restricting the transfer or pledge of the Stock represented thereby, and the
Committee may also give appropriate stop transfer instructions with respect to
such Stock to the Company's transfer agent.
15. NON-UNIFORM DETERMINATIONS.
The Committee's determinations under the Plan, including, without
limitation, (i) the determination of the Participants to receive awards, (ii)
the form, amount and timing of such awards, (iii) the terms and provisions of
such awards and (ii) the agreements evidencing the same, need not be uniform and
may be made by it selectively among Participants who receive, or who are
eligible to receive, awards under the Plan, whether or not such Participants are
similarly situated.
16. GOVERNING LAW.
The validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the
internal laws of the State of Delaware, without giving effect to principles of
conflicts of laws, and applicable federal law.
RelationServe Media, Inc.
March 2, 2006
