SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Part other than the Registrant [_]
Check the appropriate box:
[_]Preliminary Proxy Statement
[_]Confidential, for Use of the Commission Only (as permitted by Rule 14c-
5(d)(2))
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Under Rule 14a-12
EDIETS.COM, 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 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] 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:
EDIETS.COM, INC.
3801 W. HILLSBORO BOULEVARD
DEERFIELD BEACH, FL 33442
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PROXY STATEMENT RELATING TO SOLICITATION OF CONSENTS OF
STOCKHOLDERS
IN LIEU OF SPECIAL MEETING
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Dear Stockholders:
This proxy statement is furnished to the stockholders of eDiets.com, Inc., a
Delaware corporation (the "Company"), in connection with the solicitation of
written consents on behalf of the Board of Directors of the Company (the "Board
of Directors") with respect to the matter set forth below. This proxy statement
is first being mailed to stockholders of the Company on or about May 14, 2002.
In connection with this proxy statement, stockholders are being asked to
consider and consent to a proposal (the "Proposal") to amend and restate the
Company's Stock Option Plan (the "Plan"), among other things, to increase the
maximum number of shares of the Company's common stock, par value $.001 per
share (the "Common Stock"), available for issuance under the Plan by 2,270,000
shares, bringing the total shares reserved for issuance under the Plan to
5,000,000 shares, and to make certain other revisions to the Plan described
below in the accompanying proxy statement. The Board of Directors approved the
amended and restated Plan as of April 1, 2002, which, pursuant to Article X of
the Plan, became effective on such date, subject to stockholder approval.
The address of the principal executive office of the Company is 3801 W.
Hillsboro Boulevard, Deerfield Beach, Florida, 33442. The telephone number of
the principal executive office of the Company is (954) 360-9022.
In the event you wish to consent to the Proposal, you should sign and date
the Written Consent of Stockholders that accompanies this proxy statement and
promptly return it by mail to the Company, 3801 W. Hillsboro Boulevard,
Deerfield Beach, Florida, 33442, attention: Robert T. Hamilton, Chief Financial
Officer.
YOUR CONSENT IS IMPORTANT, SINCE APPROVAL OF THE PROPOSAL REQUIRES WRITTEN
CONSENT OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK.
ACCORDINGLY, YOU ARE URGED TO READ AND TO CONSIDER CAREFULLY THE INFORMATION
CONTAINED IN THIS PROXY STATEMENT.
The date of this proxy statement is May 14, 2002.
GENERAL INFORMATION
Under Delaware law, unless otherwise provided in the certificate of
incorporation, any action that may be taken at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if consents in writing, setting forth the action so taken, are signed by
the holders of outstanding voting stock having not less than the minimum number
of votes that would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote were present and voted, and those consents
are properly delivered to the corporation. The Company's Restated Certificate
of Incorporation, as amended to date, does not limit the right of stockholders
of the Company to take action by written consent.
The Board of Directors has fixed the close of business on May 3, 2002 as the
record date for the determination of stockholders entitled to consent to the
Proposal (the "Record Date"). Accordingly, only stockholders of record on the
books of the Company at the close of business on the Record Date will be
entitled to consent to the Proposal.
The approximate date on which this proxy statement and accompanying Written
Consent are first being sent or given to stockholders is May 14, 2002.
VOTING SECURITIES AND VOTES REQUIRED
At the close of business on the Record Date, there were outstanding and
entitled to vote an aggregate of 15,755,263 shares of Common Stock,
constituting all of the outstanding voting stock of the Company. Holders of
Common Stock are entitled to one vote per share.
The cost of soliciting consents will be borne by the Company. In addition to
solicitation by mail, officers, directors, and other employees of the Company
may solicit consents by telephone, telegraph or personal contact without
additional compensation.
Any consent may be revoked in writing at any time prior to the close of
business on the date that the Company receives consents signed by a sufficient
number of stockholders to take the action. The unrevoked signed and dated
consents of the holders of a majority of the Common Stock outstanding as of the
Record Date are necessary to effect the approval of the Proposal.
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AMENDMENTS TO THE STOCK OPTION PLAN
General
The Plan was adopted by the Board of Directors on November 17, 1999 and
approved by a majority of the stockholders on December 16, 1999. The Board of
Directors approved Amendment No. 1 and Amendment No. 2 to the Plan on August 9,
2000 and September 18, 2000, respectively, and a majority of the stockholders
approved them on October 19, 2000. The Board of Directors approved Amendment
No. 3 and Amendment No. 4 to the Option Plan on February 13, 2001 and October
16, 2001, respectively. Further amendments to the Plan, and a restatement of
the Plan in its entirety, were adopted by the Board of Directors on April 1,
2002. This proxy statement proposes that the stockholders approve Amendment No.
3 and Amendment No. 4, together with the further amendments to and restatement
of the Plan as adopted by the Board of Directors.
The purpose of the Plan, which is administered by the Compensation
Committee, is to attract and to encourage the continued employment and service
of, and maximum efforts by, officers, directors, key employees and other key
individuals by offering those persons an opportunity to acquire or increase a
direct proprietary interest in the operations and future success of the
Company. In the judgment of the Board of Directors, an initial or increased
grant under the Plan will be a valuable incentive and will serve to the
ultimate benefit of stockholders by aligning more closely the interests of Plan
participants with those of the stockholders. Stock options play a key role in
the Company's ability to recruit, reward and retain executives and key
employees. Many companies have used stock options as an important part of
recruitment and retention packages. The Company competes directly with other
companies in its field for experienced executives and must be able to offer
comparable packages to attract the caliber of individual that it believes is
necessary to provide the growth that stockholders desire.
Options may be granted under the Plan (i) to any employee of the Company or
an affiliate designated by the Board of Directors or the Compensation Committee
as eligible for the grant of options ("key employee") and (ii) to any non-
employee Director, consultant, or independent contractor of the Company or an
affiliate of the Company designated by the Board or the Compensation Committee
as eligible for option grants ("key non-employee"). The number of shares of
Common Stock for which options may be granted to any one key employee in any
calendar year cannot exceed 1,000,000 shares (subject to certain adjustments).
Options granted pursuant to the Plan may be either options intended to
qualify as incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended ("incentive stock options"), or
options not intended to so qualify ("nonstatutory stock options"). Incentive
stock options may be granted only to key employees, and the market value (as of
the date of grant) of shares of Common Stock as to which incentive stock
options are exercisable for the first time by any key employee during any
calendar year cannot exceed $100,000.
The exercise price of all options will be determined by the Compensation
Committee at the time of grant. However, the exercise price of an incentive
stock option will be at least 100% of the fair market value of a share of
Common Stock on the date of grant, and, if granted to a holder of more than 10%
of the total combined voting power of all classes of Company stock ("10%
stockholder"), will be at least 110% of the fair market value of a share of
Common Stock on the date of grant. As of the Record Date, the current market
price for the Common Stock was $1.80 per share.
Options granted pursuant to the Plan may be subject to time or performance
vesting and other restrictions at the sole discretion of the Compensation
Committee. The expiration date of each option granted under the Plan will be
not later than ten years from the date of grant, and, in the case of an
incentive stock option granted to a 10% stockholder, not later than five years
from the date of grant. Subject to limitations and exceptions, the right to
exercise an option will generally terminate at the earliest of:
. The expiration date of the option;
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. Three months, or such longer period as the Board of Directors or
Compensation Committee may determine, from the date the participant
ceases to be an employee or a key non-employee of the Company for any
reason other than death, permanent and total disability or termination
for cause; or
. The date the participant ceases to be an employee or a key non-employee
of the Company for cause.
If the holder of an option dies or suffers a permanent and total disability
while still employed by the Company, any option may be exercised by the
participant, or in the event of the participant's death, by the participant's
personal representative, any time prior to the earlier of the expiration date
of the option or the expiration of twelve months, or such longer period as the
Board of Directors or Compensation Committee may determine after the date of
the holder's death or beginning of permanent and total disability, but only if
and to the extent that the holder was entitled to exercise the option at the
date of such termination.
Upon adopting a plan of merger or consolidation, a tender offer for Common
Stock or a sale of all or substantially all of the Company's assets, the
Company may, in its sole discretion:
. Accelerate the timing of the exercise provisions of any outstanding
option; or
. Cancel any or all of the outstanding options and provide for the payment
to holders of a cash amount equal to the difference between the option
price and the price of a share of Common Stock, as determined by the
Compensation Committee, multiplied by the number of shares of Common
Stock subject to the canceled option.
The Plan provides that each non-employee director, when elected, is
automatically granted an option ("Formula Option") to purchase 25,000 shares of
Common Stock and a renewal grant of the same amount on each anniversary of such
director's election, at an exercise price equal to the fair market value of a
share of Common Stock on the date of grant (or, in the case of options granted
as of the initial effective date of the Plan, $2.00 per share). Options
previously granted pursuant to the Plan will not be affected by the amendment
and restatement of the Plan and will remain outstanding until they are
exercised, expire or otherwise terminate.
Increase in Shares Reserved for Issuance
On October 16, 2001, subject to the approval of the stockholders, the Board
of Directors approved Amendment No. 4 to the Plan to increase the maximum
number of shares of Common Stock available for issuance thereunder from
2,730,000 shares to a total of 5,000,000 shares.
The Company filed a Registration Statement on Form S-8 (the "Form S-8") with
the Securities and Exchange Commission ("SEC") on October 31, 2000 to register
900,000 shares issuable under the Plan. Subject to approval of the Proposal by
the stockholders, the Company intends to file an amendment to the Form S-8 with
the SEC as soon as practicable to register an additional 4,100,000 shares
underlying the options that may be granted under the Plan. No other options,
plans or arrangements for deferred compensation, or future compensation have
been adopted or are contemplated at this time.
Other Amendments to the Stock Option Plan
Pursuant to Amendment No. 3 to the Plan, the exercise period for Formula
Options was reduced from ten years to five years.
Pursuant to Amendment No. 4 to the Plan, (i) the number of shares available
for issuance thereunder was increased, as described above, (ii) termination of
a Plan participant's employment for cause was modified to include "cause" as
defined in any employment agreement with the participant, and (iii) a
participant's failure to pay for shares upon a notice of exercise of options
would cause the options as to those shares to terminate.
The Board of Directors adopted the Plan as restated in its entirety
effective April 1, 2002. The restatement included additional amendments that
(i) allowed the Board of Directors to extend the periods for option
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exercises under certain circumstances upon termination of a participant's
employment, (ii) removed the provision for forfeiture of options upon a
participant's failure to purchase shares after giving a notice of exercise,
(iii) modified the timing of Formula Option grants to members of the Board of
Directors, and (iv) permitted outstanding options to be exercised in accordance
with their terms after the termination of the Plan.
Participation in the Stock Option Plan
The grant of options under the Plan to key employees and key non-employees
is subject to the discretion of the Compensation Committee. As of the Record
Date, five executive officers (including one officer who also serves on the
Board of Directors), four non-employee directors, all employees designated as
key employees and all consultants designated as key non-employees were eligible
to participate in the Plan.
From October 16, 2001 to the date of this proxy statement, subject to
approval by the stockholders of the Plan as amended and restated, the Company
has granted options to purchase 1,750,409 shares of Common Stock pursuant to
the Plan, including options to purchase an aggregate of 112,666 shares that
were granted to consultants.
The following table summarizes the number of shares underlying stock options
granted under the Plan since October 16, 2001 to (i) each of the executive
officers named in the Annual Report filed on Form 10-KSB for the fiscal year
ended December 31, 2001 (collectively, the "Named Executive Officers"), (ii)
all current executive officers, as a group, (iii) all current directors who are
not executive officers, as a group and (iv) all employees, including all
current officers who are not executive officers and consultants, as a group.
NEW PLAN BENEFITS
eDiets.com, Inc. Stock Option Plan
Number of Dollar
Shares Value of
Underlying Options
Options Received
Name Received ($) (1)
---- ---------- ----------
David R. Humble,
Chairman and Chief Executive Officer.............. 250,000 $ (175,000)
Robert T. Hamilton,
Chief Financial Officer........................... 23,000 $ 7,475
Steven Johnson,
Chief Technology Officer.......................... 52,000 $ 30,680
Christine M. Brown,
Vice President of Operations...................... 23,000 $ 7,475
Ronald L. Caporale,
Executive Vice President of Business Development.. 45,000 $ 2,250
All current executive officers, as a group......... 393,000 $ (127,120)
All current directors who are not executive
officers, as a group.............................. 275,000(2) $ 14,250 (3)
All employees, including all current officers who
are not executive officers and consultants, as a
group............................................. 1,232,409 $ 691,573
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(1) Calculated by multiplying $1.80, the fair market value of the shares of
Common Stock on the Record Date, by the number of shares issuable upon
exercise of the applicable option, less the applicable exercise price of
each option.
(2) Includes options to purchase an aggregate of 150,000 shares of Common Stock
that the Company anticipates granting to members of its Audit and
Compensation Committees during the current fiscal year.
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(3) Reflects the dollar value of options received. Does not include the dollar
value of anticipated option grants to members of the Audit and Compensation
Committees, which value is currently indeterminable.
Because participation under the Plan is generally subject to the discretion
of the Compensation Committee, the amounts that any participant or groups of
participants may receive under the Plan in the future, other than the annual
Formula Option grants to non-employee directors as described above, are not
currently determinable. As a group, non-employee directors will receive, in the
current fiscal year, additional options to purchase an aggregate of 100,000
shares of Common Stock, assuming that the Company continues to have only four
non-employee directors on its Board of Directors through the end of the current
fiscal year.
Tax Consequences of Stock Options
Incentive Stock Options. A participant receiving an incentive stock option
will not be subject to income tax upon either the grant of such option or its
subsequent exercise. The spread between the option price and the fair market
value on the date of exercise will, however, be included in the participant's
alternative minimum taxable income for purposes of determining the
participant's liability, if any, for the alternative minimum tax. If the
participant holds the shares acquired upon exercise for more than one year
after exercise (and two years after grant), then the difference between the
amount realized on a subsequent sale or other taxable disposition of the shares
and the option price will constitute long-term capital gain or loss at the time
of sale. The Company will not be entitled to a federal income tax deduction
with respect to the grant or exercise of an incentive stock option. If the
options cease to be incentive stock options for any reason, they will be
treated as nonstatutory stock options. For example, if the participant sells
the shares before the expiration of the requisite holding periods, the
participant will be deemed to have made a "disqualifying disposition" of the
shares and will realize ordinary income in the year of the disposition. In the
event of a disqualifying disposition, the Company will be entitled to a federal
income tax deduction in the year of disposition of the shares in the amount of
the ordinary income realized by the participant.
If the option price of an incentive stock option is paid by surrendering
Common Stock, the Internal Revenue Service treats such exchange as if there
were two transactions. The first transaction is treated as a non-taxable
exchange of the previously acquired Common Stock for an equal number of shares
of new Common Stock, both having the same market value. The basis of the new
shares will be the same basis as the shares surrendered and the holding period
will include the holding period of the shares surrendered. The second
transaction concerns the additional shares that a participant will receive
pursuant to the exercise. This exchange also results in no gain or loss being
recognized at the time of the exchange. However, the basis of these additional
shares will equal zero (i.e., the participant is treated as having paid nothing
for these shares). The holding period for the additional shares begins on the
date of the exchange.
Nonstatutory Stock Options. A participant who is granted nonstatutory stock
options will not recognize any income at the time of grant. Nor is the Company
entitled to a tax deduction at the time of grant. The participant will
recognize ordinary income on the date the participant exercises a nonstatutory
stock option. The amount of income will be equal to the excess of the fair
market value of the shares on the date of exercise over the option price. The
holding period for capital gain and loss purposes will begin on the date of
exercise. The Company will be entitled to take a deduction at the time the
participant is required to recognize income from the option exercise. The
deduction will be equal to the amount that is taxable to the participant as
ordinary income as a result of exercise.
If the option price of a nonstatutory stock option is paid by surrendering
Common Stock, the participant will recognize no gain or loss on the shares that
the participant surrenders to pay the option price (the "surrendered shares").
The number of shares that the participant receives upon exercise of the option
in excess of the surrendered shares are considered "additional shares." The
participant will recognize ordinary income upon exercise equal to the fair
market value of the additional shares on the date of exercise, less any cash
paid towards the option price. The basis of the additional shares will be equal
to their fair market value on the date
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of exercise, and their holding period will begin on that date. The shares that
the participant receives upon exercise equal to the surrendered shares will
have a basis and holding period equal to that of the surrendered shares.
The basis of shares acquired pursuant to the exercise of a nonstatutory
stock option will be the fair market value of the shares upon the date of
exercise. When the recipient disposes of shares acquired pursuant to a
nonstatutory stock option, any amount realized in excess of the basis of the
shares will be treated as long-term or short-term capital gain, depending on
the holding period of the shares. If the amount realized is less than the basis
of the shares, the loss will be treated as a long-term or short-term capital
loss, depending on the holding period of the shares.
Copies of Plan
The Company will provide a copy of the Plan, as amended, without charge to
any stockholder who requests such a copy from the Company orally or in writing.
Such copies will be provided by first class mail within one day after the
Company receives any such request.
Interests of Certain Persons in or Opposition to Matters to Be Acted Upon
The Company's current executive officers and directors are eligible to
participate under the Plan and each was granted an option to purchase shares of
Common Stock following the Board's adoption of the Plan as amended and
restated. Accordingly, each executive officer and director has a substantial
direct interest in the stockholders' approval of the amendment and restatement
of the Plan.
In connection with the Company's merger with DietSmart, Inc. effective
October 19, 2001, the Company entered into a three-year employment agreement
with each of Tamara Totah, Carlos Lopez-Ona and Andrew Smith. Each agreement
provided for the grant of an option to purchase 150,000 shares of Common Stock
at an exercise price of $1.23 per share vesting in four equal semi-annual
installments over a two-year period. Ms. Totah served as the Company's
President until February 2002, when she resigned from her position and
forfeited the options granted under the agreement. Messrs. Lopez-Ona and Smith
served as the Company's Executive Vice President and Executive Vice President
of Marketing, respectively, until April 2002, when each resigned from his
position and forfeited the options granted under the agreement.
David R. Humble
On January 24, 2002, the Company granted Mr. Humble an option to purchase
250,000 shares of Common Stock at an exercise price of $2.50 per share, which
vests in six equal semi-annual installments beginning on July 24, 2002.
Robert T. Hamilton
On November 29, 2001, the Company granted Mr. Hamilton an option to purchase
23,000 shares of Common Stock at an exercise price of $1.48 per share vesting
in four equal semi-annual installments beginning on May 29, 2002.
Steven Johnson
On October 18, 2001, the Company granted Mr. Johnson an option to purchase
52,000 shares of Common Stock at an exercise price of $1.21 per share vesting
in three equal semi-annual installments beginning on April 18, 2002.
Christine M. Brown
On November 29, 2001, the Company granted Ms. Brown an option to purchase
23,000 shares of Common Stock at an exercise price of $1.48 per share vesting
in four equal semi-annual installments beginning on May 29, 2002.
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Ronald L. Caporale
On April 1, 2002, the Company granted Mr. Caporale an option to purchase
45,000 shares of Common Stock at an exercise price of $1.75 per share vesting
in four equal semi-annual installments beginning on October 1, 2002.
Non-Employee Directors
Messrs. Gohd and Kier each received an immediately vested option to purchase
25,000 shares of Common Stock on November 17, 2001 at an exercise price of
$1.49 per share. Messrs. Isgur and Meyer each received an immediately vested
option to purchase 25,000 shares of Common Stock on December 27, 2001 at an
exercise price of $1.85 per share. Mr. Meyer received an immediately vested
option to purchase 25,000 shares of Common Stock on January 3, 2002 at an
exercise price of $1.75 per share.
INFORMATION CONCERNING DIRECTOR AND
EXECUTIVE OFFICER COMPENSATION
Director Compensation
The Company's directors do not currently receive any cash compensation from
for their services as members of the board of directors, although they are
reimbursed for travel and lodging expenses in connection with attendance at
board and committee meetings. Under the Plan, non-employee directors are
eligible to receive automatic grants of vested options to purchase 25,000
shares of Common Stock per year at an exercise price equal to the market price
of Common Stock on the date of grant. Upon their appointment to the board, each
of the current directors, except for Mr. Humble, received an option to purchase
25,000 shares of Common Stock that vested immediately at an exercise price of
$2.00 per share. In addition, Messrs. Humble, Gohd and Kier, the members of the
Company's initial Executive Committee, each received on their appointment a
one-time option grant to purchase 100,000 shares of Common Stock that vested
immediately at an exercise price of $2.00 per share.
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Executive Compensation
The following table sets forth information concerning cash and non-cash
compensation paid to or accrued for the benefit of the Named Executive Officers
for all services rendered in all capacities to the Company for the fiscal years
ended December 31, 2001, 2000 and 1999.
Annual Compensation Long Term Awards
-------------------------------- ---------------------------
Shares
Name and Principal Underlying All Other
Position Year Salary($) Bonus($) Other($) Options (#) Compensation($)
- ------------------ ---- --------- -------- -------- ----------- ---------------
David R. Humble,........ 2001 $250,000 -- $2,625(3) -- --
Chairman and Chief
Executive Officer 2000 157,203 -- -- -- --
1999 17,309 -- -- 100,000 --
Robert T. Hamilton,..... 2001 $114,231 -- $2,625(3) 63,000 --
Chief Financial Officer
(1) 2000 100,000 -- 2,500(3) 32,000 --
1999 8,462 -- -- 100,000 --
Steven Johnson, ........ 2001 $142,308 -- $2,625(3) 52,000 --
Chief Technology
Officer 2000 124,670 $10,000 1,346(3) 62,998 --
1999 86,899 -- -- 159,993 --
Christine M. Brown, .... 2001 $108,777 $ 6,000 $ 675(3) 63,000 --
Vice President of
Operations (2) 2000 80,383 -- 433(3) 47,000 --
1999 25,930 -- -- 90,286 --
Ronald L. Caporale,..... 2001 $142,500 -- -- 115,000 $102,656(5)
Executive Vice
President (4) 2000 -- -- -- -- --
1999 36,061 -- -- -- --
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(1) Mr. Hamilton joined the Company in November 1999.
(2) Ms. Brown joined the Company in July 1999.
(3) Represents 401(k) contributions made by the Company on their behalf.
(4) Mr. Caporale left the Company in September 1999 and rejoined the Company in
January 2001.
(5) Represents a bonus for 2001 accrued in December 2001 and paid in January
2002 to Mr. Caporale.
Option Grants in the Last Fiscal Year
The following table sets forth each stock option grant the Company made
during the year ended December 31, 2001 pursuant to the Plan to each of the
Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
Number Of % Of Total
Securities Options
Underlying Granted To Exercise
Options Employees Price Expiration
Name Granted (#) in Fiscal Year ($/SH) Date
- ---- ----------- -------------- -------- ----------
David R. Humble.................. -- -- -- --
Robert T. Hamilton............... 40,000 2.4% $0.98 09/17/06
23,000 1.4% $1.48 11/29/06
Steven Johnson................... 52,000 3.2% $1.21 10/18/06
Christine M. Brown............... 40,000 2.4% $0.98 09/17/06
23,000 1.4% $1.48 11/29/06
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Option Exercises and Holdings
The following table sets forth information regarding option exercises during
2001 by each of the Named Executive Officers.
AGGREGATE OPTION EXERCISES FOR FISCAL 2001 AND YEAR END OPTION VALUES
Number of
Unexercised Value of Unexercised
Options at In-the-Money Options
Shares December 31, at
Acquired Value 2001(#) December 31, 2001($)
on ($) Exercisable/ Exercisable/
Name exercise Realized Unexercisable Unexercisable (1)
- ---- -------- -------- -------------- --------------------
David R. Humble........... -- -- 100,000/ -- --
Robert T. Hamilton........ -- -- 116,000/79,000 $ 15,830/$53,270
Steven Johnson............ -- -- 340,206/60,500 $227,782/$36,750
Christine M. Brown........ -- -- 113,786/86,500 $ 96,159/$45,850
Ronald L. Caporale........ -- -- 167,036/86,250 $261,218/$59,728
- --------
(1) Value is based on the difference between the option exercise price and the
fair market value of December 31, 2001, the fiscal year-end ($1.755 per
share), multiplied by the number of shares underlying the option.
Employment Agreements
In November 1999, the Company entered into a three-year employment agreement
with Mr. Humble. He currently receives a base salary of $250,000 per year,
which was increased from $150,000 in December 2000. He is also entitled to
receive a bonus to be determined by the Compensation Committee, based on income
before taxes. The employment agreement contains a non-competition provision for
the term of employment and two years thereafter and a non-disclosure provision.
In November 1999, Mr. Hamilton became the Company's Chief Financial Officer.
He currently receives an annual base salary of $160,000. In September 2001, Mr.
Hamilton was granted an option to purchase 40,000 shares of Common Stock at an
exercise price of $0.98 per share vesting in four equal semi-annual
installments over a two-year period. In November 2001, he was granted him an
option to purchase 23,000 shares of Common Stock at an exercise price of $1.48
per share vesting in four equal semi-annual installments over a two-year
period. While Mr. Hamilton does not have an employment agreement for a fixed
term, the Company has agreed that if it chooses to terminate his employment
without cause, the Company shall provide him with four months of severance at
his then current salary.
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SECURITY OWNERSHIP
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of Common Stock by each director of the Company, each of the Named
Executive Officers, all persons known to the Company to be the beneficial
owners of 5% or more of the outstanding shares of Common Stock, and all
directors and executive officers of the Company as a group. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission (the "SEC") and includes voting or investment power with
respect to the securities. Unless otherwise noted, the address for each listed
director and officer is c/o eDiets.com, Inc., 3801 W. Hillsboro Boulevard,
Deerfield Beach, Florida 33442. Except as noted, the persons named in the table
below do not own, beneficially or of record, any other securities of the
Company or its subsidiaries and have sole voting and investment power over all
securities for which they are shown as beneficial owner. The number of shares
of Common Stock outstanding used in calculating the percentage for each listed
person and group includes the shares of Common Stock underlying options or
warrants held by such person that are exercisable within 60 days after the date
of this proxy statement, but exclude shares of Common Stock underlying options
or warrants held by any other person. The percentage of beneficial ownership is
based on 15,755,263 shares of Common Stock outstanding as of the Record Date,
before any consideration is given to outstanding options, warrants or
convertible securities.
Number of
Shares of
Common Stock
owned Percentage of
Name and Address of Beneficial Owner Beneficially Common Stock
- ------------------------------------ ------------ -------------
David R. Humble.................................. 7,905,065(1) 49.9%
Isaac Kier....................................... 1,067,428(2) 6.6%
Matthew Gohd..................................... 976,470(3) 5.9%
James M. Meyer................................... 380,000(4) 2.4%
Lee S. Isgur..................................... 191,000(5) 1.2%
Ronald L. Caporale............................... 215,786(6) 1.4%
Robert T. Hamilton............................... 139,750(7) *
Christine M. Brown............................... 141,286(8) *
Steven Johnson................................... 371,787(9) 2.3%
All directors and executive officers as a group
(consisting of 9 persons)....................... 11,388,572 63.0%
- --------
* Less than 1%
(1) Includes 100,000 shares issuable upon exercise of vested stock options.
(2) Includes 232,500 shares issuable upon exercise of stock options that are
vested or exercisable within sixty days; 62,500 shares issuable upon
exercise of warrants issued in our private placement; 65,211 shares held by
a charitable remainder trust of which Mr. Kier and his wife are the
trustees; and 156,250 shares and 62,500 shares issuable upon the exercise
of immediately exercisable warrants issued in the private placement to
Coqui Capital Partners, L.P., of which Mr. Kier is the general partner. Mr.
Kier disclaims beneficial ownership of shares held by Coqui Capital
Partners, L.P. except for his proportional interest therein.
(3) Includes 280,000 shares issuable upon the exercise of immediately
exercisable warrants issued to the placement agent Whale Securities Co., LP
in the 1999 private placement and transferred to Mr. Gohd; 175,000 shares
issuable upon exercise of vested stock options; and 62,500 shares issuable
upon the exercise of warrants issued in the private placement. Also
includes 135,220 shares issuable upon the exercise of additional warrants
issued to Mr. Gohd in March 2001 in connection with the Company's agreement
with the placement agent. Included in his holdings are 31,250 shares and
12,500 shares issuable upon the exercise of warrants issued in the private
placement to Porpoise Investors I, L.P. Mr. Gohd is the President of the
general partner of Porpoise Investors I, L.P. and disclaims beneficial
ownership of these shares.
11
(4) Includes 200,000 shares issuable upon the exercise of stock options that
are vested or exercisable within sixty days; and 25,000 shares issuable
upon the exercise of immediately exercisable warrants issued in the private
placement.
(5) Includes 70,500 shares held by a revocable trust of which Mr. Isgur and his
wife are the trustees and beneficiaries and 100,000 shares issuable upon
the exercise of stock options that are vested or exercisable within sixty
days.
(6) Includes 195,786 shares issuable upon the exercise of stock options that
are vested or exercisable within sixty days.
(7) Represents 139,750 shares issuable upon the exercise of stock options that
are vested or exercisable within sixty days.
(8) Represents 141,286 shares issuable upon the exercise of stock options that
are vested or exercisable within sixty days.
(9) Includes 361,787 shares issuable upon the exercise of stock options that
are vested or exercisable within sixty days.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS CONSENT TO THE
AMENDMENT AND RESTATEMENT OF THE STOCK OPTION PLAN.
12
ADDITIONAL INFORMATION
Additional information concerning the Company, including its annual and
quarterly reports for the past twelve months that have been filed with the SEC,
may be accessed through the SEC's EDGAR archives at www.sec.gov. Upon written
request of any stockholder, addressed to the Company's Chief Financial Officer
at 3801 W. Hillsboro Boulevard, Deerfield Beach, Florida 33442, the Company
will provide a copy of its Annual Report on Form 10-KSB for the year ended
December 31, 2001, without charge.
13
APPENDIX A
eDiets.com, Inc.
CONSENT
THE ATTACHED WRITTEN CONSENT OF STOCKHOLDERS (THE "CONSENT") IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS OF EDIETS.COM, INC. (THE "COMPANY").
Stockholders are urged to sign, date and mail the Consent promptly. If not
otherwise terminated, the Consent solicitation period will terminate on the
earlier of (i) the date that Consents signed by a sufficient number of
stockholders to take the action are received by the Company or (ii) twenty (20)
days following the earliest dated Consent delivered to the Company by a
stockholder.
In the event you wish to sign the Consent, you should sign exactly as
addressed to you. Joint owners should each sign. If signing as executor,
administrator, attorney, trustee or guardian, give title as such. If a
corporation, sign in full corporate name by an authorized officer. If a
partnership, sign in the name of an authorized person.
THE ATTACHED CONSENT IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY. MANAGEMENT AND THE BOARD OF DIRECTORS RECOMMEND THAT YOU CONSENT TO
THE PROPOSAL.
14
eDiets.com, Inc.
Written Consent of Stockholders
in Lieu of Special Meeting
The undersigned, constituting the holders of voting rights with respect to a
majority of the issued and outstanding shares of common stock of eDiets.com,
Inc., a Delaware corporation (the "Company"), and in accordance with the
authority contained in Section 228 of the General Corporation Law of Delaware,
hereby consent to the adoption of the following resolution:
RESOLVED: That the Stock Option Plan (as amended and restated effective
April 1, 2002) (the "Plan"), in substantially the form attached
hereto as Exhibit A, is approved for the purpose of making
certain revisions to the terms of the Plan including, without
limitation, increasing the number of shares of the Company's
Common Stock, par value $.001 per share, reserved for issuance
under the Plan from 2,730,000 shares to 5,000,000 shares.
This Consent shall be effective, as to the resolution set forth above, as of
the first date on which it has been executed by the requisite number of
stockholders and delivered to the Company in accordance with Section 228 of the
Delaware General Corporation Law.
This Written Consent of Stockholders may be executed in one or more
counterparts.
IN WITNESS WHEREOF, the undersigned has executed this Consent as of the date
indicated with respect to all Common Stock of eDiets.com, Inc. held of record
by the undersigned as of such date.
Individual Stockholders:
Dated: May , 2002 -------------------------------------
Print Name: _________________________
Entity Stockholders:
-------------------------------------
Print/Type Name of Stockholder
-------------------------------------
Print Name: _________________________
Title: ______________________________
15
EXHIBIT A
eDiets.com, Inc.
STOCK OPTION PLAN
(As Amended and Restated Effective April 1, 2002)
eDiets.com, Inc.
STOCK OPTION PLAN
(As Amended and Restated Effective April 1, 2002)
I. PURPOSE AND DEFINITIONS
A. PURPOSE OF THE PLAN
The Plan is intended to encourage ownership of Shares by Key Employees and
Key Non-Employees in order to attract and retain such Key Employees in the
employ of the Company or an Affiliate, or to attract such Key Non-Employees to
provide services to the Company or an Affiliate, and to provide additional
incentive for such persons to promote the success of the Company or an
Affiliate.
B. DEFINITIONS
Unless otherwise specified or unless the context otherwise requires, the
following terms, as used in this Plan, have the following meanings:
1. AFFILIATE means a corporation that, for purposes of Section 422 of
the Code, is a parent or subsidiary of the Company, directly or indirectly.
2. BOARD means the Board of Directors of the Company.
3. CODE means the Internal Revenue Code of 1986, as amended.
4. COMMITTEE means the committee to which the Board delegates the power
to act under or pursuant to the provisions of the Plan, or the Board if no
committee is selected. If the Board delegates powers to a committee, and if
the Company is or becomes subject to Section 16 of the Exchange Act, then,
if necessary for compliance therewith, such committee shall consist
initially of not less than two (2) members of the Board, each member of
which must be a "Non-Employee director," within the meaning of the
applicable rules promulgated pursuant to the Exchange Act. The failure of
any Committee members to qualify as a "Non-Employee director" shall not
otherwise affect the validity of the grant of an option, or the issuance of
shares of Common Stock otherwise validly issued upon exercise of any such
option. If the Company is or becomes subject to Section 16 of the Exchange
Act, no member of the Committee shall receive any Option pursuant to the
Plan or any similar plan of the Company or any Affiliate while serving on
the Committee unless the Board determines that the grant of such an Option
satisfies the then current Rule 16b-3 requirements under the Exchange Act.
Notwithstanding anything herein to the contrary, and insofar as the
Board determines that it is necessary in order for compensation recognized
by Participants pursuant to the Plan to be fully deductible to the Company
for federal income tax purposes, each member of the Committee also shall be
an "outside director" (as defined in regulations or other guidance issued
by the Internal Revenue Service under Code Section 162(m)).
5. COMPANY means eDiets.com, Inc., a Delaware corporation, and includes
any successor or assignee corporation or corporations into which the
Company may be merged, changed, or consolidated; any corporation for whose
securities the securities of the Company shall be exchanged; and any
assignee of or successor to substantially all of the assets of the Company.
6. DISABILITY or DISABLED means permanent and total disability as
defined in Section 22(e)(3) of the Code.
7. EXCHANGE ACT means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute thereto.
8. FORMULA OPTION means a Nonstatutory Option granted automatically to a
Non-Employee Board Member in accordance with Article IV of the Plan.
9. INCENTIVE OPTION means an Option which, when granted, is intended to
be an "incentive stock option," as defined in Section 422 of the Code.
10. KEY EMPLOYEE means an employee of the Company or of an Affiliate
(including, without limitation, an employee who also is serving as any
officer or director of the Company or of an Affiliate), designated by the
Board or the Committee as being eligible to be granted one or more Options
under the Plan.
11. KEY NON-EMPLOYEE means a Non-Employee Board Member, consultant, or
independent contractor of the Company or of an Affiliate who is designated
by the Board or the Committee as being eligible to be granted one or more
Options under the Plan.
12. NON-EMPLOYEE BOARD MEMBER means a director of the Company who is not
an employee of the Company or any of its Affiliates. For purposes of this
Plan, a Non-Employee Board Member shall be deemed to include the employer
of such Non-Employee Board Member, if the Non-Employee Board Member is so
required, as a condition of his employment, to provide that any Option
granted hereunder be made to the employer.
13. NONSTATUTORY OPTION means an Option which, when granted, is not
intended to be an "incentive stock option," as defined in Section 422 of
the Code.
14. OPTION means a right or option granted under the Plan.
15. OPTION AGREEMENT means an agreement between the Company and a
participant executed and delivered pursuant to the Plan.
16. PARTICIPANT means a Key Employee to whom one or more Incentive
Options or Nonstatutory Options are granted under the Plan, and a Key Non-
Employee to whom one or more Nonstatutory Options are granted under the
Plan.
17. PLAN means this Stock Option Plan, as amended from time to time.
18. SHARES means the following shares of the capital stock of the
Company as to which Options have been or may be granted under the Plan:
treasury shares or authorized but unissued Common Stock, $.001 par value,
or any shares of capital stock into which the Shares are changed or for
which they are exchanged within the provisions of Article VII of the Plan.
II. SHARES SUBJECT TO THE PLAN
The aggregate number of Shares as to which Options may be granted from time
to time shall be 5,000,000 Shares (subject to adjustment for stock splits,
stock dividends, and other adjustments described in Article VII hereof). The
maximum number of Shares as to which Options may be granted in any calendar
year to any one Key Employee shall not exceed 1,000,000 (subject to adjustment
for stock splits, stock dividends and other adjustments described in Article
VII hereof).
If an Option ceases to be "outstanding," in whole or in part, the Shares
that were subject to such Option, if the Option was not exercised, shall be
available for the granting of other Options. Any Option shall be treated as
"outstanding" until such Option is exercised in full, terminates or expires
under the provisions of the Plan or Option Agreement, or is canceled by
agreement of the Company and the Participant.
Subject to the provisions of Article VII, the aggregate number of Shares as
to which Incentive Options may be granted shall be subject to change only by
means of an amendment of the Plan duly adopted by the
2
Company and approved by the stockholders of the Company within one year before
or after the date of the adoption of any such amendment.
III. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. A majority of the Committee
shall constitute a quorum at any meeting thereof (including by telephone
conference) and the acts of a majority of the members present, or acts approved
in writing by a majority of the entire Committee without a meeting, shall be
the acts of the Committee for purposes of this Plan. The Committee may
authorize one or more of its members or an officer of the Company to execute
and deliver documents on behalf of the Committee. A member of the Committee
shall not exercise any discretion respecting himself or herself under the Plan.
The Board shall have the authority to remove, replace or fill any vacancy of
any member of the Committee upon notice to the Committee and the affected
member. Any member of the Committee may resign upon notice to the Board. The
Committee may allocate among one or more of its members, or may delegate to one
or more of its agents, such duties and responsibilities as it determines.
Subject to the provisions of the Plan, the Committee is authorized to:
A. interpret the provisions of the Plan or of any Option or Option
Agreement and to make all rules and determinations which it deems necessary
or advisable for the administration of the Plan;
B. determine which employees of the Company or of an Affiliate shall be
designated as Key Employees and which of the Key Employees shall be granted
Options;
C. determine the Key Non-Employees to whom Nonstatutory Options shall be
granted;
D. determine whether the Option to be granted to a Key Employee shall be
an Incentive Option or Nonstatutory Option;
E. determine the number of Shares for which an Option or Options shall
be granted;
F. provide for the acceleration of the right to exercise an Option (or
portion thereof); and
G. specify the terms and conditions upon which Options may be granted;
provided, however, that with respect to Incentive Options, all such
interpretations, rules, determinations, terms, and conditions shall be made
and prescribed in the context of preserving the tax status of the Incentive
Options as incentive stock options within the meaning of Section 422 of the
Code.
All determinations of the Committee shall be reduced to writing and signed
by or on behalf of the Committee. No member of the Committee shall be liable
for any action or determination made in good faith with respect to the Plan or
any Option.
IV. ELIGIBILITY FOR PARTICIPATION
The Committee may at any time and from time to time grant one or more
Options to one or more Key Employees or Key Non-Employees and may designate the
number of Shares to be subject to each Option so granted, provided, however,
that (i) each Participant receiving an Incentive Option must be a Key Employee
of the Company or of an Affiliate at the time an Incentive Option is granted;
(ii) no Incentive Options shall be granted after the expiration of ten (10)
years from the earlier of the, date of the adoption of the Plan by the Company
or the approval of the Plan by the stockholders of the Company; and (iii) the
fair market value of the Shares (determined at the time the Option is granted)
as to which Incentive Options are exercisable for the first time by any Key
Employee during any single calendar year (under the Plan and under all other
incentive option plan of the Company or an Affiliate) shall not exceed
$100,000.
3
Notwithstanding any of the foregoing provisions, the Committee may authorize
the grant of an Option to a person not then in the employ of or serving as a
Non-Employee Board Member, consultant, or independent contractor of the Company
or of an Affiliate, conditioned upon such person becoming eligible to become a
Participant at or prior to the execution of the Option Agreement evidencing the
actual grant of such Option.
V. TERMS AND CONDITIONS OF OPTIONS
Each Option shall be set forth in an Option Agreement, duly executed on
behalf of the Company and by the Participant to whom such Option is granted.
Except for the setting of the Option price under Paragraph A, no Option shall
be granted and no purported grant of any Option shall be effective until such
Option Agreement shall have been duly executed on behalf of the Company and by
the Participant. Each such Option Agreement shall be subject to at least the
following terms and conditions:
A. OPTION PRICE
Except with respect to Formula Options as set forth in Article VI, the
exercise price of the Option covered by each Option granted under the Plan
shall be determined by the Committee. The Option price per share shall be such
amount as may be determined by the Committee in its sole discretion on the date
of the grant of the Option. In the case of an Incentive Option, if the optionee
owns directly or by reason of the applicable attribution rules ten percent
(10%) or less of the total combined voting power of all classes of share
capital of the Company, the Option price (per share) of the Shares covered by
each Incentive Option shall be not less than the "fair market value" of the
Shares on the date of the grant of the Incentive Option. In all other cases of
Incentive Options, the Option price shall be not less than one hundred ten
percent (110%) of the said fair market value on the date of grant. If the
Shares are listed on any national securities exchange, the fair market value
shall be the mean average of the "high" and "low" prices, if any, on the
largest such exchange on the date of the grant of the Option, or, if none, on
the most recent trade date thirty (30) days or less prior to the date of the
grant of the Option. If the Shares are not then listed on any such exchange,
the fair market value of such Shares shall be the mean average of the "high"
and the "low" prices, if any, as reported on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") for the date of the
grant of the Option, or if none, on the most recent trade date thirty (30) days
or less prior to the date of the grant of the Option for which such quotations
are reported. If the Shares are not then either listed on any such exchange or
quoted on NASDAQ, the fair market value shall be the mean between the "high"
and the "low" prices, if any, as reported in the National Daily Quotation
Service for the date of the grant of the Option, or, if none, for the most
recent trade date thirty (30) days or less prior to the date of the grant of
the Option for which such quotations are reported. If the fair market value
cannot be determined under the preceding three sentences, it shall be
determined in good faith by the Committee.
B. NUMBER OF SHARES
Each Option shall state the number of Shares to which it pertains.
C. TERM OF OPTION
Each Incentive Option shall terminate not more than ten (10) years from the
date of the grant thereof, or at such earlier time as the Option Agreement may
provide, and shall be subject to earlier termination as herein provided, except
that if the Option price is required under Paragraph A of this Article V to be
at least one hundred ten percent (110%) of fair market value, each such
Incentive Option shall terminate not more than five (5) years from the date of
the grant thereof, and shall be subject to earlier termination as herein
provided.
D. DATE OF EXERCISE
Upon the authorization of the grant of an Option, or at any time thereafter,
the Committee may, subject to the provisions of Paragraph C of this Article V,
prescribe the date or dates on which the Option becomes
4
exercisable, and may provide that the option rights become exercisable in
installments over a period of years, or upon the attainment of stated goals.
E. MEDIUM OF PAYMENT
The Option price shall be paid on the date of purchase specified in the
notice of exercise, as set forth in Paragraph I. It shall be paid in such form
(permitted by Section 422 of the Code in the case of Incentive Options) as the
Committee shall, either by rules promulgated pursuant to the provisions of
Article III of the Plan, or in the particular Option Agreement, provide.
F. TERMINATION OF EMPLOYMENT
1. A Participant who ceases to be an employee or Key Non-Employee of the
Company or of an Affiliate for any reason other than death, Disability, or
termination for cause, may exercise any Option granted to such Participant, to
the extent that the right to purchase Shares thereunder has become exercisable
on the date of such termination, but only within three (3) months after such
date or such greater period of time as the Board or the Committee in their sole
discretion shall determine, or, if earlier, within the originally prescribed
term of the Option, and subject to the condition that no Option shall be
exercisable after the expiration of the term of the Option. A Participant's
employment shall not be deemed terminated by reason of a transfer to another
employer that is the Company or an Affiliate.
2. A Participant who ceases to be an employee or Key Non-Employee for cause
shall, upon such termination, cease to have any right to exercise any Option.
For purposes of this Plan, unless otherwise provided in an employment agreement
with a Participant, cause shall be deemed to include (but shall not be limited
to) wrongful appropriation of funds of the Company or an Affiliate, divulging
confidential information about the Company or an Affiliate to the public, the
commission of a gross misdemeanor or felony, or the performance of any similar
action that the Board and the Committee, in their sole discretion, may deem to
be sufficiently injurious to the interests of the Company or an Affiliate to
constitute substantial cause for termination. The determination of the Board or
the Committee as to the existence of cause shall be conclusive and binding upon
the Participant and the Company.
3. A Participant who is absent from work with the Company or an Affiliate
because of temporary disability (any disability other than a permanent and
total Disability as defined at Paragraph B(6) of Article I hereof), or who is
on leave of absence for any purpose permitted by any authoritative
interpretation (i.e., regulation, ruling, case law, etc.) of Section 422 of the
Code, shall not, during the period of any such absence, be deemed, by virtue of
such absence alone, to have terminated his employment or relationship with the
Company or with an Affiliate, except as the Committee may otherwise expressly
provide or determine.
4. Paragraph F(1) shall control and fix the rights of a Participant who
ceases to be an employee or Key Non-Employee of the Company or of an Affiliate
for any reason other than death, Disability, or termination for cause, and who
subsequently becomes Disabled or dies. Nothing in Paragraphs G and H of this
Article V shall be applicable in any such case except that, in the event of
such a subsequent Disability or death within the three (3) month period after
the termination of employment or, if earlier, within the originally prescribed
term of the Option, the Participant or the Participant's estate or personal
representative may exercise the Option permitted by this Paragraph F, in the
event of Disability, within twelve (12) months after the date that the
Participant ceased to be an employee or Key Non-Employee of the Company or of
an Affiliate or, in the event of death, within twelve (12) months after the
date of death of such Participant; provided, however, that in no event may the
Option be exercised beyond its originally prescribed term.
G. TOTAL AND PERMANENT DISABILITY
A Participant who ceases to be an employee or Key Non-Employee of the
Company or of an Affiliate by reason of Disability may exercise any Option
granted to such Participant (i) to the extent that the right to
5
purchase Shares thereunder has become exercisable on or before the date such
Participant becomes Disabled as determined by the Committee, and (ii) if the
Option becomes exercisable periodically under Paragraph D, to the extent of any
additional rights that would have become exercisable had the participant not
become so disabled until after the close of business on the next periodic
exercise date.
A Disabled Participant shall exercise such rights, if at all, only within a
period of not more than twelve (12) months, or such greater period of time as
the Board or the Committee in their sole discretion shall determine, after the
date that the Participant became Disabled as determined by the Committee
(notwithstanding that the Participant might have been able to exercise the
Option as to some or all of the Shares on a later date if the Participant had
not become Disabled) or, if earlier, within the originally prescribed term of
the Option.
H. DEATH
In the event that a Participant to whom an Option bas been granted ceases to
be an employee or Key Non-Employee of the Company or of an Affiliate by reason
of such Participant's death, such Option, to the extent that the right is
exercisable but not exercised on the date of death, may be exercised by the
Participant's estate or personal representative within twelve (12) months, or
such greater period of time as the Board or the Committee in their sole
discretion shall determine, after the date of death of such Participant or, if
earlier, within the originally prescribed term of the Option, notwithstanding
that the decedent might have been able to exercise the Option as to some or all
of the Shares on a later date if the participant were alive and had continued
to be an employee or Key Non-Employee of the Company or of an Affiliate.
I. EXERCISE OF OPTION AND ISSUANCE OF STOCK
Options shall be exercised by giving written notice to the Company. Such
written notice shall: (1) be signed by the person exercising the Option, (2)
state the number of Shares with respect to which the Option is being exercised,
(3) contain the warranty required by Paragraph M of this Article V, and (4)
specify a date (other than a Saturday, Sunday or legal holiday) not less than
five (5) nor more than ten (10) days after the date of such written notice, as
the date on which the Shares will be purchased. Such tender and conveyance
shall take place at the principal office of the Company during ordinary
business hours, or at such other hour and place agreed upon by the Company and
the person or persons exercising the Option. On the date specified in such
written notice (which date may be extended by the Company in order to comply
with any law or regulation, which requires the Company to take any action with
respect to the Option Shares prior to the issuance thereof, whether pursuant to
the provisions of Article VII or otherwise), the Company shall accept payment
for the Option Shares and shall deliver to the person or persons exercising the
Option in exchange therefor an appropriate certificate or certificates for
fully paid non-assessable Shares.
J. RIGHTS AS A STOCKHOLDER
No Participant to whom an Option has been granted shall have rights as a
stockholder with respect to any Shares covered by such Option except as to such
Shares as have been issued to or registered in the Company's share register in
the name of such Participant upon the due exercise of the Option and tender of
the full Option price.
K. ASSIGNABILITY AND TRANSFERABILITY OF OPTION
Unless otherwise permitted by the Code and by Rule 16b-3 of the Exchange
Act, if applicable, and approved in advance by the Committee, an Option granted
to a Participant shall not be transferable by the participant and shall be
exercisable, during the Participant's lifetime, only by such Participant or, in
the event of the Participant's incapacity, his guardian or legal
representative. Except as otherwise permitted herein, such Option shall not be
assigned, pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment, or similar
process. Any attempted transfer, assignment,
6
pledge, hypothecation or other disposition of any Option or of any rights
grazed thereunder contrary to the provisions of this Paragraph K, or the levy
of any attachment or similar process upon an option or such rights, shall be
null and void.
L. OTHER PROVISIONS
The Option Agreement for an Incentive Option shall contain such limitations
and restrictions upon the exercise of the Option as shall be necessary in order
that such Option be treated as an "incentive stock option" within the meaning
of Section 422 of the Code. Further, the Option Agreements authorized under the
Plan shall be subject to such other terms and conditions including, without
limitation, restrictions upon the exercise of the Option, as the Committee
shall deem advisable and which, in the case of incentive Options, are not
inconsistent with the requirements of Section 422 of the Code.
M. PURCHASE FOR INVESTMENT
Unless the Shares to be issued upon the particular exercise of an Option
shall have been effectively registered under the Securities Act of 1933, as now
in force or hereafter amended, the Company shall be under no obligation to
issue the Shares covered by such exercise unless and until the following
conditions have been fulfilled. In accordance with the direction of the
Committee, the persons who exercise such Option shall warrant to the Company
that, at the time of such exercise, such persons are acquiring their Option
Shares for investment and not with a view to, or for sale in connection with,
the distribution of any such Shares, and shall make such other representations,
warranties, acknowledgments and affirmations, if any, as the Committee may
require. In such event, the persons acquiring such Shares shall be bound by the
provisions of the following legend (or similar legend) which shall be endorsed
upon the certificate(s) evidencing their Option Shares issued pursuant to such
exercise:
"The shares represented by this certificate have been acquired for
investment and they may not be sold or otherwise transferred by any person,
including a pledgee, in the absence of an effective registration statement for
the shares under the Securities Act of 1933 or an opinion of counsel
satisfactory to the Company that an exemption from registration is then
available."
Without limiting the generality of the foregoing, the Company may delay
issuance of the Shares until completion of any action or obtaining any consent
that the Company deems necessary under any applicable law (including without
limitation state securities or "blue sky" laws).
VI. FORMULA OPTIONS
A. BOARD OPTIONS
Each Non-Employee Board Member shall be granted automatically a Formula
Option to purchase 25,000 Shares, as of the date of his or her election, at an
exercise price set forth in Section B herein; provided, however, that if the
effective date of such election is other than the date of an annual meeting of
the stockholders of the Company, the number of Shares covered by the Formula
Option granted as of such effective date shall be equal to 25,000 multiplied by
a fraction, the numerator of which 365 minus the number of days elapsed between
the last such annual meeting and such effective date, and the denominator of
which is 365. On the date of each subsequent annual meeting of the stockholders
of the Company, the Non-Employee Board Member shall be entitled to an automatic
renewal grant of 25,000 Formula Options, at an exercise price set forth in
Section B herein, provided such individual is reelected as a Non-Employee Board
Member at such meeting. Each Formula Option granted pursuant to this Paragraph
VI.A. shall be fully exercisable on the date of grant for a period of five (5)
years from the date of grant.
B. EXERCISE PRICE
The purchase price of the Shares subject to the Formula Options granted as
of the Effective Date of the Plan shall be $2.00 per share. The purchase price
of the Shares subject to the Formula Options granted
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subsequent to the Effective Date hereunder shall be equal to one hundred
percent (100%) of the fair market value as of the date of grant, with such fair
market value to be determined as set forth in Article V.
C. TERMS AND CONDITIONS
Formula Options shall be evidenced by an Option Agreement that shall
conform, to the requirements of the Plan, and may contain such other provisions
not inconsistent therewith, as the Committee shall deem advisable. The
provisions of Article V governing Nonstatutory Options, and the exercise and
issuance thereof, shall apply to Formula Options to the extent such provisions
are not inconsistent with this Article VI.
VII. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; SALE OF COMPANY SHARES
In the event that the outstanding Shares of the Company are changed into or
exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of any reorganization, merger,
consolidation, recapitalization, reclassification, change in par value, stock
split-up, combination of shares or dividend payable in capital stock, or the
like, appropriate adjustments to prevent dilution or enlargement of the rights
granted to, or available for, Participants shall be made in the manner and kind
of shares for the purchase of which Options may be granted under the Plan, and,
in addition, appropriate adjustment shall be made in the number and kind of
Shares and in the Option price per share subject to outstanding Options. No
such adjustment shall be made which shall, within the meaning of Section 424 of
the Code, constitute such a modification, extension, or renewal of an Option as
to cause the adjustment to be considered as the grant of a new Option.
Notwithstanding anything herein to the contrary, the Company may, in its
sole discretion, accelerate the timing of the exercise provisions of any Option
in the event of a tender offer for the Company's Shares, the adoption of a plan
of merger or consolidation under which all the Shares of the Company would be
eliminated, or a sale of all or substantially all of the Company's assets.
Alternatively, the Company may, in its sole discretion, cancel any or all
Options upon any of the foregoing events and provide for the payment to
Participants in cash of an amount equal to the difference between the Option
price and the price of a Share, as determined in good faith by the Committee,
at the close of business on the date of such event, multiplied by the number of
Shares subject to the Option so canceled.
Upon a business combination by the Company or any of its Affiliates with any
corporation or other entity through the adoption of a plan of merger or
consolidation or a share exchange or through the purchase of all or
substantially all of the capital stock or assets of such other corporation or
entity, the Board or the Committee may, in its sole discretion, grant Options
pursuant hereto to all or any persons who, on the effective date of such
transaction, hold outstanding options to purchase securities of such other
corporation or entity and who, on and after the effective date of such
transaction, will become employees or directors of, or consultants to, the
Company or its Affiliates. The number of Shares subject to such substitute
Options shall be determined in accordance with the terms of the transaction by
which the business combination is effected. Notwithstanding the other
provisions of this Plan, the other terms of such substitute Options shall be
substantially the same as or economically equivalent to the terms of the
options for which such Options are substituted, all as determined by the Board
or by the Committee, as the case may be. Upon the grant of substitute Options
pursuant hereto, the options to purchase securities of such other corporation
or entity for which such Options are substituted shall be canceled immediately.
VIII. DISSOLUTION OR LIQUIDATION OF THE COMPANY
Upon the dissolution or liquidation of the Company other than in connection
with a transaction to which the preceding Article VII is applicable, all
Options granted hereunder shall terminate and become null and void; provided,
however, that if the rights of a Participant under the applicable Options have
not otherwise terminated and expired, the Participant shall have the right
immediately prior to such dissolution or liquidation to exercise
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any Option granted hereunder to the extent that the right to purchase shares
thereunder has become exercisable as of the date immediately prior to such
dissolution or liquidation.
IX. TERMINATION OF THE PLAN
The Plan shall terminate ten (10) years from the earlier of the date of its
adoption or the date of its approval by the stockholders. The Plan may be
terminated at an earlier date by vote of the stockholders or the Board;
provided, however, that any such earlier termination shall not affect any
Options granted or Option Agreements executed prior to the effective date of
such termination. Except as may otherwise be provided for under Articles VII
and VIII, and notwithstanding the termination of the Plan, any Options granted
prior to the effective date of the Plan's termination shall remain exercisable
in accordance with their terms, and the provisions of the Plan with respect to
the full and final authority of the Committee under the Plan shall continue to
control.
X. AMENDMENT OF THE PLAN
The Plan may be amended by the Board and such amendment shall become
effective upon adoption by the Board; provided, however, that any amendment
shall be subject to the approval of the stockholders of the Company at or
before the next annual meeting of the stockholders of the Company if such
stockholder approval is required by the Code, any federal or state law or
regulation, the rules of any stock exchange or automated quotation system on
which the Shares may be listed or quoted, or if the Board, in its discretion,
determines to submit such changes to the Plan to the Company's stockholders for
approval.
XI. EMPLOYMENT RELATIONSHIP
Nothing herein contained shall be deemed to prevent the Company or an
Affiliate from terminating the employment of a Participant, or to prevent a
Participant from terminating the Participant's employment with the Company or
an Affiliate.
XII. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee shall be
indemnified by the Company against all reasonable expenses, including
attorneys' fees, actually and reasonably incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken by them as members of the Committee and against all amounts paid by them
in settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that the
Committee member is liable for gross negligence or willful misconduct in the
performance of his or her duties. To receive such indemnification, a Committee
member must first offer in writing to the Company the opportunity, at its own
expense, to defend any such action, suit or proceeding.
XIII. SAVINGS CLAUSE
This Plan is intended to comply in all respects with applicable law and
regulations, including, (i) with respect to those Participants who are
reporting persons for purposes of Section 16 of the Exchange Act, Rule 16b-3
promulgated thereunder by the Securities and Exchange Commission, if
applicable, and (ii) with respect to executive officers, Code Section 162(m).
In case any one or more provisions of this Plan shall be held invalid, illegal,
or unenforceable in any respect under applicable law and regulation (including
Rule 16b-3 and Code Section 162(m)), the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby and the invalid, illegal, or unenforceable provision shall be deemed
null and void; however, to the extent permitted by law, any provision that
could be deemed null and void shall first
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be construed, interpreted, or revised retroactively to permit the Plan to be
construed in compliance with all applicable law (including Rule 16b-3 and Code
Section 162(m)) so as to foster the intent of this Plan. Notwithstanding
anything herein to the contrary, with respect to Participants who are
reporting persons for purposes of Section 16 of the Exchange Act, no grant of
an Option to purchase Shares shall permit unrestricted ownership of Shares by
the Participant for at least six (6) months from the date of the grant of such
Option, unless the Board determines that the grant of such Option to purchase
Shares otherwise qualifies as an exempt transaction under the then current
Rule 16b-3 requirements.
XIV. WITHHOLDING
Except as otherwise provided by the Committee,
A. The Company shall have the power and right to deduct or withhold, or
require a Participant to remit to the Company, an amount sufficient to
satisfy federal, state, and local taxes required by law to be withheld with
respect to any grant, exercise, or payment made under or as a result of
this Plan; and
B. In the case of any taxable event hereunder, a Participant may elect,
subject to the approval in advance by the Committee, to satisfy the
withholding requirement, if any, in whole or in part, by having the Company
withhold Shares of Common Stock that would otherwise be transferred to the
Participant having a Fair Market Value, on the date the tax is to be
determined, equal to the minimum marginal tax that could be imposed on the
transaction. All elections shall be made in writing and signed by the
Participant.
XV. EFFECTIVE DATE
This Plan, as amended and restated, shall become effective on April 1, 2002
upon adoption by the Board, provided that within one (1) year before or after
such adoption by the Board the amendment and restatement of the Plan is
approved by the stockholders of the Company.
XVI. GOVERNING LAW
This Plan shall be governed by the laws of the State of Delaware and
construed in accordance therewith.
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