SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No.)
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Definitive Information Statement
A.M.S. MARKETING , INC.
.................................................................................
(Name of Registrant as Specified in Charter)
6689 N.W. 16th Terrace
Fort Lauderdale, FL 33309
.................................................................................
(Name of Person(s) Filing the Information Statement)
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:
Common Stock, par value $.001 per share
.................................................................................
2) Aggregate number of securities to which transaction applies:
5,856,200 shares of Common Stock Outstanding
.................................................................................
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):
N/A
.................................................................................
4) Proposed maximum aggregate value of transaction:
.................................................................................
5) Total Fee Paid.
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:
A.M.S. MARKETING, INC.
6689 N.W. 16Th Terrace
Fort Lauderdale, Fl 33309
INFORMATION STATEMENT
PURSUANT TO SECTION 14(C) OF THE SECURITIES EXCHANGE ACT OF 1934
Approximate Date of Mailing: September__, 2003
Dear Shareholders:
This Information Statement is furnished by the Board of Directors (the
"Board") of A.M.S. Marketing, Inc. (the "Company") to inform shareholders of the
Company of the approval of certain shareholders' actions. This Information
Statement will be mailed to holders of record of common stock, par value $.001
(the "Common Stock"), of the Company as of the close of business on August 8,
2003 (the "Record Date"). On that date, the Company had outstanding and entitled
to vote 5,856,200 shares of its Common Stock. Specifically, this Information
Statement relates to the following:
1. Shareholders' approval of an amendment to the
Company's amended Certificate of Incorporation effectuating (a) a change in the
Company's name to International Imaging Systems, Inc. and (b) an increase in the
total authorized capital stock to 30,000,000 shares, of which 29,000,000 will be
classified as common stock, par value $.001 per share, and 1,000,000 will be
classified as preferred stock, par value $.001 per share, issuable in series
with such powers, designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as the Board may fix from time to time by resolution or
resolutions.
2. Shareholders' approval of the adoption of the
Company's 2003 Equity Compensation Program (the "Program").
On August 11, 2003, shareholders owning in the aggregate 4,800,000
shares of Common Stock, or approximately 82% of the then issued and outstanding
Common Stock, consented in writing to the matters described herein. As a result,
these matters were approved by the majority required by law and no further votes
will be needed.
NO VOTE OR OTHER ACTION OF THE COMPANY'S SHAREHOLDERS
IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
INFORMATION STATEMENT
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
No director, executive officer, nominee for election as a director,
associate of any director, executive officer or nominee or any other person has
any substantial interest, direct or indirect, by security holdings or otherwise,
resulting from the matters described herein, which is not shared by all other
stockholders pro-rata, and in accordance with their respective interests, except
that the Company's current officers and directors will be eligible for
participation under the Company's 2003 Equity Compensation Program. To date, no
awards have been made to the current officers and directors of the Company
thereunder.
EXECUTIVE OFFICERS
The executive officers of the Company are identified in the table
below. Each executive officer of the Company serves at the pleasure of the
Board.
Date Became an
Name: Age Executive Officer Position
- ---- --- ----------------- --------
C. Leo Smith 35 July 31, 2003 President, CEO and CFO
Susan Archer 37 July 31, 2003 Treasurer and Secretary
PRINCIPAL STOCKHOLDERS
So far as is known to the Company, the following table sets forth the
beneficial ownership of 5% or more of the Company's Common Stock as of August
11, 2003. Beneficial ownership has been determined for purposes herein in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended,
under which a person is deemed to be the beneficial owner of securities if such
person has or shares voting power or investment power in respect of such
securities or has the right to acquire beneficial ownership within 60 days.
The following table sets forth information available to the Company, as
of July 31, 2003, with respect to the beneficial ownership of the outstanding
shares of the Company's Common Stock by (i) any holder of more than five percent
(5%) of the outstanding shares; (ii) the Company's officers and directors; and
(iii) the Company's officers and directors as a group:
Name and Address of Beneficial Owner(1) Shares of Common Stock Owned Percentage (%) of Common Stock(2)
- --------------------------------------- ---------------------------- ---------------------------------
Sarah Cinnante(3) 1,200,000 20.49%
Michael D'Angelo(3) 1,200,000 20.49%
Laura Palisa Mujica(4) 1,200,000 20.49%
Lara Nicole Sarafianos(5) 1,200,000 20.49%
Alicia M. LaSala(6) 400,000(7) 6.83%(7)
Alfred M. Schiffrin(8) 400,000 6.83%
Alex Sarafianos(9) 0(10) 0 (10)
James Gaffney(11) 0 0
C. Leo Smith(3) 0(12) 0 (12)
Susan Archer(3) 100,000 1.71%
All officers and directors as a group 100,000(12) 1.71%(12)
(four) persons)
2
- -------------------------
(1) Beneficial ownership as reported in the table above has been determined
in accordance with Instruction (1) to Item 403 (b) of Regulation S-B of the
Exchange Act.
(2) Percentages are approximate.
(3) The business address of the stockholder, director or officer, as the
case may be, noted above is 6689 N.W. 16th Terrace, Ft. Lauderdale, FL 33309.
(4) The address of the stockholder noted above is 824 S.E. 8th Street, Ft.
Lauderdale, FL 33316.
(5) The address of the stockholder noted above is 4440 N.E. 22nd Avenue,
Lighthouse Point, FL 33064.
(6) The address of the stockholder noted above is 6674 Serena Lane, Boca
Raton, FL 33433.
(7) Includes 20,000 shares of Common Stock owned of record by a trust for
the benefit of Mrs. LaSala's minor child of which her husband is the sole
trustee. Mrs. LaSala disclaims beneficial ownership of such shares.
(8) The business address of the stockholder noted above is 7040 W. Palmetto
Park Road, Building 4, # 572, Boca Raton, FL 33433. Prior to the Exchange, Mr.
Schiffrin was the sole director and officer of the Company.
(9) The address of the director noted above is 16008 Willmington Place,
Tampa FL 33647.
(10) Excludes all shares owned by Lara Nicole Sarafianos. Mr. Sarafianos is
the brother-in-law of Mrs. Sarafianos and disclaims beneficial ownership of all
shares owned by Mrs. Sarafianos.
(11) The business address of the shareholder named above is 30 Montgomery
Street, Jersey City, NJ 07302.
(12) Excludes 1,200,000 shares owned by the mother of Mr. Smith, Laura
Palisa Mujica. Mr. Smith disclaims beneficial ownership of such shares.
3
APPROVAL OF AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO (A) CHANGE THE COMPANY'S NAME AND (B) TO EFFECT
AN INCREASE IN THE TOTAL AUTHORIZED CAPITAL STOCK
Amendment to the Amended Certificate of Incorporation
The Board of Directors and shareholders holding the necessary number of
votes have approved an amendment (the "Charter Amendment") of the Company's
amended Certificate of Incorporation (the "Certificate") to (a) Article First
thereof to effect a change of the Company's name (the "Name Change") to
International Imaging Systems, Inc. and (b) Article Fourth thereof to effect an
increase in the total authorized capital stock of the Company (the "Capital
Increase") to 30,000,000 shares of which 29,000,000 will be classified as common
stock, par value $.001 per share, and 1,000,000 will be classified as preferred
stock, par value $.001 per share, issuable in series with such powers,
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, as the Board
may fix from time to time by resolution or resolutions. As amended, Article
First shall read in its entirety as follows:
"Article FIRST. The name of this corporation is: INTERNATIONAL IMAGING
SYSTEMS, INC."
As amended, Article FOURTH shall read in its entirety as follows:
"Article FOURTH. (a) The total number of shares which the
Corporation shall have authority to issue is thirty million (30,000,000),
consisting of twenty-nine million (29,000,000) shares of common stock, par value
$.001 per share (hereafter called the "Common Stock"), and one million
(1,000,000) shares of preferred stock, par value $.001 per share (hereinafter
called the Preferred Stock).
(b) Each share of Common Stock outstanding at
9:00 a.m. on January 25, 1999, shall be deemed to be two shares of Common Stock
of the Corporation, par value $.001 per share.
(c) Shares of Preferred Stock may be issued from
time to time in one or more series as may be established from time to time by
resolution of the Board of Directors of the Corporation (hereinafter the
"Board"), each of which series shall consist of such number of shares and have
such distinctive designation or title as shall be fixed by resolution of the
Board prior to the issuance of any shares of such series. Each such class or
series of Preferred Stock shall have such voting powers, full or limited, or no
voting powers, and such preferences and relative, participating, optional or
other special rights and such qualifications, limitations or restrictions
thereof, as shall be stated in such resolution of the Board providing for the
issuance of such series of Preferred Stock."
The Name Change and the Capital Increase will be effected by filing a
Certificate of Amendment to the Certificate with the Secretary of State of
Delaware. The Certificate of Amendment, attached hereto as Exhibit A, will be
filed with the Secretary of State of Delaware approximately twenty (20) days
4
after the mailing of this Information Statement, and the Name Change and the
Capital Increase will become effective immediately upon such filing (the
"Effective Date").
Purpose and Effect of Name Change
The purpose of changing the Company's corporate name is to reflect the Company's
acquisition on July 31, 2003, of all of the limited liability company interests
of Advanced Imaging Systems, LLC, ("AIS"), a Delaware limited liability company
that designs, manufactures and markets plastic and paper card products,
including credit cards, pre-paid telephone cards, value storage cards, access
entry cards, identity cards and business cards. It is contemplated that for the
foreseeable future the business of AIS will constitute the principal business of
the Company. The voting and other rights that accompany the Company's Common
Stock will not be affected by the change in corporate name. SHAREHOLDERS MAY,
BUT NEED NOT, EXCHANGE THEIR CERTIFICATES TO REFLECT THE CHANGE IN CORPORATE
NAME.
Purpose and Effect of Capital Increase
General
- -------
The effect of the Capital Increase will be to increase the number of shares of
Common Stock that the Company is authorized to issue from 20,000,000 to
29,000,000 (the "Common Stock Increase") and to authorize the issuance of
1,000,000 shares of "blank check" preferred stock (the "Preferred Stock
Authorization"). Currently, the Company is not authorized to issue preferred
stock.
Common Stock Increase
- ---------------------
The additional 9,000,000 shares of Common Stock authorized by the Capital
Increase, if and when issued, will have the same rights and privileges as the
shares of Common Stock presently issued and outstanding. The Charter Amendment
and the creation of additional shares of authorized Common Stock will not alter
the current number of issued shares. The relative rights and limitations of the
shares of Common Stock will remain unchanged under the Charter Amendment.
As of August 31, 2003, a total of 5,856,200 shares of the Company's currently
authorized 20,000,000 shares of Common Stock were issued and outstanding. In
addition, as of such date (a) 6,000,000 shares were reserved for issuance under
the Program subject to the Program becoming effective and (b) 1,200,000 shares
of Common Stock were reserved for issuance upon exchange of Exchangeable Notes
issued by AIS. Accordingly, absent the Common Stock Increase, only 6,943,800
shares of the Company's Common Stock are presently unrestricted for future
issuance.
The Board expects that in the future the Company will either publicly offer or
privately place shares of its Common Stock to raise funds to finance the
expansion of its operations, including stock based acquisitions of businesses or
assets. Except for the potential issuance of reserved shares, there are no
present understandings or arrangements regarding the issuance or sale of any
5
shares of Common Stock. However, it is likely that any future financing or
acquisition will require the Company to sell shares of its Common Stock. The
Company believes that the Common Stock Increase will provide the Company with
the flexibility of having an adequate number of authorized but unissued shares
of Common Stock available for future financing requirements and other corporate
purposes, such as stock dividends or splits, mergers, or existing and future
incentive programs, without the expense or delay attendant in seeking
stockholder approval at any special or annual meeting. The Charter Amendment
would provide additional authorized shares of Common Stock that could be used
from time to time, without further action or authorization by the stockholders
(except as may be required by law or by any stock exchange or over-the-counter
market on which the Company's securities may then be listed).
Holders of Common Stock have no preemptive rights to purchase or subscribe for
any unissued stock of the Company. Accordingly, the issuance of additional
shares of Common Stock will reduce the current stockholders' percentage
ownership interest in the total outstanding shares of Common Stock and,
depending upon the circumstances, may have a dilutive effect on earnings per
share, voting power and other interests of the existing stockholders.
The increase in the authorized number of shares of Common Stock and the
subsequent issuance of such shares could also have the effect of delaying or
preventing a change in control of the Company without further action by the
stockholders. Shares of authorized and unissued Common Stock could (within the
limits imposed by applicable law) be issued in one or more transactions that
would make a change in control of the Company more difficult, and therefore less
likely.
Principal Effects of Preferred Stock Authorization
The Charter Amendment will create 1,000,000 authorized shares of "blank check"
preferred stock. The term "blank check" refers to preferred stock, the creation
and issuance of which is authorized in advance by the stockholders and the
terms, rights, and features of which are determined by the Board upon issuance.
The authorization of such blank check preferred would permit the Board to
authorize and issue preferred stock from time to time in one or more series.
Subject to the provisions of the Company's amended Certificate of Incorporation
and the limitations prescribed by law, the Board will be expressly authorized,
at its discretion, to adopt resolutions to issue shares of preferred stock, to
fix the number of such shares and to change the number of such shares
constituting any series and to provide for or change the voting powers
designations, preferences and relative, participating, optional or other special
rights, qualifications limitations or restrictions thereof, including dividend
rights (including whether the dividends are cumulative), dividend rates, terms
of redemption (including sinking fund provisions), redemption prices, conversion
rights and liquidation preferences of the shares constituting any series of the
preferred stock, in each case without any further action or vote by the
stockholders. The Board would be required to make any determination to issue
shares of preferred stock based on its judgment regarding the best interests of
the Company and its stockholders.
6
The Board believes that the Preferred Stock authorization will provide the
Company with increased financial flexibility in meeting its future capital
requirements by providing another type of security in addition to its Common
Stock, as it will allow preferred stock to be available for issuance from time
to time and with such features as determined by the Board for any proper
corporate purpose. It is anticipated that such purposes may include exchanging
preferred stock for Common Stock and, without limitation, may include the
issuance for cash as a means of obtaining capital for use by the Company, or
issuance as part or all of the consideration required to be paid by the Company
for acquisitions of other businesses or assets.
Any issuance of preferred stock with voting rights, could, under certain
circumstances, have the effect of delaying or preventing a change in control of
the Company by increasing the number of outstanding shares entitled to vote and
by increasing the number of votes required to approve a change in control of the
Company. Shares of voting or convertible preferred stock could be issued, or
rights to purchase such shares could be issued to render more difficult or
discourage an attempt to obtain control of the Company by means of a tender
offer, proxy contest, merger or otherwise. The ability of the Board to issue
such additional shares of preferred stock, with the rights and preferences it
deems advisable, could discourage an attempt by a party to acquire control of
the Company by tender offer or other means. Such issuances could therefore
deprive stockholders of benefits that could result from such an attempt.
Moreover, the issuance of such additional shares of preferred stock to persons
friendly to the Board could make it more difficult to remove incumbent managers
and directors from office even if such change were to be favorable to
stockholders generally.
Exchange of Stock Certificates
As soon as practicable after the Effective Date, shareholders of record on the
Effective Date will be furnished with the necessary materials and instructions
for the surrender and exchange of their certificates representing shares of
Common Stock. Beginning on the Effective Date, each certificate representing
shares of the Common Stock, will be deemed for all corporate purposes to
evidence ownership of the same number shares of Common Stock of the Company
notwithstanding the change of corporate name. Accordingly, shareholders may, but
need not, surrender and exchange their certificates representing shares of
existing Common Stock. SHAREHOLDERS SHOULD NOT SUBMIT ANY STOCK CERTIFICATES TO
THE COMPANY OR THE COMPANY'S TRANSFER AGENT UNTIL REQUESTED TO DO SO. No service
charge will be payable by shareholders in connection with the exchange of
certificates as all costs will be borne by the Company.
Dissenters' Rights
Under the provisions of the applicable General Corporation Law of Delaware,
shareholders are not provided with dissenters' rights or rights of appraisal in
connection with the Charter Amendment.
7
APPROVAL OF THE COMPANY'S 2003
EQUITY INCENTIVE PROGRAM
Adoption of the Company's 2003 Equity Incentive Program
The Company's 2003 Equity Incentive Program (the "Program") was adopted by the
Board in July 2003 and approved by the Company's stockholders in August 2003,
subject to becoming effective 20 days after the mailing of this Information
Statement to shareholders with respect thereto as required under applicable law.
The Program was adopted to secure for the Company and each of its Affiliates (as
defined in the Program) the benefits arising from ownership of the Company's
Common Stock by those officers, directors and employees of, and consultants to,
the Company and/or any of its Affiliates who are most responsible for the growth
and success of the Company and its Affiliates
Summary
The following summary of the Program is not intended to be complete and is
qualified in its entirety by reference to the Program itself, a copy of which is
attached hereto as Exhibit B.
Types of Awards
The Program provides for the grant of incentive stock options, nonqualified
stock options and restricted stock grants (collectively, "Awards") as approved
by the Board or a committee thereof (the "Committee"). Incentive stock options
granted under the Program are intended to qualify as "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Nonqualified stock options granted under the Program are
intended not to qualify as incentive stock options under the Code.
Shares Subject to the Program
The total number of shares of the Company's Common Stock that may be issued
under the Program upon the exercise of all options granted under the Program or
the satisfaction by all recipients of all conditions necessary for the receipt
of restricted stock grants may not exceed 6,000,000, of which 1,000,000 shares
shall be available for issuance under incentive stock options and 5,000,000
shares shall be available for issuance under nonqualified stock options and/or
restricted stock awards. The 1,000,000 shares of the Company's Common Stock
available for issuance under incentive stock options shall be increased
annually, starting with the calendar year following the calendar year in which
the Program is adopted, by 5% of the excess, if any, of (i) the total number of
issued and outstanding shares of the Company's Common Stock as of the first day
of the fiscal year of the Company beginning with or within any such subsequent
calendar year over (ii) the total number of issued and outstanding shares of the
Company's Common Stock as of the date on which the Program is adopted; provided,
however, that as of the date of any such annual increase, the total number of
shares of the Company's Common Stock available for issuance under incentive
stock options under the Program may not exceed 15% of the total number of
authorized shares of the Company's Common Stock as of the date on which the
Program is adopted. The 5,000,000 shares of the Company's Common Stock available
for issuance under nonqualified stock options and/or restricted stock awards
shall be increased annually, starting with the calendar year following the
calendar year in which the Program is adopted, by the sum of (i) 15% of the
excess, if any, of (A) the total number of issued and outstanding shares of the
Company's Common Stock at the time the first such Award is made during such
8
subsequent calendar year over (B) the total number of issued and outstanding
shares of the Company's Common Stock as of the date on which the Program is
adopted, (ii) the total number of shares of the Company's Common Stock
repurchased by the Company under the Program during the preceding calendar year
and (iii) the total number of shares of the Company's Common Stock surrendered
to the Company during the preceding calendar year in payment of the exercise
price of nonqualified stock options; provided, however, that, as of the date of
any such annual increase, the total number of shares of the Company's Common
Stock available for issuance under nonqualified stock options and/or restricted
stock awards shall not exceed 50% of the total number of authorized shares of
Common Stock as of the date on which the Program is adopted. If any Award
expires, or is terminated or forfeited, in whole or in part, the unissued shares
of the Company's Common Stock covered by such Award shall again be available for
the grant of Awards under the Program. If any Award granted under the Program
shall expire or terminate for any reason without having been exercised in full,
the unpurchased shares of the Company's Common Stock subject to such Award shall
again be available for subsequent Awards under the Program. Shares issued under
the Program may consist in whole or in part of authorized but unissued shares or
treasury shares. The number of shares of the Company's Common Stock available
for issuance under the Program is subject to adjustment, as set forth in the
Program, in the event of any stock split, reverse stock split, stock dividend,
extraordinary cash dividend, recapitalization, reorganization merger,
consolidation, exchange of shares, liquidation, spin-off, split-up or other
similar change in capitalization of the Company.
The total number of shares of the Company's Common Stock that may be granted
under all Awards made to a recipient during any one calendar year may not exceed
100,000 shares.
Persons Eligible to Receive Awards
Eligible participants under the Program include the following persons: (i)
executive officers, officers and directors (including advisory and other special
directors) of the Company and/or any of its Affiliates; (ii) full-time and
part-time employees of the Company and/or any of its Affiliates; and (iii)
natural persons engaged by the Company or any Affiliate as consultants.
Grants and Terms of Awards
Except as otherwise expressly provided therein, the Program provides that the
Board, or a committee appointed by the Board to administer the Program, shall
have complete discretion to determine when and to which eligible participants
Awards are to be granted, the number of such shares of the Company's Common
Stock to be awarded to each such participant and the terms and conditions of
each Award. An Award may be made for cash, property, services rendered or other
form of payment constituting lawful consideration under applicable law. No grant
will be made if, in the judgment of the Board or the committee described above,
as the case may be, such a grant would constitute a public distribution within
the meaning the U.S. Securities Act of 1933, as amended, or the rules or
regulation promulgated thereunder.
9
Federal Income Tax Consequences
The following discussion of Federal income tax consequences is qualified in its
entirety by the following: (i) It reflects the Company's understanding of the
Code and the rules and regulations promulgated thereunder as of the date on
which the Program was adopted by the Board, all of which are subject to change
from time to time; (ii) the Company makes no representations, warranties or
covenants as to the accuracy or continuing accuracy of the information set forth
below, and specifically advises each recipient of an Award under the Program to
consult his or her own legal counsel or tax advisor with respect to the tax
consequences associated with any Award granted to him or her; (iii) the Company
does not undertake to advise any recipient of an Award regarding the Federal
income or other tax consequences associated with any Award granted to him or
her; and (iv) the Company does not undertake to summarize any State, local or
international tax consequences, of any kind whatsoever, associated with any
Award granted under the Program.
Subject to the foregoing, the grant of an incentive stock option under the
Program will not generate Federal taxable income for the recipient or a
deduction for the Company, provided that the recipient complies with the
requirements of Sections 421 and 422 of the Code and the rules and regulations
promulgated thereunder. Neither will the exercise of the option trigger Federal
taxable income for the recipient, provided that the foregoing requirements are
met. Upon sale of the underlying shares of the Company's Common Stock subsequent
to exercise, the recipient will have either a capital gain or a capital loss for
Federal income tax purposes. If the requirements of Sections 421 and 422 are not
met, the recipient will have ordinary income for Federal income tax purposes and
the Company will have a deduction equal to this amount. In general, the sale or
other disposition of an incentive stock option within two years of the date of
grant or one year of the transfer of the shares following exercise will trigger
such ordinary income to the recipient and a corresponding deduction for the
Company.
The grant of a nonqualified stock option will trigger neither Federal taxable
income for the recipient nor a compensation deduction for the Company. However,
upon transfer of the shares to the recipient following exercise of the option,
the recipient will have ordinary income for Federal income tax purposes and the
Company will have a corresponding deduction.
An award of restricted stock triggers ordinary income to the recipient and a
corresponding deduction for the Company at the time all restrictions creating a
substantial risk of forfeiture or restraining transferability lapse.
Withholding of Taxes
The same qualifications discussed under "Federal Income Tax Consequences" apply
in the context of the "Withholding of Taxes." More particularly, the following
discussion relates solely to Federal income tax withholding rules.
Under current law, the Internal Revenue Service does not impose Federal income
tax withholding obligations with respect to the exercise of an incentive stock
option or the sale or other disposition of the underlying stock by the recipient
of the option. (The grant of such an option never has been subject to income tax
withholding.) However, if the recipient does not comply with all applicable
requirements of Sections 421 and 422 of the Code and the rules and regulations
10
promulgated thereunder (e.g., the holding period requirements described above),
withholding will apply as if the option were a nonqualified stock option.
In the case of a nonqualified stock option, withholding for Federal income tax
purposes is required at the time of exercise.
In the case of a restricted stock award, withholding for Federal income tax
purposes is required at the time that all restrictions creating a substantial
risk of forfeiture or restraining transferability of the stock lapse.
Because recipients of Awards under the Program receive in-kind compensation
payments, specifically shares of the Company's Common Stock, the Program
provides that an Award recipient, with the Company's consent, may arrange for
the Company to satisfy any and all withholding obligations applicable to the
Award by withholding shares of the Company's Common Stock subject to the Award
or by accepting delivery of other shares of the Company's Common Stock held by
the recipient. Special requirements apply under the Program for withholding in
either such manner.
Change in Control
Upon a "Change in Control," the Board has the right, but not the obligation, to
take one or more of the following actions: (i) make appropriate provision for
the continuation of such Awards by the Company or for the assumption of such
Awards by the surviving or acquiring entity, by substituting on an equitable
basis for the shares of Common Stock then subject to such Awards (A) the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Change in Control, (B) shares of stock of the surviving or
acquiring corporation or (C) such other securities as the Board deems
appropriate, the fair market value of which (as determined by the Board in its
sole discretion) shall not materially differ from the Fair Market Value (as
defined in the Program) of the shares of Common Stock subject to such Awards
immediately preceding the Change in Control; (ii) accelerate the date of
exercise or vesting of such Awards or of any installment of any such Awards;
(iii) permit the exchange of all Awards for the right to participate in any
stock option or other employee benefit program (not subject to the Employee
Retirement Income Security Act of 1974, as amended) of any successor
corporation; or (iv) subject to the requirement that any affected participant
consent, provide for the termination of any such Awards immediately prior to the
consummation of the Change in Control. Each of the foregoing options is
expressly made subject to contrary language in the applicable Award
instrument(s).
Under the Program, a "Change in Control" means the earlier to occur of the
following events: (i) a change in the identity of a majority or more of the
directors comprising the Board over any two-year period; (ii) with certain
exceptions, the acquisition by a third party of beneficial ownership of 50% or
more of the outstanding voting securities of the Company; (iii) with certain
exceptions the commencement of a tender or exchange offer the consummation of
which would result in beneficial ownership by a person of 50% or more of the
outstanding voting securities of the Company; or (iv) as the result of, or in
connection with, any cash tender or exchange offer, merger, consolidation or
other business combination, sale or disposition of all or substantially all of
11
the Company's assets, or contested election, or any combination of the foregoing
transactions (a "Transaction"), the failure of the persons who were directors of
the Company immediately before the Transaction to constitute a majority of the
board of directors of the Company or any successor to such entity, or the
failure of the persons who were stockholders of the Company immediately before
the Transaction to own at least 50% of the outstanding voting securities of the
Company or any successor to such entity. In general, the exceptions described
above apply to acquisitions of the Company's securities by related parties.
Plan Termination Date
The Program terminates on the tenth anniversary of its adoption by the Board
unless terminated earlier by the Board. Upon termination of the Program, no new
Awards may be granted; however, Awards previously granted may extend beyond the
termination date.
Amendment of the Program
The Board may amend, suspend or terminate the Program or any portion thereof at
any time. Any such amendment, suspension or termination shall be implemented
pursuant to a resolution of the Board.
By Order of the Board of Directors
/s/ C. LEO SMITH
----------------------
C. Leo Smith
President, CEO and CFO
12
Exhibit A
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
A.M.S. MARKETING, INC.
First: That the Board of Directors of A.M.S. Marketing, Inc. (the "Corporation")
by Unanimous Written Consent dated as of July 21, 2003, adopted resolutions
setting forth proposed amendments to the Certificate of Incorporation of the
Corporation as heretofore amended, declaring said amendments to be advisable and
calling for the submission of such amendments to the stockholders of the
Corporation for consideration thereof. The resolutions setting forth the
proposed amendments are as follows:
Resolved, that the Certificate of Incorporation of the Corporation be amended by
changing Article thereof numbered "First" so that, as amended, said Article
shall be and read as follows:
"Article FIRST. The name of this Corporation is International Imaging Systems,
Inc." and that the Certificate of Incorporation of the Corporation be further
amended by changing Article thereof numbered "Fourth" so that, as amended, said
Article shall be and read as follows:
"Article FOURTH. (a) The total number of shares which the Corporation
shall have authority to issue is thirty million (30,000,000), consisting of
twenty-nine million (29,000,000) shares of common stock, par value $.001 per
share (hereafter called the "Common Stock"), and one million (1,000,000) shares
of preferred stock, par value $.001 per share (hereinafter called the Preferred
Stock.
(b) Each share of Common Stock outstanding at 9:00 a.m.
on January 25, 1999, shall be deemed to be two shares of Common Stock of the
Corporation, par value $.001 per share.
(c) Shares of Preferred Stock may be issued from time to
time in one or more series as may be established from time to time by resolution
of the Board of Directors of the Corporation (hereinafter the "Board"), each of
which series shall consist of such number of shares and have such distinctive
designation or title as shall be fixed by resolution of the Board prior to the
issuance of any shares of such series. Each such class or series of Preferred
Stock shall have such voting powers, full or limited, or no voting powers, and
such preferences and relative, participating, optional or other special rights
and such qualifications, limitations or restrictions thereof, as shall be stated
in such resolution of the Board providing for the issuance of such series of
Preferred Stock."
Second: That thereafter, pursuant Section 228 of the General Corporation Law of
the State of Delaware, a consent setting forth resolutions approving the
amendments set forth above was signed by holders of outstanding 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 thereon were
present and voted.
13
Third: That said amendments were duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
Fourth: That the capital of the Corporation shall not be reduced under or by
reason of said amendments.
By: /s/ C. LEO SMITH
--------------------
(Authorized Officer)
Name: C. Leo Smith
14
Exhibit B
A.M.S. MARKETING, INC.
2003 EQUITY INCENTIVE PROGRAM
1. Purpose. This Equity Incentive Program (the "Program") is designed to
secure for A.M.S. Marketing, Inc. (the "Company") and each of its Affiliates (as
defined in Section 11), the benefits arising from ownership of the Company's
common stock, par value $.001 per share (the "Common Stock") by those officers,
directors and employees of, and consultants to, the Company and/or any of its
Affiliates who are most responsible for the growth and success of the Company
and its Affiliates. The Company believes that the Program will cause those
persons to contribute materially to the future growth and success of the Company
and its Affiliates, thereby benefiting the stockholders of each such entity.
2. Elements of the Program. In order to maintain flexibility in the award
of benefits, the Program provides for three different types of awards (each, an
"Award"): (i) incentive stock options (within the meaning of Section 422 of the
Code (as defined in Section 11); (ii) nonqualified stock options; and (iii)
restricted stock. Any person to whom an Award has been granted under the Program
is called a "Participant." Subject to the requirements of the Code, a
Participant may receive more than one type of Award under the Program.
Additional Program definitions are contained in Section 11.
3. Eligibility. Any officer, director or employee of, or consultant to,
the Company or any of its Affiliates shall be eligible to be selected as a
Participant in the Program, subject to any applicable restrictions on the types
of Awards that may be granted to different classes of Participants.
4. Administration.
a. Administration by Board of Directors. The Program will be
administered by the Board of Directors of the Company (the "Board"). The Board,
in its sole discretion, shall have the authority to grant and amend Awards, to
adopt, amend and repeal rules relating to the Program and to interpret and
correct the provisions of the Program and any Award. The Board shall have
authority, subject to the express limitations of the Program, to (i) construe
and interpret the terms of the Program and each Award thereunder; (ii)
prescribe, amend and rescind rules and regulations relating to the Program and
any Awards; (iii) determine the terms and conditions of all Awards, which need
not be identical; (iv) initiate an Option Exchange Program (as defined in
Section 11); and (v) make all other determinations that, in the judgment of the
Board, are necessary or desirable for the administration and interpretation of
the Program. The Board may correct any defect or supply any omission or
reconcile any inconsistency in the Program or in any Award in the manner and to
the extent it shall deem expedient to implement the Program or any Award, and it
shall be the sole and final judge of such expediency. All decisions by the Board
shall be final and binding on all interested persons. Neither the Company nor
any member of the Board or Affiliate shall be liable for any action or
determination relating to the Program.
b. Appointment of Committee. To the extent permitted by
applicable law, the Board may delegate any or all of its powers under the
Program to one or more committees or subcommittees of the Board (a "Committee").
For purposes of Program administration (excluding amendment and termination of
the Program or any part thereof, which shall be reserved exclusively to the
Board), where such delegation has occurred, all references herein to the "Board"
shall mean such Committee or the Board.
c. Delegation to Executive Officers. To the extent permitted by
applicable law, the Board may delegate to one or more executive officers of the
Company the power to grant Awards and exercise such other powers under the
Program as the Board may determine, provided that the Board shall fix the
maximum number of Awards to be granted and the maximum number of shares of
Common Stock issuable to any one Participant pursuant to Awards granted by such
executive officers.
15
d. Applicability of Section Rule 16b-3. Notwithstanding anything
to the contrary in the foregoing so long as the Common Stock is registered under
Section 12 of the Exchange Act (as defined in Section 11), or any successor
statute, the Program shall be administered in a manner consistent with Rule
16b-3 promulgated thereunder, as it may be amended from time to time, or any
successor rules ("Rule 16b-3"), such that all grants of Awards hereunder shall
be exempt under such rule. Those provisions of the Program which make express
reference to Rule 16b-3 or which are required in order for certain option
transactions to qualify for exemption under Rule 16b-3 shall apply only to such
persons as are required to file reports under Section 16(a) of the Exchange Act
(a "Reporting Person").
e. Applicability of Section 162(m). Those provisions of the
Program which are required by or make express reference to Section 162(m) of the
Code or any regulations thereunder, or any successor section of the Code or
regulations thereunder ("Section 162(m)") shall apply only upon the Company's
becoming a company that is subject to Section 162(m). Notwithstanding any
provisions in this Program to the contrary, whenever the Board is authorized to
exercise its discretion in the administration or amendment of this Program or
any Award hereunder or otherwise, the Board may not exercise such discretion in
a manner that would cause any outstanding Award that otherwise would qualify as
performance-based compensation under Section 162(m) to fail to so qualify under
Section 162(m).
5. Stock Available for Awards.
a. Number of Shares. Subject to adjustment under Section 5c, the
aggregate number of shares of Common Stock that may be issued under the Program
upon the exercise of all Options (as defined in Section 6a hereof) or the
satisfaction by all recipients of all conditions necessary for the receipt of
Restricted Stock Awards (as defined in Section 7a hereof) shall not exceed
6,000,000, of which 1,000,000 shares shall be available for issuance under
Incentive Stock Options (as defined in Section 6b hereof) and 5,000,000 shares
shall be available for issuance under Nonqualified Stock Options (as defined in
Section 6c hereof) and/or Restricted Stock Awards. The 1,000,000 shares of
Common Stock available for issuance under Incentive Stock Options shall be
increased annually, starting with the calendar year following the calendar year
in which the Program is adopted, by 5% of the excess, if any, of (i) the total
number of issued and outstanding shares of Common Stock as of the first day of
the fiscal year of the Company beginning with or within any such subsequent
calendar year over (ii) the total number of issued and outstanding shares of
Common Stock as of the date on which the Program is adopted; provided, however,
that, as of the date of any such annual increase, the total number of shares of
Common Stock available for issuance under Incentive Stock Options under the
Program shall not exceed 15% of the total number of authorized shares of Common
Stock as of the date on which the Program is adopted. The 5,000,000 shares of
Common Stock available for issuance under Nonqualified Stock Options and/or
Restricted Stock Awards shall be increased annually, starting with the calendar
year following the calendar year in which the Program is adopted, by the sum of
(i) 15% of the excess, if any, of (A) the total number of issued and outstanding
shares of Common Stock at the time the first such Award is made during such
subsequent calendar year over (B) the total number of issued and outstanding
shares of Common Stock as of the date on which the Program is adopted, (ii) the
total number of shares of Common Stock repurchased by the Company under the
Program during the preceding calendar year and (iii) the total number of shares
of Common Stock surrendered to the Company during the preceding calendar year in
payment of the exercise price of Nonqualified Stock Options; provided, however,
that, as of the date of any such annual increase, the total number of shares of
Common Stock available for issuance under Nonqualified Stock Options and/or
Restricted Stock Awards shall not exceed 50% of the total number of authorized
shares of Common Stock as of the date on which the Program is adopted. If any
Award expires, or is terminated or forfeited, in whole or in part, the unissued
shares of Common Stock covered by such Award shall again be available for the
grant of Awards under the Program. If an Award granted under the Program shall
expire or terminate for any reason without having been exercised in full, the
unpurchased shares of Common Stock subject to such Award shall again be
available for subsequent Awards under the Program. The re-use of shares of
Common Stock pursuant to the preceding sentences of this Section 5a shall in no
way, in and of itself, increase the aggregate number of shares of Common Stock
that may be issued under the Program. Shares issued under the Program may
consist in whole or in part of authorized but unissued shares or treasury
shares.
b. Per-Participant Limit. Subject to adjustment under Section 5c,
no Participant may be granted Awards during any one calendar year to purchase or
receive more than 100,000 shares of Common Stock.
16
c. Adjustment to Common Stock. Subject to Section 9, in the event
of any stock split, reverse stock split, stock dividend, extraordinary cash
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off, split-up, or other similar change in
capitalization or event, (i) the number and class of securities available for
Awards under the Program and the per-Participant share limit, (ii) the number
and class of securities, vesting schedule and exercise price per share subject
to each outstanding Option, (iii) the repurchase price per security subject to
repurchase, and (iv) the terms of each other outstanding stock-based Award shall
be adjusted by the Company (or substituted Awards may be made, if applicable) to
the extent that the Board determines, in good faith, and without the need for
the consent of any Participant, that such an adjustment (or substitution) is
appropriate.
Notwithstanding any provision of this Program to the contrary,
and without the need for the consent or any Participant, the Board, in its sole
discretion, may make any modifications to any Award, including, but not limited
to, effecting a cancellation, forfeiture, surrender or other termination of the
Award, in whole or in part, regardless of the vested status of the Award, in
order to facilitate any business combination that is authorized by the Board.
Further, the Board is authorized to make, in its sole discretion, and without
the need for the consent of any Participant, adjustments in the terms and
conditions of, and the criteria included in, any Award in recognition of unusual
or nonrecurring events affecting the Company or any Affiliate, or the financial
statements of the Company or any Affiliate, or of changes in applicable laws,
regulations, or accounting principles, whenever the Board determines that such
adjustments are appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Program.
The Board's rights described in this paragraph shall apply only if it
determines, in good faith, that the modification or adjustment of the Award(s)
will not impair any Participant's rights with respect to such Award(s)
(determined without regard to the preceding sentences of this paragraph). If the
Board determines, in good faith, that any such impairment would occur, it shall
not effect the modification or adjustment unless it obtains the consent of the
affected Participant(s) or unless the right to do so is expressly set forth in
the applicable Award instrument(s).
6. Stock Options.
a. General. The Board may grant options to purchase Common Stock
(each, an "Option") and determine the number of shares of Common Stock to be
covered by each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option and the Common Stock
issued upon the exercise of each Option, including, but not limited to, vesting
provisions, repurchase provisions and restrictions relating to applicable
federal or state securities laws.
b. Incentive Stock Options. An Option that the Board intends to
be an incentive stock option (an "Incentive Stock Option") as defined in Section
422 of the Code, as amended, or any successor statute ("Section 422"), shall be
granted only to employees of the Company or any of its Affiliates and shall be
subject to and shall be construed consistently with the requirements of Section
422 and regulations thereunder. Each Incentive Stock Option shall be subject to
the terms of this Section 6 applicable to Incentive Stock Options, the terms of
any applicable grant instrument (to the extent such instrument is not
inconsistent with or supersedes this Program) and the general conditions
applicable to all Awards set forth in Section 9 hereof. Neither the Board nor
the Company or any of its Affiliates shall have any liability if an Option or
any part thereof that is intended to be an Incentive Stock Option does not
qualify as such.
c. Nonqualified Stock Options. An Option or any part thereof that
does not qualify as an Incentive Stock Option is referred to herein as a
"Nonqualifed Stock Option" or a "Nonstatutory Stock Option." Each Nonqualified
Stock Option or Nonstatutory Stock Option shall be subject to the terms of this
Section 6 applicable to such an Option, the terms of any applicable grant
instrument (to the extent such instrument is not inconsistent with or supersedes
this Program) and the general conditions applicable to all Awards set forth in
Section 9 hereof.
d. Dollar Limitation. For so long as the Code shall so provide,
Options granted to any employee under the Program (and any other incentive stock
option programs of the Company) which are intended to qualify as Incentive Stock
Options shall not qualify as Incentive Stock Options to the extent that such
Options, in the aggregate, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate fair market value
(determined as of the respective date or dates of grant) of more than $100,000.
The amount of Incentive Stock Options which exceed such $100,000 limitation
shall be deemed to be Nonqualified Stock Options. For the purpose of this
17
limitation, unless otherwise required by the Code or regulations of the Internal
Revenue Service or determined by the Board, Options shall be taken into account
in the order granted, and the Board may designate that portion of any Incentive
Stock Option that shall be treated as Nonqualified Stock Option in the event
that the provisions of this paragraph apply to a portion of any Option. The
designation described in the preceding sentence may be made at such time as the
Board considers appropriate, including after the issuance of the Option or at
the time of its exercise.
e. Exercise Price. The Board shall establish the exercise price
(or determine the method by which the exercise price shall be determined) at the
time each Option is granted and specify the exercise price in the applicable
option agreement. In the case of an Incentive Stock Option granted to a
Participant who, at the time of grant of such Option, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any of its Affiliates, the exercise price shall be no less than 110%
of the Fair Market Value (as defined in Section 11) of the underlying Common
Stock on the date of grant. In the case of a grant of an Incentive Stock Option
to any other Participant, the exercise price shall be no less than 100% of the
Fair Market Value of the underlying Common Stock on the date of grant.
f. Duration of Options. Each Option shall be exercisable at such
times and subject to such terms and conditions as the Board may specify in the
applicable option agreement; provided, however, that the term of any Incentive
Stock Option may not be more than ten (10) years from the date of grant. In the
case on an Incentive Stock Option granted to a Participant who, at the time of
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Affiliate, the term
of the Option shall be no longer than five (5) years from the date of grant.
g. Exercise of Option. Options may be exercised only by delivery
to the Company of a written notice of exercise signed by the proper person
together with payment in full as specified in Section 6(h) or the option
agreement for the number of shares of Common Stock for which the Option is
exercised.
h. Payment Upon Exercise. Common Stock purchased upon the
exercise of an Option shall be paid for by one or any combination of the
following forms of payment as permitted by the Board in its sole or absolute
discretion:
i by cash;
ii by certified check payable to the order of the
Company;
iii only if the Common Stock is then publicly traded, by
delivery of an irrevocable and unconditional undertaking by a creditworthy
broker (selected by the Participant and otherwise without the financial
involvement of the Company or any Affiliate) to deliver promptly to the Company
sufficient funds to pay the exercise price, or delivery by the Participant to
the Company of a copy of irrevocable and unconditional instructions to a
creditworthy broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price (each, a "Cashless Exercise");
iv to the extent explicitly provided in the applicable
option agreement, by delivery of shares of Common Stock owned by the Participant
valued at fair market value (as determined by the Board or as determined
pursuant to the applicable option agreement);
v subject to section 9n, by delivery of a promissory
note of the Participant, with full recourse to the Participant, to the Company
(and delivery to the Company by the Participant of a check in an amount equal to
the par value of the shares of Common Stock purchased); or
vi payment of such other lawful consideration as the
Board may determine.
Except as otherwise expressly set forth in an Option Award, the Company shall
have no obligation to accept consideration other than cash and, in particular,
unless the Board so expressly provides, in no event will the Company accept the
delivery of shares of Common Stock that have not been owned by the Participant
for at least six months prior to the exercise. Subject to the preceding
sentence, an individual Award instrument for an Option may provide for a reload
18
option with respect to the exercise of such Option, such that upon payment of
the exercise price with previously acquired shares of Common Stock, the
Participant is granted one or more Options to purchase additional shares of
Common Stock under the Program. The fair market value of any shares of Common
Stock or other non-cash consideration which may be delivered upon exercise of an
Option shall be determined in such manner as may be prescribed by the Board.
i. Acceleration, Extension, Etc. The Board may, in its sole
discretion, and in all instances subject to any relevant tax and accounting
considerations which may adversely impact or impair the Company, any Affiliate
or any Participant (with respect to his or her rights under a previously granted
Option), (i) accelerate the date or dates on which all or any particular Options
or Awards granted under the Program may be exercised, or (ii) extend the dates
during which all or any particular Options or Awards granted under the Program
may be exercised.
j. Determination of Fair Market Value. If, at the time an Option
is granted under the Program, the Company's Common Stock is publicly traded
under the Exchange Act, "Fair Market Value" shall mean (i) if the Common Stock
is listed on any established stock exchange or a national market system,
including, without limitation, the Nasdaq National Market and The Nasdaq Small
Cap Market of The Nasdaq Stock Market, the last reported sales price for such
stock (on that date) or the closing bid, if no sales were reported as quoted on
such exchange or system, as reported in The Wall Street Journal or such other
source as the Board deems reliable; or (ii) the average of the closing bid and
asked prices last quoted (on that date) by an established quotation service for
over-the-counter securities (e.g., the OTC Bulletin Board), if the Common Stock
is not reported on a national market system. In the absence of an established
market for the Common Stock, the Fair Market Value thereof shall be determined
in good faith by the Board after taking into consideration all factors which it
deems appropriate.
7. Restricted Stock.
a. Grants. The Board may grant Awards entitling recipients to
acquire shares of Common Stock, subject to (i) delivery to the Company by the
Participant of a check in an amount at least equal to the par value of the
shares purchased, and (ii) the right of the Company to repurchase all or part of
such shares at their issue price or other stated or formula price from the
Participant in the event that conditions specified by the Board in the
applicable Award are not satisfied prior to the end of the applicable
restriction period or periods established by the Board for such Award (each, a
"Restricted Stock Award"). Restricted Stock Awards are subject to forfeiture
unless and until all specified employment, vesting and/or performance conditions
are met, as determined by the Board and set forth in the particular grant
instruments applicable to such Awards.
b. Terms and Conditions. The Board shall determine the terms and
conditions of any such Restricted Stock Award. Any stock certificates issued in
respect of a Restricted Stock Award shall be registered in the name of the
Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
the Company's counsel as its designee). After the expiration of the applicable
restriction periods, the Company (or such designee) shall deliver the
certificates no longer subject to such restrictions to the Participant or, if
the Participant has died, to the beneficiary designated by a Participant, in a
manner determined by the Board, to receive amounts due or exercise rights of the
Participant in the event of the Participant's death (the "Designated
Beneficiary"). In the absence of an effective designation by a Participant,
Designated Beneficiary shall mean the Participant's estate.
8. Other Stock-Based Awards. The Board shall have the right to grant other
Awards based upon Common Stock, having such terms and conditions as the Board
may determine, including, without limitation, the grant of shares based upon
certain conditions, the grant of securities convertible into Common Stock and
the grant of stock appreciation rights, phantom stock awards or stock units.
Nothing in this Section 8 shall be construed as giving the Board the right to
grant any Award that would render all or any portion of the Program subject to
any of the provisions of ERISA.
9. General Provisions Applicable to Awards.
a. Transferability of Awards. Except as the Board otherwise may
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution, and, during the life of the Participant, shall be
19
exercisable only by the Participant; provided, however, that Nonstatutory
Options may be transferred pursuant to a qualified domestic relations order (as
defined in Rule 16a-12 promulgated under the Exchange Act) or to a
grantor-retained annuity trust or a similar estate-planning vehicle in which the
trust is bound by all provisions of the Option which are applicable to the
optionee. Notwithstanding the preceding sentence, no transfer to a trust shall
be made to the extent that such transfer would violate the requirements of IRS
Notice 2003-47 and the IRS regulations referred to therein or any successor
guidance with respect to the issues addressed in such notice and regulations.
References to a Participant, to the extent relevant in the context, shall
include references to authorized transferees.
b. Documentation. Each Award under the Program shall be evidenced
by a written instrument in such form as the Board shall determine or as executed
by an officer of the Company pursuant to authority delegated by the Board.
c. Board Discretion. The terms of each type of Award need not be
identical, and the Board need not treat Participants uniformly.
d. Additional Award Provisions. The Board may, in its sole
discretion, include additional provisions in any Award granted under the
Program, including without limitation restrictions on transfer, repurchase
rights, commitments to pay cash bonuses, to make, arrange for or guaranty loans
(subject to Section 9n hereof) or to transfer other property to Participants
upon exercise of Options, or such other provisions as shall be determined by the
Board; provided that such additional provisions shall not be inconsistent with
any other term or condition of the Program (except as otherwise provided in the
written Award instrument) or applicable law.
e. Termination of Status. The Board shall determine the effect on
an Award of the disability, death, retirement, authorized leave of absence or
other change in the employment or other status of a Participant and the extent
to which, and the period during which, the Participant, or the Participant's
legal representative, conservator, guardian or Designated Beneficiary, may
exercise rights under the Award, subject to applicable law and the provisions of
the Code related to Incentive Stock Options.
f. Change in Control of the Company.
Unless otherwise expressly provided in the applicable Award
instrument, upon the occurrence of a Change in Control, the Board shall, in its
sole discretion as to outstanding Awards (on the same basis or on different
bases, as the Board shall specify), take one or more of the following actions:
A. make appropriate provision for the continuation of
such Awards by the Company or for the assumption of such Awards by the surviving
or acquiring entity, by substituting on an equitable basis for the shares of
Common Stock then subject to such Awards (x) the consideration payable with
respect to the outstanding shares of Common Stock in connection with the Change
in Control, (y) shares of stock of the surviving or acquiring corporation or (z)
such other securities as the Board deems appropriate, the fair market value of
which (as determined by the Board in its sole discretion) shall not materially
differ from the Fair Market Value of the shares of Common Stock subject to such
Awards immediately preceding the Change in Control;
B. accelerate the date of exercise or vesting of such
Awards or of any installment of any such Awards;
C. permit the exchange of all Awards for the right to
participate in any stock option or other employee benefit program (not subject
to ERISA) of any successor corporation; or
D. subject to the requirement that any affected
Participant consent, provide for the termination of any such Awards immediately
prior to the consummation of the Change in Control.
g. Change in Control Defined. A "Change in Control" shall mean
the earliest to occur of any of the following events:
20
i a change in the identity of a majority or more of the
directors comprising the Board over any two-year period;
ii the acquisition by a third party (other than a Person
or Group, each as defined in Section 11, that is an Affiliate constituting a
subsidiary or otherwise is controlled by or under common control with the
Company, as determined by the Board in its sole discretion) of Beneficial
Ownership, as defined in Section 11, of 50% or more of the outstanding voting
securities of the Company;
iii the commencement of a tender or exchange offer the
consummation of which would result in Beneficial Ownership by a Person (other
than (x) the Company, (y) any Affiliate constituting a subsidiary of the
Company, (z) any Person or Group controlled by or under common control with the
Company, as determined by the Board in its sole discretion, or (aa) any Employee
Benefit Plan, as defined in Section 11, maintained or established by the Company
or any entity described in (y) or (z) or any entity that holds voting securities
for or pursuant to such Employee Benefit Plan) of 50% or more of the outstanding
voting securities of the Company; or
iv as the result of, or in connection with, any cash
tender or exchange offer, merger, consolidation or other business combination,
sale or disposition of all or Substantially All of the Company's assets, or
contested election, or any combination of the foregoing transactions (a
"Transaction"), the failure of the Persons who were directors of the Company
immediately before the Transaction to constitute a majority of the board of
directors of the Company or any successor to such entity, or the failure of the
Persons who were stockholders of the Company immediately before the Transaction
to own at least 50% of the outstanding voting securities of the Company or any
successor to such entity.
h. Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify each
Participant as soon as practicable prior to the effective date of such proposed
transaction. The Board, in its sole discretion, may provide for a Participant to
have the right to exercise his or her Award until fifteen (15) days prior to
such transaction as to all of the Common Stock covered by the Award, including
shares as to which the Award would not otherwise be exercisable, which exercise
may, in the sole discretion of the Board, be made subject to and conditioned
upon the consummation of such proposed transaction. In addition, the Board may
provide that any Company repurchase option applicable to any Common Stock
purchased upon exercise of an Award shall lapse as to all such Common Stock,
provided the proposed dissolution and liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Award will terminate upon the consummation of such proposed action.
i. Assumption of Stock-Based Awards. In connection with a merger
or consolidation of an entity with the Company or the acquisition by the Company
of property or stock of an entity, the Board may grant Awards under the Program
in substitution for stock and stock-based awards issued by such entity or an
affiliate thereof. The substitute Awards shall be granted on such terms and
conditions as the Board considers appropriate in the circumstances.
j. Parachute Payments and Parachute Awards. Notwithstanding the
provisions of Section 10f, if, in connection with an Acquisition described
therein, a tax under Section 4999 of the Code would be imposed on the
Participant (after taking into account the exceptions set forth in Sections
280G(b)(4) and 280G(b)(5) of the Code), then the number of Awards which shall
become exercisable, realizable or vested as provided in such Section shall be
reduced (or delayed), to the minimum extent necessary, so that no such tax would
be imposed on the Participant (the Awards not becoming so accelerated,
realizable or vested, the "Parachute Awards").
k. Amendment of Awards. The Board may amend, modify or terminate
any outstanding Award including, but not limited to, substituting therefor
another Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
l. Conditions on Delivery of Stock. The Company will not be
obligated to deliver any shares of Common Stock pursuant to the Program or to
remove restrictions from shares previously delivered under the Program until (i)
all conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
21
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
m. Acceleration. The Board may at any time provide that any
Options shall become immediately exercisable in full or in part, that any
Restricted Stock Awards shall be free of some or all restrictions, or that any
other stock-based Awards may become exercisable in full or in part or free of
some or all restrictions or conditions, or otherwise realizable in full or in
part, as the case may be, despite the fact that the foregoing actions may (i)
cause the application of Sections 280G and 4999 of the Code if a change in
control (as defined in the regulations under Section 280G) of the Company
occurs, or (ii) disqualify all or part of the Option as an Incentive Stock
Option.
n. Sarbanes-Oxley Act Compliance. Notwithstanding any provision
of the Program to the contrary, the Board, in accordance with any applicable
rules or regulations promulgated by the Securities and Exchange Commission (the
"SEC") and/or the United States Department of Labor, shall (i) notify in a
timely manner each Participant who is a Reporting Person with respect to the
Company or any Affiliate of any transaction occurring under the Program or any
grant agreement on or after August 29, 2002 that requires reporting by the
Reporting Person on SEC Form 4 or 5 as applicable, each as revised pursuant to
changes to Exchange Act Rule 16a-3, 16a-6 or 16a-8, as applicable, made by
Sarbanes-Oxley Act of 2002, P.L. No. 107-204 (the "Act"); (ii) otherwise comply
with all notice, disclosure and reporting requirements applicable to the Program
pursuant to such Act; and (iii) prohibit the making or guaranteeing of loans
under Section 7c of this Program to the extent necessary to comply with Section
402 of the Act.
o. Withholding. The Company shall have the right to deduct from
payments of any kind otherwise due to the optionee or recipient of an Award any
federal, state or local taxes of any kind required by law to be withheld with
respect to any shares of Common Stock issued upon exercise of an Option or
purchase of shares of Common Stock subject to an Award, as the case may be.
Subject to the prior approval of the Company, which may be withheld by the
Company in its sole discretion, the optionee or recipient of an Award may elect
to satisfy such obligation, in whole or in part, (a) by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an Option or the purchase of shares subject to an Award or (b) by delivering to
the Company shares of Common Stock already owned by the optionee or Award
recipient. The shares so delivered or withheld shall have a Fair Market Value of
the shares used to satisfy such withholding obligation, determined by the
Company as of the date that the amount of tax to be withheld is to be
determined. An optionee or Award recipient who has made an election pursuant to
this Section may only satisfy his or her withholding obligation with shares of
Common Stock which are not subject to any repurchase, forfeiture, unfulfilled
vesting or other similar requirements.
p. Forfeiture of Award if Service or Employment Terminated for
Cause. If the employment or service of any Participant is terminated for
"Cause," the Award may terminate, upon a determination of the Board, on the date
of such termination, and all rights of the Participant with respect to such
Award shall thereupon cease to exist (including the right to exercise any
Option). For purposes of this Section 9, "Cause" shall be defined as follows:
(i) if the Participant has executed an employment agreement, the definition of
"cause" contained therein, if any, shall govern, or (ii) conduct, as determined
by the Board, involving one or more of the following: (a) gross misconduct or
inadequate performance by the Participant which is injurious to the Company; (b)
the commission of an act of embezzlement, fraud or theft, which results in
economic loss, damage or injury to the Company; (c) the unauthorized disclosure
of any trade secret or confidential information of the Company (or any client,
customer, supplier or other third party who has a business relationship with the
Company) or the violation of any noncompetition or nonsolicitation covenant or
assignment of inventions obligation with the Company; (d) the commission of an
act which constitutes unfair competition with the Company or which induces any
customer or prospective customer of the Company to break a contract with the
Company or to decline to do business with the Company; (e) the indictment of the
Participant for a felony or serious misdemeanor offense, either in connection
with the performance of his obligations to the Company or which shall adversely
affect the Participant's ability to perform such obligations; (f) the commission
of an act of fraud or breach of fiduciary duty which results in loss, damage or
injury to the Company; (g) the failure of the Participant to perform in a
material respect his or her employment obligations without proper cause. In
making such determination, the Board shall act fairly and in utmost good faith.
The Board may in its discretion waive or modify the provisions of this Section
at a meeting of the Board with respect to any individual Participant with regard
22
to the facts and circumstances of any particular situation involving a
determination under this Section. For purposes of this Section 9p, "Company"
includes any "Affiliate."
10. Miscellaneous.
a. Shareholder Approval. The effectiveness of this Program shall
be subject to the satisfaction of any applicable shareholder approval
requirements under applicable law, including, but not limited to, any such
requirements listed under Section 162(m) and/or Section 422 or the rules of any
national, regional or over-the-counter securities exchange on which the Common
Stock or any Award may be traded.
b. No Right to Employment or Other Status. No person shall have
any claim or right to be granted an Award, and the grant of an Award shall not
be construed as giving a Participant the right to continued employment or any
other relationship with the Company or an Affiliate. The Company or Affiliate,
as applicable, expressly reserves the right at any time to dismiss or otherwise
terminate its relationship with a Participant free from any liability or claim
under the Program.
c. No Rights As Stockholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
with respect to an Award until becoming the record holder thereof.
d. Effective Date and Term of Program. Subject to Section 10a
hereof, the Program shall become effective on the date on which it is adopted by
the Board (the "Effective Date"). No Awards shall be granted under the Program
after the completion of ten years from the date on which the Program was adopted
by the Board, but Awards previously granted may extend beyond that date.
e. Amendment or Termination of Program. The Board may amend,
suspend or terminate the Program or any portion thereof at any time. As such
amendment, suspension or termination shall be implemented pursuant to a
resolution of the Board.
f. No Trust Fund or ERISA Plan Created. Neither the Program nor
any Award granted thereunder shall create or be construed as creating a trust or
separate fund of any kind or a fiduciary relationship between the Company or any
Affiliate and a Participant, Designated Beneficiary or any other person. To the
extent that any Participant, Designated Beneficiary or any other person acquires
any Award under this Program, his or her rights with respect thereto shall be
not greater than the rights of any unsecured general creditor of the Company
and/or any of its Affiliates. No provision of this Program shall be construed as
subjecting any portion of this Program to any requirements of ERISA.
g. Program Controls. In the case of any conflict between the
terms of this Program and the terms of any Award instrument, the terms of this
Program will control, unless the Award instrument expressly provides that the
terms of such instrument will control.
h. Governing Law. The provisions of the Program and all Awards
made hereunder shall be governed by and interpreted in accordance with the laws
of the state of incorporation of the Company (Delaware), without regard to any
applicable conflicts of law.
11. Definitions.
a. Affiliate. A parent corporation or subsidiary corporation of
the Company, within the meaning of Sections 424(e) and 424(f) of the Code,
respectfully. Effective as of the Effective Date, Advanced Imaging Systems, LLC
shall be an Affiliate for all purposes of this Program.
b. Beneficial Ownership. "Beneficial Ownership" (or words of
similar import) within the meaning of Rule 13d-3(a) promulgated under the
Exchange Act.
c. Code. The Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder.
23
d. Employee. For purposes of eligibility under the Program
(except with respect to Awards of Incentive Stock Options), "employee" shall
include any person to whom an offer of employment has been granted by the
Company or any Affiliate.
e. Employee Benefit Plan. Any of the following:
i. each plan described in Section 3(3) of ERISA in which
any current or past employee of the Company or any Affiliate participates or has
participated, as the case may be;
ii each plan described in Section 3(3) of ERISA with
respect to which the Company or any Affiliate is or ever was a sponsor or
participating employer, as the case may be;
iii each plan described in Section 3(3) of ERISA with
respect to which the Company or any Affiliate makes or is required to make, or
made or was required to make contributions, or
iv each plan established or maintained by the Company or
any Affiliate constituting a subsidiary, irrespective of whether such plan is
described in Section 3(3) of ERISA, in which, immediately prior to an event with
otherwise would trigger an Acquisition, the Company's securities are held as an
investment option or form or benefit payment.
f. ERISA. The Employee Retirement Income Security Act of 1974 as
amended.
g. Gross Assets. Total assets as reported on the Company's most
recent audited financial statements (in accordance with United States generally
accepted accounting principles) issued prior to the transaction.
h. Group. "Group" within the meaning of Section 13(d)(3) of the
Exchange Act.
i. Net Assets. Total assets as reported on the Company's most
recent audited financial statements (in accordance with United States generally
accepted accounting principles) issued prior to the transaction, less any
short-term liabilities, as so reported.
j. Option Exercise Program. A program whereby outstanding
OSptions are exchanged for Options with a lower exercise price.
k. Person. "Person" within the meaning of Section 3(a)(9) of the
Exchange Act.
l. Substantially All. At least 90% of the Fair Market Value of
the Company's Net Assets and at least 70% of the Fair Market Value of the
Company's Gross Assets. For purposes of this Section, "Fair Market Value" means
value as determined by the Board in accordance with such factors as the Board,
in its sole discretion, shall deem appropriate.
Date Approved by the Board: July 21, 2003
A.M.S. MARKETING, INC.
By: /s/ ALFRED M. SCHIFFRIN
-----------------------
Alfred M. Schiffrin
President
Date: July 21, 2003
24