Schedule 14C
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box.
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[ ] Definitive Information Statement
LMKI, INC.
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(Name of Registrant as Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and O-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form Schedule or Registration Statement No.:
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4) Date Filed:
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LMKI, INC.
3355 MICHELSON DRIVE, SUITE 300
IRVINE, CALIFORNIA 92612
To Our Stockholders:
Notice is hereby given that on November 8, 2000, the Board of Directors
and the holders of a majority of the issued and outstanding voting securities
(the "CONSENTING STOCKHOLDERS") of LMKI, Inc., a Nevada corporation (the
"COMPANY"), granted approval of:
The Amended and Restated 1999 Stock Option Plan and the 2000 Stock
Option Plan.
The Board of Directors fixed the close of business on November 8, 2000
as the record date for the determination of stockholders entitled to vote with
respect to the above action. The Consenting Stockholders, whose outstanding
securities represent approximately 66.2% of the Company's outstanding securities
entitled to vote on the above action, have consented to the above action.
Therefore, because the Company has the requisite amount of stockholder votes
necessary to approve this action, the Company does not intend to hold a special
stockholders meeting to consider this action and is not soliciting proxies from
the other stockholders. In lieu thereof, the Company has prepared an Information
Statement pursuant to Section 14c of the Securities Exchange Act of 1934
describing the action, which is expected to become fully effective on or about
January 30, 2001.
All necessary corporate approvals in connection with the matters
referred to herein have been obtained.
By Order of the Board of Directors
Bryan L. Turbow.
Chief Executive Officer
Irvine, California
January 22, 2001
LMKI, INC.
3355 MICHELSON DRIVE, SUITE 300
IRVINE, CALIFORNIA 92612
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INFORMATION STATEMENT
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WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
This Information Statement is being furnished to the stockholders of
record as of November 8, 2000 (the "RECORD DATE") of LMKI, Inc., a Nevada
corporation (the "COMPANY"), in connection with the Company's approval of the
Amended and Restated 1999 Stock Option Plan and the 2000 Stock Option Plan.
On November 8, 2000, the Board of Directors (the "BOARD") and the
holders of a majority of outstanding voting securities of the Company on the
Record Date (the "CONSENTING STOCKHOLDERS") approved the Amended and Restated
1999 Stock Option Plan and the 2000 Stock Option Plan by written consent. The
Board believes that such actions are in the best interest of LMKI and its
stockholders. A copy of the Unanimous Written Consent in Lieu of Special Meeting
of the Directors and a copy of the Written Consent of the Majority Stockholders
are attached as EXHIBIT "A" and EXHIBIT "B," respectively. The Company will
cause the amendment to the Articles of Incorporation to become effective twenty
(20) days after this Information Statement is first sent to the stockholders of
the Company.
REQUISITE STOCKHOLDER APPROVAL
------------------------------
OUTSTANDING SECURITIES AND VOTING RIGHTS
As of the Record Date (November 8, 2000), there were issued and
outstanding 41,796,795 shares of the Company's common stock, $0.001 par value
(the "COMMON STOCK") and 3,700 shares of the Company's preferred stock, $0.001
par value (the "PREFERRED STOCK"). The Consenting Stockholders held
approximately 27,680,000 shares of Common Stock, or approximately 66.2% of the
Company's issued and outstanding Common Stock.
Each holder of Common Stock would normally be entitled to one vote in
person or by proxy for each share of Common Stock in his or her name on the
books of the Company, as of the Record Date, on any matter submitted to the vote
of stockholders. However, under Nevada Revised Statutes Section 78.315(2), any
action which may be taken at stockholders meeting may be taken by written
consent of the requisite number of stockholders required to take such action.
The approval of the Amended and Restated 1999 Stock Option Plan and the 2000
Stock Option Plan require the affirmative vote or written consent of a majority
of the Company's outstanding Common Stock. On November 8, 2000, the Consenting
Stockholders approved the Amended and Restated 1999 Stock Option Plan and the
2000 Stock Option Plan.
The corporate action described in this Information Statement will not afford the
stockholders the opportunity to dissent from the action described herein or to
receive an agreed or judicially appraised value for their shares.
THE CONSENTING STOCKHOLDERS
Stockholders of the Company, representing voting rights equal to
approximately 66.2% of the shares entitled to vote on Company matters, have
delivered written consents to approve the Amended and Restated 1999 Stock Option
Plan and the 2000 Stock Option Plan.
The following table summarizes the security ownership of the
Consenting Stockholders of the Company:
Number of Common Percentage of
Shares Entitled to Vote Common Stock
Name As of Record Date As of Record Date
---- ----------------- -----------------
William Kettle 15,680,000 37.5%
Bryan Turbow 12,000,000 28.7%
These shares represent approximately 66.2% of the outstanding Common
Stock of the Company. Therefore, the proposal has been approved by written
consent of the Consenting Stockholders and will take effect twenty (20) days
after this Information Statement is first sent to the stockholders.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to the beneficial
ownership of the capital stock of the Company as of November 8, 2000, by: (i)
each person known to the Company to beneficially own more than five percent (5%)
of the capital stock of the Company; (ii) each of the Company's directors; (iii)
certain of the Company's executive officers; and (iv) all executive officers and
directors as a group.
Approximate
Name Address No. of Shares Owned Percentage Owned
- --------------------------------------------------------------------------------------------------------------------
William J. Kettle (1)(3) 1700 East Garry Ave., Suite 203 15,680,000 37.5%
Santa Ana, CA 92705
Bryan L. Turbow (2) 3355 Michelson Dr., Suite 300
Irvine, CA 92612 12,000,000 28.7%
Barry Hall (2) 3861 Sepulveda Blvd.
Culver City, CA 90230 75,000 *
Teresa Throenle (2) 8303 Alondra Boulevard, 2nd Fl
Paramount, CA 90723 25,000 *
John W. Diehl, Jr. (4) 2972 Mindanao Drive
Costa Mesa, CA 92626 500,000 1.2%
A. Maria Kettle (1) 1700 East Garry Ave., Suite 203
Santa Ana, CA 92705 20,000 *
Christopher Capadouca (2)(7) 3355 Michelson Dr., Suite 300
Irvine, CA 92612 100,000 *
Named Officers and Directors
as a Group (3 persons) - 12,250,000 29%
- ---------------
* Less than 1%
(1) William J. Kettle and Maria Kettle resigned from all positions with
Company effective August 8, 2000. The shares held by William Kettle are
subject to an irrevocable proxy pursuant to which all shares held by
him in excess of 19.99% of the outstanding shares are voted by Barry
Hall, Leonard Kajimoto, and Peter Hobbs as proxy holders.
(2) Current Officer and/or Director.
(3) Includes 7,000,000 shares held by the Chapman Group, a trust in which
William Kettle is the Trustee.
(4) John Diehl resigned as Chief Financial Officer on August 28, 2000.
(5) Represents options to purchase 75,000 shares of common stock.
(6) Represents options to purchase 25,000 shares of common stock.
(7) Represents options to purchase 100,000 shares of common stock.
Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. Shares of stock subject to options or warrants currently
exercisable, or exercisable within 60 days, are deemed outstanding for purposes
of computing the percentage of the person holding such options or warrants, but
are not deemed outstanding for purposes of computing the percentage of any other
person.
STOCK OPTION PLANS
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PURPOSE
The Amended and Restated 1999 Stock Option Plan and the 2000 Stock
Option Plan (the "PLANS") offer selected employees, directors, and consultants
an opportunity to acquire a proprietary interest in the success of the Company,
or to increase such interest, to encourage such selected persons to remain in
the employ of the Company and to attract new employees with outstanding
qualifications. The Plans seek to achieve this purpose by providing for Awards
in the form of Restricted Shares and Options, which may constitute Incentive
Stock Options (ISO) or Non-statutory Stock Options (NSO), as well as the direct
award or sale of Shares of the Company's Common Stock. The Amended and Restated
1999 Stock Option Plan and the 2000 Stock Option Plan are attached as EXHIBIT
"C" and EXHIBIT "D," respectively.
ADMINISTRATION
The Plans shall be administered by the Compensation Committee (the
"COMMITTEE") appointed by the Company's Board of Directors and comprised of at
least two or more Outside Directors. If no Committee has been appointed, the
entire Board shall constitute the Committee. The Board shall designate one of
the members of the Committee as chairperson. The Committee may hold meetings at
such times and places as it shall determine. The acts of a majority of the
Committee members present at meetings at which a quorum exists, or acts reduced
to or approved in writing by all Committee members shall be valid acts of the
Committee. The Committee has authority in its discretion to determine eligible
Employees to whom, and the time or times, Awards may be granted and the number
of Shares subject to each Award. The Committee also has authority to prescribe,
amend, and rescind rules and regulations relating to the Plans.
ELIGIBILITY
Under both plans only Employees shall be eligible for designation as
Participants by the Committee. An "Employee" shall mean (i) any individual who
is a Common-Law Employee of the Company or of a subsidiary, (ii) a member of the
Board of Directors, including an Outside Director, or an affiliate of a member
of the Board of Directors, (iii) a member of the board of directors of a
Subsidiary, or (iv) an independent contractor who performs services for the
Company or a Subsidiary.
An Employee who owns more than ten percent (10%) of the total combined
voting power of all classes of outstanding stock of the Company or any of its
Subsidiaries shall not be eligible for designation as an Offeree or Optionee
unless (i) the Exercise Price for an ISO (and a NSO to the extent required by
applicable law) is at least one hundred ten percent (110%) of the Fair Market
Value of a Share on the date of grant, (ii) if required by applicable law, the
Purchase Price of Shares is at least one hundred percent (100%) of the Fair
Market Value of a share on the date of grant, and (iii) in the case of an ISO,
such ISO by its terms is not exercisable after the expiration of five years from
the date of grant.
STOCK SUBJECT TO PLAN
Shares offered under the Plans shall be authorized but unissued Shares.
Subject to Section 5(b) and 9 of the Plans, the aggregate number of Shares that
may be issued or transferred as Common Stock pursuant to an Award under the
Plans shall not exceed 5,000,000 shares.
TERMS OF AWARDS OR SALES
Each award of sale of Shares under the Plans shall be evidenced by a
Stock Purchase Agreement between the Offeree and the Company. Any right to
acquire Shares under the Plans shall automatically expire if not exercised by
the Offeree within 30 days after the grant of such right was communicated to the
Offeree by the Committee. Unless otherwise permitted by applicable law, the
Purchase Price of Shares to be offered under the Plans shall not be less than
eighty-five percent (85%) of the Fair Market Value of a Share on the date of
grant (100% for 10% or 5% shareholders), except as otherwise provided in Section
4(b) of the Plans. Then entire Purchase Price of Shares issued under the Plans
shall be payable in lawful money of the United States of America at the time
when such Shares are purchased.
TERMS OF OPTIONS
Each grant of Options under the Plans shall be evidenced by a Stock
Option Agreement between the Optionee and the Company. Such Option shall be
subject to all applicable terms and conditions of the Plans and may be subject
to any other terms and conditions which are not inconsistent with the Plans and
which the Committee deems appropriate for inclusion in a Stock Option Agreement.
Each Stock Option Agreement shall also specify the number of Shares that are
subject to the Option and shall provide for the adjustment of such number in
accordance with Section 9 of the Plans. The Exercise Price of ISO shall not be
less than one hundred percent (100%) of the Fair Market Value of a Share on the
date of grant, except as otherwise provided in Section 4(b) of the Plans. To the
extent required by applicable law and except as otherwise provided in Section
4(b), the Exercise price of a Nonstatutory Option shall not be less than
eighty-five percent (85%) of the Fair Market Value of a Share on the date of
grant. Subject to the preceding two sentences, the Exercise Price under any
Option shall be determine by the Committee in its sole discretion.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Under current tax law, a holder of stock options under the Plans does
not, as a general matter, realize taxable income upon the grant or exercise
thereof. In general, a holder of stock options will only recognize gain at the
time the Common Stock, acquired through exercise of the stock option, is sold or
otherwise disposed of. In that situation, the amount of gain that the optionee
must recognize is equal to the amount by which the value of the common stock on
the date of the sale or other disposition exceeds the option price.
NEW PLAN BENEFITS
As of November 8, 2000, the Company has granted to Employees options to
purchase 1,154,300 shares of Common Stock under the 2000 Stock Option Plan.
Under the 1999 Stock Option Plan, the Company has granted to Employees 4,000,000
options to purchase shares of Common Stock. Both the 1999 Amended and Restated
Stock Option Plan and the 2000 Stock Option Plan were adopted by the Board of
the Company on November 7, 2000.
The following table sets forth certain information concerning
outstanding Options under the Stock Option Plans granted to (i) all current
executive officers as a group, (ii) all current directors who are not executive
officers as a group, (iii) all employees who are not executive officers as a
group and (iv) the current non-executive officers required to be disclosed
hereunder.
Dollar Value Number of Units Dollar Value Number of Units
Name and Position of 1999 Plan of 1999 Plan of 2000 Plan of 2000 Plan
- -----------------------------------------------------------------------------------------------------------
Bryan L. Turbow - - - -
CEO, CTO, Director (1)
William J. Kettle
CEO (2) - 3,000,000 - -
Adela Maria Kettle
COO (3) - - - -
John W. Diehl, Jr.
CFO (4) - 500,000 - 200,000
Christopher Capadouca
CIO (5) - - - 350,000
Executive Group (6) - 3,500,000 - 350,000
Non-Executive Group (7) - 500,000 (8) - 175,000
Non-Executive Officer
Employee Group - 0 - 804,300
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(1) Bryan Turbow was not granted options under either plans.
(2) Willian Kettle resigned from all positions with the Company effective
August 8, 2000. Mr. Kettle was granted 3,000,000 options to purchase
shares of common stock under the 1999 Stock Option Plan, exercisable at
$.03 per share. 1,000,000 were cancelled pursuant to Mr. Kettle's
Severance and Release Agreement. The remaining 2,000,000 options were
cancelled as of August 31, 2000 pursuant to Mr. Kettle's authorization.
(3) Adela Maria Kettle resigned from all positions with the Company effective
August 8, 2000. Mrs. Kettle has no options under either Plans.
(4) John Diehl resigned from all positions with the Company effective August
28, 2000. Mr. Diehl was granted 500,000 options under the 1999 Amended and
Restated Stock Option Plan, which were exercisable at $.031 per share. Mr.
Diehl was granted an additional 200,000 options under the 2000 Stock
Option Plan, exercisable at $4.00 per share. The 200,000 options granted
to Mr. Diehl were subsequently cancelled because he failed to exercise
them within 30 days after his resignation as required by his Separation
Agreement.
(5) Mr. Capadouca's options for shares of common stock are exercisable at
$7.00 per share. One hundred thousand (100,000) options vested upon the
start of Mr. Capadouca's employment. Options to purchase an additional
100,000 shares shall vest over a three-year period (at a rate of 1/3 per
year) of employment. Such options will be exercisable at $7.00 per share.
Options to purchase the remaining one hundred fifty thousand (150,000)
shall vest upon the completion of three years of employment.
(6) The executive group currently comprises Mr. Turbow and Mr. Capadouca.
(7) The current non-executive director group comprises Teresa Throenle and
Barry Hall. Ms. Throenle was granted 25,000 options to purchase shares of
common stock, which are vested and exercisable at $3.97 per share. Mr.
Hall was granted 125,000 options to purchase shares of common stock, which
vest quarterly, beginning on September 1, 2000, and exercisable at $1.44
per share.
(8) Robert Weaver, one of the Company's former directors, was granted 500,000
options to purchase shares of common stock under the 1999 stock option
plan, exercisable at $ 0.031 per share.
Based on the closing price of the Company Common stock as of November 8, 2000,
the market value per share of the Company Common Stock underlying the Options
was $0.53, as reported by Bloomberg L.P.
EXECUTIVE COMPENSATION
----------------------
ANNUAL COMPENSATION TABLE
The following table sets forth information concerning the compensation
paid by the Company, for services rendered for the last three complete fiscal
years to the officers, directors, and the four other most highly compensated
executive officers of the Company whose salary and bonus exceed $100,000 during
the fiscal year ended 2000.
Annual Compensation Long Term Compensation
Securities
Other Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options Compensation
- -----------------------------------------------------------------------------------------------------------------------
Bryan L. Turbow 2000 $120,000 - - - -
CEO, CTO, Director 1999 $120,000 - - - -
1998 - - - - -
Willam J. Kettle 2000 $120,000 - - - $120,000
CEO (1) 1999 - - - 3,000,000 -
1998 - - - 4,000,000 -
John W. Diehl, Jr. 2000 $120,000 - - 200,000 $45,000
CFO (2) 1999 - - - - -
1998 - - - - -
Maria Kettle 2000 $120,000 - - - $120,000
COO (3) 1999 - - - - -
1998 - - - - -
Christopher Capadouca 2000 $150,000 - - 350,000 -
CIO (4) 1999 - - - - -
1998 - - - - -
- ---------------
(1) Bryan Turbow became interim CEO after the resignation of William Kettle on
August 8, 2000. For Fiscal Year 2000, the Company paid Mr. Turbow an
annual compensation of $120,000. For Fiscal Year 1999, the Company paid
Mr. Turbow an annual compensation of $120,000.
(2) For Fiscal Year 2000, William Kettle was paid an annual salary of
$120,000. For Fiscal Year 1999, in lieu of compensation, Mr. Kettle was
granted 3,000,000 options to purchase shares of common stock at $.031 per
share, vesting immediately, and 4,000,000 shares of Restricted Common
Stock. For Fiscal Year 1998, in lieu of compensation, Mr. Kettle was
granted 4,000,000 options to purchase shares of common stock at $.062 per
share and 4,000,000 shares of Restricted Common Stock. On August 8, 2000,
Mr. Kettle resigned from all positions with the Company, and pursuant to
Mr. Kettle's Severance Agreement and Release, the Company will pay him an
additional $120,000 for the Fiscal Year 2001, payable in 12 equal monthly
installments, due on the 10th of each month, commencing on August 2000.
(3) In addition to John Diehl's base salary of $120,000, he was granted
200,000 options to purchase shares of the Company's common stock at $4.00
per share. On August 28, 2000, Mr. Diehl resigned from all positions with
the Company. Because he did not exercise the 200,000 options within 30
days after his departure from the Company, as per his employment
agreement, the options were cancelled. Pursuant to his Separation
Agreement, Mr. Diehl was be retained as a consultant for 3 months and the
Company paid him $45,000.
(4) For Fiscal Year 2000, the Company paid Adela Maria Kettle $120,000. On
August 8, 2000, Mrs. Kettle resigned from all positions with the Company,
and pursuant to her Severance Agreement and Release, the Company will pay
her an additional $120,000 for the Fiscal Year 2001.
(5) In addition to Chritopher Capadouca's annual base salary of 150,000, he
was granted options to purchase 350,000 shares of common stock pursuant to
the 2000 Stock Option Plan, exercisable at $7.00 per share. Options to
purchase 100,000 shares of common stock vested upon the start of Mr.
Capadouca's employment. Options to purchase an additional 100,000 shall
vest over a three-year period (at a rate of 1/3 per year) of employment.
Options to purchase the remaining one hundred fifty thousand (150,000)
shall vest upon the completion of three years of employment.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning grants to
purchase shares of the Company's Common Stock to each of the officers named in
the summary compensation table above who were granted stock options by the
Company during the fiscal year ended August 31, 2000.
Individual Grants Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
for Option Term
Percent of
Number of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10(%)
- ------------------------------------------------------------------------------------------------------------------------
Bryan L. Turbow - - - - - -
CEO, CTO, Director (1)
William J. Kettle
CEO (2) - - - - - -
John W. Diehl, Jr.
CFO (3) 200,000 13.6% $4.00 - - -
Maria Kettle
COO (4) - - - - - -
Christopher Capadouca
CIO (5) 350,000 24% $7.00 - $122,500 $245,000
- ---------------
(1) The Company did not grant Bryan Turbow stock options during the fiscal
year ended August 31, 2000.
(2) The Company did not grant William Kettle stock options during the fiscal
year ended August 31, 2000.
(3) The Company granted John Diehl 200,000 options to purchase shares of the
Company's common stock at $4.00 per share. All 200,000 options were,
subsequently, cancelled because Mr. Diehl did not exercise them within 30
days after his departure from the Company, as per his Separation
Agreement.
(4) The Company did not grant Adela Maria Kettle stock options during the
fiscal year ended August 31, 2000.
(5) The Company granted Christopher Capadouca options to purchase 350,000
shares of common stock pursuant to the 2000 Stock Option Plan, exercisable
at $7.00 per share. Options to purchase 100,000 shares of common stock
vested upon the start of Mr. Capadouca's employment. Options to purchase
an additional 100,000 share shall vest over a three-year period (at a rate
of 1/3 per year) of employment. Options to purchase the remaining one
hundred fifty thousand (150,000) shall vest upon the completion of three
years of employment. All options will expire 3 years after vesting.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table sets forth information concerning exercises of
options by the Company's officers named in the table during the fiscal year
ended August 31, 2000.
Number of Securities Value of
Underlying Unexercised Unexercised in-
Options/SARs at fiscal the-money
year end (#) options/SARs
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------
Bryan L. Turbow - - - -
CEO, CTO, Director (1)
William J. Kettle
CEO (2) - - - -
Maria Kettle
COO (3) - - - -
John W. Diehl
CFO (4) 500,000 4,765,500 200,000 -
Christopher Capadouca
CIO (5) - - 100,000 -
- ---------------
(1) Bryan Turbow did not receive options to purchase shares under either
plans.
(2) As part of William Kettle's compensation, he received 3,000,000 options to
purchase shares of Company's common stock at $.031; however, they were
never exercised, and pursuant to Mr. Kettle's authorization, the 3,000,000
shares were subsequently cancelled.
(3) Adela Maria Kettle was not granted options to purchase shares of Company's
common stock.
(4) John Diehl exercised his 500,000 options to purchase shares of Company's
common stock on January 31, 2000. The options were granted on January 1,
2000, pursuant to the 1999 Stock Option Plan. The options were exercisable
at $.031 per share. Mr. Diehl was also granted 200,000 options to purchase
shares of the Company's common stock under the 2000 Stock Option Plan.
These options, which are generally exercisable for up to 10 years after
vesting, were not exercised and, subsequently, were cancelled in November
2000 because Mr. Diehl did not exercise the options within 30 days of his
resignation per his employment agreement.
(5) Christopher Capadouca was granted 350,000 options pursuant to the 2000
Stock Option Plan. 100,000 options vested upon the start of employment;
the remainder would vest over the next 3 years.
Based on the closing price of the Company common stock as of August 8, 2000, the
market value per share of the Company Common Stock underlying the options was
$1.81, as reported by Bloomberg L.P.
COMPENSATION OF DIRECTORS
Currently no directors receive any cash-based salary from the Company
and will not do so until the Company raises additional funding. Upon the Company
successfully raising additional capital, the Company's Advisory Directors will
receive for their services an annual fee between $10,000 to $25,000.
Additionally, such directors will also be reimbursed by the Company for their
expenses in attending meetings of the Board of Directors or any Committee
thereof.
EMPLOYMENT CONTRACTS
The Company and Mr. Christopher Capadouca are parties to an employment
agreement dated May 1, 2000 and terminating April 30, 2003. Under the agreement,
Mr. Capadouca will receive an annual salary of One Hundred and Fifty Thousand
Dollars ($150,000). The Company shall review this amount annually, and the
Company shall determine, in its sole discretion, whether Mr. Capadouca's salary
shall be increased, with such determination to be made on the basis of an
evaluation of Executive's performance, the performance of the company, and other
factors as Company deems appropriate. Mr. Capadouca shall be eligible to receive
an annual bonus up to twenty percent (20%) of his then current annual salary.
Additionally, subject to approval of the Directors, the Company shall grant to
Mr. Capadouca options to purchase an aggregate of 350,000 shares of the
Company's common stock pursuant to the 2000 Stock Option Plan, exercisable at
$7.00 per share. Options to purchase One Hundred Thousand (100,000) shares shall
vest upon the start of employment. Options to purchase an additional 100,000
shares shall vest over a 3 year period (at a rate of 1/3 per year) of
employment. Options to purchase the remaining One Hundred Fifty Thousand
(150,000) share shall vest on April 14, 2001.
No employment agreement currently exists between the Company and Mr.
Bryan Turbow. The Company, however, anticipates that it will enter into an
employment agreement with Mr. Turbow in the near future. Mr. William Kettle, Ms.
Adela Kettle, and Mr. John Diehl have all resigned from their positions as of
August 31, 2000.
OTHER BUSINESS
No further business will be transacted by Written Consent to corporate
action in lieu of meeting of stockholders to which this Information Statement
pertains.
COSTS OF INFORMATION STATEMENT
This Information Statement has been prepared by the Company and its
Board of Directors, and the Company will bear the costs of distributing this
Information Statement to stockholders, including the expense of preparing,
assembling, printing, and mailing the Information Statement and attached
materials. Although there is no formal agreement to do so, the Company may
reimburse banks, brokerage houses, and other custodians, nominees and
fiduciaries for their reasonable expenses in forwarding this Information
Statement and related materials to stockholders. The Company may pay for and use
the services of other individuals or companies not regularly employed by the
Company in connection with the distribution of this Information Statement if the
Board of Directors of the Company determines that this is advisable.
By Order of the Board of Directors
Bryan L. Turbow
Chief Executive Officer
EXHIBIT A
---------
WRITTEN CONSENT
OF THE MAJORITY STOCKHOLDERS
OF LMKI, INC.,
a Nevada corporation
The undersigned, being the majority stockholders of LMKI, INC., a
Nevada corporation (the "Corporation"), acting pursuant to the authority of
Nevada Revised Statutes Section 78.320(2), hereby adopt the following recitals
and resolutions by written consent thereto, effective as of November 8, 2000,
hereby waiving all notice to and the holding of a meeting to act upon such
resolutions.
APPROVAL OF AMENDED AND RESTATED 1999 STOCK OPTION PLAN AND
-----------------------------------------------------------
NEW 2000 STOCK OPTION PLAN
--------------------------
WHEREAS, it is deemed to be in the best interest of the Corporation to adopt an
employee stock option plan for the years 1999 and 2000.
RESOLVED, the Majority Stockholders accepts, approves, and adopts the
Corporation's Amended and Restated 1999 Stock Option Plan.
RESOLVED, the Majority Stockholders accepts, approves, and adopts the
Corporation's 2000 Stock Option Plan.
FURTHER RESOLVED, this written Consent may be executed by facsimile and
in one or more counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned, being the majority stockholders of
the Corporation, have executed this Written Consent of the Majority Stockholders
of LMKI, Inc. effective as of November 8, 2000.
/s/ Bryan L. Turbow
-------------------------------------------------
BRYAN L. TURBOW
(Holder of 31.8% of Common Stock)
Voting proxy for William J. Kettle's shares (20%)
Requires 2 of the 3 signors below
/s/ Barry Hall
-------------------------------------------------
Barry Hall
/s/ Leonard Kajimoto
-------------------------------------------------
Leonard Kajimoto
-------------------------------------------------
Peter Hobbs
EXHIBIT B
---------
UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS
OF
LMKI, INC.,
A Nevada corporation
The undersigned, being all of the directors of LMKI, Inc., a Nevada
corporation (the "Corporation"), acting pursuant to the authority vested in them
by Nevada Revised Statutes Section 78.315(2), hereby adopt the following
recitals and resolutions by their unanimous written consent thereto, effective
November 7, 2000, hereby waiving all notice to and the holding of a meeting of
the Board of Directors (the "Board") to act upon such resolutions.
Approval of Amended and Restated 1999 Stock Option Plan
-------------------------------------------------------
and 2000 Stock Option Plan
--------------------------
WHEREAS, the Board deems it to be in the best interest of the
Corporation to adopt an employee stock option plan for the years 1999 and 2000.
RESOLVED, the Board accepts, approves, and adopts the Corporation's
Amended and Restated 1999 Stock Option Plan.
RESOLVED, the Board accepts, approves, and adopts the Corporation's
2000 Stock Option Plan.
RESOLVED FURTHER, this Unanimous Written Consent may be executed by
facsimile and in one or more counterparts, each of which shall be deemed to be
an original, but all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned, being all of the directors of the
Corporation, have executed this Unanimous Written Consent of the Board of
Directors of LMKI, Inc. to be effective as of November 7, 2000.
/s/ Teresa M. Throenle /s/ Bryan L. Turbow
- ---------------------------------- ----------------------------------
Teresa M. Throenle Bryan L. Turbow
/s/ Barry Hall
- ---------------------------------
Barry Hall
EXHIBIT C
---------
LMKI, INC.
AMENDED AND RESTATED 1999 STOCK OPTION PLAN
TABLE OF CONTENTS
PAGE
----
SECTION 1. PURPOSE...........................................................1
SECTION 2. DEFINITIONS.......................................................1
(a) "Award"....................................................1
(b) "Board of Directors".......................................1
(c) "Change in Control"........................................1
(d) "Code".....................................................2
(e) "Committee"................................................2
(f) "Common-Law Employee"......................................2
(g) "Company"..................................................2
(h) "Employee".................................................2
(i) "Exchange Act".............................................2
(j) "Exercise Price"...........................................2
(k) "Fair Market Value"........................................2
(l) "Incentive Stock Option" or "ISO"..........................3
(m) "Nonstatutory Option" or "NSO".............................3
(n) "Offeree"..................................................3
(o) "Option"...................................................3
(p) "Optionee".................................................3
(q) "Outside Director".........................................3
(r) "Participant"..............................................3
(s) "Plan".....................................................4
(t) "Purchase Price"...........................................4
(u) "Restricted Share".........................................4
(v) "Service"..................................................4
(w) "Share"....................................................4
(x) "Stock"....................................................4
(y) "Stock Award Agreement"....................................4
(z) "Stock Option Agreement"...................................4
(aa) "Stock Purchase Agreement".................................4
(bb) "Subsidiary"...............................................5
(cc) "Total and Permanent Disability"...........................5
(dd) "W-2 Payroll"..............................................5
SECTION 3. ADMINISTRATION....................................................5
(a) Committee Membership.......................................5
(b) Committee Procedures.......................................5
(c) Committee Responsibilities.................................5
(d) Committee Liability........................................6
(e) Financial Reports..........................................6
-i-
SECTION 4. ELIGIBILITY.......................................................6
(a) General Rule...............................................6
(b) Ten-Percent Shareholders...................................6
(c) Attribution Rules..........................................6
(d) Outstanding Stock..........................................7
SECTION 5. STOCK SUBJECT TO PLAN.............................................7
(a) Basic Limitation...........................................7
(b) Additional Shares..........................................7
SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES...........................7
(a) Stock Purchase Agreement...................................7
(b) Duration of Offers.........................................8
(c) Purchase Price.............................................8
(d) Payment for Shares.........................................8
(e) Exercise of Awards on Termination of Service...............9
SECTION 7. ADDITIONAL TERMS AND CONDITIONS OF RESTRICTED.....................9
(a) Form and Amount of Award...................................9
(b) Exercisability.............................................9
(c) Effect of Change in Control................................9
(d) Voting Rights..............................................9
SECTION 8. TERMS AND CONDITIONS OF OPTIONS..................................10
(a) Stock Option Agreement....................................10
(b) Number of Shares..........................................10
(c) Exercise Price............................................10
(d) Exercisability............................................10
(e) Effect of Change in Control...............................10
(f) Term......................................................10
(g) Exercise of Options on Termination of Service.............11
(h) Payment of Option Shares..................................11
(i) No Rights as a Shareholder................................11
(j) Modification, Extension and Assumption of Options.........11
SECTION 9. ADJUSTMENT OF SHARES.............................................12
(a) General...................................................12
(b) Reorganizations...........................................12
(c) Reservation of Rights.....................................12
SECTION 10. WITHHOLDING TAXES...............................................12
(a) General...................................................12
(b) Share Withholding.........................................12
(c) Cashless Exercise/Pledge..................................13
(d) Other Forms of Payment....................................13
-ii-
SECTION 11. ASSIGNMENT OR TRANSFER OF AWARDS................................13
(a) General...................................................13
(b) Trusts....................................................13
SECTION 12. LEGAL REQUIREMENTS..............................................13
SECTION 13. NO EMPLOYMENT RIGHTS............................................14
SECTION 14. DURATION AND AMENDMENTS.........................................14
(a) Term of the Plan..........................................14
(b) Right to Amend or Terminate the Plan......................14
(c) Effect of Amendment or Termination........................14
-iii-
LMKI, INC. 2000 STOCK OPTION PLAN
---------------------------------
SECTION 1. PURPOSE.
- -------------------
The purpose of the 2000 Stock Option Plan (the "Plan") is to offer
selected employees, directors and consultants an opportunity to acquire a
proprietary interest in the success of the Company, or to increase such
interest, to encourage such selected persons to remain in the employ of the
Company and to attract new employees with outstanding qualifications. The Plan
seeks to achieve this purpose by providing for Awards in the form of Restricted
Shares and Options (which may constitute Incentive Stock Options or Nonstatutory
Stock Options) as well as the direct award or sale of Shares of the Company's
Common Stock. While this Plan is intended to satisfy federal Rule 701 and
Section 25102(o) of the California Corporations Code, awards may be granted
under this Plan in reliance upon other federal and state securities law
exemptions and to the extent another exemption is relied upon, the terms of this
Plan which are required only because of Rule 701 or Section 25102(o) need not
apply to the extent provided by the Committee in the award agreement.
SECTION 2. DEFINITIONS.
- -----------------------
(a) "AWARD" shall mean any award of an Option, Restricted Share or
other right under the Plan.
(b) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company, as constituted from time to time.
(c) "CHANGE IN CONTROL" shall mean:
(i) The consummation of a merger, consolidation, sale of the
Company's stock, or other reorganization of the Company (other than a
reincorporation of the Company), if after giving effect to such merger,
consolidation or other reorganization of the Company, the stockholders
of the Company immediately prior to such merger, consolidation or other
reorganization do not represent a majority interest of the holders of
voting securities (on a fully diluted basis) with the ordinary voting
power to elect directors of the surviving or resulting entity after
such merger, consolidation or other reorganization; or
(ii) The sale of all or substantially all of the assets of the
Company to a third party who is not an affiliate of the Company.
(iii) The term Change in Control shall not include: (a) a
transaction the sole purpose of which is to change the state of the
Company's incorporation, or (b) the Company's initial public offering.
-1-
(d) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" shall mean a committee of the Board of Directors which
is authorized to administer the Plan under Section 3.
(f) "COMMON-LAW EMPLOYEE" shall mean an individual paid from W-2
Payroll of the Company or a Subsidiary. If, during any period, the Company (or
Subsidiary, as applicable) has not treated an individual as a Common-Law
Employee and, for that reason, has not paid such individual in a manner which
results in the issuance of a Form W-2 and withheld taxes with respect to him or
her, then that individual shall not be an eligible Employee for that period,
even if any person, court of law or government agency determines, retroactively,
that that individual is or was a Common-Law Employee during all or any portion
of that period.
(g) "COMPANY" shall mean LMKI, Inc.
(h) "EMPLOYEE" shall mean (i) any individual who is a Common-Law
Employee of the Company or of a Subsidiary, (ii) a member of the Board of
Directors, including (without limitation) an Outside Director, or an affiliate
of a member of the Board of Directors, (iii) a member of the board of directors
of a Subsidiary, or (iv) an independent contractor who performs services for the
Company or a Subsidiary. Service as a member of the Board of Directors, a member
of the board of directors of a Subsidiary or an independent contractor shall be
considered employment for all purposes of the Plan except the second sentence of
Section 4(a).
(i) "EXCHANGE ACT" means the Securities and Exchange Act of 1934, as
amended.
(j) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.
(k) "FAIR MARKET VALUE" means the market price of Shares, determined by
the Committee as follows:
(i) If the Shares were traded over-the-counter on the date in
question but were not traded on the Nasdaq Stock Market or the Nasdaq
National Market System, then the Fair Market Value shall be equal to
the mean between the last reported representative bid and asked prices
quoted for such date by the principal automated inter-dealer quotation
system on which the Shares are quoted or, if the Shares are not quoted
on any such system, by the "Pink Sheets" published by the National
Quotation Bureau, Inc.;
(ii) If the Shares were traded over-the-counter on the date in
question and were traded on the Nasdaq Stock Market or the Nasdaq
National Market System, then the Fair Market Value shall be equal to
the last-transaction price quoted for such date by the Nasdaq Stock
Market or the Nasdaq National Market;
(iii) If the Shares were traded on a stock exchange on the
date in question, then the Fair Market Value shall be equal to the
closing price reported by the applicable composite transactions report
for such date; and
-2-
(iv) If none of the foregoing provisions is applicable, then
the Fair Market Value shall be determined by the Committee in good
faith on such basis as it deems appropriate.
In all cases, the determination of Fair Market Value by the Committee
shall be conclusive and binding on all persons.
(l) "INCENTIVE STOCK OPTION" OR "ISO" shall mean an employee incentive
stock option described in Code section 422(b).
(m) "NONSTATUTORY OPTION" OR "NSO" shall mean an employee stock option
that is not an ISO.
(n) "OFFEREE" shall mean an individual to whom the Committee has
offered the right to acquire Shares under the Plan (other than upon exercise of
an Option).
(o) "OPTION" shall mean an Incentive Stock Option or Nonstatutory
Option granted under the Plan and entitling the holder to purchase Shares.
(p) "OPTIONEE" shall mean an individual or estate who holds an Option.
(q) "OUTSIDE DIRECTOR" shall mean a member of the Board who is not a
Common-Law Employee of the Company or a Subsidiary.
(r) "PARTICIPANT" shall mean an individual or estate who holds an
Award.
-3-
(s) "PLAN" shall mean this 2000 Stock Option Plan of LMKI, Inc.
(t) "PURCHASE PRICE" shall mean the consideration for which one Share
may be acquired under the Plan (other than upon exercise of an Option), as
specified by the Committee.
(u) "RESTRICTED SHARE" shall mean a Share sold or granted to an
eligible Employee which is nontransferable and subject to substantial risk of
forfeiture until restrictions lapse.
(v) "SERVICE" shall mean service as an Employee.
(w) "SHARE" shall mean one share of Stock, as adjusted in accordance
with Section 9 (if applicable).
(x) "STOCK" shall mean the common stock of the Company.
(y) "STOCK AWARD AGREEMENT" shall mean the agreement between the
Company and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Share.
(z) "STOCK OPTION AGREEMENT" shall mean the agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his or her Option.
(aa) "STOCK PURCHASE AGREEMENT" shall mean the agreement between the
Company and an Offeree who acquires Shares under the Plan which contains the
terms, conditions and restrictions pertaining to the acquisition of such Shares.
-4-
(bb) "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.
(cc) "TOTAL AND PERMANENT DISABILITY" means that the Optionee is unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment.
(dd) "W-2 PAYROLL" means whatever mechanism or procedure that the
Company or a Subsidiary utilizes to pay any individual which results in the
issuance of Form W-2 to the individual. "W-2 Payroll" does not include any
mechanism or procedure which results in the issuance of any form other than a
Form W-2 to an individual, including, but not limited to, any Form 1099 which
may be issued to an independent contractor, an agency employee or a consultant.
Whether a mechanism or procedure qualifies as a "W-2 Payroll" shall be
determined in the absolute discretion of the Company (or Subsidiary, as
applicable), and the Company or Subsidiary determination shall be conclusive and
binding on all persons.
SECTION 3. ADMINISTRATION.
- --------------------------
(a) COMMITTEE MEMBERSHIP. The Plan shall be administered by the
Compensation Committee (the "Committee") appointed by the Company's Board of
Directors and comprised of at least two or more Outside Directors (although
Committee functions may be delegated to officers to the extent the awards relate
to persons who are not subject to the reporting requirements of Section 16 of
the Exchange Act). If no Committee has been appointed, the entire Board shall
constitute the Committee.
(b) COMMITTEE PROCEDURES. The Board of Directors shall designate one of
the members of the Committee as chairperson. The Committee may hold meetings at
such times and places as it shall determine. The acts of a majority of the
Committee members present at meetings at which a quorum exists, or acts reduced
to or approved in writing by all Committee members, shall be valid acts of the
Committee.
(c) COMMITTEE RESPONSIBILITIES. The Committee has and may exercise such
power and authority as may be necessary or appropriate for the Committee to
carry out its functions as described in the Plan. The Committee has authority in
its discretion to determine eligible Employees to whom, and the time or times at
which, Awards may be granted and the number of Shares subject to each Award.
Subject to the express provisions of the respective Award agreements (which need
not be identical) and to make all other determinations necessary or advisable
for Plan administration, the Committee has authority to prescribe, amend, and
rescind rules and regulations relating to the Plan. All interpretations,
determinations, and actions by the Committee will be final, conclusive, and
binding upon all persons.
-5-
(d) COMMITTEE LIABILITY. No member of the Board or the Committee will
be liable for any action or determination made in good faith by the Committee
with respect to the Plan or any Award made under the Plan.
(e) FINANCIAL REPORTS. To the extent required by applicable law, and
not less often than annually, the Company shall furnish to Offerees, Optionees
and Shareholders who have received Stock under the Plan its financial statements
including a balance sheet regarding the Company's financial condition and
results of operations, unless such Offerees, Optionees or Shareholders have
duties with the Company that assure them access to equivalent information. Such
financial statements need not be audited.
SECTION 4. ELIGIBILITY.
- -----------------------
(a) GENERAL RULE. Only Employees shall be eligible for designation as
Participants by the Committee. In addition, only individuals who are employed as
Common-Law Employees by the Company or a Subsidiary shall be eligible for the
grant of ISOs.
(b) TEN-PERCENT SHAREHOLDERS. An Employee who owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
stock of the Company or any of its Subsidiaries shall not be eligible for
designation as an Offeree or Optionee unless (i) the Exercise Price for an ISO
(and a NSO to the extent required by applicable law) is at least one hundred ten
percent (110%) of the Fair Market Value of a Share on the date of grant, (ii) if
required by applicable law, the Purchase Price of Shares is at least one hundred
percent (100%) of the Fair Market Value of a Share on the date of grant, and
(iii) in the case of an ISO, such ISO by its terms is not exercisable after the
expiration of five years from the date of grant.
(c) ATTRIBUTION RULES. For purposes of Subsection (b) above, in
determining stock ownership, an Employee shall be deemed to own the stock owned,
directly or indirectly, by or for his brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries. Stock
with respect to which such Employee holds an Option shall not be counted.
-6-
(d) OUTSTANDING STOCK. For purposes of Subsection (b) above,
"outstanding stock" shall include all stock actually issued and outstanding
immediately after the grant. "Outstanding Stock" shall not include shares
authorized for issuance under outstanding Options held by the Employee or by any
other person.
SECTION 5. STOCK SUBJECT TO PLAN.
- ---------------------------------
(a) BASIC LIMITATION. Shares offered under the Plan shall be authorized
but unissued Shares. Subject to Sections 5(b) and 9 of the Plan, the aggregate
number of Shares which may be issued or transferred as common stock pursuant to
an Award under the Plan shall not exceed 5,000,000 Shares.
In any event, (i) the number of Shares which are subject to Awards or
other rights outstanding at any time under the Plan shall not exceed the number
of Shares which then remain available for issuance under the Plan; and (ii) to
the extent an award is made in reliance upon the exemption available under
Section 25102(o) of the California Corporations Code, the number of Shares which
are subject to Awards or other rights outstanding at any time under the Plan or
otherwise shall not exceed the limitation imposed by Section 260.140.45 of Title
10 of the California Code of Regulations. The Company, during the term of the
Plan, shall at all times reserve and keep available sufficient Shares to satisfy
the requirements of the Plan.
(b) ADDITIONAL SHARES. In the event that any outstanding Option or
other right for any reason expires or is canceled or otherwise terminated, the
Shares allocable to the unexercised portion of such Option or other right shall
again be available for the purposes of the Plan. If a Restricted Share is
forfeited before any dividends have been paid with respect to such Restricted
Share, then such Restricted Share shall again become available for award under
the Plan.
SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES.
- ---------------------------------------------------
(a) STOCK PURCHASE AGREEMENT. Each award or sale of Shares under the
Plan (other than upon exercise of an Option) shall be evidenced by a Stock
Purchase Agreement between the Offeree and the Company. Such award or sale shall
be subject to all applicable terms and conditions of the Plan and may be subject
to any other terms and conditions which are not inconsistent with the Plan and
which the Committee deems appropriate for inclusion in a Stock Purchase
Agreement. The provisions of the various Stock Purchase Agreements entered into
under the Plan need not be identical.
-7-
(b) DURATION OF OFFERS. Any right to acquire Shares under the Plan
(other than an Option) shall automatically expire if not exercised by the
Offeree within 30 days after the grant of such right was communicated to the
Offeree by the Committee.
(c) PURCHASE PRICE. Unless otherwise permitted by applicable law, the
Purchase Price of Shares to be offered under the Plan shall not be less than
eighty-five percent (85%) of the Fair Market Value of a Share on the date of
grant (100% for 10% shareholders), except as otherwise provided in Section 4(b).
Subject to the preceding sentence, the Purchase Price shall be determined by the
Committee in its sole discretion. The Purchase Price shall be payable in a form
described in Subsection (d) below.
(d) PAYMENT FOR SHARES. The entire Purchase Price of Shares issued
under the Plan shall be payable in lawful money of the United States of America
at the time when such Shares are purchased, except as provided below:
(i) SURRENDER OF STOCK. To the extent that a Stock Option
Agreement so provides, payment may be made all or in part with Shares
which have already been owned by the Optionee or Optionee's
representative for any time period specified by the Committee and which
are surrendered to the Company in good form for transfer. Such shares
shall be valued at their Fair Market Value on the date when the new
Shares are purchased under the Plan.
(ii) PROMISSORY NOTES. To the extent that a Stock Option
Agreement or Stock Purchase Agreement so provides, payment may be made
all or in part with a full recourse promissory note executed by the
Optionee or Offeree. The interest rate and other terms and conditions
of such note shall be determined by the Committee. The Committee may
require that the Optionee or Offeree pledge his or her Shares to the
Company for the purpose of securing the payment of such note. In no
event shall the stock certificate(s) representing such Shares be
released to the Optionee or Offeree until such note is paid in full.
(iii) CASHLESS EXERCISE. To the extent that a Stock Option
Agreement so provides and a public market for the Shares exists,
payment may be made all or in part by delivery (on a form prescribed by
the Committee) of an irrevocable direction to a securities broker to
sell shares and to deliver all or part of the sale proceeds to the
Company in payment of the aggregate Exercise Price.
(iv) OTHER FORMS OF PAYMENT. To the extent provided in the
Stock Option Agreement, payment may be made in any other form that is
consistent with applicable laws, regulations and rules.
-8-
(e) EXERCISE OF AWARDS ON TERMINATION OF SERVICE. Each Stock Award
Agreement shall set forth the extent to which the recipient shall have the right
to exercise the Award following termination of the recipient's Service with the
Company and its Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, need not be uniform among all the Awards issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination of employment.
SECTION 7. ADDITIONAL TERMS AND CONDITIONS OF RESTRICTED SHARES.
- ----------------------------------------------------------------
(a) FORM AND AMOUNT OF AWARD. Each Stock Award Agreement shall specify
the number of Shares that are subject to the Award. Restricted Shares may be
awarded in combination with NSOs and such an Award may provide that the
Restricted Shares will be forfeited in the event that the related NSOs are
exercised.
(b) EXERCISABILITY. Each Stock Award Agreement shall specify the
conditions upon which Restricted Shares shall become vested, in full or in
installments. To the extent required by applicable law, each Stock Award shall
become exercisable no less rapidly than the rate of 20% per year for each of the
first five years from the date of grant. Subject to the preceding sentence, the
exercisability of any Stock Award shall be determined by the Committee in its
sole discretion.
(c) EFFECT OF CHANGE IN CONTROL. The Committee may determine at the
time of making an Award or thereafter, that such Award shall become fully
vested, in whole or in part, in the event that a Change in Control occurs with
respect to the Company.
(d) VOTING RIGHTS. Holders of Restricted Shares awarded under the Plan
shall have the same voting, dividend and other rights as the Company's other
stockholders. A Stock Award Agreement, however, may require that the holders
invested any cash dividends received in additional Restricted Shares. Such
additional Restricted Shares shall be subject to the same conditions and
restrictions as the Award with respect to which the dividends were paid. Such
additional Restricted Shares shall not reduce the number of Shares available
under Section 5.
-9-
SECTION 8. TERMS AND CONDITIONS OF OPTIONS.
- -------------------------------------------
(a) STOCK OPTION AGREEMENT. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms and conditions of
the Plan and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Committee deems appropriate for
inclusion in a Stock Option Agreement. The provisions of the various Stock
Option Agreements entered into under the Plan need not be identical.
(b) NUMBER OF SHARES. Each Stock Option Agreement shall specify the
number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 9. The Stock Option
Agreement shall also specify whether the Option is an ISO or a Nonstatutory
Option.
(c) EXERCISE PRICE. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price of an ISO shall not be less than one hundred
percent (100%) of the Fair Market Value of a Share on the date of grant, except
as otherwise provided in Section 4(b). To the extent required by applicable law
and except as otherwise provided in Section 4(b), the Exercise Price of a
Nonstatutory Option shall not be less than eighty-five percent (85%) of the Fair
Market Value of a Share on the date of grant. Subject to the preceding two
sentences, the Exercise Price under any Option shall be determined by the
Committee in its sole discretion. The Exercise Price shall be payable in a form
described in Subsection (h) below.
(d) EXERCISABILITY. Each Stock Option Agreement shall specify the date
when all or any installment of the Option is to become exercisable. To the
extent required by applicable law, an Option shall become exercisable no less
rapidly than the rate of 20% per year for each of the first five years from the
date of grant. Subject to the preceding sentence, the exercisability of any
Option shall be determined by the Committee in its sole discretion.
(e) EFFECT OF CHANGE IN CONTROL. The Committee may determine, at the
time of granting an Option or thereafter, that such Option shall become fully
exercisable as to all Shares subject to such Option in the event that a Change
in Control occurs with respect to the Company.
(f) TERM. The Stock Option Agreement shall specify the term of the
Option. The term shall not exceed ten years from the date of grant (or five (5)
years for ten percent (10%) shareholders as provided in Section 4(b)). Subject
to the preceding sentence, the Committee at its sole discretion shall determine
when an Option is to expire.
-10-
(g) EXERCISE OF OPTIONS ON TERMINATION OF SERVICE. Each Option shall
set forth the extent to which the Optionee shall have the right to exercise the
Option following termination of the Optionee's Service with the Company and its
Subsidiaries. Such provisions shall be determined in the sole discretion of the
Committee, need not be uniform among all Options issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination of employment.
Notwithstanding the foregoing, to the extent required by applicable law, each
Option shall provide that the Optionee shall have the right to exercise the
vested portion of any Option held at termination for at least 60 days following
termination of Service with the Company for any reason, and that the Optionee
shall have the right to exercise the Option for at least six months if the
Optionee's Service terminates due to death or Disability.
(h) PAYMENT OF OPTION SHARES. The entire Exercise Price of Shares
issued under the Plan shall be payable in lawful money of the United States of
America at the time when such Shares are purchased, except as provided below:
(i) SURRENDER OF STOCK. To the extent that a Stock Option
Agreement so provides, payment may be made all or in part with Shares
which have already been owned by the Optionee or Optionee's
representative for any time period specified by the Committee and which
are surrendered to the Company in good form for transfer. Such shares
shall be valued at their Fair Market Value on the date when the new
Shares are purchased under the Plan.
(ii) PROMISSORY NOTES. To the extent that a Stock Option
Agreement or Stock Purchase Agreement so provides, payment may be made
all or in part with a full recourse promissory note executed by the
Optionee or Offeree. The interest rate and other terms and conditions
of such note shall be determined by the Committee. The Committee may
require that the Optionee or Offeree pledge his or her Shares to the
Company for the purpose of securing the payment of such note. In no
event shall the stock certificate(s) representing such Shares be
released to the Optionee or Offeree until such note is paid in full.
(iii) CASHLESS EXERCISE. To the extent that a Stock Option
Agreement so provides and a public market for the Shares exists,
payment may be made all or in part by delivery (on a form prescribed by
the Committee) of an irrevocable direction to a securities broker to
sell shares and to deliver all or part of the sale proceeds to the
Company in payment of the aggregate Exercise Price.
(iv) OTHER FORMS OF PAYMENT. To the extent provided in the
Stock Option Agreement, payment may be made in any other form that is
consistent with applicable laws, regulations and rules.
(i) MODIFICATION, EXTENSION AND ASSUMPTION OF OPTIONS. Within the
limitations of the Plan, the Committee may modify, extend or assume outstanding
Options or may accept the cancellation of outstanding Options (whether granted
by the Company or another issuer) in return for the grant of new Options for the
same or a different number of Shares and at the same or a different Exercise
Price or for other consideration.
-11-
SECTION 9. ADJUSTMENT OF SHARES.
- --------------------------------
(a) GENERAL. In the event of a subdivision of the outstanding Stock, a
declaration of a dividend payable in Shares, a combination or consolidation of
the outstanding Stock into a lesser number of Shares, a recapitalization, a
reclassification or a similar occurrence, the Committee shall make appropriate
adjustments, subject to the limitations set forth in Section 9(c), in one or
more of (i) the number of Shares available for future Awards under Section 5,
(ii) the number of Shares covered by each outstanding Option or Purchase
Agreement or (iii) the Exercise Price or Purchase Price under each outstanding
Option or Stock Purchase Agreement.
(b) REORGANIZATIONS. In the event that the Company is a party to a
merger or reorganization, outstanding Options shall be subject to the agreement
of merger or reorganization, provided however, that the limitations set forth in
Section 9(c) shall apply.
(c) RESERVATION OF RIGHTS. Except as provided in this Section 9, an
Optionee or an Offeree shall have no rights by reason of (i) any subdivision or
consolidation of shares of stock of any class, (ii) the payment of any dividend
or (iii) any other increase or decrease in the number of shares of stock of any
class. Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number, Exercise
Price or Purchase Agreement of Shares subject to an Option or Stock Purchase
Agreement. The grant of an Award pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
SECTION 10. WITHHOLDING TAXES.
- ------------------------------
(a) GENERAL. To the extent required by applicable federal, state, local
or foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Committee for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Shares or make any cash payment under the Plan until such
obligations are satisfied.
(b) SHARE WITHHOLDING. The Committee may permit a Participant to
satisfy all or part of his or her withholding or income tax obligations by
having the Company withhold all or a portion of any Shares that otherwise would
be issued to him or her or by surrendering all or a portion of any Shares that
he or she previously acquired. Such Shares shall be valued at their Fair Market
Value on the date when taxes otherwise would be withheld in cash. Any payment of
taxes by assigning Shares to the Company may be subject to restrictions,
including any restrictions required by rules of any federal or state regulatory
body or other authority.
-12-
(c) CASHLESS EXERCISE/PLEDGE. The Committee may provide that if Company
Shares are publicly traded at the time of exercise, arrangements may be made to
meet the Optionee's withholding obligation by cashless exercise or pledge.
(d) OTHER FORMS OF PAYMENT. The Committee may permit such other means
of tax withholding as it deems appropriate.
SECTION 11. ASSIGNMENT OR TRANSFER OF AWARDS.
- ---------------------------------------------
(a) GENERAL. An Award granted under the Plan shall not be anticipated,
assigned, attached, garnished, optioned, transferred or made subject to any
creditor's process, whether voluntarily, involuntarily or by operation of law,
except as approved by the Committee. Notwithstanding the foregoing, ISOs may not
be transferable. Also notwithstanding the foregoing, while the Shares are
subject to California Corporations Code ss. 25102(o), (i) Offerees and Optionees
may not transfer their rights hereunder except by will, beneficiary designation
or the laws of descent and distribution, and (ii) any rights of repurchase in
favor of the Company shall take into account the provisions of Sections
260.140.41 or 260.140.42 of Title 10 of the California Code of Regulations, as
applicable.
(b) TRUSTS. Neither this Section 11 nor any other provision of the Plan
shall preclude a Participant from transferring or assigning Restricted Shares to
(a) the trustee of a trust that is revocable by such Participant alone, both at
the time of the transfer or assignment and at all times thereafter prior to such
Participant's death, or (b) the trustee of any other trust to the extent
approved by the Committee in writing. A transfer or assignment of Restricted
Shares from such trustee to any other person than such Participant shall be
permitted only to the extent approved in advance by the Committee in writing,
and Restricted Shares held by such trustee shall be subject to all the
conditions and restrictions set forth in the Plan and in the applicable Stock
Award Agreement, as if such trustee were a party to such Agreement.
SECTION 12. LEGAL REQUIREMENTS.
- -------------------------------
Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange on which the
Company's securities may then be listed.
-13-
SECTION 13. NO EMPLOYMENT RIGHTS.
- ---------------------------------
No provision of the Plan, nor any right or Option granted under the
Plan, shall be construed to give any person any right to become, to be treated
as, or to remain an Employee. The Company and its Subsidiaries reserve the right
to terminate any person's Service at any time and for any reason.
SECTION 14. DURATION AND AMENDMENTS.
- ------------------------------------
(a) TERM OF THE PLAN. The Plan, as set forth herein, shall become
effective on the date of its adoption by the Board of Directors, subject to the
approval of the Company's shareholders. In the event that the shareholders fail
to approve the Plan within twelve (12) months after its adoption by the Board of
Directors, any grants already made shall be null and void, and no additional
grants shall be made after such date. The Plan shall terminate automatically ten
(10) years after its adoption by the Board of Directors and may be terminated on
any earlier date pursuant to Subsection (b) below.
(b) RIGHT TO AMEND OR TERMINATE THE PLAN. The Board of Directors may
amend the Plan at any time and from time to time. Rights and obligations under
any right or Option granted before amendment of the Plan shall not be materially
altered, or impaired adversely, by such amendment, except with consent of the
person to whom the right or Option was granted. An amendment of the Plan shall
be subject to the approval of the Company's shareholders only to the extent
required by applicable laws, regulations or rules including the rules of any
applicable exchange.
(c) EFFECT OF AMENDMENT OR TERMINATION. No Shares shall be issued or
sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Shares previously issued or any Option
previously granted under the Plan.
-14-
EXHIBIT D
---------
LMKI, INC.
2000 STOCK OPTION PLAN
----------------------
TABLE OF CONTENTS
-----------------
PAGE
----
SECTION 1. PURPOSE.............................................................1
SECTION 2. DEFINITIONS.........................................................1
(a) "Award"......................................................1
(b) "Board of Directors".........................................1
(c) "Change in Control"..........................................1
(d) "Code".......................................................2
(e) "Committee"..................................................2
(f) "Common-Law Employee"........................................2
(g) "Company"....................................................2
(h) "Employee"...................................................2
(i) "Exchange Act"...............................................2
(j) "Exercise Price".............................................2
(k) "Fair Market Value"..........................................2
(l) "Incentive Stock Option" or "ISO"............................3
(m) "Nonstatutory Option" or "NSO"...............................3
(n) "Offeree"....................................................3
(o) "Option".....................................................3
(p) "Optionee"...................................................3
(q) "Outside Director"...........................................3
(r) "Participant"................................................3
(s) "Plan".......................................................4
(t) "Purchase Price".............................................4
(u) "Restricted Share"...........................................4
(v) "Service"....................................................4
(w) "Share"......................................................4
(x) "Stock"......................................................4
(y) "Stock Award Agreement"......................................4
(z) "Stock Option Agreement".....................................4
(aa) "Stock Purchase Agreement"...................................4
(bb) "Subsidiary".................................................5
(cc) "Total and Permanent Disability".............................5
(dd) "W-2 Payroll"................................................5
SECTION 3. ADMINISTRATION......................................................5
(a) Committee Membership.........................................5
(b) Committee Procedures.........................................5
(c) Committee Responsibilities...................................5
(d) Committee Liability..........................................6
(e) Financial Reports............................................6
-i-
SECTION 4. ELIGIBILITY.........................................................6
(a) General Rule.................................................6
(b) Ten-Percent Shareholders.....................................6
(c) Attribution Rules............................................6
(d) Outstanding Stock............................................7
SECTION 5. STOCK SUBJECT TO PLAN...............................................7
(a) Basic Limitation.............................................7
(b) Additional Shares............................................7
SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES.............................7
(a) Stock Purchase Agreement.....................................7
(b) Duration of Offers...........................................8
(c) Purchase Price...............................................8
(d) Payment for Shares...........................................8
(e) Exercise of Awards on Termination of Service.................9
SECTION 7. ADDITIONAL TERMS AND CONDITIONS OF RESTRICTED.......................9
(a) Form and Amount of Award.....................................9
(b) Exercisability...............................................9
(c) Effect of Change in Control..................................9
(d) Voting Rights................................................9
SECTION 8. TERMS AND CONDITIONS OF OPTIONS....................................10
(a) Stock Option Agreement......................................10
(b) Number of Shares............................................10
(c) Exercise Price..............................................10
(d) Exercisability..............................................10
(e) Effect of Change in Control.................................10
(f) Term........................................................10
(g) Exercise of Options on Termination of Service...............11
(h) Payment of Option Shares....................................11
(i) No Rights as a Shareholder..................................11
(j) Modification, Extension and Assumption of Options...........11
SECTION 9. ADJUSTMENT OF SHARES...............................................12
(a) General.....................................................12
(b) Reorganizations.............................................12
(c) Reservation of Rights.......................................12
SECTION 10. WITHHOLDING TAXES.................................................12
(a) General.....................................................12
(b) Share Withholding...........................................12
(c) Cashless Exercise/Pledge....................................13
(d) Other Forms of Payment......................................13
-ii-
SECTION 11. ASSIGNMENT OR TRANSFER OF AWARDS..................................13
(a) General.....................................................13
(b) Trusts......................................................13
SECTION 12. LEGAL REQUIREMENTS................................................13
SECTION 13. NO EMPLOYMENT RIGHTS..............................................14
SECTION 14. DURATION AND AMENDMENTS...........................................14
(a) Term of the Plan............................................14
(b) Right to Amend or Terminate the Plan........................14
(c) Effect of Amendment or Termination..........................14
-iii-
LMKI, INC. 2000 STOCK OPTION PLAN
---------------------------------
SECTION 1. PURPOSE.
- -------------------
The purpose of the 2000 Stock Option Plan (the "Plan") is to offer
selected employees, directors and consultants an opportunity to acquire a
proprietary interest in the success of the Company, or to increase such
interest, to encourage such selected persons to remain in the employ of the
Company and to attract new employees with outstanding qualifications. The Plan
seeks to achieve this purpose by providing for Awards in the form of Restricted
Shares and Options (which may constitute Incentive Stock Options or Nonstatutory
Stock Options) as well as the direct award or sale of Shares of the Company's
Common Stock. While this Plan is intended to satisfy federal Rule 701 and
Section 25102(o) of the California Corporations Code, awards may be granted
under this Plan in reliance upon other federal and state securities law
exemptions and to the extent another exemption is relied upon, the terms of this
Plan which are required only because of Rule 701 or Section 25102(o) need not
apply to the extent provided by the Committee in the award agreement.
SECTION 2. DEFINITIONS.
- -----------------------
(a) "AWARD" shall mean any award of an Option, Restricted Share or
other right under the Plan.
(b) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company, as constituted from time to time.
(c) "CHANGE IN CONTROL" shall mean:
(i) The consummation of a merger, consolidation, sale of the
Company's stock, or other reorganization of the Company (other than a
reincorporation of the Company), if after giving effect to such merger,
consolidation or other reorganization of the Company, the stockholders
of the Company immediately prior to such merger, consolidation or other
reorganization do not represent a majority interest of the holders of
voting securities (on a fully diluted basis) with the ordinary voting
power to elect directors of the surviving or resulting entity after
such merger, consolidation or other reorganization; or
(ii) The sale of all or substantially all of the assets of the
Company to a third party who is not an affiliate of the Company.
(iii) The term Change in Control shall not include: (a) a
transaction the sole purpose of which is to change the state of the
Company's incorporation, or (b) the Company's initial public offering.
-1-
(d) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" shall mean a committee of the Board of Directors which
is authorized to administer the Plan under Section 3.
(f) "COMMON-LAW EMPLOYEE" shall mean an individual paid from W-2
Payroll of the Company or a Subsidiary. If, during any period, the Company (or
Subsidiary, as applicable) has not treated an individual as a Common-Law
Employee and, for that reason, has not paid such individual in a manner which
results in the issuance of a Form W-2 and withheld taxes with respect to him or
her, then that individual shall not be an eligible Employee for that period,
even if any person, court of law or government agency determines, retroactively,
that that individual is or was a Common-Law Employee during all or any portion
of that period.
(g) "COMPANY" shall mean LMKI, Inc.
(h) "EMPLOYEE" shall mean (i) any individual who is a Common-Law
Employee of the Company or of a Subsidiary, (ii) a member of the Board of
Directors, including (without limitation) an Outside Director, or an affiliate
of a member of the Board of Directors, (iii) a member of the board of directors
of a Subsidiary, or (iv) an independent contractor who performs services for the
Company or a Subsidiary. Service as a member of the Board of Directors, a member
of the board of directors of a Subsidiary or an independent contractor shall be
considered employment for all purposes of the Plan except the second sentence of
Section 4(a).
(i) "EXCHANGE ACT" means the Securities and Exchange Act of 1934, as
amended.
(j) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.
(k) "FAIR MARKET VALUE" means the market price of Shares, determined by
the Committee as follows:
(i) If the Shares were traded over-the-counter on the date in
question but were not traded on the Nasdaq Stock Market or the Nasdaq
National Market System, then the Fair Market Value shall be equal to
the mean between the last reported representative bid and asked prices
quoted for such date by the principal automated inter-dealer quotation
system on which the Shares are quoted or, if the Shares are not quoted
on any such system, by the "Pink Sheets" published by the National
Quotation Bureau, Inc.;
(ii) If the Shares were traded over-the-counter on the date in
question and were traded on the Nasdaq Stock Market or the Nasdaq
National Market System, then the Fair Market Value shall be equal to
the last-transaction price quoted for such date by the Nasdaq Stock
Market or the Nasdaq National Market;
(iii) If the Shares were traded on a stock exchange on the
date in question, then the Fair Market Value shall be equal to the
closing price reported by the applicable composite transactions report
for such date; and
(iv) If none of the foregoing provisions is applicable, then
the Fair Market Value shall be determined by the Committee in good
faith on such basis as it deems appropriate.
In all cases, the determination of Fair Market Value by the Committee
shall be conclusive and binding on all persons.
-2-
(l) "INCENTIVE STOCK OPTION" OR "ISO" shall mean an employee incentive
stock option described in Code section 422(b).
(m) "NONSTATUTORY OPTION" OR "NSO" shall mean an employee stock option
that is not an ISO.
(n) "OFFEREE" shall mean an individual to whom the Committee has
offered the right to acquire Shares under the Plan (other than upon exercise of
an Option).
(o) "OPTION" shall mean an Incentive Stock Option or Nonstatutory
Option granted under the Plan and entitling the holder to purchase Shares.
(p) "OPTIONEE" shall mean an individual or estate who holds an Option.
(q) "OUTSIDE DIRECTOR" shall mean a member of the Board who is not a
Common-Law Employee of the Company or a Subsidiary.
(r) "PARTICIPANT" shall mean an individual or estate who holds an
Award.
-3-
(s) "PLAN" shall mean this 2000 Stock Option Plan of LMKI, Inc.
(t) "PURCHASE PRICE" shall mean the consideration for which one Share
may be acquired under the Plan (other than upon exercise of an Option), as
specified by the Committee.
(u) "RESTRICTED SHARE" shall mean a Share sold or granted to an
eligible Employee which is nontransferable and subject to substantial risk of
forfeiture until restrictions lapse.
(v) "SERVICE" shall mean service as an Employee.
(w) "SHARE" shall mean one share of Stock, as adjusted in accordance
with Section 9 (if applicable).
(x) "STOCK" shall mean the common stock of the Company.
(y) "STOCK AWARD AGREEMENT" shall mean the agreement between the
Company and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Share.
(z) "STOCK OPTION AGREEMENT" shall mean the agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his or her Option.
(aa) "STOCK PURCHASE AGREEMENT" shall mean the agreement between the
Company and an Offeree who acquires Shares under the Plan which contains the
terms, conditions and restrictions pertaining to the acquisition of such Shares.
-4-
(bb) "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.
(cc) "TOTAL AND PERMANENT DISABILITY" means that the Optionee is unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment.
(dd) "W-2 PAYROLL" means whatever mechanism or procedure that the
Company or a Subsidiary utilizes to pay any individual which results in the
issuance of Form W-2 to the individual. "W-2 Payroll" does not include any
mechanism or procedure which results in the issuance of any form other than a
Form W-2 to an individual, including, but not limited to, any Form 1099 which
may be issued to an independent contractor, an agency employee or a consultant.
Whether a mechanism or procedure qualifies as a "W-2 Payroll" shall be
determined in the absolute discretion of the Company (or Subsidiary, as
applicable), and the Company or Subsidiary determination shall be conclusive and
binding on all persons.
SECTION 3. ADMINISTRATION.
- --------------------------
(a) COMMITTEE MEMBERSHIP. The Plan shall be administered by the
Compensation Committee (the "Committee") appointed by the Company's Board of
Directors and comprised of at least two or more Outside Directors (although
Committee functions may be delegated to officers to the extent the awards relate
to persons who are not subject to the reporting requirements of Section 16 of
the Exchange Act). If no Committee has been appointed, the entire Board shall
constitute the Committee.
(b) COMMITTEE PROCEDURES. The Board of Directors shall designate one of
the members of the Committee as chairperson. The Committee may hold meetings at
such times and places as it shall determine. The acts of a majority of the
Committee members present at meetings at which a quorum exists, or acts reduced
to or approved in writing by all Committee members, shall be valid acts of the
Committee.
(c) COMMITTEE RESPONSIBILITIES. The Committee has and may exercise such
power and authority as may be necessary or appropriate for the Committee to
carry out its functions as described in the Plan. The Committee has authority in
its discretion to determine eligible Employees to whom, and the time or times at
which, Awards may be granted and the number of Shares subject to each Award.
Subject to the express provisions of the respective Award agreements (which need
not be identical) and to make all other determinations necessary or advisable
for Plan administration, the Committee has authority to prescribe, amend, and
rescind rules and regulations relating to the Plan. All interpretations,
determinations, and actions by the Committee will be final, conclusive, and
binding upon all persons.
-5-
(d) COMMITTEE LIABILITY. No member of the Board or the Committee will
be liable for any action or determination made in good faith by the Committee
with respect to the Plan or any Award made under the Plan.
(e) FINANCIAL REPORTS. To the extent required by applicable law, and
not less often than annually, the Company shall furnish to Offerees, Optionees
and Shareholders who have received Stock under the Plan its financial statements
including a balance sheet regarding the Company's financial condition and
results of operations, unless such Offerees, Optionees or Shareholders have
duties with the Company that assure them access to equivalent information. Such
financial statements need not be audited.
SECTION 4. ELIGIBILITY.
- -----------------------
(a) GENERAL RULE. Only Employees shall be eligible for designation as
Participants by the Committee. In addition, only individuals who are employed as
Common-Law Employees by the Company or a Subsidiary shall be eligible for the
grant of ISOs.
(b) TEN-PERCENT SHAREHOLDERS. An Employee who owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
stock of the Company or any of its Subsidiaries shall not be eligible for
designation as an Offeree or Optionee unless (i) the Exercise Price for an ISO
(and a NSO to the extent required by applicable law) is at least one hundred ten
percent (110%) of the Fair Market Value of a Share on the date of grant, (ii) if
required by applicable law, the Purchase Price of Shares is at least one hundred
percent (100%) of the Fair Market Value of a Share on the date of grant, and
(iii) in the case of an ISO, such ISO by its terms is not exercisable after the
expiration of five years from the date of grant.
(c) ATTRIBUTION RULES. For purposes of Subsection (b) above, in
determining stock ownership, an Employee shall be deemed to own the stock owned,
directly or indirectly, by or for his brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries. Stock
with respect to which such Employee holds an Option shall not be counted.
-6-
(d) OUTSTANDING STOCK. For purposes of Subsection (b) above,
"outstanding stock" shall include all stock actually issued and outstanding
immediately after the grant. "Outstanding Stock" shall not include shares
authorized for issuance under outstanding Options held by the Employee or by any
other person.
SECTION 5. STOCK SUBJECT TO PLAN.
- ---------------------------------
(a) BASIC LIMITATION. Shares offered under the Plan shall be authorized
but unissued Shares. Subject to Sections 5(b) and 9 of the Plan, the aggregate
number of Shares which may be issued or transferred as common stock pursuant to
an Award under the Plan shall not exceed 5,000,000 Shares.
In any event, (i) the number of Shares which are subject to Awards or
other rights outstanding at any time under the Plan shall not exceed the number
of Shares which then remain available for issuance under the Plan; and (ii) to
the extent an award is made in reliance upon the exemption available under
Section 25102(o) of the California Corporations Code, the number of Shares which
are subject to Awards or other rights outstanding at any time under the Plan or
otherwise shall not exceed the limitation imposed by Section 260.140.45 of Title
10 of the California Code of Regulations. The Company, during the term of the
Plan, shall at all times reserve and keep available sufficient Shares to satisfy
the requirements of the Plan.
(b) ADDITIONAL SHARES. In the event that any outstanding Option or
other right for any reason expires or is canceled or otherwise terminated, the
Shares allocable to the unexercised portion of such Option or other right shall
again be available for the purposes of the Plan. If a Restricted Share is
forfeited before any dividends have been paid with respect to such Restricted
Share, then such Restricted Share shall again become available for award under
the Plan.
SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES.
- ---------------------------------------------------
(a) STOCK PURCHASE AGREEMENT. Each award or sale of Shares under the
Plan (other than upon exercise of an Option) shall be evidenced by a Stock
Purchase Agreement between the Offeree and the Company. Such award or sale shall
be subject to all applicable terms and conditions of the Plan and may be subject
to any other terms and conditions which are not inconsistent with the Plan and
which the Committee deems appropriate for inclusion in a Stock Purchase
Agreement. The provisions of the various Stock Purchase Agreements entered into
under the Plan need not be identical.
-7-
(b) DURATION OF OFFERS. Any right to acquire Shares under the Plan
(other than an Option) shall automatically expire if not exercised by the
Offeree within 30 days after the grant of such right was communicated to the
Offeree by the Committee.
(c) PURCHASE PRICE. Unless otherwise permitted by applicable law, the
Purchase Price of Shares to be offered under the Plan shall not be less than
eighty-five percent (85%) of the Fair Market Value of a Share on the date of
grant (100% for 10% shareholders), except as otherwise provided in Section 4(b).
Subject to the preceding sentence, the Purchase Price shall be determined by the
Committee in its sole discretion. The Purchase Price shall be payable in a form
described in Subsection (d) below.
(d) PAYMENT FOR SHARES. The entire Purchase Price of Shares issued
under the Plan shall be payable in lawful money of the United States of America
at the time when such Shares are purchased, except as provided below:
(i) SURRENDER OF STOCK. To the extent that a Stock Option
Agreement so provides, payment may be made all or in part with Shares
which have already been owned by the Optionee or Optionee's
representative for any time period specified by the Committee and which
are surrendered to the Company in good form for transfer. Such shares
shall be valued at their Fair Market Value on the date when the new
Shares are purchased under the Plan.
(ii) PROMISSORY NOTES. To the extent that a Stock Option
Agreement or Stock Purchase Agreement so provides, payment may be made
all or in part with a full recourse promissory note executed by the
Optionee or Offeree. The interest rate and other terms and conditions
of such note shall be determined by the Committee. The Committee may
require that the Optionee or Offeree pledge his or her Shares to the
Company for the purpose of securing the payment of such note. In no
event shall the stock certificate(s) representing such Shares be
released to the Optionee or Offeree until such note is paid in full.
(iii) CASHLESS EXERCISE. To the extent that a Stock Option
Agreement so provides and a public market for the Shares exists,
payment may be made all or in part by delivery (on a form prescribed by
the Committee) of an irrevocable direction to a securities broker to
sell shares and to deliver all or part of the sale proceeds to the
Company in payment of the aggregate Exercise Price.
(iv) OTHER FORMS OF PAYMENT. To the extent provided in the
Stock Option Agreement, payment may be made in any other form that is
consistent with applicable laws, regulations and rules.
-8-
(e) EXERCISE OF AWARDS ON TERMINATION OF SERVICE. Each Stock Award
Agreement shall set forth the extent to which the recipient shall have the right
to exercise the Award following termination of the recipient's Service with the
Company and its Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, need not be uniform among all the Awards issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination of employment.
SECTION 7. ADDITIONAL TERMS AND CONDITIONS OF RESTRICTED SHARES.
- ----------------------------------------------------------------
(a) FORM AND AMOUNT OF AWARD. Each Stock Award Agreement shall specify
the number of Shares that are subject to the Award. Restricted Shares may be
awarded in combination with NSOs and such an Award may provide that the
Restricted Shares will be forfeited in the event that the related NSOs are
exercised.
(b) EXERCISABILITY. Each Stock Award Agreement shall specify the
conditions upon which Restricted Shares shall become vested, in full or in
installments. To the extent required by applicable law, each Stock Award shall
become exercisable no less rapidly than the rate of 20% per year for each of the
first five years from the date of grant. Subject to the preceding sentence, the
exercisability of any Stock Award shall be determined by the Committee in its
sole discretion.
(c) EFFECT OF CHANGE IN CONTROL. The Committee may determine at the
time of making an Award or thereafter, that such Award shall become fully
vested, in whole or in part, in the event that a Change in Control occurs with
respect to the Company.
(d) VOTING RIGHTS. Holders of Restricted Shares awarded under the Plan
shall have the same voting, dividend and other rights as the Company's other
stockholders. A Stock Award Agreement, however, may require that the holders
invested any cash dividends received in additional Restricted Shares. Such
additional Restricted Shares shall be subject to the same conditions and
restrictions as the Award with respect to which the dividends were paid. Such
additional Restricted Shares shall not reduce the number of Shares available
under Section 5.
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SECTION 8. TERMS AND CONDITIONS OF OPTIONS.
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(a) STOCK OPTION AGREEMENT. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms and conditions of
the Plan and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Committee deems appropriate for
inclusion in a Stock Option Agreement. The provisions of the various Stock
Option Agreements entered into under the Plan need not be identical.
(b) NUMBER OF SHARES. Each Stock Option Agreement shall specify the
number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 9. The Stock Option
Agreement shall also specify whether the Option is an ISO or a Nonstatutory
Option.
(c) EXERCISE PRICE. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price of an ISO shall not be less than one hundred
percent (100%) of the Fair Market Value of a Share on the date of grant, except
as otherwise provided in Section 4(b). To the extent required by applicable law
and except as otherwise provided in Section 4(b), the Exercise Price of a
Nonstatutory Option shall not be less than eighty-five percent (85%) of the Fair
Market Value of a Share on the date of grant. Subject to the preceding two
sentences, the Exercise Price under any Option shall be determined by the
Committee in its sole discretion. The Exercise Price shall be payable in a form
described in Subsection (h) below.
(d) EXERCISABILITY. Each Stock Option Agreement shall specify the date
when all or any installment of the Option is to become exercisable. To the
extent required by applicable law, an Option shall become exercisable no less
rapidly than the rate of 20% per year for each of the first five years from the
date of grant. Subject to the preceding sentence, the exercisability of any
Option shall be determined by the Committee in its sole discretion.
(e) EFFECT OF CHANGE IN CONTROL. The Committee may determine, at the
time of granting an Option or thereafter, that such Option shall become fully
exercisable as to all Shares subject to such Option in the event that a Change
in Control occurs with respect to the Company.
(f) TERM. The Stock Option Agreement shall specify the term of the
Option. The term shall not exceed ten years from the date of grant (or five (5)
years for ten percent (10%) shareholders as provided in Section 4(b)). Subject
to the preceding sentence, the Committee at its sole discretion shall determine
when an Option is to expire.
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(g) EXERCISE OF OPTIONS ON TERMINATION OF SERVICE. Each Option shall
set forth the extent to which the Optionee shall have the right to exercise the
Option following termination of the Optionee's Service with the Company and its
Subsidiaries. Such provisions shall be determined in the sole discretion of the
Committee, need not be uniform among all Options issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination of employment.
Notwithstanding the foregoing, to the extent required by applicable law, each
Option shall provide that the Optionee shall have the right to exercise the
vested portion of any Option held at termination for at least 60 days following
termination of Service with the Company for any reason, and that the Optionee
shall have the right to exercise the Option for at least six months if the
Optionee's Service terminates due to death or Disability.
(h) PAYMENT OF OPTION SHARES. The entire Exercise Price of Shares
issued under the Plan shall be payable in lawful money of the United States of
America at the time when such Shares are purchased, except as provided below:
(i) SURRENDER OF STOCK. To the extent that a Stock Option
Agreement so provides, payment may be made all or in part with Shares
which have already been owned by the Optionee or Optionee's
representative for any time period specified by the Committee and which
are surrendered to the Company in good form for transfer. Such shares
shall be valued at their Fair Market Value on the date when the new
Shares are purchased under the Plan.
(ii) PROMISSORY NOTES. To the extent that a Stock Option
Agreement or Stock Purchase Agreement so provides, payment may be made
all or in part with a full recourse promissory note executed by the
Optionee or Offeree. The interest rate and other terms and conditions
of such note shall be determined by the Committee. The Committee may
require that the Optionee or Offeree pledge his or her Shares to the
Company for the purpose of securing the payment of such note. In no
event shall the stock certificate(s) representing such Shares be
released to the Optionee or Offeree until such note is paid in full.
(iii) CASHLESS EXERCISE. To the extent that a Stock Option
Agreement so provides and a public market for the Shares exists,
payment may be made all or in part by delivery (on a form prescribed by
the Committee) of an irrevocable direction to a securities broker to
sell shares and to deliver all or part of the sale proceeds to the
Company in payment of the aggregate Exercise Price.
(iv) OTHER FORMS OF PAYMENT. To the extent provided in the
Stock Option Agreement, payment may be made in any other form that is
consistent with applicable laws, regulations and rules.
(i) MODIFICATION, EXTENSION AND ASSUMPTION OF OPTIONS. Within the
limitations of the Plan, the Committee may modify, extend or assume outstanding
Options or may accept the cancellation of outstanding Options (whether granted
by the Company or another issuer) in return for the grant of new Options for the
same or a different number of Shares and at the same or a different Exercise
Price or for other consideration.
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SECTION 9. ADJUSTMENT OF SHARES.
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(a) GENERAL. In the event of a subdivision of the outstanding Stock, a
declaration of a dividend payable in Shares, a combination or consolidation of
the outstanding Stock into a lesser number of Shares, a recapitalization, a
reclassification or a similar occurrence, the Committee shall make appropriate
adjustments, subject to the limitations set forth in Section 9(c), in one or
more of (i) the number of Shares available for future Awards under Section 5,
(ii) the number of Shares covered by each outstanding Option or Purchase
Agreement or (iii) the Exercise Price or Purchase Price under each outstanding
Option or Stock Purchase Agreement.
(b) REORGANIZATIONS. In the event that the Company is a party to a
merger or reorganization, outstanding Options shall be subject to the agreement
of merger or reorganization, provided however, that the limitations set forth in
Section 9(c) shall apply.
(c) RESERVATION OF RIGHTS. Except as provided in this Section 9, an
Optionee or an Offeree shall have no rights by reason of (i) any subdivision or
consolidation of shares of stock of any class, (ii) the payment of any dividend
or (iii) any other increase or decrease in the number of shares of stock of any
class. Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number, Exercise
Price or Purchase Agreement of Shares subject to an Option or Stock Purchase
Agreement. The grant of an Award pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
SECTION 10. WITHHOLDING TAXES.
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(a) GENERAL. To the extent required by applicable federal, state, local
or foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Committee for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Shares or make any cash payment under the Plan until such
obligations are satisfied.
(b) SHARE WITHHOLDING. The Committee may permit a Participant to
satisfy all or part of his or her withholding or income tax obligations by
having the Company withhold all or a portion of any Shares that otherwise would
be issued to him or her or by surrendering all or a portion of any Shares that
he or she previously acquired. Such Shares shall be valued at their Fair Market
Value on the date when taxes otherwise would be withheld in cash. Any payment of
taxes by assigning Shares to the Company may be subject to restrictions,
including any restrictions required by rules of any federal or state regulatory
body or other authority.
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(c) CASHLESS EXERCISE/PLEDGE. The Committee may provide that if Company
Shares are publicly traded at the time of exercise, arrangements may be made to
meet the Optionee's withholding obligation by cashless exercise or pledge.
(d) OTHER FORMS OF PAYMENT. The Committee may permit such other means
of tax withholding as it deems appropriate.
SECTION 11. ASSIGNMENT OR TRANSFER OF AWARDS.
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(a) GENERAL. An Award granted under the Plan shall not be anticipated,
assigned, attached, garnished, optioned, transferred or made subject to any
creditor's process, whether voluntarily, involuntarily or by operation of law,
except as approved by the Committee. Notwithstanding the foregoing, ISOs may not
be transferable. Also notwithstanding the foregoing, while the Shares are
subject to California Corporations Code ss. 25102(o), (i) Offerees and Optionees
may not transfer their rights hereunder except by will, beneficiary designation
or the laws of descent and distribution, and (ii) any rights of repurchase in
favor of the Company shall take into account the provisions of Sections
260.140.41 or 260.140.42 of Title 10 of the California Code of Regulations, as
applicable.
(b) TRUSTS. Neither this Section 11 nor any other provision of the Plan
shall preclude a Participant from transferring or assigning Restricted Shares to
(a) the trustee of a trust that is revocable by such Participant alone, both at
the time of the transfer or assignment and at all times thereafter prior to such
Participant's death, or (b) the trustee of any other trust to the extent
approved by the Committee in writing. A transfer or assignment of Restricted
Shares from such trustee to any other person than such Participant shall be
permitted only to the extent approved in advance by the Committee in writing,
and Restricted Shares held by such trustee shall be subject to all the
conditions and restrictions set forth in the Plan and in the applicable Stock
Award Agreement, as if such trustee were a party to such Agreement.
SECTION 12. LEGAL REQUIREMENTS.
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Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange on which the
Company's securities may then be listed.
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SECTION 13. NO EMPLOYMENT RIGHTS.
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No provision of the Plan, nor any right or Option granted under the
Plan, shall be construed to give any person any right to become, to be treated
as, or to remain an Employee. The Company and its Subsidiaries reserve the right
to terminate any person's Service at any time and for any reason.
SECTION 14. DURATION AND AMENDMENTS.
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(a) TERM OF THE PLAN. The Plan, as set forth herein, shall become
effective on the date of its adoption by the Board of Directors, subject to the
approval of the Company's shareholders. In the event that the shareholders fail
to approve the Plan within twelve (12) months after its adoption by the Board of
Directors, any grants already made shall be null and void, and no additional
grants shall be made after such date. The Plan shall terminate automatically ten
(10) years after its adoption by the Board of Directors and may be terminated on
any earlier date pursuant to Subsection (b) below.
(b) RIGHT TO AMEND OR TERMINATE THE PLAN. The Board of Directors may
amend the Plan at any time and from time to time. Rights and obligations under
any right or Option granted before amendment of the Plan shall not be materially
altered, or impaired adversely, by such amendment, except with consent of the
person to whom the right or Option was granted. An amendment of the Plan shall
be subject to the approval of the Company's shareholders only to the extent
required by applicable laws, regulations or rules including the rules of any
applicable exchange.
(c) EFFECT OF AMENDMENT OR TERMINATION. No Shares shall be issued or
sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Shares previously issued or any Option
previously granted under the Plan.
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