SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. _____)
Check the appropriate box:
[X] Preliminary Information Statement
[_] Confidential, For Use of the Commission Only (as Permitted by Rule 14c-
5(d)(2))
[_] Definitive Information Statement
AMARU, INC.
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(Name of Registrant as Specified in Its Charter)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1)
Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction apply:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
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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:
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[_] 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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(3) Filing party:
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(4) Date filed:
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AMARU, INC.
610 Newport Center Drive, Suite 610
Newport Beach, California 92660
INFORMATION STATEMENT
February ___, 2004
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
THE ACTIONS, DEFINED BELOW, HAS ALREADY BEEN APPROVED BY WRITTEN CONSENT OF
HOLDERS OF A MAJORITY OF THE OUTSTANDING COMMON STOCK OF THE COMPANY. A VOTE OF
THE REMAINING SHAREHOLDERS IS NOT NECESSARY.
General
This Information Statement is first being furnished on or about February ___
2004 to shareholders of record as of the close of business on February 13, 2004
(the "Record Date") of the common stock, $0.001 par value per share (the "Common
Stock") of Amaru, Inc. (the "Company") in connection with the following (the
"Action"):
Proposal Number One. Approval of the amendment of the Company's Articles of
Incorporation to increase its authorized shares of common stock to a total of up
to 200 million shares million shares of common stock. Proposal Number Two.
Approval of the Company's 2004 Equity Compensation Plan.
The Board of Directors has approved, and a majority of the shareholders (the
"Consenting Shareholders") representing not less than 1,800,000 shares of the
1,952,500 shares outstanding of the Common Stock or 92% as of the Record Date
have consented in writing to the Actions. Such approval and consent constitute
the approval and consent of a majority of the total number of shares of
outstanding of Common Stock and are sufficient under the Nevada General
Corporation Law and the Company's Bylaws to approve the Actions. The Actions
will not become effective before the date which is 21 days after this
Information Statement was first sent to stockholders. You are urged to read the
Information Statement in its entirety for a description of the Action taken by
the majority shareholders of the Company.
The Information Statement is first being mailed to stockholders of the Company
on or about February ___, 2004. Only stockholders of record at the close of
business on February 13, 2004 will be entitled to receive the Information
Statement. Accordingly, the Action will not be submitted to the shareholders of
the Company for a vote and this Information Statement is being furnished to
shareholders to provide them with certain information concerning the Action in
accordance with the requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the regulations promulgated thereunder,
including Regulation 14C.
The Company will pay all costs associated with the distribution of the
Information Statement, including the costs of printing and mailing.
FOR ADDITIONAL INFORMATION ABOUT AMARU, INC., REFERENCE IS MADE TO THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB AND QUARTERLY REPORTS ON FORMS 10-QSB.
The principal executive office of Amaru, Inc. is located at 610 Newport Center
Drive, Suite 610, Newport Beach, California 92660.
1
PROPOSAL NUMBER ONE. APPROVAL OF THE AMENDMENT OF THE COMPANY'S ARTICLES OF
INCORPORATION TO INCREASE ITS AUTHORIZED SHARES OF COMMON STOCK TO A TOTAL OF UP
TO 200 MILLION SHARES OF COMMON STOCK.
INTRODUCTION
Pursuant to Section 902 of the Nevada General Corporation Law, the majority of
the Company's shareholders (92%)and the Company's Board of Directors approved
the increase of the Company's authorized shares of common stock, par value of
$0.001 per share to a total of up to 200 million shares of common stock (the
"Increase of Authorized Capital").
To effect the Increase of the Authorized Capital, the Board of Directors would
file the approved proposed amendment to its Articles of
Incorporation(collectively, the "Amendment") with the Nevada Secretary of State
along with any other necessary filings in accordance with Nevada General
Corporation Law. The Amendment will become effective 21 calendar days after the
date of mailing of this Information Statement. The form of amendment to the
Articles of Incorporation to effect the proposed Increase in the Authorized
Capital would be in substantially the form attached to this Information
Statement as Appendix A.
The Company's Board of Directors and the Company's majority shareholders holding
1,800,000 shares of common stock (95%) have approved the Increase in the
Authorized Capital.
REASONS FOR THE INCREASE IN THE AUTHORIZED CAPITAL
The Board of Directors believes that it is advisable and in the Company's best
interests to have available additional authorized but unissued shares of Common
Stock in an amount adequate to provide for the Company's future needs. The
additional shares also will be available for issuance for any proper corporate
purpose including, among other things, future acquisitions of property or
securities of other corporations, merger transactions, stock dividends, stock
splits, stock options, convertible debt and equity financing.
POTENTIAL EFFECTS OF THE INCREASE IN THE AUTHORIZED CAPITAL
The Increase in the Authorized Capital of the Company would increase the
authorized number of shares of common stock of the Company from 10 million to
200 million. There will be no change in the existing authorized number of
preferred stock which currently consists of 5 million shares of preferred stock.
AUTHORIZED SHARES OF COMMON STOCK
The increase in the Authorized Capital would increase the number of authorized
shares of the Company as stated above. These additional shares of Common Stock
would be available for issuance from time to time for corporate purposes such as
raising additional capital, acquisitions of companies or assets and sales of
stock or securities convertible into common stock. The Company believes that the
availability of the additional shares will provide it with the flexibility to
meet business needs as they arise, to take advantage of favorable opportunities
and to respond to a changing corporate environment.
PROCEDURE FOR EFFECTING THE INCREASE IN THE AUTHORIZED CAPITAL
The Increase in the Authorized Capital of the Company will occur on the
Effective Date without any action on the part of stockholders of the Company.
II. PROPOSAL NUMBER TWO. ADOPTION OF 2004 EQUITY COMPENSATION PLAN
In February, 2004, the Company's Board of Directors unanimously approved the
Company's 2004 Equity Compensation Plan, (the "2004 Plan"). The Consenting
Shareholders approved the 2004 Plan in February, 2004. The purpose of the 2004
Plan is to enable the Company to attract and retain top-quality employees,
officers, directors and consultants and to provide such employees, officers,
directors and consultants with an incentive to enhance stockholder returns. The
full text of the 2004 Plan appears as Exhibit C to this Information Statement
and the description of the 2004 Plan herein is qualified by reference to Exhibit
C.
DESCRIPTION OF THE 2004 PLAN
The 2002 Plan provides for the grant to directors, officers, employees and
consultants of the Company (including its subsidiaries) of stock based awards
and options to purchase up to an aggregate of 400,000 shares of Common Stock.
2
All of the Company's executive officers, directors and employees of the Company
and its subsidiary will be eligible to participate in the 2004 Plan. The Company
has not granted any options yet nor other stock awards under the 2004 Plan.
Administration and Participation. The Company's 2004 Plan is administered by the
Company's Board of Directors, which may delegate its duties in whole or in part
to any subcommittee solely consisting of at least two individuals who are
non-employee directors within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, and outside directors within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended. 2004 Plan
allows the Compensation Committee to make awards of stock options and stock
based awards to any individual who is selected by the Compensation Committee to
participate in 2004 Plan.
The Compensation Committee has the authority to interpret our stock incentive
plan, to establish, amend and rescind any rules and regulations relating to our
2004 Plan and to make any other determinations that the Compensation Committee
deems necessary or desirable for the administration of our 2004 Plan. The
Compensation Committee may also correct any defect or supply any omission or
reconcile any inconsistency in our stock incentive plan in the manner and to the
extent the Compensation Committee deems necessary or desirable. Any decision of
the Compensation Committee in the interpretation and administration of our 2004
Plan lies within its sole and absolute discretion and is final, conclusive and
binding on all parties concerned, including participants in our 2004 Plan and
their beneficiaries or successors.
Limitations. An aggregate of 400,000 shares of the Company's common stock has
been authorized for issuance under the Company's 2004 Plan. No options to
purchase common stock nor other stock awards has been issued by the Company.
Stock options. Stock options granted under our 2004 Plan may be non-qualified or
incentive stock options for federal income tax purposes. The Compensation
Committee will set option exercise prices and terms and will determine the time
at which stock options will be exercisable. However, the term of a stock option
may not exceed 10 years.
The Compensation Committee may also grant options that are intended to be
incentive stock options, which comply with Section 422 of the Internal Revenue
Code of 1986, as amended. Fair market value is defined as the closing price of
the shares as reported on the grant date as quoted on the NASD's Bulletin Board.
Stock-based awards. The Compensation Committee has the authority to grant
stock-based awards, which may consist of awards of common stock, restricted
stock and awards that are valued in whole or in part by reference to, or are
otherwise based on the fair market value of, shares of common stock.
Stock-based awards may be granted on a stand-alone basis or in addition to any
other awards granted under our 2004 Plan. The Compensation Committee will
determine the form of stock-based awards and the conditions on which they may be
dependent. The conditions may include the right to receive one or more shares of
common stock or the equivalent value in cash upon the completion of a specified
period of service or the occurrence of an event or the attainment of performance
objectives. The Compensation Committee will also determine the participants to
whom stock-based awards may be made, the timing of those awards, the number of
shares to be awarded, whether those other stock-based awards will be settled in
cash, stock or a combination of cash and stock and all other terms of those
awards.
General. Stock options and restricted stock awards are not transferable or
assignable, except for estate planning purposes. The Company may deduct
sufficient sums to pay withholding required for federal, state and local taxes
or other taxes as a result of the exercise of a stock award.
In the event of any stock dividend or split, reorganization, recapitalization,
merger, consolidation, spin-off, combination or exchange of stock or other
corporate exchange or any distribution to shareholders other than regular cash
dividends, the Compensation Committee may, in its sole discretion, make a
substitution or adjustment, as the Compensation Committee deems to be equitable,
to the number or kind of stock issued or reserved for issuance under our 2004
Plan under outstanding awards and the term, including option price, of those
awards.
3
Except as otherwise provided in a stock award agreement, in the event of our
change in control or a change of control of the Company, the Compensation
Committee may, in its sole discretion, accelerate a stock award, cause us to
make a cash payment in exchange for a stock award or require the issuance of a
substitute stock award.
Certain income tax consequences. The Company has been advised by counsel that
the material federal income tax consequences to the Company and the participants
in the 2004 Plan of the grant and exercise of options under existing and
applicable provisions of the Internal Revenue Code of 1986, as amended, and
regulations will generally be as follows:
Incentive stock options. A participant will not realize any taxable income at
the time an incentive stock option is granted or exercised, and the Company will
not receive an income tax deduction at the time of grant or exercise. If a
participant does not sell stock acquired upon the exercise of an incentive stock
option within (1) two years after the date of the grant or (2) one year after
the date of exercise, then a subsequent sale of such stock generally will be
taxed as capital gain or loss. If a participant disposes of shares acquired upon
the exercise of an incentive stock option within the period set forth in clause
(1) or (2) above, then that participant will generally realize ordinary income
in an amount equal to the lesser of (a) the gain realized by that participant
upon such disposition and (b) the excess of the fair market value of the stock
on the date of exercise over the exercise price. In that event, the Company
would generally be entitled to an income tax deduction equal to the amount
recognized as ordinary income by the applicable participant. Any gain in excess
of the amount recognized by the participant as ordinary income would be taxed as
short-term or long-term capital gain, depending on the holding period.
Non-qualified stock options. A participant will not realize taxable income upon
the grant of a non-qualified stock option, and the Company will not receive an
income tax deduction at such time. Upon exercise of a non-qualified stock
option, the applicable participant will realize ordinary income in an amount
equal to the excess of the fair market value of the stock on the date of
exercise over the exercise price. Upon a subsequent sale of such stock, the
participant will recognize short-term or long-term capital gain depending on his
or her holding period for the shares. The Company is generally allowed an income
tax deduction at the same time and in the same amount recognized as ordinary
income by the participant.
Stock-based awards. Amounts received by the participant upon the grant of other
stock-based awards are ordinarily taxed as ordinary income when received.
However, if such other stock-based awards consist of property subject to
restrictions, the amounts generally will not be taxed until the restrictions
lapse or until the participant makes an election under Section 83(b) of the
Internal Revenue Code. The Company is generally allowed an income tax deduction
at the same time and in the same amount recognized as ordinary income by the
participant.
Compliance with Section 162(m). Our 2004 Plan should allow certain stock options
and other stock-based awards to be treated as qualified performance-based
compensation under Section 162(m) of the Internal Revenue Code. However, the
Compensation Committee may, from time to time, award compensation that is not
deductible under Section 162(m).
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
Persons Entitled to Notice
The Record Date for the determination of the shareholders entitled to notice of
and to consent to the Actions has been fixed as of the close of business on
February 13, 2004. As of February 13, 2004, there were outstanding 1,957,500
shares of Common Stock. The Action has been duly approved by the Consenting
Shareholders holding a majority of the outstanding Common Stock. Approval or
consent of the remaining shareholders is not required and is not being solicited
hereby or by any other means.
The Nevada General Corporation Law does not provide for dissenters rights in
connection with the adoption of the Action.
4
Security Ownership of Certain Beneficial Owners and Management
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The following table sets forth, as of February 13, 2004, the stock ownership of
all persons known to own beneficially five percent or more of the Company's
voting stock and all directors and officers of the Company, individually and as
a group. Each person has sole voting and investment power over the shares
indicated, except as noted. Unless otherwise stated in the notes to the table,
each person named below has sole authority to vote and dispose of the shares
shown. Under Rule 13d-3(d)(1) of the Securities Exchange Act of 1934, as
amended, in calculating percentage ownership, each person named below is deemed
to beneficially own securities that such person has the right to acquire within
sixty days through the exercise of any option or warrant or through the
conversion of any security. Shares of Common 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 warrant, but are not deemed outstanding for purposes of computing the
percentage of any other person. The address of those individuals for which an
address is not otherwise indicated is 610 Newport Center Drive, Suite 1400,
Newport Beach, California 92660.
SHARES PERCENT
BENEFICIALLY OF CLASS
NAME OWNED OUTSTANDING
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Sahra Partida (1) 0 0%
President, Treasurer
Secretary and Director
Iwona Alami(1) 900,000 46%
Liliana Partida (1) 900,000 46%
Officers and Directors as 0 0
a Group (2 persons)
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* Less than 1%
(1) C/o Company's address: 610 Newport Center Drive, Suite#1400, Newport
Beach, California, 92660, telephone: (949) 760-6832, facsimile: (949)
760-6815.
Based on 1,957,500 shares of Common Stock outstanding as of February
13, 2004.
EXECUTIVE COMPENSATION
Sahra Partida is the sole officer and director of the Company. She did not
receive any compensation for her services as the director and/or officer of the
Company in fiscal years 2000 and 2001. In August, 2000, the Company issued 5,000
shares of common stock for cash to Ms. Byman, prior officer and director.
COMPENSATION OF DIRECTORS
The Company's current directors do not received any type of compensation in
conjunction with their services as directors.
5
EXHIBITS
APPENDIX A Amendment to Certificate of Incorporation
APPENDIX B 2004 Equity Compensation Plan
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Sahra Partida
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Sahra Partida, President
Appendix A
CERTIFICATE OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
AMARU, INC.,
A Nevada CORPORATION
The undersigned certify that:
1. They are the president and the secretary , respectively, of Amaru,
Inc., a Nevada corporation;
2. Article Four of the Articles of Incorporation of this corporation is
amended to read as follows:
ARTICLE FOUR
CAPITAL STOCK
The amount of the total authorized capital stock of this corporation is
$20,500 as 200,000,000 shares of common stock and 5,000,000 shares of
preferred stock each with a par value of one mill ($0.001). Such
shares are non-assessable.
The Board of Directors is authorized, subject to limitations prescribed
by law, to provide for the issuance of the shares of preferred stock in
one or more series and to establish from time to time the number of
shares to be included in each such series, and to fix the
qualifications, limitations or restrictions thereof.
The authority of the Board of Directors with respect to each
series of preferred stock shall include, but not be limited to,
determination of the following:
(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate on the shares of that series,
whether dividends shall be cumulative, and, if so,
from which date or dates, and the relative rights of
priority, if any, of payment of dividends on shares
of that series;
(c) Whether that series shall have voting rights, in
addition to the voting rights provided by law, and,
if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges,
and, if so, the terms and conditions of such
conversion, including provision for adjustment of the
conversion rate in such as the Board of Directors
shall determine;
(e) Whether or not shares of that series shall be
redeemable, and, if so, the terms and conditions of
such redemption, including the date or dates upon or
after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount
may vary under different conditions, and at different
redemption dates;
(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and,
if so, the terms and amount of such sinking fund;
(g) The rights of the shares of that series in the event
of voluntary or involuntary liquidation, dissolution
or winding up of the corporation, and the relative
rights of priority, if any, of payment of shares of
that series;
(h) Any other relative rights, preferences and
limitations of that series, unless otherwise provided
by the certificate of determination.
3. The foregoing amendment of Articles of Incorporation has
been duly approved by the Board of Directors.
A-1
4. The foregoing amendment of Articles of Incorporation has
been duly approved by the required vote of shareholders in accordance
with Section 902, Nevada Corporations Code. The total number of
outstanding shares of the corporation is 1,957,500.
The number of shares voting in favor of the amendment exceeded the vote
required. The percentage vote required was more than 50%.
We further declare under penalty of perjury under the laws of
the State of Nevada that the matters set forth in this certificate are
true and correct of our own knowledge.
Dated: February __, 2004
-----------------------------------
Sahra Partida, President
A-2
APPENDIX B
2004 EQUITY COMPENSATION PLAN
1. PURPOSE OF THE PLAN
The purpose of the Plan is to aid the Company, its Subsidiaries and
Affiliates, as may be applicable, in recruiting and retaining key individuals of
outstanding ability and to motivate such individuals to exert their best efforts
on behalf of the Company, its Subsidiaries and Affiliates by providing
incentives through the granting of Awards. The Company expects that it will
benefit from the added interest which such key individuals will have in the
welfare of the Company as a result of their proprietary interest in the
Company's success.
2. DEFINITIONS
The following capitalized terms used in the Plan have the respective
meanings set forth in this Section:
(a) Act: The Securities Exchange Act of 1934, as amended, or any
successor thereto.
(b) Affiliate: With respect to the Company, any company directly or
indirectly controlling, controlled by, or under common control
with, the Company or any other entity designated by the Board of
Directors of the Company in which the Company has an interest.
(c) Award: An Option or Stock-Based
Award granted pursuant to the Plan. (d) Beneficial Owner: A
"beneficial owner", as such term is defined in Rule 13d-3 under
the Act (or any successor rule thereto).
(d) Beneficial Owner: A "beneficial owner" as such term is defined in
Rule 13d-3 under the Act (or any successor rule thereto)
(e) Board: The Board of Directors of the Company.
(f) Board Change: Within the twenty-four consecutive month period
following the occurrence of any of the events set forth in Section
2(v)(i), individuals who immediately prior to the occurrence of
any of such events constitute the Board cease for any reason to
constitute at least a majority thereof (other than in the event of
a director's death or Disability).
(g) Cause: In the event that a Participant is a party to an employment
agreement with the Company, the Parent, a Subsidiary or an
Affiliate at the date an Award is granted, "Cause" shall have the
same meaning ascribed to such term in such employment agreement.
In the event that a Participant is not party to any such
employment agreement or there is no
(h) such definition, "Cause" shall be defined as follows:
(i) a Participant's continued failure substantially to perform the
Participant's duties (other than as a result of total or
partial incapacity due to physical or mental illness) for a
period of 10 days following written notice by the Company to
the Participant of such failure; or
B-1
(ii)dishonesty in the performance of, or willful malfeasance or
willful misconduct in connection with, a Participant's duties;
or
(iii) an act or acts on a Participant's part constituting (x) a
felony under the laws of the United States or any state thereof
or (y) a misdemeanor involving moral turpitude; or
(iv)any act or omission of a Participant which is materially
injurious to the financial condition or business reputation of
Parent, the Company or any of its Subsidiaries or Affiliates;
or
(v) a Participant's breach of any restrictive covenants contained
in any agreement with the Company or any of its Subsidiaries or
Affiliates to which Participant is a party.
(i) Change in Control: The occurrence of any of the following events:
(i) any Person, other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan
of the Company, or any company owned, directly or
indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of
Stock of the Company, becomes the Beneficial Owner, directly
or indirectly, of securities of the Company, (a)
representing a greater percentage of the combined voting
power of the Company's then-outstanding securities than the
percentage of the combined voting power of the Company's
then-outstanding securities held by Parent and its
Affiliates and (b) representing 30% or more of the combined
voting power of the Company's then-outstanding securities;
or
(ii) during any period of twenty-four months (not including any
period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board, and any new
director (other than (A) a director nominated by a Person who
has entered into an agreement with the Company to effect a
transaction described in Sections 2(h)(i), (iii) or (iv) of
the Plan, (B) a director nominated by any Person (including
the Company) who publicly announces an intention to take or
to consider taking actions (including, but not limited to, an
actual or threatened proxy contest) which if consummated
would constitute a Change in Control or (C) a director
nominated by any Person, other than Parent and its
Affiliates, who is the Beneficial Owner, directly or
indirectly, of securities of the Company representing 10% or
more of the combined voting power of the Company's
securities) whose election by the Board or nomination for
election by the Company's shareholders was approved in
advance by a vote of at least two-thirds ( 2/3) of the
directors then still in office who either were directors at
the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason
to constitute at least a majority thereof; or
(iii) the Company is merged or consolidated with any other company,
other than a merger or consolidation which would result in
the shareholders of the Company immediately prior thereto
continuing to own (either by remaining outstanding or by
being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;
or
(iv) the complete liquidation of the Company or the sale or
disposition by the Company of all or substantially all of the
Company's assets, other than a liquidation of the Company or
sale of its assets to an Affiliate into a wholly-owned
subsidiary.
(j) Code: The Internal Revenue Code of 1986, as amended, or any
successor thereto.
B-2
(k) Committee: The Board of Directors of the Company, the
Compensation Committee of the Board, or, if applicable, the
subcommittee to which such Committee delegates its duties and
powers.
(l) Company: Amaru, Inc.
(m) Disability: Inability to engage in any substantial gainful
activity by reason of a medically determinable physical or mental
impairment which constitutes a permanent and total disability, as
defined in Section 22(f)(3) of the Code (or any successor section
thereto). The determination whether a Participant has suffered a
Disability shall be made by the Committee based upon such
evidence as it deems necessary and appropriate. A Participant
shall not be considered disabled unless he or she furnishes such
medical or other evidence of the existence of the Disability as
the Committee, in its sole discretion, may require.
(n) Effective Date: The date set by the Company's Board of Directors.
(o) Employer: The Company, a Subsidiary or an Affiliate, as
applicable, which employs any given Participant.
(p) Fair Market Value: on a given date, the closing price of the
Shares as reported on such date on the Composite Tape of the
principal national securities exchange on which such Shares are
listed or admitted to trading, or, if no Composite Tape exists
for such national securities exchange on such date, then on the
principal national securities exchange on which such Shares are
listed or admitted to trading, or, if the Shares are not listed
or admitted on a national securities exchange, the per Share
closing bid price on such date as quoted on the National
Association of Securities Dealers Automated Quotation System (or
such market in which such prices are regularly quoted), or, if
there is no market on which the Shares are regularly quoted, the
Fair Market Value shall be the value established by the Committee
in good faith;
If no sale of Shares shall have been reported on such Composite
Tape or such national securities exchange on such date or quoted
on the National Association of Securities Dealer Automated
Quotation System on such date, then the immediately preceding
date on which sales of the Shares have been so reported or quoted
shall be used.
(q) ISO: An Option that is also an incentive stock option granted
pursuant to Section 6(d) of the Plan.
(r) Stock-Based Awards: Awards granted pursuant to Section 8 of the
Plan. Option: A stock option granted pursuant to Section 6 of the
Plan. Option Price: The purchase price per Share of an Option, as
determined pursuant to Section 6(a) of the Plan.
(w) Participant: An employee or director of the Company, its Parent,
Subsidiary or Affiliate, or an individual who is not such an
employee or director but who otherwise performs services for the
Company, its Parent, Subsidiary or Affiliate, and in any case,
who is selected by the Committee to participate in the Plan.
(x) Performance-Based Awards: Certain Other Stock-Based Awards
granted pursuant to Section 8(b) of the Plan.
(y) Person: A "person", as such term is used for purposes of Section
13(d) or 14(d) of the Act (or any successor section thereto).
(z) Plan: The Advanced Refrigeration Technologies, Inc. 2003 Equity
Compensation Plan.
(aa) Public Offering: A sale of shares of the Company's common stock
to the public pursuant to a registration statement under the
Securities Act of 1933, as amended, that has been declared
effective by the Securities and Exchange Commission (other than a
registration statement on Form S-4 or Form S-8, or any other
successor or other forms promulgated for similar purposes, or a
registration statement in connection with an offering to
employees of the Company and its Subsidiaries) that results in an
active trading market in the Company's common stock; provided,
that there shall be deemed to be an "active trading market" if
the Company's common stock is listed or quoted on a national
stock exchange or the NASDAQ National Market.
B-3
(bb) Shares: Shares of Common Stock of the Company, no par value per
Share.
(cc) Subsidiary: A subsidiary corporation, as defined in Section
424(f) of the Code (or any successor section thereto).
3. SHARES SUBJECT TO THE PLAN
The total number of Shares which may be issued under the Plan is less than
15% of the total Shares outstanding, which shall not exceed 2,500,000 Shares.
The Shares may consist, in whole or in part, of unissued Shares or treasury
Shares. The issuance of Shares or the payment of cash upon the exercise of an
Award shall reduce the total number of Shares available under the Plan, as
applicable. Shares which are subject to Awards which terminate or lapse may be
granted again under the Plan.
4. ADMINISTRATION
The Plan shall be administered by the Board of Directors or the Committee,
which may delegate its duties and powers in whole or in part to any subcommittee
thereof consisting solely of at least two individuals who are intended to
qualify as "non-employee directors" within the meaning of Rule 16b-3 under the
Act (or any successor rule thereto) and "outside directors" within the meaning
of Section 162(m) of the Code (or any successor section thereto). Awards may, in
the discretion of the Committee, be made under the Plan in assumption of, or in
substitution for, outstanding awards previously granted by the Company or its
affiliates or a company acquired by the Company or with which the Company
combines. The number of Shares underlying such substitute awards shall be
counted against the aggregate number of Shares available for Awards under the
Plan. The Committee is authorized to interpret the Plan, to establish, amend and
rescind any rules and regulations relating to the Plan, and to make any other
determinations that it deems necessary or desirable for the administration of
the Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan in the manner and to the extent the
Committee deems necessary or desirable. Any decision of the Committee in the
interpretation and administration of the Plan, as described herein, shall lie
within its sole and absolute discretion and shall be final, conclusive and
binding on all parties concerned (including, but not limited to, Participants
and their beneficiaries or successors). The Committee shall have the full power
and authority to establish the terms and conditions of any Award consistent with
the provisions of the Plan and to waive any such terms and conditions at any
time (including, without limitation, accelerating or waiving any vesting
conditions). The Committee shall require payment of any amount it may determine
to be necessary to withhold for federal, state, local or other taxes as a result
of the exercise of an Award. Unless the Committee specifies otherwise, the
Participant may elect to pay a portion or all of such withholding taxes by (a)
delivery in Shares or (b) having Shares withheld by the Company from any Shares
that would have otherwise been received by the Participant.
5. LIMITATIONS
No Award may be granted under the Plan after the tenth anniversary of the
Effective Date, but Awards theretofore granted may extend beyond that date.
6. TERMS AND CONDITIONS OF OPTIONS
Options granted under the Plan shall be, as determined by the Committee,
nonqualified or incentive stock options for federal income tax purposes, as
evidenced by the related Award agreements, and shall be subject to the foregoing
and the following terms and conditions and to such other terms and conditions,
not inconsistent therewith, as the Committee shall determine:
(a) Option Price. The Option Price per Share shall be determined by
the Committee.
(b) Exercisability. Options granted under the Plan shall be
exercisable at such time and upon such terms and conditions as may
be determined by the Committee, but in no event shall an Option be
exercisable more than ten years after the date it is granted.
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(c) Exercise of Options. Except as otherwise provided in the Plan or
in an Award agreement, an Option may be exercised for all, or from
time to time any part, of the Shares for which it is then
exercisable. For purposes of Section 6 of the Plan, the exercise
date of an Option shall be the later of the date a notice of
exercise is received by the Company and, if applicable, the date
payment is received by the Company pursuant to clauses (i), (ii)
or (iii) in the following sentence. The purchase price for the
Shares as to which an Option is exercised shall be paid to
the Company in full at the time of exercise at the election of the
Participant (i) in cash or its equivalent (e.g., by check); (ii)
in Shares having a Fair Market Value equal to the aggregate Option
Price for the Shares being purchased and satisfying such other
requirements as may be imposed by the Committee; provided, that
such Shares have been held by the Participant for no less than six
months (or such other period as established from time to time by
the Committee or generally accepted accounting principles); (iii)
partly in cash and partly in such Shares; or (iv) through the
delivery of irrevocable instruments to a broker to deliver
promptly to the Company an amount equal to the aggregate Option
price for the shares being purchased. No Participant shall have
any rights to dividends or other rights of a stockholder with
respect to Shares subject to an Option until the Participant has
given written notice of exercise of the Option, paid in full for
such Shares and, if applicable, has satisfied any other conditions
imposed by the Committee pursuant to the Plan.
(d) ISOs. The Committee may grant to employees Options under the Plan
that are intended to be ISOs. Such ISOs shall comply with the
requirements of Section 422 of the Code (or any successor section
thereto), including, without limitation the requirement that the
Option Price per Share subject to an ISO shall not be less than
100% of the Fair Market Value of the Shares on the date an ISO is
granted.. No ISO may be granted to any Participant who at the time
of such grant, owns more than ten percent of the total combined
voting power of all classes of stock of the Company or of any
Subsidiary, unless (i) the Option Price for such ISO is at least
110% of the Fair Market Value of a Share on the date the ISO is
granted and (ii) the date on which such ISO terminates is a date
not later than the day preceding the fifth anniversary of the date
on which the ISO is granted. Any Participant who disposes of
Shares acquired upon the exercise of an ISO either (i) within two
years after the date of grant of such ISO or (ii) within one year
after the transfer of such Shares to the Participant, shall notify
the Company of such disposition and of the amount realized upon
such disposition.
(e) Attestation. Wherever in this Plan or any agreement evidencing an
Award a Participant is permitted to pay the exercise price of an
Option or taxes relating to the exercise of an Option by
delivering Shares, the Participant may, subject to procedures
satisfactory to the Committee, satisfy such delivery requirement
by presenting proof of beneficial ownership of such Shares, in
which case the Company shall treat the Option as exercised without
further payment and shall withhold such number of Shares from the
Shares acquired by the exercise of the Option.
7. STOCK-BASED AWARDS
(a) Generally. The Committee, in its sole discretion, may grant Awards of
Shares, Awards of restricted Shares and Awards that are valued in whole
or in part by reference to, or are otherwise based on the Fair Market
Value of, Shares ("Stock-Based Awards"). Such Stock-Based Awards shall
be in such form, and dependent on such conditions, as the Committee
shall determine, including, without limitation, the right to receive
one or more Shares (or the equivalent cash value of such Shares) upon
the completion of a specified period of service, the occurrence of an
event and/or the attainment of performance objectives. Stock-Based
Awards may be granted alone or in addition to any other Awards granted
under the Plan. Subject to the provisions of the Plan, the Committee
shall determine to whom and when other Stock-Based Awards will be made,
the number of Shares to be awarded under (or otherwise related to) such
Stock-Based Awards; whether such Stock-Based Awards shall be settled in
cash, Shares or a combination of cash and Shares; and all other terms
and conditions of such Awards (including, without limitation, the
vesting provisions thereof and provisions ensuring that all Shares so
awarded and issued shall be fully paid and non-assessable).
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(b) Performance-Based Awards. Notwithstanding anything to the contrary
herein, certain Stock-Based Awards granted under this Section 8 may be
granted in a manner which is deductible by the Company under Section
162(m) of the Code (or any successor section thereto)
("Performance-Based Awards"). A Participant's Performance-Based Award
shall be determined based on the attainment of written performance
goals approved by the Committee for a performance period established by
the Committee (i) while the outcome for that performance period is
substantially uncertain and (ii) no more than 90 days after the
commencement of the performance period to which the performance goal
relates or, if less, the number of days which is equal to 25 percent of
the relevant performance period. The performance goals, which must be
objective, shall be based upon one or more of the following criteria:
(i) consolidated earnings before or after taxes (including earnings
before interest, taxes, depreciation and amortization); (ii) net
income; (iii) operating income; (iv) earnings per Share; (v) book value
per Share; (vi) return on shareholders' equity; (vii) expense
management; (viii) return on investment; (ix) improvements in capital
structure; (x) profitability of an identifiable business unit or
product; (xi) maintenance or improvement of profit margins; (xii) stock
price; (xiii) market share; (xiv) revenues or sales; (xv) costs; (xvi)
cash flow; (xvii) working capital and (xviii) return on assets. The
foregoing criteria may relate to the Company, one or more of its
Subsidiaries or one or more of its divisions or units, or any
combination of the foregoing, and may be applied on an absolute basis
and/or be relative to one or more peer group companies or indices, or
any combination thereof, all as the Committee shall determine. In
addition, to the degree consistent with Section 162(m) of the Code (or
any successor section thereto), the performance goals may be calculated
without regard to extraordinary items. The Committee shall determine
whether, with respect to a performance period, the applicable
performance goals have been met with respect to a given Participant
and, if they have, to so certify and ascertain the amount of the
applicable Performance Based Award. No Performance-Based Awards will be
paid for such performance period until such certification is made by
the Committee. The amount of the Performance-Based Award actually paid
to a given Participant may be less than the amount determined by the
applicable performance goal formula, at the discretion of the
Committee. The amount of the Performance-Based Award determined by the
Committee for a performance period shall be paid to the Participant at
such time as determined by the Committee in its sole discretion after
the end of such performance period; provided, however, that a
Participant may, if and to the extent permitted by the Committee and
consistent with the provisions of Section 162(m) of the Code, elect to
defer payment of a Performance-Based Award.
8. ADJUSTMENTS UPON CERTAIN EVENTS
Notwithstanding any other provisions in the Plan to the contrary, the
following provisions shall apply to all Awards granted under the Plan:
(a) Generally. In the event of any change in the outstanding Shares
after the Effective Date by reason of any Share dividend or split,
reorganization, recapitalization, merger, consolidation, spin-off,
combination or exchange of Shares or other corporate exchange, or
any distribution to shareholders of Shares other than regular cash
dividends or any transactions similar to the foregoing, the
Committee in its sole discretion and without liability to any
person may make such substitution or adjustment, if any, as it
deems to be equitable, as to (i) the number or kind of Shares or
other securities issued or reserved for issuance pursuant to the
Plan or pursuant to outstanding Awards, (ii) the Option Price
and/or (iii) any other affected terms of such Awards.
(b) Change in Control. Except as otherwise provided in an Award
agreement or an employment, severance or change in control
agreement, in the event of a Change in Control or a Parent
Triggering Event, the Committee in its sole discretion and without
liability to any person may take such actions, if any, as it deems
necessary or desirable with respect to any Award (including,
without limitation, (i) the acceleration of an Award, (ii) the
payment of a cash amount in exchange for the cancellation of an
Award and/or (iii) the requiring of the issuance of substitute
Awards that will substantially preserve the value, rights and
benefits of any affected Awards previously granted hereunder) as
of the date of the consummation of the Change in Control.
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9. NO RIGHT TO EMPLOYMENT OR AWARDS
The granting of an Award under the Plan shall impose no obligation on the
Company or any Subsidiary to continue the employment or service or consulting
relationship of a Participant and shall not lessen or affect the Company's or
Subsidiary's right to terminate the employment or service or consulting
relationship of such Participant. No Participant or other Person shall have any
claim to be granted any Award, and there is no obligation for uniformity of
treatment of Participants, or holders or beneficiaries of Awards. The terms and
conditions of Awards and the Committee's determinations and interpretations with
respect thereto need not be the same with respect to each Participant (whether
or not such Participants are similarly situated).
10. SUCCESSORS AND ASSIGNS
The Plan shall be binding on all successors and assigns of the Company and
a Participant, including without limitation, the estate of such Participant and
the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the Participant's creditors.
11. NONTRANSFERABILITY AWARDS
Unless otherwise determined by the Committee or as hereinafter provided, an
Award shall not be transferable or assignable by the Participant otherwise than
by will or by the laws of descent and distribution. An Award exercisable after
the death of a Participant may be exercised by the legatees, personal
representatives or distributees of the Participant. However, unless the Award
agreement provides otherwise, a Participant may transfer his or her rights under
a nonqualified Option agreement, by assignment, satisfactory in form and
substance to the Committee, to a trust or similar entity established solely for
the benefit of the Participant's lineal descendants; provided, that such
assignee must first agree to be bound by the same terms and conditions as the
Participant with respect to such Option; and provided, further, that the rights
of such assignee shall not themselves be transferable.
12. AMENDMENTS OR TERMINATION
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which, (a) without the approval of
the shareholders of the Company, would (except as is provided in Section 9 of
the Plan), increase the total number of Shares reserved for the purposes of the
Plan or change the maximum number of Shares for which Awards may be granted to
any Participant or (b) without the consent of a Participant, would impair any of
the rights or obligations under any Award theretofore granted to such
Participant under the Plan; provided, however, that the Committee may amend the
Plan in such manner as it deems necessary to permit the granting of Awards
meeting the requirements of the Code or other applicable laws. Notwithstanding
anything to the contrary herein, the Board may not amend, alter or discontinue
the provisions relating to Section 8(b) of the Plan after the occurrence of a
Change in Control.
13. INTERNATIONAL PARTICIPANTS
With respect to Participants who reside or work outside the United States
of America and who are not (and who are not expected to be) "covered employees"
within the meaning of Section 162(m) of the Code, the Committee may, in its sole
discretion, amend the terms of the Plan or Awards with respect to such
Participants in order to conform such terms with the requirements of local law.
14. CHOICE OF LAW
The Plan shall be governed by and construed in accordance with the laws of
the State of California, without regard to conflicts of laws.
15. EFFECTIVENESS OF THE PLAN
The Plan shall be effective as of the Effective Date.
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