Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[_] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss.
240.14a-12
PREMIUM ENTERPRISES, INC.
-------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
--------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
- -----------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- -----------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- -----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- -----------------------------------------------------------------
1
PREMIUM ENTERPRISES, INC.
1510 Poole Boulevard
Yuba City, CA 95993
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD June 6, 2003
Notice is hereby given that the Annual Meeting of Shareholders of Premium
Enterprises, Inc., (hereinafter referred to as "the Company") will be held at
1510 Poole Boulevard, Yuba City, CA 95993, at 10:00 a.m., local time, for the
following purposes:
1. To elect five directors to hold office until the next annual
meeting of shareholders and qualification of their respective
successors.
2. To ratify the appointment of Gordon, Hughes, & Banks as Inde-
pendent Accountants for the annual period ending December 31,
2003.
3. To change the name of the corporation to eTotalsource, Inc.
and to authorize the Amendment of the Articles of Incorpora-
tion.
4. To Authorize a reverse split of the common stock on a one for
four basis, by which each four shares shall become one share;
provided that no shareholder shall be reversed below 100
shares, and no shareholder owning 100 shares or less shall be
reversed. Fractional shares will be rounded up to the next
whole share.
5. To approve the Company's 2003 Employee Stock Option and Award
Plan.
6. To transact such other business as may properly come before
the annual meeting or any postponement of or adjournment
thereof.
The Board of Directors has fixed the closing of business on May 19,
2003, as the record date for the determination of shareholders entitled to
notice of and to vote at this meeting or any adjournment thereof. The stock
transfer books will not be closed.
The Company's Annual Report to Stockholders for the transitional year
ended December 31, 2002 accompanies this Notice of Annual Meeting and Proxy
Statement.
All stockholders, whether or not they expect to attend the Meeting in
person, are requested either to complete, date, sign, and return the enclosed
form of proxy in the accompanying envelope or to record their proxy by other
authorized means. The proxy may be revoked by the person executing the proxy by
filing with the Secretary of the Company an instrument of revocation or duly
executed proxy bearing a later date, or by electing to vote in person at the
meeting.
/s/ Terry Eilers
-----------------------
Premium Enterprises, Inc.
Terry Eilers, President
2
PROXY STATEMENT
PREMIUM ENTERPRISES, INC.
1510 Poole Boulevard
Yuba City, CA 95993
ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD
June 6, 2003
This Proxy Statement is being furnished to the shareholders of PREMIUM
ENTERPRISES, INC., a Colorado corporation, in connection with the solicitation
by the Board of Directors of proxies to be used at the Annual Meeting of Share-
holders to be held at 10:00 a.m., local time, June 6, 2003 at 1510 Poole
Boulevard, Yuba City, CA 95993. The Proxy Statement is first being sent or given
to shareholders on or about May 21, 2003.
PROXIES ARE BEING SOLICITED BY THE BOARD OF DIRECTORS.
WE ARE ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED TO SEND US A
PROXY.
VOTING RIGHTS
Stockholders of record of the Company as of the close of business on
May 19, 2003 have the right to receive notice of and to vote at the Annual
Meeting. On May 19, 2003, the Company had issued an outstanding 17,565,151
shares of Common Stock (the "Common Stock"), the only class of voting securities
outstanding. Each share of Common Stock is entitled to one (1) vote for as many
separate nominees as there are directors to be elected and for or against all
other matters presented. For action to be taken at the Annual Meeting, a
majority of the shares entitled to vote must be represented at the Annual
Meeting in person or by proxy. Shares of stock may not be voted cumulatively.
Abstentions and broker non-votes each will be included in determining the number
of shares present and voting at the Annual Meeting. Abstentions will be counted
in tabulations of the votes cast on proposals, whereas broker non-votes will not
be counted for purposes of determining whether a proposal has been approved.
EXPENSE OF MAILING
The expense of preparing and mailing of this Proxy Statement to
shareholders of the Company is being paid for by the Company. The Company is
also requesting brokers, custodians, nominees and fiduciaries to forward this
3
Proxy Statement to the beneficial owners of the shares of common stock of the
Company held of record by such persons. The Company will not reimburse such
persons for the cost of forwarding.
PROXIES
In voting their Common Stock, stockholders may vote in favor of or
against the proposal to approve the proposals on the agenda or may abstain from
voting. Stockholders should specify their choice on the accompanying proxy card.
All properly executed proxy cards delivered pursuant to this solicitation and
not revoked will be voted at the Meeting in accordance with the directions
given. If no specific instruction are given with regard to the matter to be
voted upon, then the shares represented by a signed proxy card will be voted
"FOR" the approval of the Amendment and in the discretion of such proxies to any
other procedural matters which may properly come before the Meeting or any
adjournments thereof. All proxies delivered pursuant to this solicitation are
revocable at any time before they are voted at the option of the persons
executing them by (i) giving written notice to the Secretary of the Company,
(ii) by delivering a later dated proxy card, or (iii) by voting in person at the
Meeting. All written notices of revocation and other communications with respect
to revocations of proxies should be addressed to Michael Sullinger, Secretary,
Premium Enterprises, Inc., 1510 Poole Boulevard, Yuba City, CA 95993.
HOLDERS OF COMMON STOCK ARE REQUIRED TO COMPLETE, DATE, AND SIGN THE
ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY TO THE COMPANY IN THE
ACCOMPANYING ENVELOPE.
The person named as proxy is Terry Eilers, a director of the Company.
In addition to the solicitation of proxies by mail, the Company,
through its directors, officers, and employees, may solicit proxies from
stockholders personally or by telephone or other forms of communication. The
Company will not reimburse anyone for reasonable out-of-pocket costs and
expenses incurred in the solicitation of proxies. The Company also will request
brokerage houses, nominees, fiduciaries, and other custodians to forward
soliciting materials to beneficial owners, and the Company will reimburse such
persons for their reasonable expenses incurred in doing so. All expenses
incurred in connection with the solicitation of proxies will be borne by the
Company.
INTEREST OF PERSONS IN MATTERS TO BE ACTED UPON
None. No director or shareholder owning 10% or more of the outstanding
shares has indicated her or his intent to oppose any action to be taken at the
meeting. No officer or director or shareholder has any interest in any matter to
4
be voted upon, except that all officers and directors may be deemed
beneficiaries under the Employee Stock Award Program.
VOTING SECURITIES AND BENEFICIAL OWNERSHIP
As of the call date of the meeting, May 19, 2003, the total number of
common shares outstanding and entitled to vote was 17,565,151.
The holders of such shares are entitled to one vote for each share held
on the record date. There is no cumulative voting on any matter on the agenda of
this meeting. No additional shares will be issued subsequent to call date and
prior to meeting.
RECORD DATE
Stock transfer records will remain open. Five days prior to mailing of
the Proxy Statement shall be the record date for determining shareholders
entitled to vote and receive notice of the meeting.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of May 19, 2003, with
respect to the shares of common stock of the Company owned by (i) owners of more
than 5% of the outstanding shares of common stock, (ii) each director of the
Company, and (iii) all directors and officers of the Company as a group. Unless
otherwise indicated, all shares are held by the person named and are subject to
sole voting and investment by such person.
Title Name and Amount and Percent
of Address of Nature of of
Class Beneficial Owner Beneficial Interest Class
- ----- ---------------- ------------------- -------
Common Terry Eilers 8,399,457 48%
1510 Poole Boulevard 300,000 options(1) 1.6%
Yuba City, CA 95993
Common Clark Davenport 1,535,386 7.7%
1510 Poole Boulevard
Yuba City, CA 95993
Common Morrow Revocable Trust 1,645,056 8.2%
(beneficially John Morrow
and family)
12655 Rough & Ready
Grass Valley, CA 95945
5
Common Wesley Whiting 75,000 .4%
10200 W. 44th Ave., #210E
Wheat Ridge, CO 80033
Common Richard Barber 584,352 3%
1510 Poole Boulevard 25,000 options (2) .1%
Yuba City, CA 95993
Common Virgil Baker 987,033 5.6%
1510 Poole Boulevard 300,000 options (2) 1.6%
Yuba City, CA 95993
Common Michael Sullinger 68,544 .3%
1510 Poole Boulevard 200,000 options (1) 1%
Yuba City, CA 95993
Common Cody Morrow (resigned 2002) 1,645,056 9.3%
Directors and officers as a group (2) 11,759,442 66.9%
12,584,442 68.4%
(1) Options exercisable within 60 days computed pursuant to Section 13(d).
(2) Includes total options exercisable as mentioned in (1) above.
VOTING REQUIRED FOR APPROVAL
A majority of the shares of common stock outstanding at the record date
must be represented at the Annual Meeting in person or by proxy in order for a
quorum to be present and in order to take action upon all matters to be voted
upon, but if a quorum should not be present, the meeting may be adjourned with-
out further notice to shareholders, until a quorum is assembled. Each share-
holder will be entitled to cast one vote at the Annual Meeting for each share of
common stock registered in such shareholder's name at the record date.
Abstentions and broker non-votes are counted for purposes of determin-
ing the presence or absence of a quorum for the transaction of business. Each
share of Common Stock entitles the holder thereof to one vote on all matters to
come before the Annual Meeting. Holders of shares of Common Stock are not
entitled to cumulative voting rights.
The favorable vote of a plurality of the votes of the shares of Common
Stock present in person or represented by proxy at the Annual Meeting is
necessary to elect the nominees for directors of the Company. To take the other
actions at the meeting a majority of the shares must vote in favor of the
proposals present in person or by Proxy.
6
REMUNERATION AND OTHER TRANSACTIONS WITH MANAGEMENT
(a) Cash Compensation.
Compensation paid by the Company for all services provided during the
transitional year ended December 31, 2002, (1) to each of the Company's two most
highly compensated executive officers whose cash compensation exceeded
$60,000.00 and (2) to all officers as a group is set forth below under
directors. None.
(b) Compensation Pursuant to Plans. None.
(c) Other Compensation. None.
(d) Compensation of Directors.
Compensation paid by the Company for all services provided during the
period ended December 31, 2002, (1) to each of the Company's directors whose
cash compensation exceeded $60,000.00 and (2) to all directors as a group is set
forth below:
SUMMARY COMPENSATION TABLE OF EXECUTIVES
Annual Compensation Awards
Name & Principal Year Salary Bonus Other Restricted Securities ALL
Position ($) ($) Annual Stock Underlying LONG TERM OTHER
Comp- Award(s) Options/SARS COMPENSATION COMPENSA-
ensation ($) (#) / OPTION TION
($)
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald D. Morrow, (1)(2)
President (Resigned 2002) 2000 0 0 0 0 0 0 0
2001 $50,000* 0 0 0 0 0 0
2002 0 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Terry Eilers, President, 2000 $50,000 0 0 0 0 0 0
CEO 2001 $111,000 0 0 0 200,000 0 0
2002 $37,000 0 0 0 100,000 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Michael Sullinger, 2000 0 0 0 0 0 0 0
Secretary, COO, Legal Counsel 2001 0 0 0 0 0 0
2002 0 0 0 0 200,000 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Wesley F. Whiting, (2) 2002 0 0 10,000 shares 0 0 0 0
Assistant Secretary
(Former Pres., resigned 2002)
- ------------------------------------------------------------------------------------------------------------------------------------
Virgil Baker, CFO 2000 $27,000 0 0 0 0 0 0
2001 $72,000 0 0 0 200,000 0
2002 $18,000 0 0 0 100,000 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Former President (resigned 2002)
(2) After a proposed one for four reverse split.
Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR
value (None)
Long Term Incentive Plans - Awards in Last Fiscal Year (None)
Committees and Meetings
The Board held two meetings during the fiscal year ended December 31,
2002. The Board has appointed standing Audit and Compensation Committees as of
April 2003. No committees exist in prior years in Premium Enterprises, Inc. The
Audit Committee will conduct its business during the regular meetings of the
Board of Directors during the current fiscal year and in addition, will confer
from time to time as necessary. The Compensation Committee, in addition to meet-
ings as part of the regular meetings of the Board, also will confer from time to
time as necessary. The Board has no standing nominating committee. Directors are
required to attend more than 75% of the Board meetings and the meetings of the
Board committees on which such directors served.
7
Directors' Compensation for Last Fiscal Year
-----------------------
Name Annual Meeting Consulting Number Number of ALL
Retainer Fees Fees/Other of Securities LONG TERM OTHER
Fee ($) ($) Fees ($) Shares Underlying COMPENSATION COMPENSA-
(#) Options / OPTION TION
SARs(#)
- ------------------------------------------------------------------------------------------------------------------
A. Director 2002 0 0 0 0 0 0 0
Ronald D. Morrow 2001 0 0 0 0 0 0 0
(Resigned)
B. Director 2002 0 0 0 0 0 0 0
Terry Eilers 2001 0 0 0 0 0 0 0
C. Director 2002 0 0 0 0 0 0 0
Michael Sullinger 2001 0 0 0 0 0 0 0
(Designee)
D. Director 2002 0 0 0 0 0 0 0
Virgil Baker 2001 0 0 0 0 0 0 0
(Designee)
E. Director 2002 0 0 0 0 0 0 0
Cody Morrow 2001 0 0 0 0 0 0 0
(Designee)
F. Director 2002 0 0 0 0 25,000 0 0
Richard Barber 2001 0 0 0 0 0 0 0
(Designee)
G. Wesley F. Whiting 2002 0 0 0 0 0 0 0
(Resigned 2002) 2001 0 0 0 0 0 0 0
Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR
value (None)
Long Term Incentive Plans - Awards in Last Fiscal Year (None)
The Audit Committee of the Board consists of Virgil Baker and Michael
Sullinger. The Audit Committee has the responsibility to review the scope of the
annual audit, recommend to the Board the appointment of the independent
auditors, and meet with the independent auditors for review and analysis of the
Company's systems, the adequacy of controls and the sufficiency of financial
reporting and accounting compliance.
Terry Eilers and Virgil Baker will serve on the Compensation Committee. The
Compensation Committee administers the Company's Employee Stock Award Plan (the
"Plan") and determines the compensation to be paid to each of the Company's
executive officers, employees, and Directors.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
The Securities and Exchange Commission requires disclosure where an
executive officer of a company served or serves as a director or on the
compensation committee of an entity other than the Company and an executive
officer of such other entity served or serves as a director or on the
compensation committee of the Company. The Company does not have any such
interlocks. Decisions as to executive compensation are made by the Compensation
Committee.
Indemnification of Directors and Officers
As permitted by the Colorado Business Corporation Act, the personal
liability of its directors for monetary damages for breach or alleged breach of
their duty of care is very limited. In addition, as permitted by the Colorado
8
Business Corporation Act, the Bylaws of the Company provide generally that the
Company shall indemnify its directors and officers to the fullest extent
permitted by Colorado law, including those circumstances in which indemnifica-
tion would otherwise be discretionary.
The Company has agreed to indemnify each of its directors and executive
officers to provide the maximum indemnity allowed to directors and executive
officers by the Colorado Business Corporation Act and the Bylaws, as well as
certain additional procedural protections. In addition, the indemnification
agreements provide generally that the Company will advance expenses incurred by
directors and executive officers in any action or proceeding as to which they
may be indemnified.
The indemnification provision in the Bylaws, and the indemnification
agreements entered into between the Company and its directors and executive
officers, may be sufficiently broad to permit indemnification of the officers
and directors for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act").
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
ANNUAL REPORT
The Company's Annual Report on Form 10-KT for the year ended December
31, 2002 (the "Form 10-KSB") is being furnished simultaneously herewith. The
Form 10-KSB is not considered a part of this Proxy Statement.
9
The Company will also furnish to any stockholder of the Company a copy
of any exhibit to the Form 10-KT as listed thereon, upon request and upon
payment of the Company's reasonable expenses of furnishing such exhibit.
Requests should be directed to Michael Sullinger, Secretary, at 1510 Poole
Boulevard, Yuba City, CA 95993.
BOARD OF DIRECTORS AND OFFICERS
The persons listed below are currently Officers and the members of the
Board of Directors. Three persons designated with numerals (1), (2), and (3) are
nominees for Director for the following term.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company as of May 20, 2003
are as follows:
Period of
Service As
An Officer Or
Name Age Position(s) Director
- ----------------------------- -------- ------------------------ --------------
Terry Eilers (1) 55 President & Director Annual
Michael Sullinger (2) 59 Secretary & Counsel Annual
& Director
Wesley F. Whiting (3) 70 Assistant Secretary Annual
Director
Virgil Baker 50 CFO & Director Annual
Cody Morrow 49 Director Annual
Richard Barber 62 Director Annual
The directors of the Company hold office until the next annual meeting
of the shareholders and until their successors have been duly elected and
qualified. The officers of the Company are elected at the annual meeting of the
Board of Directors and hold office until their successors are chosen and
qualified or until their death, resignation, or removal. The Company presently
has no executive committee.
The principal occupations of each director and officer of the Company
for at least the past five years are as follows:
MANAGEMENT EXPERIENCE
Terry Eilers - CEO Chairman, Director and Founder of eTotalSource, Inc. -
1994-Present - Former VP and Regional Manager, Regional Training Director for
Lawyers Title Company, 1984-1987, Creation, operation and sale of Sydney Cambric
Publishing 1983-1985 , implemented marketing and management systems, developed
and supervising management training and conducting live seminars to nearly 1
million people worldwide for many Fortune 500 companies such as, Bank of
America, Coldwell Banker, IBM, Xerox, and First American Financial. Over the
past 30 years, his management and computer sales programs have been utilized by
major real estate entities, banks, savings and loans, insurance companies, sales
and research organizations and publishing companies worldwide such as Norwest
Mortgage, Century 21, Sun Trust, Stewart Title Company, and Lawyers Title.
1980-1994. He has been President and Director of Premium Enterprises, Inc. since
December 31, 2002.
10
He is a frequent author, having written, and published through Crescent
Publishing, Sydney Cambric Publishing and the Disney Corporation-Hyperion
Publishing, 12 books concentrated in the real estate, business management and
personal development fields. Some of the titles Mr. Eilers has written include:
How to Sell Your Home Fast(Disney/Hyperion), How To Buy the Home You Want
(Disney/Hyperion), The Title and Document Handbook (Sydney Cambric), Mortgage
Lending Handbook (Sydney Cambric), Mastering Peak Performance (EMR Publishing),
Real Estate Calculator Handbook (Sydney Cambric). He is a AA Administration of
Justice - Sacramento City College 1971 Extensive Course Work - California State
College/Sacramento, Yuba College, Lincoln School of Law 1970-1985.
Virgil Baker-CFO Director and founder of eTotalSource, Inc. 1996-Present.
Formerly the CFO for AGRICO, a large agriculture corporation (1993-1996) - where
he designed and integrated the network programs for the accounting, cash flow
and inventory systems on a nationwide basis. Mr. Baker had the added
responsibility for all of the International commerce generation. He has a BA
Accounting - California State University/Chico -1992. He has been an officer of
Premium Enterprises since December 31, 2002 and was appointed a director in May
2003.
Michael Sullinger-COO - Director - Secretary - In-house legal counsel of
eTotalSource, Inc. since 2000 Extensive background in development and management
of partnerships and joint ventures. Previous private legal practice (1993 to
date) involved business litigation, formation of business entities and advising
principals and directors in the planning and operation of various companies. Has
served as a Board of Director on numerous government, business and philanthropic
organizations. He has a BA Business - San Francisco State University 1977 JD -
California Northern School of Law 1993. He has been an officer of Premium Enter
- -prises since December 31, 2002 and was appointed as a director in May 2003.
Cody Morrow - Director of eTotalSource, Inc., since 2000 President of
Morrow Marketing International 1995-present, $200 million+ annual sales
nationally and internationally. Current direct business operations in Europe,
Thailand and India. He has many years experience in opening foreign markets.
Prior to Morrow Marketing, Cody was President of Monarch Development Corporation
1989-1993 a Southern California based Real Estate Development Company. He was
appointed as a director of Premium Enterprises, Inc. in May 2003.
Richard Barber - Director of eTotalSource, Inc. (since 1998), Founder and
senior partner of A. Richard Barber & Associates 1983-Present, a literary agency
and consultant to numerous major publishing companies. He was also the Director
of Development for Network Enterprises, Inc., 1969-1983 where he supervised the
creations and writing of television and film properties. Former Director and
Senior Editor of Public Relations, for Viking Penguin, Inc. Lecturer in
publishing at New York, Harvard and Radcliff Universities, 1971-1989. His
Academic Background is: Phillips Exeter Academy, Exeter Fellow in History
(1963-1965), Columbia University, M.A, Ph.D (1962-1963). Course work at
Dartmouth College, Special Dartmouth Fellow, A.B., and study programs with Corey
Ford at Harvard, William & Mary, University of Michigan, British Museum, Oxford
University and Columbia University (1961-1962). He was appointed a director of
Premium Enterprises, Inc. in May 2003.
11
Proposal #1
NOMINATION AND ELECTION OF DIRECTORS
The Company's Bylaws currently provide for the number of directors of
the Company to be established by resolution of the Board of Directors and that
number is five. The Board has nominated five (5) persons. At this Annual Meet-
ing, a Board of five (5) directors will be elected. Except as set forth below,
unless otherwise instructed, the proxy holders will vote the proxies received by
them for Management's nominees named below.
All the nominees are presently directors of the Company. In the event
that any Management nominee shall become available, or if other persons are
nominated, the proxy holders will vote in their discretion for a substitute
nominee. It is not expected that any nominee will be unavailable. The term of
office of each person elected as a director will continue until the next Annual
Meeting of Stockholders or until a successor has been elected and qualified.
The proxies solicited hereby cannot be voted for a number of persons
greater than the number of nominees named below. The Certificate of
Incorporation of the Company does not permit cumulative voting. A plurality of
the votes of the holders of the outstanding shares of Common Stock represented
at a meeting at which a quorum is presented may elect directors.
The business experience of each director nominee is discussed on pages
10, 11, and 12 of this Proxy Statement.
THE DIRECTORS NOMINATED BY MANAGEMENT ARE:
Terry Eilers
Michael Sullinger
Cody Morrow
Virgil Baker
Richard Barber
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" MANAGEMENT'S NOMINEES.
Proposal #2
INDEPENDENT PUBLIC ACCOUNTANTS
Gordon, Hughes, & Banks, Independent Public Accountants, of Lakewood,
Colorado have been appointed as the Certifying accountants for the period
through fiscal year 2003 and shareholders are asked to ratify such appointment.
Ratification of the appointment of Gordon, Hughes, & Banks, as the Company's
independent public accountantsfor the fiscal year ending December 31, 2003 will
require the affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy and entitled to vote at the Annual Meeting. In
the event the stockholders do not ratify the appointment of Gordon, Hughes, &
Banks for the forthcoming fiscal year, such appointment will be reconsidered by
the Board. Representatives of Gordon, Hughes, & Banks are expected to be present
at the Annual Meeting to make statements if they desires to do so, and such
representatives are expected to be available to respond to appropriate
questions.
12
Unless marked to the contrary, proxies received will be voted "FOR"
ratification of the appointment of Gordon, Hughes, & Banks as independent
accountants for the Company's year ending December 31, 2003.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
COMPANY'S INDEPENDENT ACCOUNTANTS.
Proposal #3
AMENDMENT TO ARTICLES FOR
CORPORATION NAME CHANGE
The Board is asking shareholders to authorize a change in the name of this
corporation to eTotalsource, Inc. This requires an amendment to the Articles of
Incorporation.
The Board believes the name change in our Articles of Incorporation are in
the best interest of the corporation, to create a new market image to be focused
on the Company's business.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO CHANGE THE
NAME OF THE CORPORATION, AND UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED
WILL BE VOTED FOR THE PROPOSAL TO AMEND THE ARTICLES TO CHANGE THE NAME OF THE
CORPORATION.
PROPOSAL 4
PROPOSED REVERSE SPLIT OF COMMON STOCK ISSUED AND OUTSTANDING
To Authorize a reverse split of the common stock on a one for four basis,
by which each four shares shall become one share; provided that no shareholder
shall be reversed below 100 shares, and no shareholder owning 100 or less shares
shall be reversed. Fractional shares will be rounded up to the next whole share.
We are asking shareholders to approval a pro-rata reverse split of our
common stock, by which each four shares would become one share. The proposal
contains a savings provision for small shareholders. We do not wish to eliminate
any shareholder owning less than 100 shares, if any there be; nor to cause any
shareholder owning more than 100 shares to be reduced to less than 100 shares.
We feel this minor adjustment in favor of small shareholders is decent, fair and
just. We also wish to eliminate the need for fractional shares, so that fraction
- -al shares resulting will be rounded up to constitute a whole share. The effec-
tive date of the reverse split will be 10 days following the date of the meet-
ing, in conformity with the requirements of the National Association of Securi-
ties Dealers.
13
We believe that reverse split will be advantageous to us and to all
shareholders, because it may provide the opportunity for higher share prices
based upon fewer shares. It is also a factor that most brokerage houses do not
permit or favor lower-priced stocks to be used as collateral for margin
accounts. Certain polices and practices of the securities industry may tent to
discourage individual brokers within those firms from dealing in lower-priced
stocks. Some of those polices and practices involve time-consuming procedures
that make the handling of lower priced stocks economically unattractive. The
brokerage commissions on the purchase or sale of lower priced stocks may also
represent a higher percentage of the price than the brokerage commission on
higher priced stocks.
As a general rule, potential investors who might consider making
investments in our company will refuse to do so when the company has a large
number of shares issued and outstanding with no equity. In other words, the
"dilution" which new investors would suffer would discourage them from
investing, as general rule of experience. A reduction in the total outstanding
shares may, without any assurance, make our capitalization structure more
attractive.
While our acceptability for ultimate listing on one of the NASDAQ markets
is presently remote, we believe that it is in the interests of our company to
adjust our capital structure in the direction of conformity with the NASDAQ
structural requirements. At the current date, even with the proposed changes we
would not meet NASDAQ criteria. NASDAQ requirements change constantly. There is
no assurance that the proposed changes with meet NASDAQ requirements when, and
if, we are otherwise qualified. There is no assurance that we will qualify for
NASDAQ.
There is no assurance that any effect of the price of our stock will
result, or that the market price for our common stock, immediately or shortly
after the proposed changes, if approved, will rise, or that any rise which may
occur will be sustained. Market conditions obey their own changes in investor
attitudes and external conditions. We are proposing the steps we deem best
calculation to meet the market attractively. We cannot control the markets
reaction.
Dissenting shareholders have no appraisal rights under Colorado law or
pursuant to our constituent documents of incorporation or bylaws, in connection
with the proposed reverse split.
14
Proposal #5
EMPLOYEE STOCK OPTION AND AWARD PLAN
On April 30, 2003 the Board unanimously approved an Employee Stock Option
and Award Plan, subject to stockholder approval, for 30% of shares outstanding,
all of which shares will be available for grant to directors, officers, and
selected employees, advisors and consultants of the Company for compensation and
as part of a Stock Option Plan. The Board believes that the Plan is necessary
for the Company to compete effectively in its market by attracting and retaining
key talent with stock options and to use its stock for compensation.
The following summary does not purport to be a complete statement of
the Plan's terms and is subject to and qualified in its entirety by reference to
Exhibit A.
Under the Plan, only employees, directors, advisors and consultants of the
Company or any subsidiary (including, without limitation, independent
contractors who are not members of the Board) are eligible to receive grants of
Options by the Compensation Committee or awards of stock for compensation. The
Plan is administered by the Compensation Committee of the Board, which selects
the employees to whom options or awards will be granted, determines the number
of shares to be made subject to each grant, and prescribes other terms and
conditions, including the type of consideration to be paid to the Company for
the grant of each option and vesting schedules in connection with each grant.
Set forth below is an explanation of the Plan and a summary of its
principal terms. The text of the Plan is set forth in Exhibit A to this Proxy
Statement.
Shares Subject to the Employee Stock Option and Award Plan
The maximum number of option grants is set at 15% of shares outstanding.
The maximum number of award shares for compensation is 15% of the shares
outstanding. The authorized shares issuable in connection with the Plan are
subject to adjustment in the event of stock dividends, mergers or other
reorganizations and other situations.
If any option granted under the Plan expires or is canceled or otherwise
terminated, the shares allocable to the unexercised portion of such option shall
again be available for additional option grants.
Participants
All directors, Officers, employees, advisors and consultants of the Company
are eligible to receive grants oroptions under the Plan ursuant to the Plan or
as it may be administered by the Compensation Committee.
Terms of Stock Options
The exercise price of NSOs under the Plan shall not be less than 85% of
the fair market value of a share of the Company's Common Stock on the date of
grant. The exercise price of all NSOs granted to a nonemployee director shall be
equal to 100% of the fair market value of a share of the Company's Common Stock
on the date of grant.
15
The exercise price of ISOs granted to the Company's employees shall not
be less than 100% of the fair market value of a share of the Company's Common
Stock on the date of grant.
The term of any Option granted under the Plan shall not exceed ten (10)
years from the date of grant.
The Compensation Committee shall have sole discretion in determining the
award amounts.
The Compensation Committee: (1) administers the Plan, and except for
automatic grants for the Board made pursuant to the Plan (2) determines the
number of shares and options to be granted under the Plan, and the timing,
vesting, and other terms of such grants, including, without limitation, the
purchase price for each award or sale of shares and the exercise price of each
option.
Federal Income Tax Consequences
The following discussion of the federal income tax consequences of the
Plan is intended to be a summary of applicable federal law. State and local tax
consequences may differ. Because the federal income tax rules governing options
and related payments are complex and subject to frequent change, optionees are
advised to consult their tax advisors prior to exercise of options or
dispositions of stock acquired pursuant to option exercise.
ISOs and NSOs are treated differently for federal income tax purposes.
ISOs are intended to comply with the requirements of Section 422 of the Internal
Revenue Code. NSOs need not comply with such requirements.
An employee is not taxed on the grant or exercise of an ISO. The
difference between the exercise price and the fair market value on the exercise
date of the shares acquired under an ISO will, however, be a preference item for
purposes of the alternative minimum tax. If an optionee holds the shares
acquired upon exercise of an ISO for at least two (2) years following grant and
at least one (1) year following exercise, the optionee's gain, if any, upon a
subsequent disposition of such shares is long-term capital gain. If such shares
are held longer than 18 months, the long-term capital gains rate is generally
20%. The measure of the gain is the difference between the proceeds received on
disposition and the optionee's basis in the shares (which generally equals the
exercise price). If an optionee disposes of stock acquired pursuant to exercise
of an ISO before satisfying the one (1)- and two (2)-year holding periods
described above, the optionee may recognize both ordinary income and capital
gain in the year of disposition. The amount of the ordinary income will be
limited to the difference between the fair market value of the stock on the
exercise date and the option exercise price.
New Plan Benefits
The Compensation Committee has full discretion to determine the number
and amount of options to be granted to employees under the Plan. Therefore, the
benefits and amounts that will be received by each of the officers named in the
Summary Compensation Table above, the executive officers as a group, the
directors who are not executive officers as a group, and all other employees
under the Plan are not presently determinable.
16
The number of options to be received by each nonemployee director
pursuant to the terms of the Plan, subject to stockholder approval, are
determined by the Compensation Committee.
Required Approval
For action to be taken at the Annual Meeting, a quorum must be present.
To be considered approved, the Plan must receive the affirmative vote of the
holders of a majority of the shares represented and voting at the Annual
Meeting.
Unless marked to the contrary, proxies received will be voted "FOR" the
approval of the company's Employee Stock Award Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE COMPANY'S EMPLOYEE
STOCK AWARD PLAN.
SHAREHOLDER PROPOSALS
Shareholders are entitled to submit proposals on matter appropriate for
shareholder action consistent with regulations of the Securities and Exchange
Commission. Should a shareholder intend to present a proposal at next year's
annual meeting, it must be received by the secretary of the Company at 1510
Poole Boulevard, Yuba City, CA 95993, not later than 30 days prior to fiscal
year end, in order to be included in the Company's proxy statement and form of
proxy relating to that meeting. It is anticipated that the next annual meeting
will be held in May, 2004.
Other Matters. Management knows of no business that will be presented
for consideration at the Annual Meeting other than as stated in the Notice of
Annual Meeting. If, however, other matters are properly brought before the
Annual Meeting, it is the intention of the persons named in the accompanying
form of proxy to vote the shares represented thereby on such matters in
accordance with their best judgment.
Dated: May 20, 2003
By Order of the Board of Directors
/s/ Terry Eilers
By: ----------------------------------
Terry Eilers, President
17
EXHIBIT A
2003 STOCK OPTION AND AWARD PLAN
OF
PREMIUM ENTERPRISES, INC.
SECTION 1. ESTABLISHMENT AND PURPOSE.
The Plan is established on May 20, 2003, effective on approval by share-
holders, to offer directors and selected employees, advisors and consultants an
opportunity to acquire a proprietary interest in the success of the Company, or
to increase such interest, by purchasing Shares of the Company's Common Stock.
The Plan provides both for the direct award or sale of Shares and for the grant
of Options to purchase Shares. Options granted under the Plan may include Non-
statutory Options as well as ISOs intended to qualify under section 422 of the
Code.
The Plan is intended to comply in all respects with Rule 16b-3 (or its
successor) under the Exchange Act and shall be construed accordingly.
SECTION 2. DEFINITIONS.
(a) "Board of Directors" shall mean the Board of Directors of the
Company, as constituted from time to time.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean a committee of the Board of Directors, as
described in Section 3(a).
(d) "Company" shall mean Premium Enterprises, Inc., a Colorado
corporation.
(e) "Employee" shall mean (i) any individual who is a common-law
employee of the Company or of a Subsidiary, (ii) an Outside Director and (iii)
an independent contractor who performs services for the Company or a Subsidiary
and who is not a member of the Board of Directors. Service as an Outside
Director or independent contractor shall be considered employment for all
purposes of the Plan, except as provided in Subsections (a) and (b) of Section
4.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(g) "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.
(h) "Fair Market Value" shall mean the market price of Stock,
determined by the Committee as follows:
(i) If Stock was traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the
closing price reported for such date by the applicable
composite- transactions report;
(ii) If Stock was traded over-the-counter on the date in
question and was traded on the Nasdaq system or the Nasdaq
National Market, then the Fair Market Value shall be equal to
the last-transaction price quoted for such date by the Nasdaq
system or the Nasdaq National Market;
(iii) If Stock was traded over-the-counter on the date in
question but was not traded on the Nasdaq system or the Nasdaq
National Market, 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 Stock is quoted or, if
the Stock is not quoted on any such system, by the "Pink
Sheets" published by the National Quotation Bureau, Inc.; 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.
(i) "ISO" shall mean an employee incentive stock option described
insection 422(b) of the Code.
(j) "Nonstatutory Option" shall mean an employee stock option not
describedin sections 422(b) or 423(b) of the Code.
(k) "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).
(l) "Option" shall mean an ISO or Nonstatutory Option granted under the
Plan and entitling the holder to purchase Shares.
(m) "Optionee" shall mean an individual who holds an Option.
(n) "Outside Director" shall mean a member of the Board of Directors
who is not a common-law employee of the Company or of a Subsidiary.
(o) "Committee Procedures." The Committee shall designate one of its
members as chairman. 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.
(p) Committee Responsibilities. Subject to the provisions of the Plan,
the Committee shall have the authority and discretion to take the following
actions:
(i) To interpret the Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms
relating to the Plan;
(iii) To authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of
the Plan;
(iv) To determine when Shares are to be awarded or offered
for sale and when Options are to be granted under the Plan;
(v) To select the Offerees and Optionees;
(vi) To determine the number of Shares to be offered to each
Offeree or to be made subject to each Option;
(vii) To prescribe the terms and conditions of each award or
sale of Shares, including (without limitation) the Purchase
Price, and to specify the provisions of the Stock Purchase
Agreement relating to such award or sale;
(viii) To prescribe the terms and conditions of each Option,
including (without limitation) the Exercise Price, to
determine whether such Option is to be classified as an ISO or
as a Nonstatutory Option, and to specify the provisions of the
Stock Option Agreement relating to such Option;
(ix) To amend any outstanding Stock Purchase Agreement or
Stock Option Agreement, subject to applicable legal
restrictions and, to the extent such amendments adverse to the
Offeree's or Optionee's interest, to the consent of the
Offeree or Optionee who entered into such agreement;
(x) To prescribe the consideration for the grant of each
Option or other right under the Plan and to determine the
sufficiency of such consideration; and
(xi) To take any other actions deemed necessary or advisable
for the administration of the Plan.
All decisions, interpretations and other actions of the Committee shall be final
and binding on all Offerees, all Optionees, and all persons deriving their
rights from an Offeree or Optionee. No member of the Committee shall be liable
for any action that he or she has taken or has failed to take in good faith with
respect to the Plan, any Option, or any right to acquire Shares under the Plan.
SECTION 3. ADMINISTRATION.
(a) Committee Membership. The Plan shall be administered by the
Committee. The "Committee" shall mean the full Board of Directors and/or a
committee designated by the Board of Directors, which is authorized to
administer the Plan under this Section. The Committee's membership shall enable
the Plan to qualify under Rule 16b-3 with regard to the grant of Shares and
Options under the Plan to persons who are subject to Section 16 of the Exchange
Act. Subject to the requirements of applicable law, the Committee may designate
persons other than members of the Committee to carry out its responsibilities
and may prescribe such conditions and limitations as it may deem appropriate,
except that the Committee may not delegate its authority with regard to the
selection for participation of or the granting of Shares or Options under the
Plan to persons subject to Section 16 of the Exchange Act.
(b) Committee Procedures. The Committee shall designate one of its
members as chairman. 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. Subject to the provisions of the Plan,
the Committee shall have full authority and discretion to take the following
actions:
(i) To interpret the Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms
relating to the Plan;
(iii) To authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of
the Plan;
(iv) To determine when Shares are to be awarded or offered
for sale and when Options are to be granted under the Plan;
(v) To select the Offerees and Optionees;
(vi) To determine the number of Shares to be offered to each
Offeree or to be made subject to each Option;
(vii) To prescribe the terms and conditions of each award or
sale of Shares, including (without limitation) the Purchase
Price, and to specify the provisions of the Stock Purchase
Agreement relating to such award or sale;
(viii) To prescribe the terms and conditions of each Option,
including (without limitation) the Exercise Price, to
determine whether such Option is to be classified as an ISO or
as a Nonstatutory Option, and to specify the provisions of the
Stock Option Agreement relating to such Option;
(ix) To amend any outstanding Stock Purchase Agreement or
Stock Option Agreement, subject to applicable legal
restrictions and, to the extent such amendments adverse to the
Offeree's or Optionee's interest, to the consent of the
Offeree or Optionee who entered into such agreement;
(x) To prescribe the consideration for the grant of each
Option or other right under the Plan and to determine the
sufficiency of such consideration; and
(xi) To take any other actions deemed necessary or advisable
for the administration of the Plan.
All decisions, interpretations and other actions of the Committee shall
be final and binding on all Offerees, all Optionees, and all persons deriving
their rights from an Offeree or Optionee. No member of the Committee shall be
liable for any action that he or she has taken or has failed to take in good
faith with respect to the Plan, any Option, or any right to acquire Shares under
the Plan.
SECTION 4. ELIGIBILITY.
(a) General Rules. Only Employees (including, without limitation,
independent contractors who are not members of the Board of Directors) shall be
eligible for designation as Optionees or Offerees by the Committee. In addition,
only Employees who are common-law employees of the Company or a Subsidiary shall
be eligible for the grant of ISOs. Employees who are Outside Directors shall
only be eligible for the grant of the Nonstatutory Options described in
Subsection (b) below.
(b) Outside Directors. Any other provision of the Plan notwith-
standing, the participation of Outside Directors in the Plan shall be subject to
the following restrictions:
(i) Outside Directors shall receive no grants other than the
Nonstatutory Options described in this Subsection (b).
(ii) All Nonstatutory Options granted to an Outside Director
under this Subsection (b) shall also become exercisable in
full in the event of the termination of such Outside
Director's service because of death, Total and Permanent
Disability or voluntary retirement at or after age 65.
(iii) The Exercise Price under all Nonstatutory Options
granted to an Outside Director under this Subsection (b) shall
be equal to 100 percent of the Fair Market Value of a Share on
the date of grant, payable in one of the forms described in
Subsection (a), (b), (c) or (d) of Section 8.
(iv) Nonstatutory Options granted to an Outside Director under
this Subsection (b) shall terminate on the earliest of (A) the
10th anniversary of the date of grant, (B) the date three
months after the termination of such Outside Director's
service for any reason other than death or Total and Perm-
anent Disability or (C) the date 12 months after the termi-
nation of such Outside Director's service because of death or
Total and Permanent Disability.
The Committee may provide that the Nonstatutory Options that otherwise would be
granted to an Outside Director under this Subsection (b) shall instead be
granted to an affiliate of such Outside Director. Such affiliate shall then be
deemed to be an Outside Director for purposes of the Plan, provided that the
service-related vesting and termination provisions pertaining to the
Nonstatutory Options shall be applied with regard to the service of the Outside
Director.
SECTION 5. STOCK SUBJECT TO PLAN.
(a) Basic Limitation. Shares offered under the Plan shall be authorized but
unissued Shares or treasury Shares. The aggregate number of Shares which may be
issued under the Plan (upon exercise of Options Awards or other rights to
acquire Shares) shall not exceed 30% of Shares oustanding, subject to adjustment
pursuant to Section 9. The number of Shares which are subject to Options 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. 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.
The maximum number of option grants is set at 15% of shares outstanding.
The maximum number of award shares for compensation is 15% of the shares out-
standing. The authorized shares issuable in connection with the Plan are subject
to adjustment in the event of stock dividends, mergers, or other reorganizations
and other situations.
(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. In the event that Shares issued
under the Plan are reacquired by the Company pursuant to a forfeiture provision,
a right of repurchase or a right of first refusal, such Shares shall again be
available for the purposes of 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.
(b) Duration of Offers and Nontransferability of Rights. 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. Such right shall not be
transferable and shall be exercisable only by the Offeree to whom such right was
granted.
(c) Purchase Price. The Purchase Price of Shares to be offered under
the Plan shall not be less than 85 percent of the Fair Market Value of such
Shares. Subject to the preceding sentence, the Purchase Price shall be
determined by the Committee at its sole discretion. The Purchase Price shall be
payable in a form described in Section 8.
(d) Withholding Taxes. As a condition to the award, sale or vesting of
Shares, the Offeree shall make such arrangements as the Committee may require
for the satisfaction of any federal, state, local or foreign withholding tax
obligations that arise in connection with such Shares. The Committee may permit
the Offeree to satisfy all or part of his or her tax obligations related to such
Shares by having the Company withhold a portion of any Shares that otherwise
would be issued to him or her or by surrendering any Shares that previously were
acquired by him or her. The Shares withheld or surrendered shall be valued at
their Fair Market Value on the date when taxes otherwise would be withheld in
cash. The payment of taxes by assigning Shares to the Company, if permitted by
the Committee, shall be subject to such restrictions as the Committee may
impose, including any restrictions required by rules of the Securities and
Exchange Commission.
(e) Restrictions on Transfer of Shares. Any Shares awarded or sold
under the Plan shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Purchase Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.
SECTION 7. 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. Options granted to any
Optionee in a single calendar year shall in no event cover more than 150,000
Shares, subject to adjustment 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 100 percent of the
Fair Market Value of a Share on the date of grant, except as otherwise provided
in Section 4(c). The Exercise Price of a Nonstatutory Option shall not be less
than 85 percent 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 at its sole discretion. The Exercise Price
shall be payable in a form described in Section 8.
(d) Withholding Taxes. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that arise in connection with such exercise. The Optionee shall also make such
arrangements as the Committee may require for the satisfaction of any federal,
state, local or foreign withholding tax obligations that may arise in connection
with the disposition of Shares acquired by exercising an Option. The Committee
may permit the Optionee to satisfy all or part of his or her tax obligations
related to the Option by having the Company withhold a portion of any Shares
that otherwise would be issued to him or her or by surrendering any Shares that
previously were acquired by him or her. Such Shares shall be valued at their
Fair Market Value on the date when taxes otherwise would be withheld in cash.
The payment of taxes by assigning Shares to the Company, if permitted by the
Committee, shall be subject to such restrictions as the Committee may impose,
including any restrictions required by rules of the Securities and Exchange
Commission.
(e) Exercisability and Term. Each Stock Option Agreement shall specify
the date when all or any installment of the Option is to become exercisable. The
vesting of any Option shall be determined by the Committee at its sole
discretion. A Stock Option Agreement may provide for accelerated exercisability
in the event of the Optionee's death, Total and Permanent Disability or
retirement or other events. The Stock Option Agreement shall also specify the
term of the Option. The term shall not exceed 10 years from the date of grant,
except as otherwise provided in Section 4(c). Subject to the preceding sentence,
the Committee at its sole discretion shall determine when an Option is to
expire.
(f) Nontransferability. During an Optionee's lifetime, such Optionee's
Option(s) shall be exercisable only by him or her and shall not be transferable,
unless permitted by the Stock Option Agreement. In the event of an Optionee's
death, such Optionee's Option(s) shall not be transferable other than by will,
by a beneficiary designation executed by the Optionee and delivered to the
Company, or by the laws of descent and distribution.
(g) Termination of Service (Except by Death). If an Optionee's Service
terminates for any reason other than the Optionee's death, then such Optionee's
Option(s) shall expire on the earliest of the following occasions:
(i) The expiration date determined pursuant to Subsection (e) above;
(ii) The date 90 days after the termination of the Optionee's Service
for any reason other than Total and Permanent Disability; or
(iii) The date six months after the termination of the Optionee's
Service by reason of Total and Permanent Disability.
The Optionee may exercise all or part of his or her Option(s) at any time before
the expiration of such Option(s) under the preceding sentence, but only to the
extent that such Option(s) had become exercisable before the Optionee's Service
terminated or became exercisable as a result of the termination. The balance of
such Option(s) shall lapse when the Optionee's Service terminates. In the event
that the Optionee dies after the termination of the Optionee's Service but
before the expiration of the Optionee's Option(s), all or part of such Option(s)
may be exercised (prior to expiration) by his or her designated beneficiary (if
applicable), by the executors or administrators of the Optionee's estate or by
any person who has acquired such Option(s) directly from the Optionee by bequest
or inheritance, but only to the extent that such Option(s) had become
exercisable before the Optionee's Service terminated or became exercisable as a
result of the termination.
(h) Leaves of Absence. For purposes of Subsection (g) above, Service
shall be deemed to continue while the Optionee is on military leave, sick leave
or other bona fide leave of absence (as determined by the Committee). The
foregoing notwithstanding, in the case of an ISO granted under the Plan, Service
shall not be deemed to continue beyond the first 90 days of such leave, unless
the Optionee's reemployment rights are guaranteed by statute or by contract.
(i) Death of Optionee. If an Optionee dies while he or she is in
Service, then such Optionee's Option(s) shall expire on the earlier of the
following dates:
(i) The expiration date determined pursuant to Subsection (e) above;
or
(ii) The date six months after the Optionee's death.
All or part of the Optionee's Option(s) may be exercised at any time
before the expiration of such Option(s) under the preceding sentence by his or
her designated beneficiary (if applicable), by the executors or administrators
of the Optionee's estate or by any person who has acquired such Option(s)
directly from the Optionee by bequest or inheritance, but only to the extent
that such Option(s) had become exercisable before the Optionee's death or became
exercisable as a result of the Optionee's death. The balance of such Option(s)
shall lapse when the Optionee dies.
(j) No Rights as a Stockholder. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his or her Option until the date of the issuance of a stock
certificate for such Shares. No adjustments shall be made, except as provided in
Section 9.
(k) Modification, Extension and Renewal of Options. Within the
limitations of the Plan, the Committee may modify, extend or renew outstanding
Options or may accept the cancellation of outstanding Options (to the extent not
previously exercised) in return for the grant of new Options at the same or a
different price. The foregoing notwithstanding, no modification of an Option
shall, without the consent of the Optionee, impair such Optionee's rights or
increase his or her obligations under such Option.
(l) Restrictions on Transfer of Shares. Any Shares issued upon exercise
of an Option shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Option Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.
SECTION 8. PAYMENT FOR SHARES.
(a) General Rule. The entire Purchase Price or 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 follows:
(i) In the case of Shares sold under the terms of a Stock
Purchase Agreement subject to the Plan, payment shall be made
only pursuant to the express provisions of such Stock Purchase
Agreement. However, the Committee (at its sole discretion) may
specify in the Stock Purchase Agreement that payment may be
made in one or all of the forms described in Subsections (e),
(f) and (g) below.
(ii) In the case of an ISO granted under the Plan, payment
shall be made only pursuant to the express provisions of the
applicable Stock Option Agreement. However, the Committee (at
its sole discretion) may specify in the Stock Option Agreement
that payment may be made pursuant to Subsections (b), (c),
(d), (f) or (g) below.
(iii) In the case of a Nonstatutory Option granted under the
Plan, the Committee (at its sole discretion) may accept
payment pursuant to Subsections (b), (c), (d), (f) or (g)
below.
(b) Surrender of Stock. To the extent that this Subsection (b) is
applicable, payment may be made all or in part with Shares which have already
been owned by the Optionee or his or her representative for more than 12 months
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.
(c) Exercise/Sale. To the extent that this Subsection (c) is
applicable, payment may be made by the delivery (on a form prescribed by the
Company) of an irrevocable direction to a securities broker approved by the
Company to sell Shares and to deliver all or part of the sales proceeds to the
Company in payment of all or part of the Exercise Price and any withholding
taxes.
(d) Exercise/Pledge. To the extent that this Subsection (d) is
applicable, payment may be made by the delivery (on a form prescribed by the
Company) of an irrevocable direction to pledge Shares to a securities broker or
lender approved by the Company, as security for a loan, and to deliver all or
part of the loan proceeds to the Company in payment of all or part of the
Exercise Price and any withholding taxes.
(e) Services Rendered. To the extent that this Subsection (e) is
applicable, Shares may be awarded under the Plan in consideration of services
rendered to the Company or a Subsidiary prior to the award. If Shares are
awarded without the payment of a Purchase Price in cash, the Committee shall
make a determination (at the time of the award) of the value of the services
rendered by the Offeree and the sufficiency of the consideration to meet the
requirements of Section 6(c).
(f) Promissory Note. To the extent that this Subsection (f) is
applicable, a portion of the Purchase Price or Exercise Price, as the case may
be, of Shares issued under the Plan may be payable by a full-recourse promissory
note, provided that (i) the par value of such Shares must be paid in lawful
money of the United States of America at the time when such Shares are
purchased, (ii) the Shares are security for payment of the principal amount of
the promissory note and interest thereon and (iii) the interest rate payable
under the terms of the promissory note shall be no less than the minimum rate
(if any) required to avoid the imputation of additional interest under the Code.
Subject to the foregoing, the Committee (at its sole discretion) shall specify
the term, interest rate, amortization requirements (if any) and other provisions
of such note.
(g) Other Forms of Payment. To the extent that this Subsection (g) is
applicable, payment may be made in any other form approved by the Committee,
consistent with applicable laws, regulations and rules.
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 declaration of a dividend payable
in a form other than Shares in an amount that has a material effect on the value
of Shares, a combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization, a spinoff or a similar occurrence, the Committee shall make
appropriate adjustments in one or more of (i) the number of Shares available for
future grants under Section 5, (ii) the number of Nonstatutory Options to be
granted to Outside Directors under Section 4(b), (iii) the number of Shares
covered by each outstanding Option or (iv) the Exercise Price under each
outstanding Option.
(b) Reorganizations. In the event that the Company is a party to a merger
or other reorganization, outstanding Options shall be subject to the agreement
of merger or reorganization. Such agreement may provide, without limitation, for
the assumption of outstanding Options by the surviving corporation or its
parent, for their continuation by the Company (if the Company is a surviving
corporation), for payment of a cash settlement equal to the difference between
the amount to be paid for one Share under such agreement and the Exercise Price,
or for the acceleration of their exercisability followed by the cancellation of
Options not exercised, in all cases without the Optionees' consent. Any
cancellation shall not occur until after such acceleration is effective and
Optionees have been notified of such acceleration. In the case of Options that
have been outstanding for less than 12 months, a cancellation need not be
preceded by an acceleration.
(c) Reservation of Rights. Except as provided in this Section 9, an
Optionee or Offeree shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any dividend or
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 or
Exercise Price of Shares subject to an Option. The grant of an Option 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. SECURITIES LAWS.
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.
SECTION 11. NO RETENTION RIGHTS.
Neither the Plan nor any Option shall be deemed to give any individual
a right to remain an employee, consultant or director of the Company or a
Subsidiary. The Company and its Subsidiaries reserve the right to terminate the
service of any employee, consultant or director at any time, with or without
cause, subject to applicable laws, the Company's certificate of incorporation
and by-laws and a written employment agreement (if any).
SECTION 12. DURATION AND AMENDMENTS.
(a) Term of the Plan. The Plan, as set forth herein, shall become
effective upon approval by shareholders. The Plan shall terminate automatically
15 years after its initial 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,
subject to applicable law, amend, suspend or terminate the Plan at any time and
for any reason. An amendment to the Plan shall require stockholder approval only
to the extent required by applicable law.
(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 Share previously issued or any Option
previously granted under the Plan.
SECTION 13. EXECUTION.
To record the adoption of the Plan by the Board of Directors on May 20,
2003 subject to approval and by the Company's stockholders at a duly noticed
shareholders' meeting, the Company has caused its authorized officer to execute
the same.
PREMIUM ENTERPRISES, INC.
By /s/ Terry Eilers
-----------------------
Its President
BALLOT
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PREMIUM ENTERPRISES, INC.
1510 Poole Boulevard
Yuba City, CA 95993
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS, June 6, 2003
The undersigned hereby appoints Terry Eilers proxy, with full power of
substitution, for and in the name or names of the undersigned, to vote all
shares of Common Stock of Premium Enterprises, Inc. held of record by the under-
signed at the Annual Meeting of Stockholders to be held on June 6, 2003, at
10:00 a.m., at 1510 Poole Boulevard, Yuba City, CA 95993, and at any adjourn-
ment thereof, upon the matters described in the accompanying Notice of Annual
Meeting and Proxy Statement, receipt of which is hereby acknowledged, and upon
any other business that may properly come before, and matters incident to the
conduct of, the meeting or any adjournment thereof. Said person is directed to
vote on the matters described in the Notice of Annual Meeting and Proxy State-
ment as follows, and otherwise in their discretion upon such other business as
may properly come before, and matters incident to the conduct of, the meeting
and any adjournment thereof.
1. To elect a Board of five (5) directors to hold office until the next
annual meeting of stockholders or until their respective successors have been
elected and qualified:
Nominees: Terry Eilers, Michael Sullinger, Cody Morrow, Virgil Baker,
and Richard Barber
[_] FOR: nominees listed above (except as marked to the con-
trary below).
[_] WITHHOLD authority to vote for nominee(s) specified below
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), write
the applicable name(s) in the space provided below.
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2. To ratify the appointment of Gordon, Hughes & Banks as independent
accountants for the period ending December 31, 2003:
[_] FOR [_] AGAINST [_] ABSTAIN
3. To change the name of the corporation to a name to eTotalSouce, Inc.
[_] FOR [_] AGAINST [_] ABSTAIN
4. To Authorize a reverse split of the common stock on a one for four basis, by
which each four shares shall become one share; provided that no shareholder
shall be reversed below 100 shares, and no shareholder owning 100 shares or less
shall be reversed. Fractional shares will be rounded up to the next whole share.
[_] FOR [_] AGAINST [_] ABSTAIN
5. To approve the Company's 2003 Stock Option and Award Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
6. To transact such other business as may properly come before the Annual
Meeting.
[_] FOR [_] AGAINST [_] ABSTAIN
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND RETURN THIS PROXY
CARD IN THE ENCLOSED ENVELOPE.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED,
WILL BE VOTED "FOR" THE STATED PROPOSALS.
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Signature of Stockholder
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Signature if held jointly
Dated: __________________________, 2003
IMPORTANT: If shares are jointly owned, both owners should sign. If signing as
attorney, executor, administrator, trustee, guardian or other person signing in
a representative capacity, please give your full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.