UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)
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 Rule 14a-12
FRONTIER STAFFING, INC.
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(Name of Registrant as Specified in Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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TABLE OF CONTENTS
Page
Introduction............................................................... 3
Outstanding Securities and Voting Rights................................... 3
Questions and Answers About the Meeting and Voting......................... 4
Security Ownership of Certain Beneficial Owners and Management............. 8
Item 1: Election of Directors........................................ 10
Item 2: Change of Corporate Name..................................... 12
Indebtedness of Executive Officers and Directors........................... 13
Family Relationships....................................................... 13
Legal Proceedings.......................................................... 13
The Board of Directors and Corporate Governance............................ 13
Executive Compensation and Related Matters................................. 14
Section 16(a) Beneficial Ownership Reporting Compliance.................... 16
Report of the Compensation Committee on Executive Compensation............. 16
Item 3: The Approval of the 2005 Stock Incentive Compensation Plan......... 16
Report of the Board of Directors Functioning as the Audit Committee........ 26
Item 4: Ratification of the Appointment of Independent Auditors............ 28
Form 10-KSB................................................................ 28
Deadline for Future Proposals of Stockholders.............................. 28
Other Matters Which May Come Before the Annual Meeting..................... 29
Solicitation of Proxies.................................................... 29
FRONTIER STAFFING, INC.
NOTICE OF ANNUAL MEETING
and
PROXY STATEMENT
2005
FRONTIER STAFFING, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held OCTOBER 7, 2005
TO THE STOCKHOLDERS OF FRONTIER STAFFING, INC.:
You are cordially invited to the 2005 Annual Meeting of Stockholders of
FRONTIER STAFFING, INC., which will be held at 3520 Pan American Freeway, Suite
A-1, Albuquerque, New Mexico 87107, on October 7, 2005, beginning at 10:00 a.m.,
local time. The Annual Meeting will be held for the following purposes:
1. To elect five members to our Board of Directors, each to hold
office until the 2006 Annual Meeting and until his successor is
elected and qualified;
2. To amend our Articles of Incorporation to change our name to
"Tradestar Construction Services, Inc.," or a derivation thereof;
3. To consider, approve and ratify the 2005 Incentive Compensation
Plan;
4. To consider, approve and ratify the appointment of Gordon, Hughes
& Banks LLP as our independent auditors for the fiscal year
ending December 31, 2005; and
5. To transact such other business as may properly come before the
meeting or any postponements or adjournments of the meeting.
Our Board of Directors has fixed September 1, 2005 as the record date for
the determination of stockholders entitled to notice of and to vote at the
Annual Meeting and any postponements or adjournments of the meeting, and only
stockholders of record at the close of business on that date are entitled to
this notice and to vote at the Annual Meeting. A list of stockholders entitled
to vote at the Annual Meeting will be available at the meeting and at our
offices for ten days prior to the meeting.
We hope that you will use this opportunity to take an active part in our
affairs by voting on the business to come before the Annual Meeting, either by
executing and returning the enclosed Proxy Card or by casting your vote in
person at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
CLARENCE DOWNS
President
Albuquerque, New Mexico
SEPTEMBER 23, 2005
STOCKHOLDERS UNABLE TO ATTEND THE ANNUAL MEETING IN PERSON ARE REQUESTED TO DATE
AND SIGN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. A STAMPED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE. IF A STOCKHOLDER RECEIVES MORE THAN ONE PROXY
CARD BECAUSE HE OR SHE OWNS SHARES REGISTERED IN DIFFERENT NAMES OR ADDRESSES,
EACH PROXY CARD SHOULD BE COMPLETED AND RETURNED.
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FRONTIER STAFFING, INC.
3520 Pan American Freeway
Suite A-1
Albuquerque, New Mexico 87107
(505) 872-3133
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 7, 2005
INTRODUCTION
This Proxy Statement is furnished to the stockholders by the Board of
Directors of FRONTIER STAFFING, INC., for solicitation of proxies for use at the
2005 Annual Meeting of Stockholders to be held at 3520 Pan American Freeway,
Suite A-1, Albuquerque, New Mexico 87107, on October 7, 2005, at 10:00 a.m.,
local time, and at any and all adjournments of the meeting.
The purpose of the Annual Meeting and the matters to be acted upon are set
forth in the following Proxy Statement. As of the date of this Proxy Statement,
our Board of Directors knows of no other business which will be presented for
consideration at the Annual Meeting. A stockholder giving a proxy pursuant to
this solicitation may revoke it at any time before it is exercised by submitting
a duly executed proxy bearing a later date or by delivering to our Secretary a
written notice of revocation prior to the Annual Meeting, or by appearing at the
meeting and expressing a desire to vote his or her shares in person. Subject to
such revocation, all shares represented by a properly executed proxy received
prior to or at the Annual Meeting will be voted by the proxy holders whose names
are set forth in the accompanying proxy in accordance with the instructions on
the proxy. If no instruction is specified with respect to a matter to be acted
upon, the shares represented by the proxy will be voted "FOR" the election of
the nominees for director and "FOR" each other matter set forth in this Proxy
Statement. If any other business properly comes before the meeting, votes will
be cast in accordance with the proxies in respect of any such other business in
accordance with the judgment of the persons acting under the proxies.
It is anticipated that the mailing to stockholders of this Proxy Statement
and the enclosed proxy will commence on or about September 23, 2005.
OUTSTANDING SECURITIES AND VOTING RIGHTS
Only stockholders of record at the close of business on the record date of
September 1, 2005 are entitled to notice of and to vote at the Annual Meeting.
At that date there were 10,950,000 outstanding shares of our common stock, par
value $.001 per share, our only outstanding voting securities. At the Annual
Meeting, each share of common stock will be entitled to one vote
The representation, in person or by properly executed proxy, of the holders
of a majority of the voting power of the shares of stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum for the transaction of
business at the meeting. Stockholders are not entitled to cumulate their votes.
Abstentions and broker non-votes (shares held by a broker or nominee which are
represented at the Annual Meeting, but with respect to which such broker or
nominee is not empowered to vote on a particular proposal) are counted for
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purposes of determining the presence or absence of a quorum for the transaction
of business. In the election of directors, holders of Common Stock are entitled
to elect five directors with the five candidates who receive the highest number
of affirmative votes being elected. Votes against a candidate and broker
non-votes have no legal effect. In matters other than the election of directors,
abstentions have the effect of votes against a proposal in tabulations of the
votes cast on proposals presented to stockholders, while broker non-votes do not
have any effect for purposes of determining whether a proposal has been
approved.
QUESTIONS AND ANSWERS ABOUT
ABOUT THE MEETING AND VOTING
1. WHAT IS A PROXY?
It is your legal designation of another person to vote the stock that you
own. That other person is called a proxy. If you designate someone as your
proxy in a written document, that document also is called a proxy or a
proxy card. Clarence Downs, our President and Chief Executive Officer, and
Frederick A. Huttner, our Secretary and Treasurer and Chief Financial
Officer, have been designated as proxies for the 2005 Annual Meeting of
Stockholders.
2. WHAT IS THE RECORD DATE AND WHAT DOES IT MEAN?
The record date for the 2005 Annual Meeting of Stockholders is September 1,
2005. The record date is established by our Board of Directors as required
by Nevada law and our By-laws. Stockholders of record registered
stockholders and street name holders) at the close of business on the
record date are entitled to:
(a) receive notice of the meeting; and
(b) vote at the meeting and any adjournments or postponements of the
meeting.
3. WHAT IS THE DIFFERENCE BETWEEN A REGISTERED STOCKHOLDER AND A STOCKHOLDER
WHO HOLDS STOCK IN STREET NAME?
If your shares of stock are registered in your name on the books and
records of our transfer agent, you are a registered stockholder. If your
shares of stock are held for you in the name of your broker or bank, your
shares are held in street name. The answer to Question 15 describes
brokers' discretionary voting authority and when your bank or broker is
permitted to vote your shares of stock without instructions from you.
4. WHAT ARE THE DIFFERENT METHODS THAT I CAN USE TO VOTE MY SHARES OF COMMON
STOCK?
(a) In Writing:
All stockholders of record can vote by mailing in their completed
proxy card (in the case of registered stockholders) or their completed
vote instruction form (in the case of street name holders).
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(b) In Person:
All stockholders may vote in person at the meeting (unless they are
street name holders without a legal proxy).
5. HOW CAN I REVOKE A PROXY?
You can revoke a proxy prior to the completion of voting at the meeting by:
(a) giving written notice to our Secretary;
(b) delivering a later-dated proxy; or
(c) voting in person at the meeting.
6. ARE VOTES CONFIDENTIAL? WHO COUNTS THE VOTES?
We will hold the votes of each stockholder in confidence from directors,
officers and employees except:
(a) as necessary to meet applicable legal requirements and to assert or
defend claims for or against us;
(b) in case of a contested proxy solicitation;
(c) if a stockholder makes a written comment on the proxy card or
otherwise communicates his or her vote to management; or
(d) to allow the independent inspectors of election to certify the results
of the vote.
7. WHAT ARE THE VOTING CHOICES WHEN VOTING ON DIRECTOR NOMINEES, AND WHAT VOTE
IS NEEDED TO ELECT DIRECTORS?
When voting on the election of director nominees to serve until the 2006
Annual Meeting of Stockholders, stockholders may:
(a) vote in favor of all nominees;
(b) vote to withhold votes as to all nominees; or
(c) withhold votes as to specific nominees.
Directors will be elected by a plurality of the votes cast.
Our Board recommends a vote "FOR" all of the nominees.
8. WHY ARE WE CHANGING OUR CORPORATE NAME?
We believe that the proposed name "Tradestar Construction Services, Inc."
more accurately reflects our business operations, i.e., the staffing for
the construction industry, than our current name. In addition, this is
already the name of our wholly-owned subsidiary.
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9. WHAT ARE THE VOTING CHOICES WHEN VOTING ON THE APPROVAL OF THE CORPORATE
NAME CHANGE, AND WHAT VOTE IS NEEDED TO APPROVE?
When voting on the change of our corporate name to Tradestar Construction
Services, Inc., stockholders may:
(a) vote in favor of the name change;
(b) vote against the name change; or
(c) abstain from voting on the name change.
The plan will be approved if the votes cast "FOR" are a majority of the
votes present at the meeting. The Board recommends a vote "FOR" the name
change.
10. WHAT ARE THE VOTING CHOICES WHEN VOTING ON THE APPROVAL OF THE 2005
INCENTIVE COMPENSATION PLAN, AND WHAT VOTE IS NEEDED TO APPROVE?
When voting on the approval of the 2005 Incentive Compensation Plan,
stockholders may:
(a) vote in favor of the plan;
(b) vote against the plan; or
(c) abstain from voting on the plan.
The plan will be approved if the votes cast "FOR" are a majority of the
votes present at the meeting. The Board recommends a vote "FOR" the plan.
11. WHAT ARE THE VOTING CHOICES WHEN VOTING ON THE RATIFICATION OF THE
SELECTION OF GORDON, HUGHES & BANKS LLP, AND WHAT VOTE IS NEEDED TO RATIFY
ITS SELECTION?
When voting on the ratification of the selection of Gordon, Hughes & Banks
LLP as our independent auditors, stockholders may:
(a) vote in favor of the ratification;
(b) vote against the ratification; or
(c) abstain from voting on the ratification.
The selection of the independent auditors will be ratified if the votes
cast "FOR" are a majority of the votes present at the meeting. The Board
recommends a vote "FOR" this proposal.
12. WHAT IF A STOCKHOLDER DOES NOT SPECIFY A CHOICE FOR A MATTER WHEN RETURNING
A PROXY?
Stockholders should specify their choice for each matter on the enclosed
proxy. If no specific instructions are given, proxies which are signed and
returned will be voted FOR the election of all director nominees, FOR the
approval of the 2005 Incentive Compensation Plan and FOR the proposal to
ratify the selection of Gordon, Hughes & Banks LLP.
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13. WHO IS ENTITLED TO VOTE?
You may vote if you owned stock as of the close of business on September 1,
2005. Each share of our common stock is entitled to one vote. As of June
30, 2005, we had 10,950,000 shares of common stock outstanding.
14. WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
It means that you have multiple accounts with brokers or our transfer
agent. Please vote all of these shares. We recommend that you contact your
broker or our transfer agent to consolidate as many accounts as possible
under the same name and address. Our transfer agent is X Clearing
Corporation, 535 16th Street Mall, Suite 810, Denver, Colorado 80202, or
you can reach X Clearing Corporation at (303) 573-1000.
15. WILL MY SHARES BE VOTED IF I DO NOT PROVIDE MY PROXY?
If your shares are registered in your name, they will not be voted unless
you submit your proxy card, or vote in person at the meeting. If your
shares are held in street name, your bank, brokerage firm or other nominee,
under some circumstances, may vote your shares. Brokerage firms, banks and
other nominees may vote customers' unvoted shares on "routine" matters.
Generally, a broker may not vote a customer's unvoted shares on non-routine
matters without instructions from the customer and must instead submit a
"broker non-vote." A broker non-vote is counted toward the shares needed
for a quorum, but it is not counted in determining whether a matter has
been approved.
16. ARE ABSTENTIONS AND BROKER NON-VOTES COUNTED?
Broker non-votes will not be included in vote totals and will not affect
the outcome of the vote. In matters other than the elections of directors,
abstentions have the effect of votes against a proposal in tabulations of
the votes cast on proposals presented to stockholders.
17. HOW MANY VOTES MUST BE PRESENT TO HOLD THE MEETING?
To hold the meeting and conduct business, a majority of our outstanding
voting shares as of September 1, 2005 must be present at the meeting. On
this date, a total of 10,950,000 shares of our common stock were out-
standing and entitled to vote. Shares representing a majority, or 5,485,950
votes, must be present. This is called a quorum. Mr. Downs owns a total of
6,401,600 shares, or approximately 58.46% of the issued and outstanding
shares.
Votes are counted as present at the meeting if the stockholder either:
(a) Is present and votes in person at the meeting, or
(b) Has properly submitted a proxy card.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to the shares of our common
stock beneficially owned as of June 30, 2005 by (i) each person known to us to
be the beneficial owner of more than 5% of our common stock; (ii) each director
and nominee for director; (iii) each executive officer; and (iv) all of our
directors and executive officers as a group. Unless otherwise indicated in the
footnotes following the table, the persons as to whom the information is given
had sole voting and investment power over the shares of common stock shown as
beneficially owned by them.
Name and Address
Beneficial No. of Percentage
Owner Shares of Ownership
------------------------- --------- --------------
Clarence Downs(1)(4) 6,401,600 58.46%
3520 Pan American Freeway
Suite A-1
Albuquerque, NM 87107
Fredrick A. Huttner (2)(4) 950,000 8.68%
3520 Pan American Freeway
Suite A-1
Albuquerque, NM 87107
Douglas Parker(3) 100,000(3) 0%(3)
3520 Pan American Freeway
Suite A-1
Albuquerque, NM 87107
Richard Piske III 100,000 .91%
3520 Pan American Freeway
Suite A-1
Albuquerque, NM 87107
Guy David Knoller 24,665 .23%
3520 Pan American Freeway
Suite A-1
Albuquerque, NM 87107
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All Officers and 7,476,265 68.28%
Directors as a Group
(five persons)excluding
stock options
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(1) All shares of owned of record or beneficially by Mr. Downs. Includes 1,600
shares owned of record by Christopher Downs, the minor son of Mr. Downs.
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(2) Includes 950,000 shares owned of record by the Huttner 1999 Partnership,
Ltd., but does not include 20,000 shares owned of record by Mesia Huttner, an
adult child, for which Mr. Huttner disclaims beneficial ownership.
(3) Mr. Parker has a stock option to acquire total of 100,000 common shares at
an exercise price of $0.15 per share. On the first anniversary of his Option
Agreement, a total of 33,334 shares will vest and may be exercised. On the
second anniversary of his Option Agreement, a total of an additional 33,333
shares will vest and may be exercised. On the third anniversary of his Option
Agreement, a total of an additional 33,333 shares will vest and may be
exercised.
(4) A total of 8,380,000 shares of our common stock are subject to lockup
agreement dated January 30, 2004 and amended January 1, 2005. Mr. Downs, Mr.
Huttner's partnership and several other individual non-affiliate shareholders
signed this agreement, which requires, as amended, each signatory to be bound to
sell shares proportionately with other signatories for a period which now ends
on January 31, 2006.
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ITEM 1: ELECTION OF DIRECTORS
Pursuant to our Articles of Incorporation, the holders of our common stock,
may elect our five directors. All nominees have advised us that they are able
and willing to serve as directors. However, if any nominee is unable to or for
good cause will not serve, the persons named in the accompanying proxy will vote
for any other person nominated by our Board of Directors.
No arrangement or understanding exists between any nominee and any other
person or persons pursuant to which any nominee was or is to be selected as a
director or nominee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF THE NOMINEES LISTED BELOW.
The following table sets forth the names and ages of the nominees of our
Board of Directors.
DIRECTOR SINCE NAME AGE
-------------- ---- ---
Inception Clarence Downs 52
Inception Fredrick A. Huttner 60
Inception Douglas Parker 52
Inception Richard Piske III 55
To Be Elected Guy David Knoller 59
The principal occupations for the past five years (and, in some instances,
for prior years) of each of our directors are as follows:
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Clarence Downs has been the President, Chief Executive Officer and a
Director of our company since January, 2004. He has worked in the temporary
services industry since 1979. He opened his own temporary services company,
Crown Technical Services, in 1988. This company specialized in the placement of
skilled construction labor and was sold in 2000 to Contractors Labor Pool. Mr.
Downs formed Tradestar Construction Services, Inc. in 2001. He will devote full
time to our business, a minimum of forty hours per week.
Fredrick A. Huttner was the President and a Director of our company at
inception. In January, 2004, he became Secretary-Treasurer and Chief Financial
Officer. He continues to serve as a Director of our company. Since 1994, he has
served as Chairman and President of Huttner and Company, a private consulting
firm offering business consulting services to entrepreneurial growth companies.
From 2000 to 2002, he was a principal of Innovation Growth Partners, LLC, a
private consulting firm which had acquired Huttner and Company during this
period. Also from 2000 until 2002, he was a director of Intercom Systems, Inc.,
a public company originally organized to develop measuring devices in the
telecommunications industry. This company completed a reverse acquisition in
2002. He received a bachelor's degree from New York University in 1971 and has
been a member of the American Institute of Certified Public Accountants since
1977. Mr. Huttner currently devotes part time on an as needed basis to our
business, which generally amounts to about five hours per week.
Douglas Parker has been a Director of our company since January, 2004. From
August, 2003 to December 2004, he was the Chief Financial Officer and Senior
Vice President of Operations of TRIBUTE DIRECT Inc., of Houston, Texas, a
private company in the funeral products industry. From August, 2003 to December,
2003, he was also involved as a consultant to EPCglobal, Inc., a private United
Kingdom company involved in engineering staffing. From January, 2003 to July,
2003, he was Chief Executive Officer and President of Pliant Technologies, Inc.,
of Houston, Texas, a private start-up software company. From 1995 to 2002, he
was Chief Financial Officer and Corporate Controller of FS Strategies/Talent
Tree, a nationwide private commercial staffing company with a primary focus on
clerical, light industrial, health services, and information technology . He was
also previously involved in the petroleum industry. He is a Certified Public
Accountant - Texas. Mr. Parker has an MBA, Finance and Taxation and a BBA,
Accounting from the University of Houston. He currently devotes on an as needed
basis to our business, which generally amounts to about five hours per month.
Richard Piske III has been a Director since June, 2004. From October of
2003 to the present, he is Vice President/General Manager of Kelly FedSecure , a
division of Kelly Services (a public international staffing firm) that provides
personnel with active government security clearances nationally. (The FedSecure
Group was acquired by Kelly Services in October of 2003).From September, 2002 to
August, 2003, he was Senior Vice President and General Manager, Western
Division, of Comsys, Inc. a nationwide private information technology staffing
company. From May, 2002 to September, 2002, he was President and Chief Operating
Officer of Talent Tree, Inc., a nationwide private commercial staffing company
with a primary focus on clerical, light industrial, health services, and
information technology. From November, 2001 to September, 2002, he was the
chairman and co-founder of the Fedsecure Group, a start-up professional staffing
company focused on the placement in private industry of former federal law
enforcement agents. From November, 1998 to November, 2001, he was President and
Chief Operating Officer of Tradesource, Inc., a nationwide private staffing
agency specializing in providing skilled tradespeople to the construction
industry. From 1980 to 1998, he was involved in various capacities with Olsten
Corporation, a private international company providing a broad range of staffing
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services to clients in North America, South America and Europe. Mr. Piske has a
degree in Marketing and Sales Management from Memphis State University. He
currently devotes part time on an as needed basis to our business, which
generally amounts to about five hours per month.
Guy David Knoller is a nominee for Director. From 1985 to the present, he
has been engaged in the private practice of law as the Law Offices of Guy David
Knoller, P.C. From 1984 to 1985, he was a partner in the law firm of Fannin,
Terry & Hay. He is a member of the Arizona bar. Mr. Knoller has a B.A. from
Bloomfield College and a J.D. from Arizona State University.
ITEM 2: CHANGE OF CORPORATE NAME
Our Board of Directors has approved, subject to stockholder approval at
this meeting, an amendment to our Articles of Incorporation to change our
corporate name from "FRONTIER STAFFING, INC." to "Tradestar Construction
Services, Inc.," or such derivation thereof as we may obtain. We believe that
the proposed name more accurately reflects our business operations, i.e., the
staffing for the construction industry, than our current name. In addition, this
is already the name of our wholly-owned subsidiary.
Accordingly, our Board of Directors believes it would be appropriate and in
the best interests of our company and stockholders to change our corporate name
to "Tradestar Construction Services, Inc."
If the name change is approved by our stockholders, we intend to have the
trading symbol for our common stock on the OTC Bulletin Board changed from
"FSFF.OB" to a symbol more readily associated with our new name. The currently
outstanding stock certificates evidencing shares of our common stock bearing the
name "FRONTIER STAFFING, INC." will continue to be valid and represent our
shares following the name change. Following completion of the name change, you
will be contacted on how to exchange your existing stock certificates for new
stock certificates bearing the new name, if you wish. Your current stock
certificates will continue to represent shares of our common stock and will not
be affected by the name change.
Our Board of Directors has approved an amendment to our Articles of
Incorporation to effect the change of corporate name. A copy of the Articles of
Amendment to the Articles of Incorporation providing for this amendment is
attached to this Proxy Statement as Exhibit 1.
The Board recommends a vote FOR this proposal.
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INDEBTEDNESS OF EXECUTIVE OFFICERS AND DIRECTORS
No executive officer, director or any member of these individuals'
immediate families or any corporation or organization with whom any of these
individuals is an affiliate is or has been indebted to us since the beginning of
our last fiscal year.
FAMILY RELATIONSHIPS
There are no family relationships among our executive officers and
directors.
LEGAL PROCEEDINGS
As of the date of this Proxy Statement, there are no material proceedings
to which any of our directors, executive officers, affiliates or stockholders is
a party adverse to us.
THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Our Board of Directors is responsible for establishing broad corporate
policies and for overseeing our overall management. In addition to considering
various matters which require Board approval, the Board provides advice and
counsel to, and ultimately monitors the performance of, our senior management.
We have established no Committees. Our Board of Directors performs as our
Audit Committee.
The Board, its committees and our management strive to perform and fulfill
their respective duties and obligations in a responsible and ethical manner. The
Board performs annual self evaluations.
During 2004, the Board of Directors met two times. Each nominee for
director attended more than 75% of the Board of Directors meetings and the
meetings of Board committees on which he served. While we do not have a formal
policy requiring members of the Board to attend the Annual Meeting of
Stockholders, we strongly encourage all directors to attend.
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EXECUTIVE COMPENSATION AND RELATED MATTERS
With exception of Mr. Huttner, none of our officers and directors are
compensated for the work they perform on our behalf. Mr. Huttner is paid $6,000
per month. For the year ended December 31, 2003, Tradestar Construction
Services, Inc. recorded the estimated value of the foregone salary of $50,000
for Mr. Downs. For the year ended December 31, 2003, we recorded the estimated
value of the foregone salary of $12,000 for Mr. Huttner. In addition, we have
recorded the estimated value of the foregone salary for the year ended December
31, 2004 at $9,000 for Mr. Huttner and at $50,000 for Mr. Downs. In addition,
our officers and directors are reimbursed for any out-of-pocket expenses they
incur on our behalf. In addition, in the future, we may approve payment of
salaries for our management, but currently, no such plans have been approved.
For our full-time office employees, we pay for vacation and holidays and provide
major medical coverage. In addition, none of our officers, directors or
employees is a party to any employment agreements. We have no plans or
agreements which provide health care, insurance or compensation on the event of
termination of employment or change in our control.
We do not pay our non-management Directors the Board meetings they attend
but reimburse them for any out-of-pocket expenses incurred by them in connection
with our business. The following table discloses, for the years indicated, the
compensation for our President.
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------
Name and Annual Compensation Long-Term Comp
Position(s) Year Salary Annual Other Awards Payouts
------------------------------------------------------------------------------
Clarence Downs 2004 $50,000 (1) -0- -0- -0- -0-
President 2003 $50,000 (1) -0- -0- -0- -0-
------------------------------------------------------------------------------
- ----------------
(1) This represents foregone salary to Mr. Downs for the year ended December
31, 2004 and December 31, 2003.
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14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
With exception of Mr. Huttner, none of our officers and directors are
compensated for the work they perform on our behalf. Mr. Huttner is paid $6,000
per month. In addition, we have recorded the estimated value of the foregone
salary for the year ended December 31, 2004 at $9,000 for Mr. Huttner and at
$50,000 for Mr. Downs. In addition, our officers and directors are reimbursed
for any out-of-pocket expenses they incur on our behalf.
Mr. Downs has provided unsecured advances to Tradestar Construction
Services, Inc. of $562,944 as of June 30, 2005. Interest on the advances has
been accrued at 7% per annum. All principal and accrued interest are due
December 31, 2009. Subsequent to June 30, 2005, the Company made a $25,000
payment on the note payable.
A total of 8,380,000 shares of our common stock are subject to lockup
agreement dated January 30, 2004 and amended January 1, 2005. Mr. Downs, Mr.
Huttner's partnership and several other individual non-affiliate shareholders
signed this agreement, which requires, as amended, each signatory to be bound to
sell shares proportionately with other signatories for a period which now ends
on January 31, 2006.
It is our policy that all ongoing and future affiliated transactions will
be made or entered into on terms no less favorable to us than those that can be
obtained from unaffiliated third parties and that all ongoing and future
affiliated transactions and any forgiveness of loans, must be approved by a
majority of the independent, disinterested members of our board of directors.
On August 1, 2005, we opened an office and began start-up operations in Las
Vegas, Nevada. We entered into a lease for office space under a non-cancelable
lease agreement. The lease calls for lease payments of $3,120 plus common area
expenses and other miscellaneous expenses over the term of the lease expiring
June 30, 2010. Mr. Downs has personally guaranteed this lease. Mr. Downs has
also personally guaranteed the office leases to our Albuquerque and Phoenix
offices
We are in the process of signing a lease to move our Albuquerque, New
Mexico office due to the expiration of its existing lease. The new office will
provide the necessary space to accommodate our growth. The lease calls for lease
payments ranging from $2,790 to $3,011 plus common area expenses over the term
of the lease expiring in 2010. Mr. Downs has personally guaranteed this lease.
In July 2005, we entered an agreement with a number of investors for
$750,000 of 9% Secured promissory notes, due along with any unpaid interest 18
months after issuance. Messrs. Downs and Huttner are part of the investor group.
Under the terms of the Notes, we granted the Lenders a security interest in our
accounts receivable and any other assets we have as set forth in a Security
Agreement. We will make interest only payments monthly commencing August 1,
2005. We also agreed to pay the Lenders an origination fee of five percent (5%)
of the Principal Amount of the Notes, at the execution of the Notes. The
origination fee was assessed at five percent (5%) of the Principal Amount at the
inception of the loan. Consequently, we have received to date net proceeds of
$725,000. Proceeds from the Notes were used to partially repay the note to Mr.
Downs discussed above and to provide working capital.
15
In connection with the Note described above, we granted warrants to
purchase common stock equal to 0.1 warrant for each dollar on the loan given or
75,000 warrants. The warrants vest immediately, are exercisable at price of $.30
per share and expire in 2009.
We granted warrants in August 2005 to Sanders Morris Harris for investment
banking services to purchase from the Company at any time, or from time to time
during the period commencing on August 1, 2005 and expiring August 1, 2010, up
to Two Hundred Thousand (200,000) fully paid and non-assessable shares of Common
Capital Stock of our Stock at a price equal to Thirty Cents ($0.30) per share.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the Exchange Act, our directors, our executive officers, and any
persons holding more than 10% of our common stock are required to report their
ownership of the common stock and any changes in that ownership to the
Commission. Specific due dates for these reports have been established and we
are required to report in this Proxy Statement any failure to file by these
dates during the fiscal year ended December 31, 2004. None of these filing
requirements were satisfied on a timely basis by our directors, officers and 10%
holders. All have since filed their required reports.
ITEM 3: THE APPROVAL OF THE 2005 INCENTIVE COMPENSATION PLAN
BACKGROUND AND PURPOSE
On June 20, 2005, the board of directors of our company adopted and
approved a new 2005 Incentive Compensation Plan, which we refer to as the 2005
Plan, and recommended that it be submitted to our shareholders for their
approval at the next annual meeting.
The purpose of the 2005 Plan is to provide a means for our company and its
subsidiaries and other designated affiliates, which we refer to as Related
Entities, to attract key personnel to provide services to our company and the
Related Entities, as well as, to provide a means whereby those key persons can
acquire and maintain stock ownership, thereby strengthening their commitment to
the welfare of our company and its Related Entities and promoting the mutuality
of interests between participants and our shareholders. A further purpose of the
2005 Plan is to provide participants with additional incentive and reward
opportunities designed to enhance the profitable growth of our company and its
Related Entities, and provide participants with annual and long term performance
incentives to expend their maximum efforts in the creation of shareholder value.
The terms of the 2005 Plan provide for grants of stock options, stock
appreciation rights or SARs, restricted stock, deferred stock, other stock
related awards and performance awards that may be settled in cash, stock or
other property. As of August 22, 2005, no awards have been granted under the
2005 Plan, subject to stockholder approval.
Shareholder approval of the 2005 Plan is required (i) to comply with
certain exclusions from the limitations of Section 162(m) of the Internal
Revenue Code of 1986, which we refer to as the Code, as described below, (ii)
for the 2005 Plan to be eligible under the "plan lender" exemption from the
margin requirements of Regulation G promulgated under the Securities Exchange
Act of 1934, as amended, which we refer to as the Exchange Act, and (iii) to
comply with the incentive stock options rules under Section 422 of the Code.
16
The following is a summary of certain principal features of the 2005 Plan.
This summary is qualified in its entirety by reference to the complete text of
the 2005 Plan. Shareholders are urged to read the actual text of the 2005 Plan
in its entirety which is set forth as Exhibit 1 to this information statement.
SHARES AVAILABLE FOR AWARDS; ANNUAL PER PERSON LIMITATIONS
Under the 2005 Plan, the total number of shares of our common stock that
may be subject to the granting of awards under the 2005 Plan shall be equal to
900,000 shares, plus the number of shares with respect to which awards
previously granted thereunder are forfeited, expire, terminate without being
exercised or are settled with property other than shares, and the number of
shares that are surrendered in payment of any awards or any tax withholding
requirements.
Awards with respect to shares that are granted to replace outstanding
awards or other similar rights that are assumed or replaced by awards under the
2005 Plan pursuant to the acquisition of a business are not subject to, and do
not count against, the foregoing limit.
In addition, the 2005 Plan imposes individual limitations on the amount of
certain awards in part to comply with Code Section 162(m). Under these
limitations, during any fiscal year the number of options, SARs, restricted
shares of our common stock, deferred shares of our common stock, shares as a
bonus or in lieu of other company obligations, and other stock based awards
granted to any one participant may not exceed 45,000 for each type of such
award, subject to adjustment in certain circumstances. The maximum amount that
may be earned by any one participant as a performance award in respect of a
performance period of one year is $5,000,000, and in respect of a performance
period greater than one year is $5,000,000 multiplied by the number of full
years in the performance period.
A committee of our Board of Directors, which we refer to as the Committee,
is to administer the 2005 Plan. See "Administration." The Committee is
authorized to adjust the limitations described in the two preceding paragraphs
and is authorized to adjust outstanding awards (including adjustments to
exercise prices of options and other affected terms of awards) in the event that
a dividend or other distribution (whether in cash, shares of our company common
stock or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange or other similar corporate transaction or event affects the our company
common stock so that an adjustment is appropriate in order to prevent dilution
or enlargement of the rights of participants. The Committee is also authorized
to adjust performance conditions and other terms of awards in response to these
kinds of events or in response to changes in applicable laws, regulations or
accounting principles.
ELIGIBILITY
The persons eligible to receive awards under the 2005 Plan are the
officers, directors, employees and independent contractors of our company and
our Related Entities. An employee on leave of absence may be considered as still
in our employ or in the employ of a Related Entity for purposes of eligibility
for participation in the 2005 Plan.
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ADMINISTRATION
Our Board of Directors shall select the Committee that will administer the
2005 Plan. All Committee members must be "non-employee directors" as defined by
Rule 16b-3 of the Exchange Act, "outside directors" for purposes of Section
162(m) of the Code, and independent as defined by NASDAQ or any other national
securities exchange on which any securities of our company may be listed for
trading in the future. However, except as otherwise required to comply with Rule
16b-3 of the Exchange Act or Section 162(m) of the Code, our Board of Directors
may exercise any power or authority granted to the Committee. Subject to the
terms of the 2005 Plan, the Committee is authorized to select eligible persons
to receive awards, determine the type and number of awards to be granted and the
number of shares of our company common stock to which awards will relate,
specify times at which awards will be exercisable or settle able (including
performance conditions that may be required as a condition thereof), set other
terms and conditions of awards, prescribe forms of award agreements, interpret
and specify rules and regulations relating to the 2005 Plan and make all other
determinations that may be necessary or advisable for the administration of the
2005 Plan.
STOCK OPTIONS AND SARS
The Committee is authorized to grant stock options, including both
incentive stock options or ISOs, which can result in potentially favorable tax
treatment to the participant, and non qualified stock options, and SARs
entitling the participant to receive the amount by which the fair market value
of a share of our company common stock on the date of exercise (or the "change
in control price," as defined in the 2005 Plan, following a change in control)
exceeds the grant price of the SAR. The exercise price per share subject to an
option and the grant price of an SAR are determined by the Committee, but in the
case of an ISO must not be less than the fair market value of a share of our
company common stock on the date of grant. For purposes of the 2005 Plan, the
term "fair market value" means the fair market value of our company common
stock, awards or other property as determined by the Committee or under
procedures established by the Committee. Unless otherwise determined by the
Committee or our Board of Directors, the fair market value of our company common
stock as of any given date shall be the closing sales price per share of our
company common stock as reported on the principal stock exchange or market on
which our company common stock is traded on the date as of which such value is
being determined or, if there is no sale on that date, the last previous day on
which a sale was reported. The maximum term of each option or SAR, the times at
which each option or SAR will be exercisable, and provisions requiring
forfeiture of unexercised options or SARs at or following termination of
employment or service generally are fixed by the Committee except that no option
or SAR may have a term exceeding 10 years. Options may be exercised by payment
of the exercise price in cash, shares that have been held for at least six
months (or that the Committee otherwise determines will not result in a
financial accounting charge to our company), outstanding awards or other
property having a fair market value equal to the exercise price, as the
Committee may determine from time to time. Methods of exercise and settlement
and other terms of the SARs are determined by the Committee. SARs granted under
the 2005 Plan may include "limited SARs" exercisable for a stated period of time
following a change in control of our company or upon the occurrence of some
other event specified by the Committee, as discussed below.
18
RESTRICTED AND DEFERRED STOCK
The Committee is authorized to grant restricted stock and deferred stock.
Restricted stock is a grant of shares of our company common stock which may not
be sold or disposed of, and which may be forfeited in the event of certain
terminations of employment or service, prior to the end of a restricted period
specified by the Committee. A participant granted restricted stock generally has
all of the rights of a shareholder of our company, unless otherwise determined
by the Committee. An award of deferred stock confers upon a participant the
right to receive shares of our company common stock at the end of a specified
deferral period, and may be subject to possible forfeiture of the award in the
event of certain terminations of employment prior to the end of a specified
restricted period. Prior to settlement, an award of deferred stock carries no
voting or dividend rights or other rights associated with share ownership,
although dividend equivalents may be granted, as discussed below.
DIVIDEND EQUIVALENTS
The Committee is authorized to grant dividend equivalents conferring on
participants the right to receive, currently or on a deferred basis, cash,
shares of our company common stock, other awards or other property equal in
value to dividends paid on a specific number of shares of our company common
stock or other periodic payments. Dividend equivalents may be granted alone or
in connection with another award, may be paid currently or on a deferred basis
and, if deferred, may be deemed to have been reinvested in additional shares of
our company common stock, awards or otherwise as specified by the Committee.
BONUS STOCK AND AWARDS IN LIEU OF CASH OBLIGATIONS
The Committee is authorized to grant shares of our company common stock as
a bonus free of restrictions, or to grant shares of our company common stock or
other awards in lieu of our company obligations to pay cash under the 2005 Plan
or other plans or compensatory arrangements, subject to such terms as the
Committee may specify.
OTHER STOCK BASED AWARDS
The Committee is authorized to grant awards under the 2005 Plan that are
denominated or payable in, valued by reference to, or otherwise based on or
related to shares of our company common stock. Such awards might include con-
vertible or exchangeable debt securities, other rights convertible or exchange-
able into shares of our company common stock, purchase rights for shares of our
company common stock, awards with value and payment contingent upon performance
of our company or any other factors designated by the Committee, and awards
valued by reference to the book value of shares of our company common stock or
the value of securities of or the performance of specified subsidiaries or
business units. The Committee determines the terms and conditions of such
awards.
19
PERFORMANCE AWARDS
The right of a participant to exercise or receive a grant or settlement of
an award, and the timing thereof, may be subject to such performance conditions
(including subjective individual goals) as may be specified by the Committee. In
addition, the 2005 Plan authorizes specific performance awards, which represent
a conditional right to receive cash, shares of our company common stock or other
awards upon achievement of certain pre-established performance goals and
subjective individual goals during a specified fiscal year. Performance awards
granted to persons whom the Committee expects will, for the year in which a
deduction arises, be "covered employees" (as defined below) will, if and to the
extent intended by the Committee, be subject to provisions that should qualify
such awards as "performance based compensation" not subject to the limitation on
tax deductibility by our company under Code Section 162(m). For purposes of
Section 162(m), the term "covered employee" means our chief executive officer
and each other person whose compensation is required to be disclosed in our
company's filings with the SEC by reason of that person being among the four
highest compensated officers of our company as of the end of a taxable year. If
and to the extent required under Section 162(m) of the Code, any power or
authority relating to a performance award intended to qualify under Section
162(m) of the Code is to be exercised by the Committee, not our Board of
Directors.
Subject to the requirements of the 2005 Plan, the Committee will determine
performance award terms, including the required levels of performance with
respect to specified business criteria, the corresponding amounts payable upon
achievement of such levels of performance, termination and forfeiture provisions
and the form of settlement. One or more of the following business criteria for
our company, on a consolidated basis, and/or for Related Entities, or for
business or geographical units of our company and/or a Related Entity (except
with respect to the total shareholder return and earnings per share criteria),
shall be used by the Committee in establishing performance goals for performance
awards to "covered employees" that are intended to qualify under Section 162(m):
(1) earnings per share; (2) revenues or margin; (3) cash flow; (4) operating
margin; (5) return on net assets; (6) return on investment; (7) return on
capital; (8) return on equity; (9) economic value added; (10) direct contri-
bution; (11) net income, (12) pretax earnings; (13) earnings before interest,
taxes, depreciation and amortization; (14) earnings after interest expense and
before extraordinary or special items; (15) operating income; (16) income before
interest income or expense, unusual items and income taxes, local, state or
federal and excluding budgeted and actual bonuses which might be paid under any
ongoing bonus plans of our company; (17) working capital; (18) management of
fixed costs or variable costs; (19) identification or consummation of investment
opportunities or completion of specified projects in accordance with corporate
business plans, including strategic mergers, acquisitions or divestitures; (20)
total shareholder return; (21) debt reduction; and (22) any of the above goals
determined on an absolute or relative basis or as compared to the performance of
a published or special index deemed applicable by the Committee including, but
not limited to, the Standard & Poor's 500 Stock Index or a group of comparable
companies. The Committee may exclude the impact of an event or occurrence which
the Committee determines should appropriately be excluded, including without
limitation (i) restructurings, discontinued operations, extraordinary items, and
other unusual or non-recurring charges, (ii) an event either not directly
related to the operations of our company or not within the reasonable control of
our company's management, or (iii) a change in accounting standards required by
generally accepted accounting principles.
20
In granting performance awards, the Committee may establish unfunded award
"pools," the amounts of which will be based upon the achievement of a
performance goal or goals based on one or more of certain business criteria
described in the 2005 Plan (including, for example, total shareholder return,
net income, pretax earnings, EBITDA, earnings per share, and return on
investment). During the first 90 days of a performance period, the Committee
will determine who will potentially receive performance awards for that
performance period, either out of the pool or otherwise.
After the end of each performance period, the Committee will determine (i)
the amount of any pools and the maximum amount of potential performance awards
payable to each participant in the pools and (ii) the amount of any other
potential performance awards payable to participants in the 2005 Plan. The
Committee may, in its discretion, determine that the amount payable as a
performance award will be reduced from the amount of any potential award.
OTHER TERMS OF AWARDS
Awards may be settled in the form of cash, shares of our company common
stock, other awards or other property, in the discretion of the Committee. The
Committee may require or permit participants to defer the settlement of all or
part of an award in accordance with such terms and conditions as the Committee
may establish, including payment or crediting of interest or dividend
equivalents on deferred amounts, and the crediting of earnings, gains and losses
based on deemed investment of deferred amounts in specified investment vehicles.
The Committee is authorized to place cash, shares of our company common stock or
other property in trusts or make other arrangements to provide for payment of
our company's obligations under the 2005 Plan. The Committee may condition any
payment relating to an award on the withholding of taxes and may provide that a
portion of any shares of our company common stock or other property to be
distributed will be withheld (or previously acquired shares of our company
common stock or other property be surrendered by the participant) to satisfy
withholding and other tax obligations. Awards granted under the 2005 Plan
generally may not be pledged or otherwise encumbered and are not transferable
except by will or by the laws of descent and distribution, or to a designated
beneficiary upon the participant's death, except that the Committee may, in its
discretion, permit transfers for estate planning or other purposes subject to
any applicable restrictions under Rule 16b 3 of the Exchange Act.
Awards under the 2005 Plan are generally granted without a requirement that
the participant pay consideration in the form of cash or property for the grant
(as distinguished from the exercise), except to the extent required by law. The
Committee may, however, grant awards in exchange for other awards under the 2005
Plan awards or under other company plans, or other rights to payment from our
company, and may grant awards in addition to and in tandem with such other
awards, rights or other awards.
ACCELERATION OF VESTING; CHANGE IN CONTROL
The Committee may, in its discretion, accelerate the exercisability, the
lapsing of restrictions or the expiration of deferral or vesting periods of any
award, and such accelerated exercisability, lapse, expiration and if so provided
in the award agreement, vesting shall occur automatically in the case of a
"change in control" of our company, as defined in the 2005 Plan (including the
cash settlement of SARs and "limited SARs" which may be exercisable in the event
of a change in control). In addition, the Committee may provide in an award
agreement that the performance goals relating to any performance based
21
award will be deemed to have been met upon the occurrence of any "change in
control." Upon the occurrence of a change in control, if so provided in the
award agreement, stock options and limited SARs (and other SARs which so
provide) may be cashed out based on a defined "change in control price," which
will be the higher of (i) the cash and fair market value of property that is the
highest price per share paid (including extraordinary dividends) in any
reorganization, merger, consolidation, liquidation, dissolution or sale of
substantially all assets of our company, or (ii) the highest fair market value
per share (generally based on market prices) at any time during the 60 days
before and 60 days after a change in control.
AMENDMENT AND TERMINATION
Our Board of Directors may amend, alter, suspend, discontinue or terminate
the 2005 Plan or the Committee's authority to grant awards without further
shareholder approval, except shareholder approval must be obtained for any
amendment or alteration if such approval is required by law or regulation or
under the rules of any stock exchange or quotation system on which shares of our
company common stock are then listed or quoted. Thus, shareholder approval may
not necessarily be required for every amendment to the 2005 Plan which might
increase the cost of the 2005 Plan or alter the eligibility of persons to
receive awards. Shareholder approval will not be deemed to be required under
laws or regulations, such as those relating to ISOs, that condition favorable
treatment of participants on such approval, although our Board of Directors may,
in its discretion, seek shareholder approval in any circumstance in which it
deems such approval advisable. Unless earlier terminated by our Board of
Directors, the 2005 Plan will terminate at such time as no shares of our company
common stock remain available for issuance under the 2005 Plan and our company
has no further rights or obligations with respect to outstanding awards under
the 2005 Plan.
FEDERAL INCOME TAX CONSEQUENCES OF AWARDS
The 2005 Plan is not qualified under the provisions of section 401(a) of
the Code and is not subject to any of the provisions of the Employee Retirement
Income Security Act of 1974.
NONQUALIFIED STOCK OPTIONS. On exercise of a nonqualified stock option
granted under the 2005 Plan an optionee will recognize ordinary income equal to
the excess, if any, of the fair market value on the date of exercise of the
shares of stock acquired on exercise of the option over the exercise price. If
the optionee is an employee of our company or a Related Entity, that income will
be subject to the withholding of Federal income tax. The optionee's tax basis in
those shares will be equal to their fair market value on the date of exercise of
the option, and his holding period for those shares will begin on that date. If
an optionee pays for shares of stock on exercise of an option by delivering
shares of our company's stock, the optionee will not recognize gain or loss on
the shares delivered, even if their fair market value at the time of exercise
differs from the optionee's tax basis in them. The optionee, however, otherwise
will be taxed on the exercise of the option in the manner described above as if
he had paid the exercise price in cash. If a separate identifiable stock
certificate is issued for that number of shares equal to the number of shares
delivered on exercise of the option, the optionee's tax basis in the shares
represented by that certificate will be equal to his tax basis in the shares
delivered, and his holding period for those shares will include his holding
period for the shares delivered. The optionee's tax basis and holding
22
period for the additional shares received on exercise of the option will be the
same as if the optionee had exercised the option solely in exchange for cash.
Our company will be entitled to a deduction for Federal income tax purposes
equal to the amount of ordinary income taxable to the optionee, provided that
amount constitutes an ordinary and necessary business expense for our company
and is reasonable in amount, and either the employee includes that amount in
income or our company timely satisfies its reporting requirements with respect
to that amount.
INCENTIVE STOCK OPTIONS. The 2005 Plan provides for the grant of stock
options that qualify as "incentive stock options" as defined in section 422 of
the Code, which we refer to as ISOs. Under the Code, an optionee generally is
not subject to tax upon the grant or exercise of an ISO. In addition, if the
optionee holds a share received on exercise of an ISO for at least two years
from the date the option was granted and at least one year from the date the
option was exercised, which we refer to as the Required Holding Period, the
difference, if any, between the amount realized on a sale or other taxable
disposition of that share and the holder's tax basis in that share will be
long-term capital gain or loss.
If, however, an optionee disposes of a share acquired on exercise of an ISO
before the end of the Required Holding Period, which we refer to as a
Disqualifying Disposition, the optionee generally will recognize ordinary income
in the year of the Disqualifying Disposition equal to the excess, if any, of the
fair market value of the share on the date the ISO was exercised over the exer-
cise price. If, however, the Disqualifying Disposition is a sale or exchange on
which a loss, if realized, would be recognized for Federal income tax purposes,
and if the sales proceeds are less than the fair market value of the share on
the date of exercise of the option, the amount of ordinary income recognized by
the optionee will not exceed the gain, if any, realized on the sale. If the
amount realized on a Disqualifying Disposition exceeds the fair market value of
the share on the date of exercise of the option, that excess will be short-term
or long-term capital gain, depending on whether the holding period for the share
exceeds one year.
An optionee who exercises an ISO by delivering shares of stock acquired
previously pursuant to the exercise of an ISO before the expiration of the
Required Holding Period for those shares is treated as making a Disqualifying
Disposition of those shares. This rule prevents "pyramiding" or the exercise of
an ISO (that is, exercising an ISO for one share and using that share, and
others so acquired, to exercise successive ISOs) without the imposition of
current income tax.
For purposes of the alternative minimum tax, the amount by which the fair
market value of a share of stock acquired on exercise of an ISO exceeds the
exercise price of that option generally will be an adjustment included in the
optionee's alternative minimum taxable income for the year in which the option
is exercised. If, however, there is a Disqualifying Disposition of the share in
the year in which the option is exercised, there will be no adjustment with
respect to that share. If there is a Disqualifying Disposition in a later year,
no income with respect to the Disqualifying Disposition is included in the
optionee's alternative minimum taxable income for that year. In computing
alternative minimum taxable income, the tax basis of a share acquired on
exercise of an ISO is increased by the amount of the adjustment taken into
account with respect to that share for alternative minimum tax purposes in the
year the option is exercised.
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Our company is not allowed an income tax deduction with respect to the
grant or exercise of an incentive stock option or the disposition of a share
acquired on exercise of an incentive stock option after the Required Holding
Period. However, if there is a Disqualifying Disposition of a share, our company
is allowed a deduction in an amount equal to the ordinary income includible in
income by the optionee, provided that amount constitutes an ordinary and
necessary business expense for our company and is reasonable in amount, and
either the employee includes that amount in income or our company timely
satisfies its reporting requirements with respect to that amount.
STOCK AWARDS. Generally, the recipient of a stock award will recognize
ordinary compensation income at the time the stock is received equal to the
excess, if any, of the fair market value of the stock received over any amount
paid by the recipient in exchange for the stock. If, however, the stock is
non-vested when it is received under the 2005 Plan (for example, if the employee
is required to work for a period of time in order to have the right to sell the
stock), the recipient generally will not recognize income until the stock
becomes vested, at which time the recipient will recognize ordinary compensation
income equal to the excess, if any, of the fair market value of the stock on the
date it becomes vested over any amount paid by the recipient in exchange for the
stock. A recipient may, however, file an election with the Internal Revenue
Service, within 30 days of his or her receipt of the stock award, to recognize
ordinary compensation income, as of the date the recipient receives the award,
equal to the excess, if any, of the fair market value of the stock on the date
the award is granted over any amount paid by the recipient in exchange for the
stock.
The recipient's basis for the determination of gain or loss upon the
subsequent disposition of shares acquired as stock awards will be the amount
paid for such shares plus any ordinary income recognized either when the stock
is received or when the stock becomes vested. Upon the disposition of any stock
received as a stock award under the 2005 Plan the difference between the sale
price and the recipient's basis in the shares will be treated as a capital gain
or loss and generally will be characterized as long-term capital gain or loss if
the shares have been held for more the one year from the date as of which he or
she would be required to recognize any compensation income.
STOCK APPRECIATION RIGHTS
Our company may grant SARs separate from any other award, which we refer to
as Stand-Alone SARs, or in tandem with options, which we refer to as Tandem
SARs, under the 2005 Plan. Generally, the recipient of a Stand-Alone SAR will
not recognize any taxable income at the time the Stand-Alone SAR is granted.
With respect to Stand-Alone SARs, if the recipient receives the
appreciation inherent in the SARs in cash, the cash will be taxable as ordinary
compensation income to the recipient at the time that the cash is received. If
the recipient receives the appreciation inherent in the SARs in shares of stock,
the recipient will recognize ordinary compensation income equal to the excess of
the fair market value of the stock on the day it is received over any amounts
paid by the recipient for the stock.
24
With respect to Tandem SARs, if the recipient elects to surrender the
underlying option in exchange for cash or shares of stock equal to the
appreciation inherent in the underlying option, the tax consequences to the
recipient will be the same as discussed above relating to the Stand-Alone SARs.
If the recipient elects to exercise the underlying option, the holder will be
taxed at the time of exercise as if he or she had exercised a nonqualified stock
option (discussed above), i.e., the recipient will recognize ordinary income for
federal tax purposes measured by the excess of the then fair market value of the
shares of stock over the exercise price.
In general, there will be no federal income tax deduction allowed to our
company upon the grant or termination of Stand-Alone SARs or Tandem SARs. Upon
the exercise of either a Stand-Alone SAR or a Tandem SAR, however, our company
will be entitled to a deduction for federal income tax purposes equal to the
amount of ordinary income that the employee is required to recognize as a result
of the exercise, provided that the deduction is not otherwise disallowed under
the Code.
DIVIDEND EQUIVALENTS. Generally, the recipient of a dividend equivalent
award will recognize ordinary compensation income at the time the dividend
equivalent award is received equal to the fair market value dividend equivalent
award received. Our company generally will be entitled to a deduction for
federal income tax purposes equal to the amount of ordinary income that the
employee is required to recognize as a result of the dividend equivalent award,
provided that the deduction is not otherwise disallowed under the Code.
SECTION 409A. Section 409A of the Code, enacted as part of the American
Jobs Creation Act of 2004, imposes certain new requirements applicable to
"nonqualified deferred compensation plans," including new rules relating to the
timing of deferral elections and elections with regard to the form and timing of
benefit distributions, prohibitions against the acceleration of the timing of
distributions, and the times when distributions may be made, as well as rules
that generally prohibit the funding of nonqualified deferred compensation plans
in offshore trusts or upon the occurrence of a change in the employer's
financial health. These new rules generally apply with respect to deferred
compensation that becomes earned and vested on or after January 1, 2005. If a
nonqualified deferred compensation plan subject to Section 409A fails to meet,
or is not operated in accordance with, these new requirements, then all
compensation deferred under the plan is or becomes immediately taxable to the
extent that it is not subject to a substantial risk of forfeiture and was not
previously taxable. The tax imposed as a result of these new rules would be
increased by interest at a rate equal to the rate imposed upon tax underpayments
plus one percentage point, and an additional tax equal to 20% of the
compensation required to be included in income. Some of the awards to be granted
under this 2005 Plan may constitute deferred compensation subject to the Section
409A requirements, including, without limitation, discounted stock options,
deferred stock and SARs that are not payable in shares of our company stock. It
is our company's intention that any award agreement that will govern awards
subject to Section 409A will comply with these new rules.
25
SECTION 162 LIMITATIONS. The Omnibus Budget Reconciliation Act of 1993
added Section 162(m) to the Code, which generally disallows a public company's
tax deduction for compensation to covered employees in excess of $1 million in
any tax year beginning on or after January 1, 1994. Compensation that qualifies
as "performance based compensation" is excluded from the $1 million
deductibility cap, and therefore remains fully deductible by the company that
pays it. Our Company intends that options granted to employees whom the
Committee expects to be covered employees at the time a deduction arises in
connection with such options, will qualify as such "performance based
compensation," so that such options will not be subject to the Section 162(m)
deductibility cap of $1 million. Future changes in Section 162(m) or the
regulations thereunder may adversely affect the ability of our company to ensure
that options under the 2005 Plan will qualify as "performance based
compensation" that is fully deductible by our company under Section 162(m).
IMPORTANCE OF CONSULTING TAX ADVISER. The information set forth above is a
summary only and does not purport to be complete. In addition, the information
is based upon current Federal income tax rules and therefore is subject to
change when those rules change. Moreover, because the tax consequences to any
recipient may depend on his particular situation, each recipient should consult
his tax adviser as to the Federal, state, local and other tax consequences of
the grant or exercise of an award or the disposition of stock acquired as a
result of an award.
The Board recommends a vote FOR this proposal.
REPORT OF THE BOARD OF DIRECTORS FUNCITIONING AS THE AUDIT COMMITTEE
The following Report of the Board of Directors functioning as the Audit
Committee, covering our fiscal year ended December 31, 2004, shall not be deemed
to be "soliciting material" or to be "filed" with the Commission or subject to
Regulations 14A or 14C of the Commission, or the liabilities of Section 18 of
the Exchange Act. Such report shall not be deemed incorporated by reference into
any filing under the Securities Act or the Exchange Act, notwithstanding any
general incorporation by reference of this Proxy Statement into any other
document.
We do not have an audit committee and as a result our entire board of
directors performs the duties of an audit committee. Our board of directors
evaluates and approves the scope and cost of auditor activities before audit and
non-audit services are rendered.
The board of directors oversees our financial reporting process. Our
management has the primary responsibility for our financial statements as well
as our financial reporting process, principles and internal controls. Our
independent auditors are responsible for performing an audit of our financial
statements and expressing an opinion on such financial statements and their
conformity with generally accepted accounting principles.
Management has reviewed the audited financial statements in the Annual
Report with the board of directors including a discussion of the quality, not
just the acceptability, of the accounting principles, the reasonableness of
significant accounting judgments and estimates, and the clarity of disclosures
in the financial statements.
26
In its meetings with representatives of the independent auditors, the board
of directors asks them to address, and discusses their responses to several
questions that the board of directors believes are particularly relevant to its
oversight. These questions include:
o Are there any significant accounting judgments or estimates made by
management in preparing the financial statements that would have been
made differently had the auditors themselves prepared and been
responsible for the financial statements?
o Based on the auditors' experience, and their knowledge of our company,
do our financial statements fairly present to investors, with clarity
and completeness, our financial position and performance for the
reporting period in accordance with generally accepted accounting
principles, and SEC disclosure requirements?
o Based on the auditors' experience, and their knowledge of our company,
have we implemented effective internal controls over financial
reporting and internal audit procedures that are appropriate for us?
The board of directors believes that, by thus focusing its discussions with
the independent auditors, it can promote a meaningful dialogue that provides a
basis for its oversight judgments.
The board of directors also discussed with the independent auditors other
matters required to be discussed by the auditors with the Committee under
Statement on Auditing Standards No. 61, as amended by Statement on Auditing
Standards No. 90, and other regulations. The Committee received and discussed
with the auditors their annual written report on their independence from us and
our management, which is made under Rule 3600T of the Public Company Accounting
Oversight Board, which adopts on an interim basis Independence Standards Board
Standard No. 1 (independence discussions with board of directors), and
considered with the auditors whether the provision of non-audit services
provided by them to us during 2004 was compatible with the auditors'
independence.
In performing all of these functions, the board of directors acts in an
oversight capacity. The board of directors reviews our earnings releases before
issuance and quarterly and annual reporting on Form 10-QSB and Form 10-KSB prior
to filing with the SEC. In its oversight role, the board of directors relies on
the work and assurances of our management, which has the primary responsibility
for our financial statements and reports, and of the independent auditors, who,
in their report, express an opinion on such financial statements and their
conformity generally accepted accounting principles.
The board of directors has also considered whether the independent
auditors' provision of non-audit services to us is compatible with maintaining
the auditors' independence.
Based on the reports and discussions described above, the audited financial
statements were included in our Annual Report on Form 10-KSB for the year ended
December 31, 2004, for filing with the SEC.
27
ITEM 4: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The board of directors has appointed Gordon, Hughes & Banks LLP to serve as
independent auditors for the year ending December 31, 2005. Gordon, Hughes &
Banks LLP has served as our independent auditors since 2003, and is considered
by our management to be well qualified.
Our independent auditor, Gordon, Hughes & Banks, LLP, billed an aggregate
of $21,100 for the year ended December 31, 2004 for professional services
rendered for the audit of our annual financial statements and review of interim
financial statements. Gordon, Hughes & Banks, LLP also billed $13,500 for
services related to the filing of our Form SB-2. In addition, Gordon, Hughes &
Banks, LLP billed an aggregate of $-0- for the year ending December 31, 2004 for
professional services rendered for tax compliance and filings.
All services performed by Gordon, Hughes & Banks LLP were pre-approved by
the board of directors. On an annual basis, the board of directors will review
and provide approval for services that may be provided by the independent
auditors.
The Board recommends a vote FOR the appointment of Gordon, Hughes & Banks
LLP as independent auditors.
FORM 10-KSB
UPON WRITTEN REQUEST OF ANY PERSON ENTITLED TO VOTE AT THE MEETING, ADDRESSED TO
US, ATTENTION: SECRETARY, FRONTIER STAFFING, INC., 3520 PAN AMERICAN FREEWAY,
SUITE A-1, ALBUQUERQUE, NEW MEXICO 87107, WE WILL PROVIDE WITHOUT CHARGE, A COPY
OF OUR ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004,
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
COMMUNICATIONS WITH STOCKHOLDERS
Anyone who has a concern about our conduct, including accounting, internal
accounting controls or audit matters, may communicate directly with our Chief
Executive Officer, or our non-management directors. Such communications may be
confidential or anonymous, and may be submitted in writing addressed care of
Frederick A. Huttner, Chief Financial Officer, Frontier Staffing, Inc., 3520 Pan
American Freeway, Suite A-1, Albuquerque, New Mexico 87107. All such concerns
will be forwarded to the appropriate directors for their review, and will be
simultaneously reviewed and addressed by the proper executive officers in the
same way that other concerns are addressed by us.
DEADLINE FOR FUTURE PROPOSALS OF STOCKHOLDERS
Proposals that a stockholder desires to have included in our proxy
materials for our 2006 Annual Meeting of Stockholders must comply with the
applicable rules and regulations of the Commission, including that any such
proposal must be received by our Secretary at our principal office no later than
January 16, 2006. It is suggested that such proposals be sent by Certified Mail,
Return Receipt Requested. Our By-laws require a stockholder to give advance
notice of any business, including the nomination of candidates for the Board of
Directors, which the stockholder wishes to bring before a meeting of our
28
stockholders. In general, for business to be brought before an annual meeting by
a stockholder, written notice of the stockholder proposal or nomination must be
received by our Secretary not more than 180 days prior to the anniversary of the
preceding year's annual meeting. With respect to stockholder proposals, the
stockholder's notice to our Secretary must contain a brief description of the
business to be brought before the meeting and the reasons for conducting such
business at the meeting, as well as other information set forth in our By-laws
or required by law. With respect to the nomination of a candidate for the Board
of Directors by a stockholder, the stockholder's notice to our Secretary must
contain certain information set forth in our By-laws about both the nominee and
the stockholder making the nominations. If a stockholder desires to have a
proposal included in our proxy materials for our 2006 Annual Meeting of
Stockholders and desires to have such proposal brought before the same annual
meeting, the stockholder must comply with both sets of procedures described in
this paragraph. Any required written notices should be sent to Frontier
Staffing, Inc., 3451-A Candelaria NE ,Albuquerque, New Mexico 87107. Attn:
Secretary.
OTHER MATTERS WHICH MAY COME BEFORE THE ANNUAL MEETING
We know of no other matters to be presented at the Annual Meeting, but if
any other matters should properly come before the meeting, it is intended that
the persons named in the accompanying form of proxy will vote the same in
accordance with their best judgment and their discretion, and authority to do so
is included in the proxy.
SOLICITATION OF PROXIES
The expense of this solicitation of proxies will be borne by us.
Solicitations will be made only by use of the mail except that, if deemed
desirable, our officers and regular employees may solicit proxies by telephone,
telegraph or personal calls. Brokerage houses, custodians, nominees and
fiduciaries will be requested to forward the proxy soliciting material to the
beneficial owners of the stock held of record by such persons and we will
reimburse them for their reasonable expenses incurred in this effort.
BY ORDER OF THE BOARD OF DIRECTORS
CLARENCE DOWNS
Chairman of the Board of
Directors
29
Exhibit 1
2005 Incentive Compensation Plan
=================================
FRONTIER STAFFING, INC.
2005 INCENTIVE COMPENSATION PLAN
=================================
FRONTIER STAFFING, INC.
2005 INCENTIVE COMPENSATION PLAN
1. Purpose .................................................................1
2. Definitions..............................................................1
3. Administration...........................................................6
(a) Authority of the Committee.....................................6
(b) Manner of Exercise of Committee Authority......................6
(c) Limitation of Liability........................................6
4. Shares Subject to Plan...................................................6
(a) Limitation on Overall Number of Shares Available for Delivery
Under Plan.....................................................6
(b) Application of Limitation to Grants of Award...................7
(c) Availability of Shares Not Delivered under Awards and
Adjustments to Limits..........................................7
(d) No Further Awards Under Prior Plan.............................8
5. Eligibility; Per-Person Award Limitations................................8
6. Specific Terms of Awards.................................................8
(a) General........................................................8
(b) Options........................................................8
(c) Stock Appreciation Rights.....................................10
(d) Restricted Stock Awards.......................................11
(e) Deferred Stock Award..........................................12
(f) Bonus Stock and Awards in Lieu of Obligations.................12
(g) Dividend Equivalents..........................................13
(h) Performance Awards............................................13
(i) Other Stock-Based Awards......................................13
7. Certain Provisions Applicable to Awards.................................13
(a) Stand-Alone, Additional, Tandem, and Substitute Awards........13
(b) Term of Awards................................................14
(c) Form and Timing of Payment Under Awards; Deferrals............14
(d) Exemptions from Section 16(b) Liability.......................14
8. Code Section 162(m) Provisions..........................................14
(a) Covered Employees.............................................14
(b) Performance Criteria..........................................14
(c) Performance Period; Timing for Establishing Performance Goals.15
(d) Adjustments...................................................15
(e) Committee Certification.......................................15
9. Change in Control......................................................15
(a) Effect of Change in Control...................................15
(b) Definition of Change in Control...............................16
10. General Provisions................................................17
(a) Compliance With Legal and Other Requirements..................17
(b) Limits on Transferability; Beneficiaries......................18
(c) Adjustments...................................................18
(d) Taxes.........................................................19
(e) Changes to the Plan and Awards................................19
(f) Limitation on Rights Conferred Under Plan.....................20
(g) Unfunded Status of Awards; Creation of Trusts.................20
(h) Nonexclusivity of the Plan....................................20
(i) Payments in the Event of Forfeitures; Fractional Shares.......20
(j) Governing Law.................................................20
(k) Non-U.S. Laws.................................................20
(l) Plan Effective Date and ShareholderApproval;Termination
of Plan.......................................................20
FRONTIER STAFFING, INC.
2005 INCENTIVE COMPENSATION PLAN
1. Purpose.
The purpose of this 2005 INCENTIVE COMPENSATION PLAN (the "Plan") is to
assist FRONTIER STAFFING, INC., a Nevada corporation (the "Company") and its
Related Entities (as hereinafter defined) in attracting, motivating, retaining
and rewarding high-quality executives and other employees, officers, directors,
consultants and other persons who provide services to the Company or its Related
Entities by enabling such persons to acquire or increase a proprietary interest
in the Company in order to strengthen the mutuality of interests between such
persons and the Company's shareholders, and providing such persons with
performance incentives to expend their maximum efforts in the creation of
shareholder value.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth
below, in addition to such terms defined in Section 1 hereof.
(a) "Award" means any Option, Stock Appreciation Right, Restricted
Stock Award, Deferred Stock Award, Share granted as a bonus or in lieu of
another award, Dividend Equivalent, Other Stock-Based Award or Performance
Award, together with any other right or interest, granted to a Participant
under the Plan.
(b) "Award Agreement" means any written agreement, contract or other
instrument or document evidencing any Award granted by the Committee
hereunder.
(c) "Beneficiary" means the person, persons, trust or trusts that have
been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards
or other rights are transferred if and to the extent permitted under
Section 10(b) hereof. If, upon a Participant's death, there is no
designated Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means the person, persons, trust or trusts entitled by will or
the laws of descent and distribution to receive such benefits.
(d) "Beneficial Owner" shall have the meaning ascribed to such term in
Rule 13d-3 under the Exchange Act and any successor to such Rule.
(e) "Board" means the Company's Board of Directors.
(f) "Cause" shall, with respect to any Participant have the meaning
specified in the Award Agreement. In the absence of any definition in the
Award Agreement, "Cause" shall have the equivalent meaning or the same
meaning as "cause" or "for cause" set forth in any employment, consulting,
or other agreement for the performance of services between the Participant
and the Company or a Related Entity or, in the absence of any such
agreement or any such definition in such agreement, such term shall mean
(i) the failure by the Participant to perform, in a reasonable manner, his
or her duties as assigned by the Company or a Related Entity, (ii) any
violation or breach by the Participant of his or her employment, consulting
or other similar agreement with the Company or a Related Entity, if any,
(iii) any violation or breach by the Participant of any non-competition,
non-solicitation, non-disclosure and/or other similar agreement with the
1
Company or a Related Entity, (iv) any act by the Participant of dishonesty
or bad faith with respect to the Company or a Related Entity, (v) use of
alcohol, drugs or other similar substances in a manner that adversely
affects the Participant's work performance, or (vi) the commission by the
Participant of any act, misdemeanor, or crime reflecting unfavorably upon
the Participant or the Company or any Related Entity. The good faith
determination by the Committee of whether the Participant's Continuous
Service was terminated by the Company for "Cause" shall be final and
binding for all purposes hereunder.
(g) "Change in Control" means a Change in Control as defined with
related terms in Section 9(b) of the Plan.
(h) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions and
regulations thereto.
(i) "Committee" means a committee designated by the Board to
administer the Plan; provided, however, that if the Board fails to
designate a committee or if there are no longer any members on the
committee so designated by the Board, then the Board shall serve as the
Committee. The Committee shall consist of at least two directors, and each
member of the Committee shall be (i)a "non-employee director" within the
meaning of Rule 16b-3 (or any successor rule) under the Exchange Act,
unless administration of the Plan by "non-employee directors" is not then
required in order for exemptions under Rule 16b-3 to apply to transactions
under the Plan, (ii) an "outside director" within the meaning of Section
162(m) of the Code, and (iii) "Independent."
(j) "Consultant" means any person (other than an Employee or a
Director, solely with respect to rendering services in such person's
capacity as a director) who is engaged by the Company or any Related Entity
to render consulting or advisory services to the Company or such Related
Entity.
(k) "Continuous Service" means the uninterrupted provision of services
to the Company or any Related Entity in any capacity of Employee, Director,
Consultant or other service provider. Continuous Service shall not be
considered to be interrupted in the case of (i) any approved leave of
absence, (ii) transfers among the Company, any Related Entities, or any
successor entities, in any capacity of Employee, Director, Consultant or
other service provider, or (iii) any change in status as long as the
individual remains in the service of the Company or a Related Entity in any
capacity of Employee, Director, Consultant or other service provider
(except as otherwise provided in the Award Agreement). An approved leave of
absence shall include sick leave, military leave, or any other authorized
personal leave.
(l) "Covered Employee" means an Eligible Person who is a "covered
employee" within the meaning of Section 162(m)(3) of the Code, or any
successor provision thereto.
(m) "Deferred Stock" means a right to receive Shares, including
Restricted Stock, cash or a combination thereof, at the end of a specified
deferral period.
(n) "Deferred Stock Award" means an Award of Deferred Stock granted to
a Participant under Section 6(e) hereof.
2
(o) "Director" means a member of the Board or the board of directors
of any Related Entity.
(p) "Disability" means a permanent and total disability (within the
meaning of Section 22(e) of the Code), as determined by a medical doctor
satisfactory to the Committee.
(q) "Discounted Option" means any Option awarded under Section 6(b)
hereof with an exercise price that is less than the Fair Market Value of a
Share on the date of grant.
(r) "Discounted Stock Appreciation Right" means any Stock Appreciation
Right awarded under Section 6(c) hereof with an exercise price that is less
than the Fair Market Value of a Share on the date of grant.
(s) "Dividend Equivalent" means a right, granted to a Participant
under Section 6(g) hereof, to receive cash, Shares, other Awards or other
property equal in value to dividends paid with respect to a specified
number of Shares, or other periodic payments.
(t) "Effective Date" means the effective date of the Plan, which shall
be June 20, 2005.
(u) "Eligible Person" means each officer, Director, Employee,
Consultant and other person who provides services to the Company or any
Related Entity. The foregoing notwithstanding, only employees of the
Company, or any parent corporation or subsidiary corporation of the Company
(as those terms are defined in Sections 424(e) and (f) of the Code,
respectively), shall be Eligible Persons for purposes of receiving any
Incentive Stock Options. An Employee on leave of absence may be considered
as still in the employ of the Company or a Related Entity for purposes of
eligibility for participation in the Plan.
(v) "Employee" means any person, including an officer or Director, who
is an employee of the Company or any Related Entity. The payment of a
director's fee by the Company or a Related Entity shall not be sufficient
to constitute "employment" by the Company.
(w) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(x) "Executive Committee" means the Executive Committee of the Board.
(y) "Fair Market Value" means the fair market value of Shares, Awards
or other property as determined by the Committee, or under procedures
established by the Committee. Unless otherwise determined by the Committee,
the Fair Market Value of a Share as of any given date shall be the closing
sale price per Share reported on a consolidated basis for stock listed on
the principal stock exchange or market on which Shares are traded on the
date as of which such value is being determined or, if there is no sale on
that date, then on the last previous day on which a sale was reported.
(z) "Good Reason" shall, with respect to any Participant, have the
meaning specified in the Award Agreement. In the absence of any definition
in the Award Agreement, "Good Reason" shall have the equivalent meaning or
the same meaning as "good reason" or "for good reason" set forth in any
employment, consulting or other agreement for the performance of services
3
between the Participant and the Company or a Related Entity or, in the
absence of any such agreement or any such definition in such agreement,
such term shall mean (i) the assignment to the Participant of any duties
inconsistent in any material respect with the Participant's position,
authority, duties or responsibilities as assigned by the Company or a
Related Entity, or any other action by the Company or a Related Entity
which results in a material diminution in such position, authority, duties
or responsibilities, excluding for this purpose any action not taken in bad
faith and which is remedied by the Company or a Related Entity promptly
after receipt of notice thereof given by the Participant; or (ii) any
material failure by the Company or a Related Entity to comply with its
obligations to the Participant as agreed upon, other than any failure not
occurring in bad faith and which is remedied by the Company or a Related
Entity promptly after receipt of notice thereof given by the Participant.
(aa) "Incentive Stock Option" means any Option intended to be
designated as an incentive stock option within the meaning of Section 422
of the Code or any successor provision thereto.
(bb) "Independent," when referring to either the Board or members of
the Committee, shall have the same meaning as used in the rules of the
Nasdaq Stock Market or any national securities exchange on which any
securities of the Company are listed for trading, and if not listed for
trading, by the rules of the Nasdaq Stock Market.
(cc) "Incumbent Board" means the Incumbent Board as defined in Section
9(b)(ii) of the Plan.
(dd) "Option" means a right granted to a Participant under Section
6(b) hereof, to purchase Shares or other Awards at a specified price during
specified time periods.
(ee) "Optionee" means a person to whom an Option is granted under this
Plan or any person who succeeds to the rights of such person under this
Plan.
(ff) "Option Proceeds" means the cash actually received by the Company
for the exercise price in connection with the exercise of Options that are
exercised after the Effective Date of the Plan, plus the maximum tax
benefit that could be realized by the Company as a result of the exercise
of such Options, which tax benefit shall be determined by multiplying (i)
the amount that is deductible for Federal income tax purposes as a result
of any such option exercise (currently, equal to the amount upon which the
Participant's withholding tax obligation is calculated), times (ii) the
maximum Federal corporate income tax rate for the year of exercise. With
respect to Options, to the extent that a Participant pays the exercise
price and/or withholding taxes with Shares, Option Proceeds shall not be
calculated with respect to the amounts so paid in Shares.
(gg) "Other Stock-Based Awards" means Awards granted to a Participant
under Section 6(i) hereof.
(hh) "Outside Director" means a member of the Board who is not an
Employee.
(ii) "Participant" means a person who has been granted an Award under
the Plan which remains outstanding, including a person who is no longer an
Eligible Person.
4
(jj) "Performance Award" shall mean any Award of Performance Shares or
Performance Units granted pursuant to Section 6(h).
(kk) "Performance Period" means that period established by the
Committee at the time any Performance Award is granted or at any time
thereafter during which any performance goals specified by the Committee
with respect to such Award are to be measured.
(ll) "Performance Share" means any grant pursuant to Section 6(h) of a
unit valued by reference to a designated number of Shares, which value may
be paid to the Participant by delivery of such property as the Committee
shall determine, including cash, Shares, other property, or any combination
thereof, upon achievement of such performance goals during the Performance
Period as the Committee shall establish at the time of such grant or
thereafter.
(mm) "Performance Unit" means any grant pursuant to Section 6(h) of a
unit valued by reference to a designated amount of property (including
cash) other than Shares, which value may be paid to the Participant by
delivery of such property as the Committee shall determine, including cash,
Shares, other property, or any combination thereof, upon achievement of
such performance goals during the Performance Period as the Committee shall
establish at the time of such grant or thereafter.
(nn) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
and shall include a "group" as defined in Section 13(d) thereof.
(oo) "Prior Plan" means any prior plan.
(pp) "Related Entity" means any Subsidiary, and any business,
corporation, partnership, limited liability company or other entity
designated by Board in which the Company or a Subsidiary holds a
substantial ownership interest, directly or indirectly.
(qq) "Restricted Stock" means any Share issued with the restriction
that the holder may not sell, transfer, pledge or assign such Share and
with such risks of forfeiture and other restrictions as the Committee, in
its sole discretion, may impose (including any restriction on the right to
vote such Share and the right to receive any dividends), which restrictions
may lapse separately or in combination at such time or times, in
installments or otherwise, as the Committee may deem appropriate.
(rr) "Restricted Stock Award" means an Award granted to a Participant
under Section 6(d) hereof.
(ss) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(tt) "Shareholder Approval Date" means the date on which this Plan is
approved shareholders of the Company eligible to vote in the election of
directors, by a vote sufficient to meet the requirements of Code Sections
162(m) (if applicable) and 422, Rule 16b-3 under the Exchange Act (if
applicable), applicable requirements under the rules of any stock exchange
or automated quotation system on which the Shares may be listed on quoted,
and other laws, regulations and obligations of the Company applicable to
the Plan.
5
(uu) "Shares" means the shares of common stock of the Company, par
value $.001 per share, and such other securities as may be substituted (or
resubstituted) for Shares pursuant to Section 10(c) hereof.
(vv) "Stock Appreciation Right" means a right granted to a Participant
under Section 6(c) hereof.
(ww) "Subsidiary" means any corporation or other entity in which the
Company has a direct or indirect ownership interest of 50% or more of the
total combined voting power of the then outstanding securities or interests
of such corporation or other entity entitled to vote generally in the
election of directors or in which the Company has the right to receive 50%
or more of the distribution of profits or 50% or more of the assets on
liquidation or dissolution.
(xx) "Substitute Awards" shall mean Awards granted or Shares issued by
the Company in assumption of, or in substitution or exchange for, awards
previously granted, or the right or obligation to make future awards, by a
company acquired by the Company or any Related Entity or with which the
Company or any Related Entity combines.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee, except to the extent the Board elects to administer the Plan, in
which case the Plan shall be administered by only those directors who are
Independent Directors, in which case references herein to the "Committee"
shall be deemed to include references to the Independent members of the
Board. The Committee shall have full and final authority, subject to and
consistent with the provisions of the Plan, to select Eligible Persons to
become Participants, grant Awards, determine the type, number and other
terms and conditions of, and all other matters relating to, Awards,
prescribe Award Agreements (which need not be identical for each
Participant) and rules and regulations for the administration of the Plan,
construe and interpret the Plan and Award Agreements and correct defects,
supply omissions or reconcile inconsistencies therein, and to make all
other decisions and determinations as the Committee may deem necessary or
advisable for the administration of the Plan. In exercising any discretion
granted to the Committee under the Plan or pursuant to any Award, the
Committee shall not be required to follow past practices, act in a manner
consistent with past practices, or treat any Eligible Person or Participant
in a manner consistent with the treatment of other Eligible Persons or
Participants.
(b) Manner of Exercise of Committee Authority. The Committee, and not
the Board, shall exercise sole and exclusive discretion on any matter
relating to a Participant then subject to Section 16 of the Exchange Act
with respect to the Company to the extent necessary in order that
transactions by such Participant shall be exempt under Rule 16b-3 under the
Exchange Act. Any action of the Committee shall be final, conclusive and
binding on all persons, including the Company, its Related Entities,
Participants, Beneficiaries, transferees under Section 10(b) hereof or
other persons claiming rights from or through a Participant, and
shareholders. The express grant of any specific power to the Committee, and
the taking of any action by the Committee, shall not be construed as
limiting any power or authority of the Committee. The Committee may
delegate to officers or managers of the Company or any Related Entity, or
committees thereof, the authority, subject to such terms as the Committee
shall determine, to perform such functions, including administrative
functions as the Committee may determine to the extent that such delegation
6
will not result in the loss of an exemption under Rule 16b-3(d)(1) for
Awards granted to Participants subject to Section 16 of the Exchange Act in
respect of the Company and will not cause Awards intended to qualify as
"performance-based compensation" under Code Section 162(m) to fail to so
qualify. The Committee may appoint agents to assist it in administering the
Plan.
(c) Limitation of Liability. The Committee and the Board, and each
member thereof, shall be entitled to, in good faith, rely or act upon
any report or other information furnished to him or her by any officer or
Employee, the Company's independent auditors, Consultants or any other
agents assisting in the administration of the Plan. Members of the
Committee and the Board, and any officer or Employee acting at the
direction or on behalf of the Committee or the Board, shall not be
personally liable for any action or determination taken or made in good
faith with respect to the Plan, and shall, to the extent permitted by law,
be fully indemnified and protected by the Company with respect to any such
action or determination.
4. Shares Subject to Plan.
(a) Limitation on Overall Number of Shares Available for Delivery
Under Plan. Subject to adjustment as provided in Section 10(c) hereof, the
total number of Shares reserved and available for delivery under the Plan
shall be 900,000. Any Shares delivered under the Plan may consist, in whole
or in part, of authorized and unissued shares or treasury shares.
(b) Application of Limitation to Grants of Award. No Award may be
granted if the number of Shares to be delivered in connection with such an
Award or, in the case of an Award relating to Shares but settled only in
cash (such as cash-only Stock Appreciation Rights), the number of Shares to
which such Award relates, exceeds the number of Shares remaining available
for delivery under the Plan, minus the number of Shares deliverable in
settlement of or relating to then outstanding Awards. The Committee may
adopt reasonable counting procedures to ensure appropriate counting, avoid
double counting (as, for example, in the case of tandem or substitute
awards) and make adjustments if the number of Shares actually delivered
differs from the number of Shares previously counted in connection with an
Award.
(c) Availability of Shares Not Delivered under Awards and Adjustments
to Limits.
(i) If any Shares subject to an Award, or any award under the
Prior Plan that was outstanding on the Effective Date, are forfeited,
expire or otherwise terminate without issuance of such Shares, or any
Award, or any Award under any Prior Plan, that was outstanding on the
Effective Date, is settled for cash or otherwise does not result in
the issuance of all or a portion of the Shares subject to such Award
or award the Shares shall, to the extent of such forfeiture,
expiration, termination, cash settlement or non-issuance, again be
available for Awards under the Plan, subject to Section 4(c)(v) below.
(ii) In the event that any Option or other Award granted
hereunder, or any Award under the Prior Plan that was outstanding on
the Effective Date, is exercised through the tendering of Shares
(either actually or by attestation) or by the withholding of Shares by
the Company, or withholding tax liabilities arising from such option
or other award are satisfied by the tendering of Shares (either
actually or by attestation) or by the withholding of Shares by the
Company, then only the number of Shares issued net of the Shares
tendered or withheld shall be counted for purposes of determining the
maximum number of Shares available for grant under the Plan.
7
(iii) Shares reacquired by the Company on the open market using
Option Proceeds shall be available for Awards under the Plan. The
increase in Shares available pursuant to the repurchase of Shares with
Option Proceeds shall not be greater than the amount of such proceeds
divided by the Fair Market Value of a Share on the date of exercise of
the Option giving rise to such Option Proceeds.
(iv) Substitute Awards shall not reduce the Shares authorized for
grant under the Plan or authorized for grant to a Participant in any
period. Additionally, in the event that a company acquired by the
Company or any Related Entity or with which the Company or any Related
Entity combines has shares available under a pre-existing plan
approved by shareholders and not adopted in contemplation of such
acquisition or combination, the shares available for delivery pursuant
to the terms of such pre-existing plan (as adjusted, to the extent
appropriate, using the exchange ratio or other adjustment or valuation
ratio or formula used in such acquisition or combination to determine
the consideration payable to the holders of common stock of the
entities party to such acquisition or combination) may be used for
Awards under the Plan and shall not reduce the Shares authorized for
delivery under the Plan; provided that Awards using such available
shares shall not be made after the date awards or grants could have
been made under the terms of the pre-existing plan, absent the
acquisition or combination, and shall only be made to individuals who
were not Employees or Directors prior to such acquisition or
combination.
(v) Any Shares that again become available for delivery pursuant
to this Section 4(c) shall be added back as one (1) Share.
(vi) Notwithstanding anything in this Section 4(c) to the
contrary and solely for purposes of determining whether Shares are
available for the delivery of Incentive Stock Options, the maximum
aggregate number of shares that may be granted under this Plan shall
be determined without regard to any Shares restored pursuant to this
Section 4(c) that, if taken into account, would cause the Plan to fail
the requirement under Code Section 422 that the Plan designate a
maximum aggregate number of shares that may be issued.
(d) No Further Awards Under any Prior Plan. In light of the adoption
of this Plan, no further awards shall be made under any Prior Plan after
the Effective Date.
5. Eligibility; Per-Person Award Limitations.
Awards may be granted under the Plan only to Eligible Persons. Subject to
adjustment as provided in Section 10(c), in any fiscal year of the Company
during any part of which the Plan is in effect, no Participant may be granted
(i) Options or Stock Appreciation Rights with respect to more than 45,000 Shares
or (ii) Restricted Stock, Deferred Stock, Performance Shares and/or Other
Stock-Based Awards with respect to more than 45,000 Shares. In addition, the
maximum dollar value payable to any one Participant with respect to Performance
Units is (x) $5,000,000 with respect to any 12 month Performance Period, and (y)
with respect to any Performance Period that is more than 12 months, $5,000,000
multiplied by the number of full years in the Performance Period.
8
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any Award
or the exercise thereof, at the date of grant or thereafter (subject to
Section 10(e)), such additional terms and conditions, not inconsistent with
the provisions of the Plan, as the Committee shall determine, including
terms requiring forfeiture of Awards in the event of termination of the
Participant's Continuous Service and terms permitting a Participant to make
elections relating to his or her Award. The Committee shall retain full
power and discretion to accelerate, waive or modify, at any time, any term
or condition of an Award that is not mandatory under the Plan. Except in
cases in which the Committee is authorized to require other forms of
consideration under the Plan, or to the extent other forms of consideration
must be paid to satisfy the requirements of Nevada law, no consideration
other than services may be required for the grant (but not the exercise) of
any Award.
(b) Options. The Committee is authorized to grant Options to any
Eligible Person on the following terms and conditions:
(i) Exercise Price. Other than in connection with Substitute
Awards, the exercise price per Share purchasable under an Option shall
be determined by the Committee, provided that such exercise price
shall not, in the case of Incentive Stock Options, be less than 100%
of the Fair Market Value of a Share on the date of grant of the Option
and shall not, in any event, be less than the par value of a Share on
the date of grant of the Option. If an Employee owns or is deemed to
own (by reason of the attribution rules applicable under Section
424(d) of the Code) more than 10% of the combined voting power of all
classes of stock of the Company (or any parent corporation or
subsidiary corporation of the Company, as those terms are defined in
Sections 424(e) and (f) of the Code, respectively) and an Incentive
Stock Option is granted to such employee, the exercise price of such
Incentive Stock Option (to the extent required by the Code at the time
of grant) shall be no less than 110% of the Fair Market Value a Share
on the date such Incentive Stock Option is granted.
(ii) Time and Method of Exercise. The Committee shall determine
the time or times at which or the circumstances under which an Option
may be exercised in whole or in part (including based on achievement
of performance goals and/or future service requirements), the time or
times at which Options shall cease to be or become exercisable
following termination of Continuous Service or upon other conditions,
the methods by which the exercise price may be paid or deemed to be
paid (including in the discretion of the Committee a cashless exercise
procedure), the form of such payment, including, without limitation,
cash, Shares, other Awards or awards granted under other plans of the
Company or a Related Entity, or other property (including notes or
other contractual obligations of Participants to make payment on a
deferred basis provided that such deferred payments are not in
violation of the Sarbanes-Oxley Act of 2002, or any rule or regulation
adopted thereunder or any other applicable law), and the methods by or
forms in which Shares will be delivered or deemed to be delivered to
Participants.
(iii) Incentive Stock Options. The terms of any Incentive Stock
Option granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code. Anything in the Plan to the
contrary notwithstanding, no term of the Plan relating to Incentive
Stock Options (including any Stock Appreciation Right issued in tandem
therewith) shall be interpreted, amended or altered, nor shall any
discretion or authority granted under the Plan be exercised, so as to
disqualify either the Plan or any Incentive Stock Option under Section
9
422 of the Code, unless the Participant has first requested, or
consents to, the change that will result in such disqualification.
Thus, if and to the extent required to comply with Section 422 of the
Code, Options granted as Incentive Stock Options shall be subject to
the following special terms and conditions:
(A) the Option shall not be exercisable more than ten years
after the date such Incentive Stock Option is granted; provided,
however, that if a Participant owns or is deemed to own (by
reason of the attribution rules of Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of
stock of the Company (or any parent corporation or subsidiary
corporation of the Company, as those terms are defined in
Sections 424(e) and (f) of the Code, respectively) and the
Incentive Stock Option is granted to such Participant, the term
of the Incentive Stock Option shall be (to the extent required by
the Code at the time of the grant) for no more than five years
from the date of grant; and
(B) The aggregate Fair Market Value (determined as of the
date the Incentive Stock Option is granted) of the Shares with
respect to which Incentive Stock Options granted under the Plan
and all other option plans of the Company (and any parent
corporation or subsidiary corporation of the Company, as those
terms are defined in Sections 424(e) and (f) of the Code,
respectively) during any calendar year exercisable for the first
time by the Participant during any calendar year shall not (to
the extent required by the Code at the time of the grant) exceed
$100,000.
(iv) Automatic Grants to Outside Directors and Executive
Committee Members.
(A) Annual Grants. Upon the conclusion of each regular
annual meeting of the Company's stockholders held in the year
2005 and thereafter, (1) each Outside Director who will continue
serving as a member of the Board thereafter shall receive an
Option as determined by the Committee, (2) each member of the
Executive Committee who will continue serving as a member of the
Executive Committee shall receive an Option as determined by the
Committee; and (3) the person who will continue serving as the
Chairman of the Executive Committee shall receive, in addition to
any Options granted pursuant to (1) and (2) above, an Option as
determined by the Committee. A Participant who serves in more
than one capacity shall be eligible for the foregoing awards
applicable to each capacity in which the individual serves.
Options granted under this Section 6(b)(iv)(A) shall become
exercisable in 3 equal installments on each of the first three
anniversaries of the date on which the Option is granted. An
Outside Director or member of the Executive Committee who
previously was an Employee shall be eligible to receive grants
under this Section 6(b)(iv)(A).
(B) Exercise Price. The exercise price under all Options
granted to an Outside Director or member of the Executive
Committee under this Section 6(b)(iv) shall be equal to 100% of
the Fair Market Value of a Share on the date on which the Option
is granted, payable in one of the forms determined by the
Committee.
10
(C) Term. All Options granted to an Outside Director or
member of the Executive Committee under this Section 6(b)(iv)
shall terminate on the earliest of (a) the 10th anniversary of
the date on which the Option is granted, (b) the date three (3)
months after the termination of the Service of the Outside
Director or member of the Executive Committee for any reason
other than death or total and permanent disability or (c) the
date 12 months after the termination of such Service because of
death or total and permanent disability.
(D) Other Awards. Outside Directors and members of the
Executive Committee shall be eligible to receive any other
Options or other Awards awarded by the Committee pursuant to this
Plan.
(c) Stock Appreciation Rights. The Committee may grant Stock
Appreciation Rights to any Eligible Person in conjunction with all or part
of any Option granted under the Plan or at any subsequent time during the
term of such Option (a "Tandem Stock Appreciation Right"), or without
regard to any Option (a "Freestanding Stock Appreciation Right"), in each
case upon such terms and conditions as the Committee may establish in its
sole discretion, not inconsistent with the provisions of the Plan,
including the following:
(i) Right to Payment. A Stock Appreciation Right shall confer on
the Participant to whom it is granted a right to receive, upon
exercise thereof, the excess of (A) the Fair Market Value of one Share
on the date of exercise over (B) the grant price of the Stock
Appreciation Right as determined by the Committee. The grant price of
a Stock Appreciation Right shall not be less than 75% of the Fair
Market Value of a Share on the date of grant, in the case of a
Freestanding Stock Appreciation Right, or less than the associated
Option exercise price, in the case of a Tandem Stock Appreciation
Right.
(ii) Other Terms. The Committee shall determine at the date of
grant or thereafter, the time or times at which and the circumstances
under which a Stock Appreciation Right may be exercised in whole or in
part (including based on achievement of performance goals and/or
future service requirements), the time or times at which Stock
Appreciation Rights shall cease to be or become exercisable following
termination of Continuous Service or upon other conditions, the method
of exercise, method of settlement, form of consideration payable in
settlement, method by or forms in which Shares will be delivered or
deemed to be delivered to Participants, whether or not a Stock
Appreciation Right shall be in tandem or in combination with any other
Award, and any other terms and conditions of any Stock Appreciation
Right.
(iii) Tandem Stock Appreciation Rights. Any Tandem Stock
Appreciation Right may be granted at the same time as the related
Option is granted or, for Options that are not Incentive Stock
Options, at any time thereafter before exercise or expiration of such
Option. Any Tandem Stock Appreciation Right related to an Option may
be exercised only when the related Option would be exercisable and the
Fair Market Value of the Shares subject to the related Option exceeds
the exercise price at which Shares can be acquired pursuant to the
Option. In addition, if a Tandem Stock Appreciation Right exists with
respect to less than the full number of Shares covered by a related
Option, then an exercise or termination of such Option shall not
reduce the number of Shares to which the Tandem Stock Appreciation
Right applies until the number of Shares then exercisable under such
Option equals the number of Shares to which the Tandem Stock
Appreciation Right applies. Any Option related to a Tandem Stock
Appreciation Right shall no longer be exercisable to the extent the
Tandem Stock Appreciation Right has been exercised, and any Tandem
Stock Appreciation Right shall no longer be exercisable to the extent
the related Option has been exercised.
(d) Restricted Stock Awards. The Committee is authorized to grant
Restricted Stock Awards to any Eligible Person on the following terms and
conditions:
(i) Grant and Restrictions. Restricted Stock Awards shall be
subject to such restrictions on transferability, risk of forfeiture
and other restrictions, if any, as the Committee may impose, or as
otherwise provided in this Plan, covering a period of time specified
by the Committee (the "Restriction Period"). The terms of any
Restricted Stock Award granted under the Plan shall be set forth in a
written Award Agreement which shall contain provisions determined by
the Committee and not inconsistent with the Plan. The restrictions may
lapse separately or in combination at such times, under such
circumstances (including based on achievement of performance goals
11
and/or future service requirements), in such installments or
otherwise, as the Committee may determine at the date of grant or
thereafter. Except to the extent restricted under the terms of the
Plan and any Award Agreement relating to a Restricted Stock Award, a
Participant granted Restricted Stock shall have all of the rights of a
shareholder, including the right to vote the Restricted Stock and the
right to receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the Committee). During
the Restriction Period, subject to Section 10(b) below, the Restricted
Stock may not be sold, transferred, pledged, hypothecated, margined or
otherwise encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of a Participant's Continuous Service during the
applicable Restriction Period, the Participant's Restricted Stock that
is at that time subject to a risk of forfeiture that has not lapsed or
otherwise been satisfied shall be forfeited and reacquired by the
Company; provided that the Committee may provide, by rule or
regulation or in any Award Agreement, or may determine in any
individual case, that forfeiture conditions relating to Restricted
Stock Awards shall be waived in whole or in part in the event of
terminations resulting from specified causes.
(iii) Certificates for Stock. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall determine.
If certificates representing Restricted Stock are registered in the
name of the Participant, the Committee may require that such
certificates bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted Stock, that
the Company retain physical possession of the certificates, and that
the Participant deliver a stock power to the Company, endorsed in
blank, relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the grant of a
Restricted Stock Award, the Committee may require or permit a
Participant to elect that any cash dividends paid on a Share of
Restricted Stock be automatically reinvested in additional Shares of
Restricted Stock or applied to the purchase of additional Awards under
the Plan. Unless otherwise determined by the Committee, Shares
distributed in connection with a stock split or stock dividend, and
other property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the
Restricted Stock with respect to which such Shares or other property
have been distributed.
(v) Automatic Grants to Outside Directors and Executive Committee
Members. Upon the conclusion of each regular annual meeting of the
Company's stockholders held in the year 2006 and thereafter, (1) each
Outside Director who will continue serving as a member of the Board
thereafter shall receive an award of Shares of Restricted Stock as
determined by the Committee, which shall vest in two equal
installments on each of the first two anniversaries of the date on
which the Restricted Stock is granted; and, (2) each member of the
Executive Committee who will continue serving as a member of the
Executive Committee shall receive an award of Shares of Restricted
Stock as determined by the Committee. The Shares of Restricted Stock
granted pursuant to this section 6(d)(vi) shall vest in two equal
installments on each of the first two anniversaries of the date on
which the Restricted Stock is granted. A Participant who serves in
more than one capacity shall be eligible for the foregoing awards
applicable to each capacity in which the individual serves.
12
(e) Deferred Stock Award. The Committee is authorized to grant
Deferred Stock Awards to any Eligible Person on the following terms and
conditions:
(i) Award and Restrictions. Satisfaction of a Deferred Stock
Award shall occur upon expiration of the deferral period specified for
such Deferred Stock Award by the Committee (or, if permitted by the
Committee, as elected by the Participant). In addition, a Deferred
Stock Award shall be subject to such restrictions (which may include a
risk of forfeiture) as the Committee may impose, if any, which
restrictions may lapse at the expiration of the deferral period or at
earlier specified times (including based on achievement of performance
goals and/or future service requirements), separately or in
combination, in installments or otherwise, as the Committee may
determine. A Deferred Stock Award may be satisfied by delivery of
Shares, cash equal to the Fair Market Value of the specified number of
Shares covered by the Deferred Stock, or a combination thereof, as
determined by the Committee at the date of grant or thereafter. Prior
to satisfaction of a Deferred Stock Award, a Deferred Stock Award
carries no voting or dividend or other rights associated with Share
ownership.
(ii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of a Participant's Continuous Service during the
applicable deferral period or portion thereof to which forfeiture
conditions apply (as provided in the Award Agreement evidencing the
Deferred Stock Award), the Participant's Deferred Stock Award that is
at that time subject to a risk of forfeiture that has not lapsed or
otherwise been satisfied shall be forfeited; provided that the
Committee may provide, by rule or regulation or in any Award
Agreement, or may determine in any individual case, that forfeiture
conditions relating to a Deferred Stock Award shall be waived in whole
or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in part
the forfeiture of any Deferred Stock Award.
(iii) Dividend Equivalents. Unless otherwise determined by the
Committee at date of grant, any Dividend Equivalents that are granted
with respect to any Deferred Stock Award shall be either (A) paid with
respect to such Deferred Stock Award at the dividend payment date in
cash or in Shares of unrestricted stock having a Fair Market Value
equal to the amount of such dividends, or (B) deferred with respect to
such Deferred Stock Award and the amount or value thereof
automatically deemed reinvested in additional Deferred Stock, other
Awards or other investment vehicles, as the Committee shall determine
or permit the Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is
authorized to grant Shares to any Eligible Persons as a bonus, or to grant
Shares or other Awards in lieu of obligations to pay cash or deliver other
property under the Plan or under other plans or compensatory arrangements,
provided that, in the case of Eligible Persons subject to Section 16 of the
Exchange Act, the amount of such grants remains within the discretion of
the Committee to the extent necessary to ensure that acquisitions of Shares
or other Awards are exempt from liability under Section 16(b) of the
Exchange Act. Shares or Awards granted hereunder shall be subject to such
other terms as shall be determined by the Committee.
(g) Dividend Equivalents. The Committee is authorized to grant
Dividend Equivalents to any Eligible Person entitling the Eligible Person
to receive cash, Shares, other Awards, or other property equal in value to
the dividends paid with respect to a specified number of Shares, or other
periodic payments. Dividend Equivalents may be awarded on a free-standing
basis or in connection with another Award. The Committee may provide that
13
Dividend Equivalents shall be paid or distributed when accrued or shall be
deemed to have been reinvested in additional Shares, Awards, or other
investment vehicles, and subject to such restrictions on transferability
and risks of forfeiture, as the Committee may specify.
(h) Performance Awards. The Committee is authorized to grant
Performance Awards to any Eligible Person payable in cash, Shares, or other
Awards, on terms and conditions established by the Committee, subject to
the provisions of Section 8 if and to the extent that the Committee shall,
in its sole discretion, determine that an Award shall be subject to those
provisions. The performance criteria to be achieved during any Performance
Period and the length of the Performance Period shall be determined by the
Committee upon the grant of each Performance Award; provided, however, that
a Performance Period shall not be shorter than 12 months nor longer than
five years. Except as provided in Section 9 or as may be provided in an
Award Agreement, Performance Awards will be distributed only after the end
of the relevant Performance Period. The performance goals to be achieved
for each Performance Period shall be conclusively determined by the
Committee and may be based upon the criteria set forth in Section 8(b), or
in the case of an Award that the Committee determines shall not be subject
to Section 8 hereof, any other criteria that the Committee, in its sole
discretion, shall determine should be used for that purpose. The amount of
the Award to be distributed shall be conclusively determined by the
Committee. Performance Awards may be paid in a lump sum or in installments
following the close of the Performance Period or, in accordance with
procedures established by the Committee, on a deferred basis.
(i) Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to any Eligible Person such
other Awards that may be denominated or payable in, valued in whole or in
part by reference to, or otherwise based on, or related to, Shares, as
deemed by the Committee to be consistent with the purposes of the Plan.
Other Stock-Based Awards may be granted to Participants either alone or in
addition to other Awards granted under the Plan, and such Other Stock-Based
Awards shall also be available as a form of payment in the settlement of
other Awards granted under the Plan. The Committee shall determine the
terms and conditions of such Awards. Shares delivered pursuant to an Award
in the nature of a purchase right granted under this Section 6(i) shall be
purchased for such consideration (including, without limitation, loans from
the Company or a Related Entity provided that such loans are not in
violation of the Sarbanes Oxley Act of 2002, or any rule or regulation
adopted thereunder or any other applicable law) paid for at such times, by
such methods, and in such forms, including, without limitation, cash,
Shares, other Awards or other property, as the Committee shall determine.
7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of
the Company, any Related Entity, or any business entity to be acquired by
the Company or a Related Entity, or any other right of a Participant to
receive payment from the Company or any Related Entity. Such additional,
tandem, and substitute or exchange Awards may be granted at any time. If an
Award is granted in substitution or exchange for another Award or award,
the Committee shall require the surrender of such other Award or award in
consideration for the grant of the new Award. In addition, Awards may be
granted in lieu of cash compensation, including in lieu of cash amounts
14
payable under other plans of the Company or any Related Entity, in which
the value of Stock subject to the Award is equivalent in value to the cash
compensation (for example, Deferred Stock or Restricted Stock), or in which
the exercise price, grant price or purchase price of the Award in the
nature of a right that may be exercised is equal to the Fair Market Value
of the underlying Stock minus the value of the cash compensation
surrendered (for example, Options or Stock Appreciation Right granted with
an exercise price or grant price "discounted" by the amount of the cash
compensation surrendered).
(b) Term of Awards. The term of each Award shall be for such period as
may be determined by the Committee; provided that in no event shall the
term of any Option or Stock Appreciation Right exceed a period of ten years
(or in the case of an Incentive Stock Option such shorter term as may be
required under Section 422 of the Code).
(c) Form and Timing of Payment Under Awards; Deferrals. Subject to the
terms of the Plan and any applicable Award Agreement, payments to be made
by the Company or a Related Entity upon the exercise of an Option or other
Award or settlement of an Award may be made in such forms as the Committee
shall determine, including, without limitation, cash, Shares, other Awards
or other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. Any installment or deferral provided
for in the preceding sentence shall, however, be subject to the Company's
compliance with the provisions of the Sarbanes-Oxley Act of 2002, the rules
and regulations adopted by the U.S. Securities and Exchange Commission
thereunder, and all applicable rules of the Nasdaq Stock Market or any
national securities exchange on which the Company's securities are listed
for trading and, if not listed for trading on either the Nasdaq Stock
Market or a national securities exchange, then the rules of the Nasdaq
Stock Market. The settlement of any Award may be accelerated, and cash paid
in lieu of Stock in connection with such settlement, in the discretion of
the Committee or upon occurrence of one or more specified events (in
addition to a Change in Control). Installment or deferred payments may be
required by the Committee (subject to Section 10(e) of the Plan, including
the consent provisions thereof in the case of any deferral of an
outstanding Award not provided for in the original Award Agreement) or
permitted at the election of the Participant on terms and conditions
established by the Committee. Payments may include, without limitation,
provisions for the payment or crediting of a reasonable interest rate on
installment or deferred payments or the grant or crediting of Dividend
Equivalents or other amounts in respect of installment or deferred payments
denominated in Shares.
(d) Exemptions from Section 16(b) Liability. It is the intent of the
Company that the grant of any Awards to or other transaction by a
Participant who is subject to Section 16 of the Exchange Act shall be
exempt from Section 16 pursuant to an applicable exemption (except for
transactions acknowledged in writing to be non-exempt by such Participant).
Accordingly, if any provision of this Plan or any Award Agreement does not
comply with the requirements of Rule 16b-3 then applicable to any such
transaction, such provision shall be construed or deemed amended to the
extent necessary to conform to the applicable requirements of Rule 16b-3 so
that such Participant shall avoid liability under Section 16(b).
8. Code Section 162(m) Provisions.
(a) Covered Employees. The Committee, in its discretion, may determine
at the time an Award is granted to an Eligible Person who is, or is likely
to be, as of the end of the tax year in which the Company would claim atax
deduction in connection with such Award, a Covered Employee, that the
provisions of this Section 8 shall be applicable to such Award.
15
(b) Performance Criteria. If an Award is subject to this Section 8,
then the lapsing of restrictions thereon and the distribution of cash,
Shares or other property pursuant thereto, as applicable, shall be
contingent upon achievement of one or more objective performance goals.
Performance goals shall be objective and shall otherwise meet the
requirements of Section 162(m) of the Code and regulations thereunder
including the requirement that the level or levels of performance targeted
by the Committee result in the achievement of performance goals being
"substantially uncertain." One or more of the following business criteria
for the Company, on a consolidated basis, and/or for Related Entities, or
for business or geographical units of the Company and/or a Related Entity
(except with respect to the total shareholder return and earnings per share
criteria), shall be used by the Committee in establishing performance goals
for such Awards: (1) earnings per share; (2) revenues or margins; (3) cash
flow; (4) operating margin; (5) return on net assets, investment, capital,
or equity; (6) economic value added; (7) direct contribution; (8) net
income; pretax earnings; earnings before interest and taxes; earnings
before interest, taxes, depreciation and amortization; earnings after
interest expense and before extraordinary or special items; operating
income; income before interest income or expense, unusual items and income
taxes, local, state or federal and excluding budgeted and actual bonuses
which might be paid under any ongoing bonus plans of the Company; (9)
working capital; (10) management of fixed costs or variable costs; (11)
identification or consummation of investment opportunities or completion of
specified projects in accordance with corporate business plans, including
strategic mergers, acquisitions or divestitures; (12) total shareholder
return; and (13) debt reduction. Any of the above goals may be determined
on an absolute or relative basis or as compared to the performance of a
published or special index deemed applicable by the Committee including,
but not limited to, the Standard & Poor's 500 Stock Index or a group of
companies that are comparable to the Company. The Committee may exclude the
impact of an event or occurrence which the Committee determines should
appropriately be excluded, including without limitation (i) restructurings,
discontinued operations, extraordinary items, and other unusual or
non-recurring charges, (ii) an event either not directly related to the
operations of the Company or not within the reasonable control of the
Company's management, or (iii) a change in accounting standards required by
generally accepted accounting principles.
(c) Performance Period; Timing For Establishing Performance Goals.
Achievement of performance goals in respect of such Performance Awards
shall be measured over a Performance Period no shorter than 12 months and
no longer than five years, as specified by the Committee. Performance goals
shall be established not later than 90 days after the beginning of any
Performance Period applicable to such Performance Awards, or at such other
date as may be required or permitted for "performance-based compensation"
under Code Section 162(m).
(d) Adjustments. The Committee may, in its discretion, reduce the
amount of a settlement otherwise to be made in connection with Awards
subject to this Section 8, but may not exercise discretion to increase any
such amount payable to a Covered Employee in respect of an Award subject to
this Section 8. The Committee shall specify the circumstances in which such
Awards shall be paid or forfeited in the event of termination of Continuous
Service by the Participant prior to the end of a Performance Period or
settlement of Awards.
16
(e) Committee Certification. No Participant shall receive any payment
under the Plan unless the Committee has certified, by resolution or other
appropriate action in writing, that the performance criteria and any other
material terms previously established by the Committee or set forth in the
Plan, have been satisfied to the extent necessary to qualify as
"performance based compensation" under Code Section 162(m).
9. Change in Control.
(a) Effect of "Change in Control." Subject to Section 9(a)(iv), and if
and only to the extent provided in the Award Agreement, or to the extent
otherwise determined by the Committee, upon the occurrence of a "Change in
Control," as defined in Section 9(b):
(i) Any Option or Stock Appreciation Right that was not
previously vested and exercisable as of the time of the Change in
Control, shall become immediately vested and exercisable, subject to
applicable restrictions set forth in Section 10(a) hereof.
(ii) Any restrictions, deferral of settlement, and forfeiture
conditions applicable to a Restricted Stock Award, Deferred Stock
Award or an Other Stock-Based Award subject only to future service
requirements granted under the Plan shall lapse and such Awards shall
be deemed fully vested as of the time of the Change in Control, except
to the extent of any waiver by the Participant and subject to
applicable restrictions set forth in Section 10(a) hereof.
(iii) With respect to any outstanding Award subject to
achievement of performance goals and conditions under the Plan, the
Committee may, in its discretion, deem such performance goals and
conditions as having been met as of the date of the Change in Control.
(iv) Notwithstanding the foregoing, if in the event of a Change
in Control the successor company assumes or substitutes for an Option,
Stock Appreciation Right, Restricted Stock Award, Deferred Stock Award
or Other Stock-Based Award, then each outstanding Option, Stock
Appreciation Right, Restricted Stock Award, Deferred Stock Award or
Other Stock-Based Award shall not be accelerated as described in
Sections 9(a)(i), (ii) and (iii). For the purposes of this Section
9(a)(iv), an Option, Stock Appreciation Right, Restricted Stock Award,
Deferred Stock Award or Other Stock-Based Award shall be considered
assumed or substituted for if following the Change in Control the
award confers the right to purchase or receive, for each Share subject
to the Option, Stock Appreciation Right, Restricted Stock Award,
Deferred Stock Award or Other Stock-Based Award immediately prior to
the Change in Control, the consideration (whether stock, cash or other
securities or property) received in the transaction constituting a
Change in Control by holders of Shares for each Share held on the
effective date of such transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares); provided, however,
that if such consideration received in the transaction constituting a
Change in Control is not solely common stock of the successor company
or its parent or subsidiary, the Committee may, with the consent of
the successor company or its parent or subsidiary, provide that the
17
consideration to be received upon the exercise or vesting of an
Option, Stock Appreciation Right, Restricted Stock Award, Deferred
Stock Award or Other Stock-Based Award, for each Share subject
thereto, will be solely common stock of the successor company or its
parent or subsidiary substantially equal in fair market value to the
per share consideration received by holders of Shares in the
transaction constituting a Change in Control. The determination of
such substantial equality of value of consideration shall be made by
the Committee in its sole discretion and its determination shall be
conclusive and binding. Notwithstanding the foregoing, on such terms
and conditions as may be set forth in an Award Agreement, in the event
of a termination of a Participant's employment in such successor
company (other than for Cause) within 24 months following such Change
in Control, each Award held by such Participant at the time of the
Change in Control shall be accelerated as described in Sections
9(a)(i), (ii) and (iii) above.
(b) Definition of "Change in Control." Unless otherwise specified in
an Award Agreement, a "Change in Control" shall mean the occurrence of any
of the following:
(i) The acquisition by any Person of Beneficial Ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than fifty percent (50%) of either (A) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock")
or (B) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election
of directors (the "Outstanding Company Voting Securities) (the
foregoing Beneficial Ownership hereinafter being referred to as a
"Controlling Interest"); provided, however, that for purposes of this
Section 9(b), the following acquisitions shall not constitute or
result in a Change of Control: (v) any acquisition directly from the
Company; (w) any acquisition by the Company; (x) any acquisition by
any Person that as of the Effective Date owns Beneficial Ownership of
a Controlling Interest; (y) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
Subsidiary; or (z) any acquisition by any corporation pursuant to a
transaction which complies with clauses (A), (B) and (C) of subsection
(iii) below; or
(ii) During any period of two (2) consecutive years (not
including any period prior to the Effective Date) individuals who
constitute the Board on the Effective Date (the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent
to the Effective Date whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger, statutory share
exchange or consolidation or similar corporate transaction involving
the Company or any of its Subsidiaries, a sale or other disposition of
all or substantially all of the assets of the Company, or the
acquisition of assets or stock of another entity by the Company or any
of its Subsidiaries (each a "Business Combination"), in each case,
unless, following such Business Combination, (A) all or substantially
all of the individuals and entities who were the Beneficial Owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than fifty
percent (50%) of the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of
18
such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be,
(B) no Person (excluding any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Business
Combination or any Person that as of the Effective Date owns
Beneficial Ownership of a Controlling Interest) beneficially owns,
directly or indirectly, fifty percent (50%) or more of the then
outstanding shares of common stock of the corporation resulting from
such Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to the extent
that such ownership existed prior to the Business Combination and (C)
at least a majority of the members of the Board of Directors of the
corporation resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
10. General Provisions.
(a) Compliance With Legal and Other Requirements. The Company may, to
the extent deemed necessary or advisable by the Committee, postpone the
issuance or delivery of Shares or payment of other benefits under any Award
until completion of such registration or qualification of such Shares or
other required action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock exchange or
automated quotation system upon which the Shares or other Company
securities are listed or quoted, or compliance with any other obligation of
the Company, as the Committee, may consider appropriate, and may require
any Participant to make such representations, furnish such information and
comply with or be subject to such other conditions as it may consider
appropriate in connection with the issuance or delivery of Shares or
payment of other benefits in compliance with applicable laws, rules, and
regulations, listing requirements, or other obligations.
(b) Limits on Transferability; Beneficiaries. No Award or other right
or interest granted under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of
such Participant to any party, or assigned or transferred by such
Participant otherwise than by will or the laws of descent and distribution
or to a Beneficiary upon the death of a Participant, and such Awards or
rights that may be exercisable shall be exercised during the lifetime of
the Participant only by the Participant or his or her guardian or legal
representative, except that Awards and other rights (other than Incentive
Stock Options and Stock Appreciation Rights in tandem therewith) may be
transferred to one or more Beneficiaries or other transferees during the
lifetime of the Participant, and may be exercised by such transferees in
accordance with the terms of such Award, but only if and to the extent such
transfers are permitted by the Committee pursuant to the express terms of
an Award Agreement (subject to any terms and conditions which the Committee
may impose thereon). A Beneficiary, transferee, or other person claiming
any rights under the Plan from or through any Participant shall be subject
to all terms and conditions of the Plan and any Award Agreement applicable
to such Participant, except as otherwise determined by the Committee, and
to any additional terms and conditions deemed necessary or appropriate by
the Committee.
19
(c) Adjustments.
(i) Adjustments to Awards. In the event that any extraordinary
dividend or other distribution (whether in the form of cash, Shares,
or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination,
repurchase, share exchange, liquidation, dissolution or other similar
corporate transaction or event affects the Shares and/or such other
securities of the Company or any other issuer such that a
substitution, exchange, or adjustment is determined by the Committee
to be appropriate, then the Committee shall, in such manner as it may
deem equitable, substitute, exchange or adjust any or all of (A) the
number and kind of Shares which may be delivered in connection with
Awards granted thereafter, (B) the number and kind of Shares by which
annual per-person Award limitations are measured under Section 5
hereof, (C) the number and kind of Shares subject to or deliverable in
respect of outstanding Awards, (D) the exercise price, grant price or
purchase price relating to any Award and/or make provision for payment
of cash or other property in respect of any outstanding Award, and (E)
any other aspect of any Award that the Committee determines to be
appropriate.
(ii) Adjustments in Case of Certain Corporate Transactions. In
the event of any merger, consolidation or other reorganization in
which the Company does not survive, or in the event of any Change in
Control, any outstanding Awards may be dealt with in accordance with
any of the following approaches, as determined by the agreement
effectuating the transaction or, if and to the extent not so
determined, as determined by the Committee: (a) the continuation of
the outstanding Awards by the Company, if the Company is a surviving
corporation, (b) the assumption or substitution for, as those terms
are defined in Section 9(b)(iv) hereof, the outstanding Awards by the
surviving corporation or its parent or subsidiary, (c) full
exercisability or vesting and accelerated expiration of the
outstanding Awards, or (d) settlement of the value of the outstanding
Awards in cash or cash equivalents or other property followed by
cancellation of such Awards (which value, in the case of Options or
Stock Appreciation Rights, shall be measured by the amount, if any, by
which the Fair Market Value of a Share exceeds the exercise or grant
price of the Option or Stock Appreciation Right as of the effective
date of the transaction). The Committee shall give written notice of
any proposed transaction referred to in this Section 10(c)(ii) a
reasonable period of time prior to the closing date for such
transaction (which notice may be given either before or after the
approval of such transaction), in order that Participants may have a
reasonable period of time prior to the closing date of such
transaction within which to exercise any Awards that are then
exercisable (including any Awards that may become exercisable upon the
closing date of such transaction). A Participant may condition his
exercise of any Awards upon the consummation of the transaction.
(iii) Other Adjustments. The Committee (and the Board if and only
to the extent such authority is not required to be exercised by the
Committee to comply with Section 162(m) of the Code) is authorized to
make adjustments in the terms and conditions of, and the criteria
included in, Awards (including Performance Awards, or performance
goals relating thereto) in recognition of unusual or nonrecurring
events (including, without limitation, acquisitions and dispositions
of businesses and assets) affecting the Company, any Related Entity or
any business unit, or the financial statements of the Company or any
Related Entity, or in response to changes in applicable laws,
20
regulations, accounting principles, tax rates and regulations or
business conditions or in view of the Committee's assessment of the
business strategy of the Company, any Related Entity or business unit
thereof, performance of comparable organizations, economic and
business conditions, personal performance of a Participant, and any
other circumstances deemed relevant; provided that no such adjustment
shall be authorized or made if and to the extent that such authority
or the making of such adjustment would cause Options, Stock
Appreciation Rights, Performance Awards granted pursuant to Section
8(b) hereof to Participants designated by the Committee as Covered
Employees and intended to qualify as "performance-based compensation"
under Code Section 162(m) and the regulations thereunder to otherwise
fail to qualify as "performance-based compensation" under Code Section
162(m) and regulations thereunder.
(d) Taxes. The Company and any Related Entity are authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Shares, or any payroll or other
payment to a Participant, amounts of withholding and other taxes due or
potentially payable in connection with any transaction involving an Award,
and to take such other action as the Committee may deem advisable to enable
the Company or any Related Entity and Participants to satisfy obligations
for the payment of withholding taxes and other tax obligations relating to
any Award. This authority shall include authority to withhold or receive
Shares or other property and to make cash payments in respect thereof in
satisfaction of a Participant's tax obligations, either on a mandatory or
elective basis in the discretion of the Committee.
(e) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue or terminate the Plan, or the Committee's authority to
grant Awards under the Plan, without the consent of shareholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's shareholders not later than the
annual meeting next following such Board action if such shareholder
approval is required by any federal or state law or regulation (including,
without limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any
stock exchange or automated quotation system on which the Shares may then
be listed or quoted, and the Board may otherwise, in its discretion,
determine to submit other such changes to the Plan to shareholders for
approval; provided that, without the consent of an affected Participant, no
such Board action may materially and adversely affect the rights of such
Participant under any previously granted and outstanding Award. The
Committee may waive any conditions or rights under, or amend, alter,
suspend, discontinue or terminate any Award theretofore granted and any
Award Agreement relating thereto, except as otherwise provided in the Plan;
provided that, without the consent of an affected Participant, no such
Committee or the Board action may materially and adversely affect the
rights of such Participant under such Award.
(f) Limitation on Rights Conferred Under Plan. Neither the Plan nor
any action taken hereunder shall be construed as (i) giving any Eligible
Person or Participant the right to continue as an Eligible Person or
Participant or in the employ or service of the Company or a Related Entity;
(ii) interfering in any way with the right of the Company or a Related
Entity to terminate any Eligible Person's or Participant's Continuous
Service at any time, (iii) giving an Eligible Person or Participant any
claim to be granted any Award under the Plan or to be treated uniformly
with other Participants and Employees, or (iv) conferring on a Participant
any of the rights of a shareholder of the Company unless and until the
Participant is duly issued or transferred Shares in accordance with the
terms of an Award.
21
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligation to deliver Shares pursuant to an Award, nothing contained in the
Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company; provided that the
Committee may authorize the creation of trusts and deposit therein cash,
Shares, other Awards or other property, or make other arrangements to meet
the Company's obligations under the Plan. Such trusts or other arrangements
shall be consistent with the "unfunded" status of the Plan unless the
Committee otherwise determines with the consent of each affected
Participant. The trustee of such trusts may be authorized to dispose of
trust assets and reinvest the proceeds in alternative investments, subject
to such terms and conditions as the Committee may specify and in accordance
with applicable law.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by
the Board nor its submission to the shareholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board or a committee thereof to adopt such other incentive arrangements as
it may deem desirable including incentive arrangements and awards which do
not qualify under Section 162(m) of the Code.
(i) Payments in the Event of Forfeitures; Fractional Shares. Unless
otherwise determined by the Committee, in the event of a forfeiture of an
Award with respect to which a Participant paid cash or other consideration,
the Participant shall be repaid the amount of such cash or other
consideration. No fractional Shares shall be issued or delivered pursuant
to the Plan or any Award. The Committee shall determine whether cash, other
Awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction and effect of the Plan,
any rules and regulations under the Plan, and any Award Agreement shall be
determined in accordance with the laws of the State of Nevada without
giving effect to principles of conflict of laws, and applicable federal
law.
(k) Non-U.S. Laws. The Committee shall have the authority to adopt
such modifications, procedures, and sub-plans as may be necessary or
desirable to comply with provisions of the laws of foreign countries in
which the Company or its Subsidiaries may operate to assure the viability
of the benefits from Awards granted to Participants performing services in
such countries and to meet the objectives of the Plan.
(l) Plan Effective Date and Shareholder Approval; Termination of Plan.
The Plan shall become effective on the Effective Date, subject to
subsequent approval, within 12 months of its adoption by the Board, by
shareholders of the Company eligible to vote in the election of directors,
by a vote sufficient to meet the requirements of Code Sections 162(m) (if
applicable) and 422, Rule 16b-3 under the Exchange Act (if applicable),
applicable requirements under the rules of any stock exchange or automated
quotation system on which the Shares may be listed or quoted, and other
laws, regulations, and obligations of the Company applicable to the Plan.
Awards may be granted subject to shareholder approval, but may not be
exercised or otherwise settled in the event the shareholder approval is not
obtained. The Plan shall terminate at the earliest of (a) such time as no
Shares remain available for issuance under the Plan, (b) termination of
this Plan by the Board, or (c) the tenth anniversary of the Effective Date.
Awards outstanding upon expiration of the Plan shall remain in effect until
they have been exercised or terminated, or have expired.
22
ANNUAL MEETING OF STOCKHOLDERS OF
FRONTIER STAFFING, INC.
OCTOBER 7, 2005
-- FOLD AND DETACH HERE AND READ THE REVERSE SIDE --
PROXY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FRONTIER STAFFING, INC.
The undersigned appoints Clarence Downs and Frederick A. Huttner, and each of
them, as proxies, each with the power to appoint his or her substitute, and
authorizes each of them to represent and to vote, as designated on the reverse
side hereof, all shares of Common Stock of Frontier Staffing, Inc., held of
record by the undersigned at the close of business on September 1, 2005, at the
Annual Meeting of Stockholders to be held at 10:00 a.m. on October 7, 2005, at
3520 Pan American Freeway, Suite A-1, Albuquerque, New Mexico 87107, and at any
adjournment thereof. Any and all proxies heretofore given are hereby revoked.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
-- FOLD AND DETACH HERE AND READ THE REVERSE SIDE --
PROXY
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE PROPOSALS. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS.
1. ELECTION OF DIRECTORS:
FOR WITHHOLD AUTHORITY
[-] [-]
(TO WITHHOLD AUTHORITY TO VOTE FOR
ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THAT NOMINEE'S NAME
IN THE LIST BELOW)
Nominees are: Clarence Downs; Frederick A. Huttner, Douglas Parker;
Richard Piske III; and Guy David Knoller
2. PROPOSAL TO CHANGE CORPORATE NAME TO "TRADESTAR CONSTRUCTION
SERVICES, INC."
FOR AGAINST ABSTAIN
[-] [-] [-]
3. PROPOSAL TO APPROVE 2005 INCENTIVE COMPENSATION PLAN.
FOR AGAINST ABSTAIN
[-] [-] [-]
4. PROPOSAL TO RATIFY APPOINTMENT OF GORDON, HUGHES & BANKS LLP AS INDEPENDENT
AUDITORS.
FOR AGAINST ABSTAIN
[-] [-] [-]
5. In their discretion, the proxies are authorized to vote on such other
business as may properly come before the meeting.
Signature: Signature:
--------------------------- ----------------------------
Date:
------------------
NOTE: Please sign exactly as name appears hereon. When shares are held by joint
owners, both should sign. When signing as an attorney, executor, administrator,
trustee or guardian, please give 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 persons.
23