AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 1, 2003
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
TMI HOLDINGS, INC.
(Exact name of registration as specified in its charter)
Florida 65-0309540
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
11924 Forest Hill Boulevard
Suite 22-204
Wellington, Florida 33414
(954) 579-8599
(Address and Telephone Number of Principal Executive Offices)
TMI HOLDINGS, INC.
2003 Qualified Securities Plan
2003 Non-Qualified Securities Plan
(Full Title of the Plan)
Copies to:
Scott Siegel James M. Schneider, Esq.
Chief Executive Officer Schneider Weinberger LLP
TMI Holdings, Inc. 2499 Glades Road, Suite 108
11924 Forest Hill Blvd., Suite 22-204 Boca Raton, FL 33431
Wellington, FL 33414 (561) 362-9595
(954) 579-8599
CALCULATION OF REGISTRATION FEE
Proposed Proposed
maximum maximum
offering aggregate Amount of
Title of securities Amount to be price per offering registration
to be registered registered share price fee
- -------------------------------------------------------------------------------------------------------------
Common Stock, $.01
par value per share (1) 6,000,000 $0.35 $2,100,000 $169.89
(1) This calculation is made solely for the purpose of determining the
registration fee pursuant to the provisions of Rule 457(h) under the
Securities Act, and is calculated upon the average of the bid and asked
price of the securities on the Over-the-Counter-Bulletin Board on June
30, 2003.
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
This registration statement relates to two separate prospectuses.
Items 1 and 2 of this Part I, and the documents incorporated herein by
reference pursuant to Item 3 of Part II of this Form S-8, constitute the first
prospectus relating to issuances to our employees, consultants and others of up
to 2,640,000 shares of common stock pursuant to our 2003 Qualified Securities
Plan and 2003 Non-Qualified Securities Plan (the "Plans"). Pursuant to the
requirements of Form S-8 and Rule 428, we will deliver or cause to be delivered
to Plan participants any required information as specified by Rule 428(b)(1).
The second prospectus, referred to as the reoffer prospectus, relates to the
reoffer or resale of any shares that are deemed to be control securities or
restricted securities under the Securities Act of 1933.
PROSPECTUS
ITEM 1. PLAN INFORMATION
We established the Plans effective May 2, 2003, to provide us with
flexibility and to conserve our cash resources in compensating certain of our
technical, administrative and professional employees and consultants. The
issuance of shares under the Plans are restricted to persons and firms who are
closely-related to us and who provide services in connection with the
development and production of our products and services or otherwise in
connection with our business. The Plans authorize us currently to issue up to
2,640,000 shares of our common stock. Shares must be issued only for bona fide
services and may not be issued under the Plans for services in connection with
the offer and sale of securities in a capital raising or capital promoting
transaction. Shares are awarded under the Plans pursuant to individually
negotiated compensation contracts as determined and/or approved by the Board of
Directors or compensation committee. The eligible participants include
directors, officers, employees and non-employee consultants and advisors. There
is no limit as to the number of shares that may be awarded under the Plans to a
single participant. We anticipate that a substantial portion of the shares to be
issued under the Plans will be issued as compensation to our employees,
directors, technical consultants and advisors who provide development services
in the development and promoting of our various products and services.
The plans do not require restrictions on the transferability of shares
issued thereunder. However, such shares may be restricted as a condition to
their issuance where the Board of Directors deems such restrictions appropriate.
The Plans are not subject to the Employee Retirement Income Securities Act of
1974 ("ERISA"). Restricted shares awarded under the Plans are intended to be
fully taxable to the recipient as earned income.
We will provide without charge, upon written or oral request, the
documents incorporated by reference in Item 3 of Part II of this Registration
Statement. These documents are incorporated by reference in the Section 10(a)
prospectus. We will also provide without charge, upon written or oral request,
all other documents required to be delivered to recipients pursuant to Rule
428(b). Any and all such requests shall be directed to the Company at is
principal office at 11924 Forest Hill Boulevard, Suite 22-204, Wellington,
Florida 33414, attention: Chief Executive Officer.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
No person has been authorized by us to give any information or to make
any representation other than as contained in this prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized by us. Neither the delivery of this prospectus nor any distribution
of the shares of common stock issuable under the terms of the Plans shall, under
any circumstances, create any implication that there has been no change in our
affairs since the date hereof.
Our principal offices are located at:
11924 Forest Hill Boulevard, Suite 22-204
Wellington, Florida 33414
Telephone (954) 579-8599.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
PROSPECTUS
REOFFER PROSPECTUS
TMI HOLDINGS, INC.
6,000,000 SHARES OF COMMON STOCK
($.01 PAR VALUE)
This prospectus forms a part of a registration statement, which
registers an aggregate of 6,000,000 shares of common stock issued or issuable
from time-to-time under the TMI Holdings, Inc. 2003 Qualified Securities Plan
(the "Qualified Plan") and the 2003 Non-Qualified Securities Plan (the
"Non-Qualified Plan") (collectively the "Plans").
TMI Holdings, Inc. is referred to in this prospectus as "TMI," the
"Company," "we," "us" or "our." The 6,000,000 shares covered by this prospectus
are referred to as the "shares." Persons who are issued shares are sometimes
referred to as the "selling security holders."
This prospectus also covers the future resale of shares by persons who
are our "affiliates" within the meaning of federal securities laws. Affiliated
selling security holders may sell all or a portion of the shares from time to
time in the over-the-counter market, in negotiated transactions, directly or
through brokers or otherwise, and at market prices prevailing at the time of
such sales or at negotiated prices, but which may not exceed 1% of our
outstanding common stock in any three month period.
We will not receive any proceeds from sales of shares by selling
security holders.
These securities have not been approved or disapproved by the
Securities and Exchange Commission nor has the Commission passed on the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
This prospectus does not constitute an offer to sell securities in any
state to any person to whom it is unlawful to make such offer in such state.
The date of this prospectus is July 1, 2003.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and, in accordance therewith, we file reports,
proxy statements and other information with the Securities and Exchange
Commission. Reports, proxy statements and other information filed with the
Commission can be inspected and copied at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of this
material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a website on the Internet
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission at
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by us with the Commission are
incorporated herein by reference and made a part hereof:
- Quarterly Report on Form 10-QSB filed on June 17, 2003
- Annual Report on Form 10-KSB filed on May 23, 2003
- Form 8-K Current Report filed on June 9, 2003 and Amended on June
11, 2003
- Definitive Information Statement filed on June 12, 2003
All reports and documents filed by us pursuant to Section 13, 14 or
15(d) of the Exchange Act, prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference herein and to be a part hereof from the respective
date of filing of such documents. Any statement incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this prospectus to
the extent that a statement contained herein or in any other subsequently filed
document, which also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement modified or superseded
shall not be deemed, except as so modified or superseded, to constitute part of
this prospectus.
We hereby undertake to provide without charge to each person, including
any beneficial owner, to whom a copy of the prospectus has been delivered, on
the written request of any such person, a copy of any or all of the documents
referred to above which have been or may be incorporated by reference in this
prospectus, other than exhibits to such documents. Written requests for such
copies should be directed to Corporate Secretary, TMI Holdings, Inc., 11924
Forest Hill Boulevard, Suite 22-204, Wellington, Florida 33414.
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THE COMPANY
INTRODUCTION
On January 31, 2003, the Company acquired 100% of the assets and
outstanding stock of Kina'ole Development Corporation (Kina'ole"), a Hawaii
corporation. Kina'ole is a wholly owned subsidiary of the Company and is the
Company's only current business operation. Going forward, the Company's current
plans are to divest Kina'ole and pursue the acquisition of undervalued and/or
unused manufacturing or other assets or services. The Company has identified
possible acquisition opportunities, and is in very early discussions with
potential acquisition candidates.
The Company acquired the Kina'ole shares from William Michael Sessions
and John W. Meyers, who were then directors of the Company. Messrs. Sessions and
Meyers had previously acquired their capital stock interests in the Company from
Mr. Matt Dwyer who, in turn, had acquired the stock interest from Mr. Marc
Douglas. Prior to the acquisition, the Company had not engaged in any material
business operations in over a year.
Kina'ole is located in Lihue, Hawaii, and through joint venture
arrangements with dealerships on each Hawaiian island, Kina'ole plans to sell
manufactured homes to retail customers. Kina'ole also develops subdivisions of
manufactured homes and has an unrelated installation company that, as a licensed
contractor, completes the foundation and site work as well as installing the
manufactured homes. Due to the inherent uncertainty in the housing market, there
is no guarantee that Kina'ole will be successful in producing manufactured homes
and/or finding suitable locations for their installation.
HISTORICAL OPERATIONS
Until August 2001, the Company managed and operated discount retail
outlets known as thrift stores, which dealt in new and used articles of
clothing, miscellaneous household items, furniture, bric-a-brac and antiques at
discounted prices. In 2001, the Company operated six thrift stores in Florida.
These stores and all of the Company's other business units were sold on August
27, 2001, in a transaction involving the sale of substantially all of the
Company's assets to Thrift Ventures, Inc., a corporation that was controlled by
one of the then Company's principal stockholders at that date.
After the sale of the Company's assets to Thrift Ventures, Inc., the
Company's sole activity was to identify potential acquisition candidates and
attempting to negotiate and complete the acquisition of an operating business.
In October 2001, the Company entered into a non-binding letter of intent with a
privately held company for a transaction that would have resulted in a change in
control of the Company. The letter of intent was terminated in February 2002 by
mutual agreement of the parties.
In 2002, the Company underwent two changes of voting control, until its
current management acquired voting control of the Company on February 21, 2003.
Currently, the Company's only business is the sale of manufactured homes through
Kina'ole, the Company's wholly-owned subsidiary. Due to the inherent uncertainty
5
in the housing market there is no guarantee that Kina'ole will be successful in
producing manufactured homes and/or finding suitable locations for their
installation. The Company is currently seeking other potential acquisition
candidates.
The Company currently has no employees. Mr. Scott Siegel, the Company's
sole officer and one of its directors is an independent contractor. Kina'ole has
four employees.
RECENT DEVELOPMENTS
As previously reported in the Company's Schedule 14C Information
Statement filed with the Securities and Exchange Commission and provided to the
shareholders of TMI, the Board of Directors and the holders of a majority of the
voting capital stock interest of TMI approved an increase in the authorized
common stock of the Company from 1,500,000 shares to 30,000,000 shares of common
stock. In addition, the Company has adopted and obtained approval for its 2003
Qualified Securities Plan and 2003 Non-Qualified Securities Plan. Previous
shareholder approval was ratified anew on June 17, 2003.
The Company, along with its Chief Executive Officer, Scott Siegel, were
recently named in a lawsuit filed in the Circuit Court for Broward County,
Florida (Marc Douglas v. Matthew P. Dwyer, William Michael Sessions, John W.
Meyers, Scott Siegel, Neil Dolgin and TMI Holdings, Inc. - Case No. 03-10440).
TMI had previously described the prospect of such litigation in its various
reports under the Securities Exchange Act of 1934. The suit seeks damages and
recovery of securities previously transferred to various parties in connection
with the prior transfer of control of the Company by the plaintiff. The
complaint also alleges a civil conspiracy by Siegel and TMI to prevent Mr.
Douglas, a former officer and director, from receiving the benefits under
various contracts he entered into with subsequent officers and directors of the
Company relating to the purchase of securities of the Company which could
potentially affect the control of TMI. This suit also claims that TMI as well as
Mr. Siegel breached various contracts affecting the plaintiff. Among other
remedies, the plaintiff is seeking damages and injunctive relief. The Company
was only recently served with this lawsuit and is evaluating the various counts,
and both the Company and Mr. Siegel believe they have meritorious defenses and
claims, but will also seek an amicable resolution with the plaintiff.
RISK FACTORS AFFECTING OUR FUTURE RESULTS OF OPERATIONS
Our future results of operations involve a number of risks and
uncertainties. The following paragraphs discuss a number of risks that could
impact the Company's financial condition and results of operations.
WE HAVE NOT COMMENCED REVENUE-PRODUCING OPERATIONS, AND THE LIMITED INFORMATION
AVAILABLE ABOUT US MAKES AN EVALUATION OF US DIFFICULT
We have conducted limited operations, and we have little operating
history that permits you to evaluate our business and our prospects based on
prior performance. You must consider your investment in light of the risks,
uncertainties, expenses and difficulties that are usually encountered by
6
companies in their early stages of development. There can be no assurance that
we will successfully address such risks, and the failure to do so could have a
material adverse effect on our business, financial condition and results of
operations.
TMI HAS LIMITED HISTORICAL OPERATIONS WITH SUBSTANTIAL POTENTIAL CAPITAL NEEDS
TMI has a limited operating history and limited operations, and no
revenues since the commencement of its 2002 fiscal year. In addition, as of
March 30, 2003, the Company had insufficient cash available to satisfy its cash
requirements prospectively through December 28, 2003. The Company will continue
to need additional cash infusions in order for it to continue to develop and
implement a business plan. Even if the Company acquires short-term cash
resources, it will likely need further debt or equity funding in order to bring
products or services to market. However, there are no agreements or
understandings for such financing as of this time.
THERE IS SUBSTANTIAL DOUBT AS TO OUR ABILITY TO CONTINUE AS A GOING CONCERN
The Company's ability to continue as a going concern is dependent on
its ability to raise funds to implement its development of a business plan. The
Company's poor financial condition could inhibit its ability to achieve a
business plan, due to current operations that are reflecting substantial losses.
The future prospect of profitability is severely in doubt. Because of these
difficulties, our independent auditors have expressed substantial doubt as to
our ability to continue as a going concern.
LACK OF FUNDING WILL ADVERSELY AFFECT OUR ABILITY TO GENERATE REVENUES
The Company's goals are all contingent upon raising debt or equity
funding. Currently there are limited sources for such funding. There are
significant risks, difficulties, delays and unforeseen expenses associated with
companies with limited or no operating history. Constraints we face due to a
lack of funding include:
- Inability to generate necessary revenue to operate for the next
12 months or thereafter;
- Operating costs that may exceed our current estimates;
- Unanticipated development expenses; and
- The Company's ability to generate sufficient revenues to offset
the substantial costs of operating our business.
START-UP EXPENSES AND FUTURE LOSSES WILL ADVERSELY AFFECT OUR OPERATIONS
Because of significant up-front expenses required to enter into new
businesses, the Company anticipates that it may incur losses until revenues are
sufficient to cover its operating costs. Future losses are likely before our
operations become profitable. As a result of the Company's lack of operating
history, you will have no basis upon which to accurately forecast the Company's:
- Total assets, liabilities, and equity;
- Total revenues;
- Gross and operating margins; and
- Labor costs.
7
Accordingly, any subsequent business plans may not either materialize or prove
successful, and the Company may never be profitable.
WE DO NOT EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE
TMI does not presently intend to pay dividends on our common stock. TMI
has never paid dividends on our common stock and does not presently intend to
pay cash dividends on our common stock. Any future decisions as to the payment
of dividends will be at the discretion of TMI's Board of Directors, subject to
applicable law.
OUR MANAGEMENT MAY BE UNABLE TO EFFECTIVELY INTEGRATE FUTURE ACQUISITIONS AND TO
MANAGE OUR GROWTH, AND WE MAY BE UNABLE TO FULLY REALIZE ANY ANTICIPATED
BENEFITS OF ANY ACQUISITION
Our business strategy includes growth through acquisition and internal
development. We are subject to various risks associated with our growth
strategy, including the risk that we will be unable to identify and recruit
suitable acquisition candidates in the future or to integrate and manage the
acquired companies. Acquired companies' histories, geographical locations,
business models and business cultures can be different from ours in many
respects. If we should consummate one or more acquisitions, our directors and
senior management will face a significant challenge in their efforts to
integrate our business and the business of the acquired companies or assets, and
to effectively manage our continued growth. There can be no assurance that our
efforts to integrate the operations of any acquired assets or companies acquired
in the future will be successful, that we can manage our growth or that the
anticipated benefits of these proposed acquisitions will be fully realized. The
dedication of management resources to these efforts may detract attention from
our day-to-day business. There can be no assurance that there will not be
substantial costs associated with these activities or of the success of our
integration efforts, either of which could have a material adverse effect on our
operating results.
OUR STRATEGY OF SEEKING JOINT VENTURES OR STRATEGIC ALLIANCES MAY BE
UNSUCCESSFUL
We may also choose to expand our operations by entering into joint
ventures or other strategic alliances with other parties. Any such transaction
would be accompanied by the risks commonly encountered in such transactions.
These include, among others, the difficulty of assimilating the operations and
personnel and other various factors. There can be no assurance should we enter
into any strategic alliance with a third party that we will be successful in
overcoming these risks or any other problems encountered in connection with
joint ventures or other strategic alliances.
WE DEPEND ON THE CONTINUED SERVICES OF SCOTT SIEGEL AND ON OUR ABILITY TO
ATTRACT AND MAINTAIN OTHER QUALIFIED EMPLOYEES
Our future success depends on the continued services of Scott Siegel,
our Chief Executive Officer. The loss of his services would be detrimental to us
and could have a material adverse effect on our business, financial condition
and results of operations. We do not currently maintain key-man insurance on his
life. Our future success is also dependent on our ability to identify, hire,
train and retain other qualified managerial and other employees. Competition for
these individuals is intense and increasing. We may not be able to attract,
assimilate, or retain qualified technical and managerial personnel and our
failure to do so could have a material adverse effect on our business, financial
condition and results of operations.
8
OUR COMMON STOCK IS THINLY TRADED AND AN ACTIVE AND VISIBLE TRADING MARKET FOR
OUR COMMON STOCK MAY NOT DEVELOP
Our common stock is currently traded on a limited basis on the
Over-the-Counter Bulletin Board under the symbol "TMIO." The quotation of our
common stock on the OTCBB does not assure that a meaningful, consistent and
liquid trading market currently exists. We cannot predict whether a more active
market for our common stock will develop in the future. In the absence of an
active trading market:
- investors may have difficulty buying and selling or obtaining
market quotations;
- market visibility for our common stock may be limited; and
- a lack of visibility for our common stock may have a depressive
effect on the market price for our common stock.
THE SALE OF SHARES ELIGIBLE FOR FUTURE SALE COULD HAVE A DEPRESSIVE EFFECT ON
THE MARKET PRICE FOR OUR COMMON STOCK
As of the date of this prospectus, there are 7,589,675 shares of common
stock issued and outstanding.
Of the currently issued and outstanding shares, 32,650 restricted
shares of common stock have been held for in excess of one year and are
currently available for public resale pursuant to Rule 144 promulgated under the
Securities Act ("Rule 144"). Unless registered on a form other than Form S-8,
the resale of our shares of Common Stock owned by officers, directors and
affiliates is subject to the volume limitations of Rule 144. In general, Rule
144 permits our shareholders who have beneficially owned restricted shares of
common stock for at least one year to sell without registration, within a
three-month period, a number of shares not exceeding one percent of the then
outstanding shares of common stock. Furthermore, if such shares are held for at
least two years by a person not affiliated with us (in general, a person who is
not one of our executive officers, directors or principal shareholders during
the three-month period prior to resale), such restricted shares can be sold
without any volume limitation.
Sales of our common stock under Rule 144 or pursuant to such
registration statement may have a depressive effect on the market price for our
common stock.
IT IS NOT POSSIBLE TO FORESEE ALL RISKS WHICH MAY AFFECT US. MOREOVER,
WE CANNOT PREDICT WHETHER WE WILL SUCCESSFULLY EFFECTUATE OUR CURRENT BUSINESS
PLAN. EACH PROSPECTIVE PURCHASER IS ENCOURAGED TO CAREFULLY ANALYZE THE RISKS
AND MERITS OF AN INVESTMENT IN THE SHARES AND SHOULD TAKE INTO CONSIDERATION
WHEN MAKING SUCH ANALYSIS, AMONG OTHERS, THE RISK FACTORS DISCUSSED ABOVE.
9
TMI HOLDINGS, INC. 2003 QUALIFIED SECURITIES PLAN
GENERAL
On May 2, 2003, the Board of Directors of the Company approved,
declared it advisable and in the Company's best interests and directed that
there be submitted to the holders of a majority of the Company's voting stock
for action by written consent, the TMI Holdings, Inc. 2003 Qualified Securities
Plan (the "2003 Qualified Securities Plan"). On May 2, 2003, the 2003 Qualified
Securities Plan was approved by written consent of a majority of voting Capital
Stock interest of the Company's shareholders, which were ratified on June 17,
2003.
PURPOSE
The purpose of the 2003 Qualified Securities Plan is to promote the
interests of the Company (including its subsidiaries) and its shareholders by
using investment interests in the Company to attract, retain and motivate its
management and other persons, including officers, directors, key employees and
certain consultants, to encourage and reward such persons' contributions to the
performance of the Company and to align their interests with the interests of
the Company's shareholders. In furtherance of this purpose, the 2003 Qualified
Securities Plan authorizes the granting of the following types of stock-based
awards (each, an "Award"):
- stock options (including incentive stock options and
non-qualified stock options);
- restricted stock awards;
- unrestricted stock awards; and
- performance stock awards.
Each of these types of Awards is described below under "Awards."
ELIGIBILITY
Key employees (including employees who are also directors or officers),
directors and certain consultants of the Company or any subsidiary are eligible
to be granted Awards under the 2003 Qualified Securities Plan at the discretion
of the Board of Directors. In determining the eligibility of any person, as well
as in determining the number of shares to be covered by an Award and the type or
types of Awards to be made, the Board of Directors may consider:
- the position, relationship, responsibilities and importance of
the person to the Company; and
- such other factors as the Board of Directors deems relevant.
Selected consultants may participate in the 2003 Qualified Securities Plan if:
- the consultant renders bona fide services to the Company or one
of its subsidiaries;
- the services rendered by the consultant are not in connection
with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain
a market for the Company's securities; and
10
- the consultant is a natural person who has contracted directly
with the Company or a subsidiary of the Company to render such
services.
ADMINISTRATION
The 2003 Qualified Securities Plan currently is administered by the
Board of Directors. In the future, the Board of Directors may form a
Compensation Committee to administer the 2003 Qualified Securities Plan. Any
Compensation Committee must be comprised of at least two non-employee directors.
If a Compensation Committee is formed to administer the 2003 Qualified
Securities Plan, the Board of Directors will delegate to the Compensation
Committee full authority, in its discretion, to:
- select the persons to whom Awards will be granted (each a
"Participant");
- grant Awards under the 2003 Qualified Securities Plan;
- determine the number of shares to be covered by each Award;
- determine the nature, amount, pricing, timing and other terms of
the Award;
- interpret, construe and implement the provisions of the 2003
Qualified Securities Plan (including the authority to adopt rules
and regulations for carrying out the purposes of the plan); and
- terminate, modify or amend the 2003 Qualified Securities Plan.
The 2003 Qualified Securities Plan is not subject to the provisions of
the Employee Retirement Income Security Act of 1974.
SHARES SUBJECT TO THE PLAN
A total of 140,000 shares of Common Stock (subject to adjustment as
described below) are currently reserved for issuance under the 2003 Qualified
Securities Plan, which may be increased from time to time upon proper
authorization. Shares of common stock issued under the 2003 Qualified Securities
Plan may be authorized but unissued shares, or shares reacquired by the Company,
including shares purchased on the open market. The unexercised, unearned or
yet-to-be acquired portions of any Award that expire, terminate or are canceled,
and shares of common stock issued pursuant to Awards under the 2003 Qualified
Securities Plan that are reacquired by the Company pursuant to the terms under
which such shares were issued, will again become available for the grant of
further Awards.
ADJUSTMENT
In general, the aggregate number of shares as to which Awards may be
granted to Participants under the 2003 Qualified Securities Plan, the number and
kind of shares thereof covered by each outstanding Award, and/or the price per
share thereof in each such Award will, upon a determination of the Board of
Directors, all be proportionately adjusted for any increase or decrease in the
number of issued shares of common stock resulting from an increase, decrease or
exchange in the outstanding shares of common stock or additional shares or new
or different shares are distributed in respect of such shares of common stock,
through merger, consolidation, sale or exchange of all or substantially all of
the assets of the Company, reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, spin-off or other distribution
with respect to such shares. On May 1 of each year, the number of shares in the
2003 Qualified Securities Plan shall automatically be adjusted to an amount
equal to ten percent (10%) of the issued and outstanding stock of the Company on
April 30 of the immediately preceding year.
11
Fractional interests will not be issued upon any adjustments made by
the Board or Directors; however, the committee may, in its discretion, make a
cash payment in lieu of any fractional shares of common stock issuable as a
result of such adjustments.
AWARDS
STOCK OPTIONS
Under the 2003 Qualified Securities Plan, the Board of Directors may
grant either incentive stock options or nonqualified stock options. Incentive
stock options and non-qualified stock options may be granted for such number of
shares of common stock as the Board of Directors determines, so long as such
number of shares does not exceed the amount permitted under the plan, or in the
case of incentive stock options, the amount permissible under I.R.C. Section
422.
The exercise price for each stock option is determined by the Board of
Directors. Stock options must have an exercise price of at least 85% (100% in
the case of incentive stock options, or at least 110% in the case of incentive
stock options granted to certain employees owning more than 10% of the
outstanding voting stock) of the fair market value of the common stock on the
date the stock option is granted. Under the 2003 Qualified Securities Plan, fair
market value of the common stock for a particular date is generally the average
of the closing bid and asked prices per share for the stock as quoted on the OTC
Bulletin Board on such date.
No stock option may be exercised after the expiration of ten years from
the date of grant (or five years in the case of incentive stock options granted
to certain employees owning more than 10% of the outstanding voting stock).
Pursuant to the 2003 Qualified Securities Plan, the aggregate fair market value
of the common stock, for which one or more incentive stock options granted to
any participant may for the first time become exercisable as incentive stock
options under the federal tax laws during any one calendar year shall not exceed
$100,000.
A stock option may be exercised in whole or in part according to the
terms of the applicable stock option agreement by delivery of written notice of
exercise to the Company specifying the number of shares to be purchased. The
exercise price for each stock option may be paid by the Participant in cash or
by such other means as the Board of Directors may authorize. Fractional shares
are not to be issued upon exercise of a stock option. The Board of Directors may
grant reload stock options in tandem with stock options that provide for an
automatic grant of a stock option in the event a participant pays the exercise
price of a stock option by delivery of common stock.
The Board of Directors may, in its discretion, at any time after the
grant of a stock option, accelerate vesting of such option, as a whole or in
part, by increasing the number of shares then purchasable. However, the Board of
Directors may not increase the total number of shares subject to an option.
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Subject to the foregoing and the other provisions of the 2003 Qualified
Securities Plan, stock options may be exercised at such times and in such
amounts and be subject to such restrictions and other terms and conditions, if
any, as determined by the Board of Directors.
RESTRICTED STOCK
Restricted stock may be awarded by the Board of Directors subject to
such terms, conditions and restrictions as it deems appropriate. Restrictions
may include limitations on voting rights and transferability of the shares,
restrictions based on the duration of employment or engagement with the Company,
and Company or individual performance. Restricted stock may not be sold or
encumbered until all restrictions expire or are terminated. In this regard, the
Secretary of the Company or such other escrow holder as the Board of Directors
may appoint shall retain physical custody of each certificate representing
restricted stock until all restrictions imposed under the applicable Award
Agreement shall expire or be removed.
The Board of Directors may require the Participant to pay the Company
an amount at least equal to the par value of the common stock awarded to the
Participant. Subject to any limitations imposed by the applicable Award
Agreement, from the date a Participant becomes the holder of record of
restricted stock, the Participant has all the rights of a stockholder with
respect to such shares, including the right to vote the shares and to receive
all dividends and other distributions paid with respect to the shares.
The 2003 Qualified Securities Plan provides that to the extent the
Board of Directors elects to grant an Award of restricted stock, the Award
Agreement applicable thereto shall, except in certain specified situations,
provide the Company with the right to repurchase the restricted stock then
subject to restrictions immediately upon a termination of employment or
engagement for any reason whatsoever at a cash price per share equal to the
price paid by the Participant for the restricted stock.
UNRESTRICTED STOCK
The Board of Directors may, in its discretion, grant an Award of
unrestricted stock to any eligible Participant, pursuant to which such
Participant may receive shares of Common Stock free of any vesting restrictions
under the 2003 Qualified Securities Plan. The Board of Directors may also sell
shares of unrestricted stock to eligible Participants at a purchase price
determined in its discretion. Unrestricted stock may be granted or sold in
respect of past services or other valid consideration, or in lieu of any cash
compensation due to such individual.
PERFORMANCE STOCK AWARDS
The Board of Directors may make performance stock awards under the 2002
Qualified Securities Plan based upon terms it deems appropriate. The Board of
Directors may make performance stock awards independent of or in connection with
the granting of any other Award under the 2003 Qualified Securities Plan. The
Board of Directors shall determine whether and to whom performance stock awards
shall be made, the performance criteria applicable under each such Award, the
periods during which performance is to be measured, and all other limitations
and conditions applicable to the awarded shares. The Board of Directors may
13
utilize any of the following performance criteria when granting performance
stock awards:
- net income;
- pre-tax income;
- operating income;
- cash flow;
- earnings per share;
- return on equity;
- return on invested capital or assets;
- cost reductions or savings;
- funds from operations;
- appreciation in the fair market value of the common stock;
- earnings before anyone or more of the following: interest, taxes,
depreciation or amortization; and
- such other criteria deemed appropriate by the Board of Directors.
The Participant receiving a performance stock award shall have the
rights of a stockholder only as to shares actually received by the Participant
and not with respect to shares subject to the Award but not actually received.
At any time prior to the Participant's termination of employment (or other
business relationship) by the Company, the Board of Directors may, in its
discretion, accelerate, waive or, subject to the other provisions of the 2003
Qualified Securities Plan, amend any and all performance criteria specified
under any performance stock award.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal federal income tax
consequences of the grant and exercise of Awards under present law. This summary
is not intended to be exhaustive and does not describe foreign, state or local
tax consequences. Recipients of Awards are advised to consult their personal tax
advisors with regard to all tax consequences arising with respect to the Awards.
TAX WITHHOLDING
If a distribution is made under this 2003 Qualified Securities Plan in
cash, the Company will withhold taxes as required by law. If an Award is
satisfied in the form of shares of the common stock, then no shares may be
issued unless and until arrangements satisfactory to the Company have been made
to satisfy any tax withholding obligations applicable with respect to such
Award.
DEDUCTIBILITY OF AWARDS
Company deductions for Awards granted under the 2003 Qualified
Securities Plan are limited by Section 162(m) of the Internal Revenue Code of
1986 (the "Code") which generally limits the Company's deduction for
non-performance based compensation to $1.0 million per year for the Company's
CEO and its other four (4) most highly compensated officers. The Company has not
paid any compensation that was not deductible by reason of the prohibition of
Section 162(m) to any executive officers.
14
INCENTIVE STOCK OPTIONS
Pursuant to the 2003 Qualified Securities Plan, employees may be
granted stock options that are intended to qualify as "incentive stock options"
under the provisions of Section 422 of the Code. An optionee will not recognize
any taxable income for federal income tax purposes upon receipt of an incentive
stock option or, generally, at the time of exercise of an incentive stock
option. The exercise of an incentive stock option generally will result in an
increase in an optionee's taxable income for alternative minimum tax purposes.
If an optionee exercises an incentive stock option and does not dispose
of the shares received in a subsequent "disqualifying disposition" (generally, a
sale, gift or other transfer within two years after the date of grant of the
incentive stock option or within one year after the shares are transferred to
the optionee), upon disposition of the shares any amount realized in excess of
the optionee's tax basis in the shares disposed of will be treated as a
long-term capital gain, and any loss will be treated as a long-term capital
loss. In the event of a disqualifying disposition, the difference between the
fair market value of the shares received on the date of exercise and the
exercise price (limited, in the case of a taxable sale or exchange, to the
excess of the amount realized upon disposition over the optionee's tax basis in
the shares) will be treated as compensation received by the optionee in the year
of disposition. Any additional gain will be taxable as a capital gain and any
loss as a capital loss, which will be long-term or short-term, depending on the
length of time the optionee held the shares.
If the exercise price of an incentive stock option is paid in whole or
in part with shares of common stock, no income gain or loss generally will be
recognized by the optionee with respect to the shares of common stock paid as
the exercise price. However, if such shares of common stock were received upon
the exercise of an incentive stock option, the use of those shares as payment of
the exercise price will be considered a disposition for purposes of determining
whether there has been a disqualifying disposition of those shares.
Neither the Company nor any of its subsidiaries will be entitled to a
deduction with respect to shares received by an optionee upon exercise of an
incentive stock option and not disposed of in a disqualifying disposition. If an
amount is treated as compensation received by an optionee because of a
disqualifying disposition, the Company or one of its subsidiaries generally will
be entitled to a corresponding deduction in the same amount for compensation
paid.
NON-QUALIFIED STOCK OPTIONS
An optionee will not recognize any taxable income for federal income
tax purposes upon receipt of a non-qualified stock option. Upon the exercise of
a non-qualified stock option the amount by which the fair market value of the
shares received, determined as of the date of exercise, exceeds the exercise
price, the stock option will be treated as compensation received by the optionee
in the year of exercise. If the exercise price of a non-qualified stock option
is paid in whole or in part with shares of common stock, (i) no income, gain or
loss will be recognized by the optionee on the receipt of shares equal in value
on the date of exercise to the shares delivered in payment of the exercise
price, and (ii) no income, gain or loss will be recognized by the optionee with
respect to the shares of common stock paid as the exercise price of the option.
The fair market value of the remainder of the shares received upon exercise of
the non-qualified stock option, determined as of the date of exercise, less the
amount of cash, if any, paid upon exercise, will be treated as compensation
income received by the optionee on the date of exercise of the stock option. The
Company, or one of its subsidiaries, generally will be entitled to a deduction
for compensation paid in the same amount treated as compensation received by the
optionee.
15
RELOAD OPTION RIGHTS
An optionee should not recognize any taxable income for federal income
tax purposes upon receipt of reload option rights, and a reload option should be
treated as a non-qualified stock option.
RESTRICTED STOCK
A recipient of restricted stock will not recognize any taxable income
for federal income tax purposes in the year of the Award, provided the shares
are subject to restrictions (that is, they are non-transferable and subject to a
substantial risk of forfeiture). However, the recipient may elect under Section
83(b) of the Code to recognize compensation income in the year of the Award in
an amount equal to the fair market value of the shares on the date of the Award
(less the amount paid by the recipient for such shares), determined without
regard to the restrictions. If the recipient does not make a Section 83(b)
election, the fair market value of the shares on the date the restrictions lapse
(less the amount paid by the recipient for such shares) will be treated as
compensation income to the recipient and will be taxable in the year the
restrictions lapse. The Company or one of its subsidiaries generally will be
entitled to a deduction for compensation paid in the same amount treated as
compensation income to the recipient.
UNRESTRICTED STOCK
Any shares of common stock received pursuant to an Award of
unrestricted stock will be treated as compensation income received by the
recipient, generally, in the year in which the recipient receives such shares.
In each case, the amount of compensation income will equal the fair market value
of the shares of common stock on the date compensation income is recognized
(less the amount, if any, paid by the recipient for such shares). The Company or
one of its subsidiaries, generally, will be entitled to a corresponding
deduction in the same amount for compensation paid.
PERFORMANCE STOCK AWARDS
A recipient of a performance stock award will not recognize any taxable
income for federal income tax purposes upon receipt of the Award. Any shares of
common stock received pursuant to the Award will be treated as compensation
income received by the recipient, generally, in the year in which the recipient
receives such shares of common stock. The amount of compensation income will
equal the fair market value of the shares of common stock on the date
compensation income is recognized. The Company or one of its subsidiaries,
generally, will be entitled to a deduction for compensation paid in the same
amount treated as compensation income to the recipient.
16
OTHER TAX MATTERS
The exercise by a recipient of a stock option, the lapse of
restrictions on restricted stock, or the deemed earnout of performance stock
awards following the occurrence of a change in control, in certain
circumstances, may result in:
- a 20% federal excise tax (in addition to federal income tax) to
the recipient on certain payments of common stock or cash
resulting from such exercise or deemed earnout of performance
stock awards or, in the case of restricted stock, on all or a
portion of the fair market value of the shares on the date the
restrictions lapse; and
- the loss of a compensation deduction which would otherwise be
allowable to the Company or one of its subsidiaries as explained
above.
GRANTS UNDER THE 2003 QUALIFIED SECURITIES PLAN
As of the date hereof, no employee has been granted Options or Shares
under the Plan.
THE TMI HOLDINGS, INC. 2003 NON-QUALIFIED SECURITIES PLAN
GENERAL
On May 2, 2003, the Board of Directors of the Company approved,
declared it advisable and in the Company's best interests and directed that
there be submitted to the holders of a majority of the Company's voting stock
for action by written consent, the TMI Holdings, Inc. 2003 Non-Qualified
Securities Plan (the "2003 Non-Qualified Securities Plan"). On May 2, 2003, the
Board of Directors approval of the 2003 Non-Qualified Securities Plan was
ratified by written consent of a majority of voting Capital Stock interest of
the Company's Stockholders. The 2003 Non-Qualified Securities Plan is already in
effect based upon the above Board of Directors' approval.
PURPOSE
The purpose of the 2003 Non-Qualified Securities Plan is to promote the
interests of the Company (including its subsidiaries) and its stockholders by
using investment interests in the Company to attract, retain and motivate its
management and other persons, including officers, directors, key employees and
certain consultants, to encourage and reward such persons' contributions to the
performance of the Company and to align their interests with the interests of
the Company's stockholders. In furtherance of this purpose, the 2003
Non-Qualified Securities Plan authorizes the granting of the following types of
stock-based awards (each, an "Award"):
- stock options (including incentive stock options and
non-qualified stock options);
- restricted stock awards;
- unrestricted stock awards; and
- performance stock awards.
17
Each of these types of Awards is described below under "Awards."
ELIGIBILITY
Key employees (including employees who are also directors or officers),
directors and certain consultants of the Company or any subsidiary are eligible
to be granted Awards under the 2003 Non-Qualified Securities Plan at the
discretion of the Board of Directors. In determining the eligibility of any
person, as well as in determining the number of shares to be covered by an Award
and the type or types of Awards to be made, the Board of Directors may consider:
- the position, relationship, responsibilities and importance of
the person to the Company; and
- such other factors as the Board of Directors deems relevant.
Selected consultants may participate in the 2003 Non-Qualified Securities Plan
if:
- the consultant renders bona fide services to the Company or one
of its subsidiaries;
- the services rendered by the consultant are not in connection
with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain
a market for the Company's securities; and
- the consultant is a natural person who has contracted directly
with the Company or a subsidiary of the Company to render such
services.
ADMINISTRATION
The 2003 Non-Qualified Securities Plan currently is administered by the
Board of Directors. In the future, the Board of Directors may form a
Compensation Committee to administer the 2003 Non-Qualified Securities Plan. Any
Compensation Committee must be comprised of at least two non-employee directors.
If a Compensation Committee is formed to administer the 2003 Non-Qualified
Securities Plan, the Board of Directors will delegate to the Compensation
Committee full authority, in its discretion, to:
- select the persons to whom Awards will be granted (each a
"Participant");
- grant Awards under the 2003 Non-Qualified Securities Plan;
- determine the number of shares to be covered by each Award;
- determine the nature, amount, pricing, timing and other terms of
the Award;
- interpret, construe and implement the provisions of the 2003
Non-Qualified Securities Plan (including the authority to adopt
rules and regulations for carrying out the purposes of the plan);
and
- terminate, modify or amend the 2003 Non-Qualified Securities
Plan.
The 2003 Non-Qualified Securities Plan is not subject to the provisions
of the Employee Retirement Income Security Act of 1974.
18
SHARES SUBJECT TO THE PLAN
A total of 2.5 million shares of Common Stock (subject to adjustment as
described below) are reserved for issuance under the 2003 Non-Qualified
Securities Plan which may be increased from time to time upon proper
authorization. Shares of common stock issued under the 2003 Non-Qualified
Securities Plan may be authorized but unissued shares, or shares reacquired by
the Company, including shares purchased on the open market. The unexercised,
unearned or yet-to-be acquired portions of any Award that expire, terminate or
are canceled, and shares of common stock issued pursuant to Awards under the
2003 Non-Qualified Securities Plan that are reacquired by the Company pursuant
to the terms under which such shares were issued, will again become available
for the grant of further Awards.
ADJUSTMENT
In general, the aggregate number of shares as to which Awards may be
granted to Participants under the 2003 Non-Qualified Securities Plan, the number
and kind of shares thereof covered by each outstanding Award, and/or the price
per share thereof in each such Award will, upon a determination of the Board of
Directors, all be proportionately adjusted for any increase or decrease in the
number of issued shares of common stock resulting from an increase, decrease or
exchange in the outstanding shares of common stock or additional shares or new
or different shares are distributed in respect of such shares of common stock,
through merger, consolidation, sale or exchange of all or substantially all of
the assets of the Company, reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, spin-off or other distribution
with respect to such shares.
Fractional interests will not be issued upon any adjustments made by
the Board or Directors; however, the committee may, in its discretion, make a
cash payment in lieu of any fractional shares of common stock issuable as a
result of such adjustments.
AWARDS
STOCK OPTIONS
Under the 2003 Non-Qualified Securities Plan, the Board of Directors
may only grant non-qualified stock options. Non-qualified stock options may be
granted for such number of shares of common stock as the Board of Directors
determines, so long as such number of shares does not exceed the amount
permitted under the plan.
The exercise price for each stock option is determined by the Board of
Directors. Stock options under the 2003 Non-Qualified Securities Plan must have
an exercise price of at least 85% of the fair market value of the common stock
on the date the stock option is granted. Under the 2003 Non-Qualified Securities
Plan, fair market value of the common stock for a particular date is generally
the average of the closing bid and asked prices per share for the stock as
quoted on the OTC Bulletin Board on such date.
No stock option may be exercised after the expiration of ten years from
the date of grant.
19
A stock option may be exercised in whole or in part according to the
terms of the applicable stock option agreement by delivery of written notice of
exercise to the Company specifying the number of shares to be purchased. The
exercise price for each stock option may be paid by the Participant in cash or
by such other means as the Board of Directors may authorize. Fractional shares
are not to be issued upon exercise of a stock option. The Board of Directors may
grant reload stock options in tandem with stock options that provide for an
automatic grant of a stock option in the event a participant pays the exercise
price of a stock option by delivery of common stock.
The Board of Directors may, in its discretion, at any time after the
grant of a stock option, accelerate vesting of such option, as a whole or in
part, by increasing the number of shares then purchasable. However, the Board of
Directors may not increase the total number of shares subject to an option.
Subject to the foregoing and the other provisions of the 2003
Non-Qualified Securities Plan, stock options may be exercised at such times and
in such amounts and be subject to such restrictions and other terms and
conditions, if any, as determined by the Board of Directors.
RESTRICTED STOCK
Restricted stock may be awarded by the Board of Directors subject to
such terms, conditions and restrictions as it deems appropriate. Restrictions
may include limitations on voting rights and transferability of the shares,
restrictions based on the duration of employment or engagement with the Company,
and Company or individual performance. Restricted stock may not be sold or
encumbered until all restrictions expire or are terminated. In this regard, the
Secretary of the Company or such other escrow holder as the Board of Directors
may appoint shall retain physical custody of each certificate representing
restricted stock until all restrictions imposed under the applicable Award
Agreement shall expire or be removed.
The Board of Directors may require the Participant to pay the Company
an amount at least equal to the par value of the common stock awarded to the
Participant. Subject to any limitations imposed by the applicable Award
Agreement, from the date a Participant becomes the holder of record of
restricted stock, the Participant has all the rights of a stockholder with
respect to such shares, including the right to vote the shares and to receive
all dividends and other distributions paid with respect to the shares.
The 2003 Non-Qualified Securities Plan provides that to the extent the
Board of Directors elects to grant an Award of restricted stock, the Award
Agreement applicable thereto shall, except in certain specified situations,
provide the Company with the right to repurchase the restricted stock then
subject to restrictions immediately upon a termination of employment or
engagement for any reason whatsoever at a cash price per share equal to the
price paid by the Participant for the restricted stock.
20
UNRESTRICTED STOCK
The Board of Directors may, in its discretion, grant an Award of
unrestricted stock to any eligible Participant, pursuant to which such
Participant may receive shares of Common Stock free of any vesting restrictions
under the 2003 Non-Qualified Securities Plan. The Board of Directors may also
sell shares of unrestricted stock to eligible Participants at a purchase price
determined in its discretion. Unrestricted stock may be granted or sold in
respect of past services or other valid consideration, or in lieu of any cash
compensation due to such individual.
PERFORMANCE STOCK AWARDS
The Board of Directors may make performance stock awards under the 2002
Securities Plan based upon terms it deems appropriate. The Board of Directors
may make performance stock awards independent of or in connection with the
granting of any other Award under the 2003 Non-Qualified Securities Plan. The
Board of Directors shall determine whether and to whom performance stock awards
shall be made, the performance criteria applicable under each such Award, the
periods during which performance is to be measured, and all other limitations
and conditions applicable to the awarded shares. The Board of Directors may
utilize any of the following performance criteria when granting performance
stock awards:
- net income;
- pre-tax income;
- operating income;
- cash flow;
- earnings per share;
- return on equity;
- return on invested capital or assets;
- cost reductions or savings;
- funds from operations;
- appreciation in the fair market value of the common stock;
- earnings before anyone or more of the following: interest, taxes,
depreciation or amortization; and
- such other criteria deemed appropriate by the Board of Directors.
The Participant receiving a performance stock award shall have the
rights of a stockholder only as to shares actually received by the Participant
and not with respect to shares subject to the Award but not actually received.
At any time prior to the Participant's termination of employment (or other
business relationship) by the Company, the Board of Directors may, in its
discretion, accelerate, waive or, subject to the other provisions of the 2003
Non-Qualified Securities Plan, amend any and all performance criteria specified
under any performance stock award.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal federal income tax
consequences of the grant and exercise of Awards under present law. This summary
is not intended to be exhaustive and does not describe foreign, state or local
tax consequences. Recipients of Awards are advised to consult their personal tax
advisors with regard to all tax consequences arising with respect to the Awards.
21
TAX WITHHOLDING
If a distribution is made under this 2003 Non-Qualified Securities Plan
in cash, the Company will withhold taxes as required by law. If an Award is
satisfied in the form of shares of the common stock, then no shares may be
issued unless and until arrangements satisfactory to the Company have been made
to satisfy any tax withholding obligations applicable with respect to such
Award.
DEDUCTIBILITY OF AWARDS
Company deductions for Awards granted under the 2003 Non-Qualified
Securities Plan are limited by Section 162(m) of the Internal Revenue Code of
1986 (the "Code") which generally limits the Company's deduction for
non-performance based compensation to $1.0 million per year for the Company's
CEO and its other four (4) most highly compensated officers. The Company has not
paid any compensation that was not deductible by reason of the prohibition of
Section 162(m) to any executive officers.
NON-QUALIFIED STOCK OPTIONS
An optionee will not recognize any taxable income for federal income
tax purposes upon receipt of a non-qualified stock option. Upon the exercise of
a non-qualified stock option the amount by which the fair market value of the
shares received, determined as of the date of exercise, exceeds the exercise
price, the stock option will be treated as compensation received by the optionee
in the year of exercise. If the exercise price of a non-qualified stock option
is paid in whole or in part with shares of common stock, (i) no income, gain or
loss will be recognized by the optionee on the receipt of shares equal in value
on the date of exercise to the shares delivered in payment of the exercise
price, and (ii) no income, gain or loss will be recognized by the optionee with
respect to the shares of common stock paid as the exercise price of the option.
The fair market value of the remainder of the shares received upon exercise of
the non-qualified stock option, determined as of the date of exercise, less the
amount of cash, if any, paid upon exercise, will be treated as compensation
income received by the optionee on the date of exercise of the stock option. The
Company, or one of its subsidiaries, generally will be entitled to a deduction
for compensation paid in the same amount treated as compensation received by the
optionee.
RELOAD OPTION RIGHTS
An optionee should not recognize any taxable income for federal income
tax purposes upon receipt of reload option rights, and a reload option should be
treated as a non-qualified stock option.
RESTRICTED STOCK
A recipient of restricted stock will not recognize any taxable income
for federal income tax purposes in the year of the Award, provided the shares
are subject to restrictions (that is, they are non-transferable and subject to a
substantial risk of forfeiture). However, the recipient may elect under Section
83(b) of the Code to recognize compensation income in the year of the Award in
an amount equal to the fair market value of the shares on the date of the Award
(less the amount paid by the recipient for such shares), determined without
regard to the restrictions. If the recipient does not make a Section 83(b)
election, the fair market value of the shares on the date the restrictions lapse
(less the amount paid by the recipient for such shares) will be treated as
compensation income to the recipient and will be taxable in the year the
restrictions lapse. The Company or one of its subsidiaries generally will be
entitled to a deduction for compensation paid in the same amount treated as
compensation income to the recipient.
22
UNRESTRICTED STOCK
Any shares of common stock received pursuant to an Award of
unrestricted stock will be treated as compensation income received by the
recipient, generally, in the year in which the recipient receives such shares.
In each case, the amount of compensation income will equal the fair market value
of the shares of common stock on the date compensation income is recognized
(less the amount, if any, paid by the recipient for such shares). The Company or
one of its subsidiaries, generally, will be entitled to a corresponding
deduction in the same amount for compensation paid.
PERFORMANCE STOCK AWARDS
A recipient of a performance stock award will not recognize any taxable
income for federal income tax purposes upon receipt of the Award. Any shares of
common stock received pursuant to the Award will be treated as compensation
income received by the recipient, generally, in the year in which the recipient
receives such shares of common stock. The amount of compensation income will
equal the fair market value of the shares of common stock on the date
compensation income is recognized. The Company or one of its subsidiaries,
generally, will be entitled to a deduction for compensation paid in the same
amount treated as compensation income to the recipient.
OTHER TAX MATTERS
The exercise by a recipient of a stock option, the lapse of
restrictions on restricted stock, or the deemed earnout of performance stock
awards following the occurrence of a change in control, in certain
circumstances, may result in:
- a 20% federal excise tax (in addition to federal income tax) to
the recipient on certain payments of common stock or cash
resulting from such exercise or deemed earnout of performance
stock awards or, in the case of restricted stock, on all or a
portion of the fair market value of the shares on the date the
restrictions lapse; and
- the loss of a compensation deduction which would otherwise be
allowable to the Company or one of its subsidiaries as explained
above.
23
RESTRICTIONS UNDER SECURITIES LAWS
The sale of all shares issued under the Plans must be made in
compliance with federal and state securities laws. Our officers, directors and
10% or greater shareholders, as well as certain other persons or parties who may
be deemed to be "affiliates" of ours under federal securities laws, should be
aware that resales by affiliates can only be made pursuant to an effective
registration statement, Rule 144 or other applicable exemption. Our officers,
directors and 10% and greater shareholders may also become subject to the "short
swing" profit rule of Section 16(b) of the Securities Exchange Act of 1934.
PLAN OF DISTRIBUTION
The information under this heading includes resales of shares covered
by this prospectus by persons who are our "affiliates" as that term in defined
under federal securities laws.
The shares covered by this prospectus may be resold and distributed
from time to time by the selling security holders in one or more transactions,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of these shares as
principals, at market prices existing at the time of sale, at prices related to
existing market prices, through Rule 144 transactions or at negotiated prices.
Usual and customary or specifically negotiated brokerage fees or commissions may
be paid by the selling security holders in connection with sales of securities.
The selling security holders may sell shares in one or more of the
following methods, which may include crosses or block transactions:
- through the "pink sheets", on the over-the-counter Bulletin
Board, or on such exchanges or over-the-counter markets on which
our shares may be listed from time-to-time, in transactions which
may include special offerings, exchange distributions and/or
secondary distributions, pursuant to and in accordance with the
rules of such exchanges;
- in transactions other than on such exchanges or in the
over-the-counter market, or a combination of such transactions,
including sales through brokers, acting as principal or agent,
sales in privately negotiated transactions, or dispositions for
value, subject to rules relating to sales by affiliates; or
- through the writing of options on our shares, whether or not such
options are listed on an exchange, or other transactions
requiring delivery of our shares, or the delivery of our shares
to close out a short position.
Any such transactions may be effected at market prices prevailing at
the time of sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices.
24
In making sales, brokers or dealers used by the selling security
holders may arrange for other brokers or dealers to participate. The selling
security holders who are affiliates of TMI and others through whom such
securities are sold may be "underwriters" within the meaning of the Securities
Act for the securities offered, and any profits realized or commission received
may be considered underwriting compensation. Information as to whether an
underwriter(s) who may be selected by the selling security holders, or any other
broker-dealer, is acting as principal or agent for the selling security holders,
the compensation to be received by underwriters who may be selected by the
selling security holders, or any broker-dealer, acting as principal or agent for
the selling security holders and the compensation to be received by other
broker-dealers, in the event the compensation of other broker-dealers is in
excess of usual and customary commissions, will, to the extent required, be set
forth in a supplement to this prospectus. Any dealer or broker participating in
any distribution of the shares may be required to deliver a copy of this
prospectus, including the supplement, if any, to any person who purchases any of
the shares from or through a dealer or broker.
We have advised the selling security holders that, at the time a resale
of the shares is made by or on behalf of a selling security holder, a copy of
this prospectus is to be delivered.
We have also advised the selling security holders that during the time
as they may be engaged in a distribution of the shares included herein they are
required to comply with Regulation M of the Exchange Act. With certain
exceptions, Regulation M precludes any selling security holders, any affiliated
purchasers and any broker-dealer or other person who participates in the
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase any security which is the subject of the distribution
until the entire distribution is complete. Regulation M also prohibits any bids
or purchase made in order to stabilize the price of a security in connection
with the distribution of that security.
Sales of securities by the selling security holders and us or even the
potential of these sales may have an adverse effect on the market price for
shares of our common stock.
DESCRIPTION OF SECURITIES
GENERAL
The following description of our capital stock and provisions of our
Articles of Incorporation is a summary thereof and is qualified by reference to
our Articles of Incorporation, copies of which may be obtained upon request. Our
authorized capital consists of 30,000,000 shares of common stock, par value $.01
per share, of which 7,589,675 shares are issued and outstanding. We are
authorized to issue 2,000,000 shares of preferred stock, of which 750,000 shares
are issued or outstanding.
COMMON STOCK
Holders of shares of common stock are entitled to share, on a ratable
basis, such dividends as may be declared by the board of directors out of funds,
legally available therefor. Upon our liquidation, dissolution or winding up,
after payment to creditors, our assets will be divided pro rata on a per share
basis among the holders of our common stock.
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Each share of common stock entitles the holders thereof to one vote.
Holders of common stock do not have cumulative voting rights. Our By-Laws
require that only a majority of our issued and outstanding shares need be
represented to constitute a quorum and to transact business at a stockholders'
meeting. Our common stock has no preemptive, subscription or conversion rights
and is not redeemable by us.
PREFERRED STOCK
Our articles of incorporation authorizes our board of directors to
create and issue series of preferred stock from time to time, with such
designations, preferences, conversion rights, cumulative, relative,
participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof as permitted under Florida
law.
The Company has established its Series A Preferred Stock consisting in
total of 250,000 shares. This series carries no dividend or conversion rights,
but includes a stated right to vote 10 shares for each share of Series A
Preferred Stock. The Series A Preferred Stock will have priority as to
liquidation with respect to the Common Stock and any series of preferred stock
ranking junior to the Series A Preferred Stock.
The Company authorized the establishment of its Series B Convertible
Preferred Stock on January 31, 2003, and subsequently filed an amendment to the
designations. The Series B Preferred Stock carries no specified dividend rate
and may be declared pro rata with the common stock on a pari passu basis.
However, no dividend may be declared while the Company has outstanding
indebtedness. Any dividends will accrue on a non-cumulative basis. Upon
liquidation, the Series B Preferred Stock will have the same liquidation
preference equal to that of the common stock of TMI. If at any time at least 5%
of Kina'ole's outstanding common stock is distributed to TMI's shareholders on a
pro rata basis, the Series B Preferred Stock will automatically convert into
that number of shares of common stock of Kina'ole equal to 90% of the then
outstanding common stock of Kina'ole. In the original designations, the Company
provided for each share of Series B Preferred Stock to have 30 votes on all
matters submitted to shareholders. Thereafter, the Company filed an amendment to
eliminate the voting rights of the Series B Preferred Stock. No redemption
rights are provided with regard to the Series B Preferred Stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is North American
Transfer Company is North American Transfer Company, 147 West Merrick Road,
Freeport, New York 11520.
EXPERTS
The financial statements of TMI Holdings, Inc. as of December 29, 2002,
and for the years ended December 29, 2002 and December 30, 2001, appearing in
our Annual Report on Form 10-KSB for the year ended December 29, 2002 have been
audited by Berkowitz, Dick Pollack & Brant, LLP, Certified Public Accountants,
as set forth in their report thereon and are incorporated by reference in
reliance upon the authority of such firm as experts in auditing and accounting.
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INDEMNIFICATION
The Florida Business Corporation Act allows us to indemnify each of our
officers and directors who are made a party to a proceeding if
(a) the officer or director conducted himself or herself in good
faith;
(b) his or her conduct was in our best interests, or if the
conduct was not in an official capacity, that the conduct
was not opposed to our best interests; and
(c) in the case of a criminal proceeding, he or she had no
reasonable cause to believe that his or her conduct was
unlawful.
Article IX of the Company's Restated Articles of Incorporation provide
as follows:
"Article IX
To the fullest extent permitted by law, no director or officer
of the Corporation shall be personally liable to the Corporation or its
shareholders for damages for breach of any duty owed to the Corporation
or its shareholders. In addition, the Corporation shall have the power,
in its Bylaws or in any resolution of its stockholders or directors, to
undertake to indemnify the officers and directors of this Corporation
against any contingency or peril as may be determined to be in the best
interests of this Corporation, and in conjunction therewith, to
procure, at this Corporation's expense, policies of insurance."
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The documents listed below are incorporated by reference in the
Registration Statement. All documents subsequently filed by the Registrant
pursuant to Section 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), prior to the filing of a post-effective
amendment which indicates that all securities offered have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference in the Registration Statement and to be part thereof
from the date of filing of such documents.
- Quarterly Report on Form 10-QSB filed on June 17, 2003
- Annual Report on Form 10-KSB filed on May 23, 2003
- Form 8-K Current Report filed on June 9, 2003 and Amended on June
11, 2003
- Definitive Information Statement filed on June 12, 2003
All reports and documents filed by us pursuant to Section 13, 14 or
15(d) of the Exchange Act, prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference herein and to be a part hereof from the respective
date of filing of such documents. Any statement incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this prospectus to
the extent that a statement contained herein or in any other subsequently filed
document, which also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement modified or superseded
shall not be deemed, except as so modified or superseded, to constitute part of
this prospectus.
We hereby undertake to provide without charge to each person, including
any beneficial owner, to whom a copy of the prospectus has been delivered, on
the written request of any such person, a copy of any or all of the documents
referred to above which have been or may be incorporated by reference in this
prospectus, other than exhibits to such documents. Written requests for such
copies should be directed to Corporate Secretary, TMI Holdings, Inc., 11924
Forest Hill Boulevard, Suite 22-204, Wellington, Florida 33414.
ITEM 4. DESCRIPTION OF SECURITIES
A description of the Registrant's securities is set forth in the
Prospectus incorporated as a part of this Registration Statement.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
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ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Florida Business Corporation Act allows us to indemnify each of our officers
and directors who are made a party to a proceeding if
(d) the officer or director conducted himself or herself in good
faith;
(e) his or her conduct was in our best interests, or if the conduct
was not in an official capacity, that the conduct was not opposed
to our best interests; and
(f) in the case of a criminal proceeding, he or she had no reasonable
cause to believe that his or her conduct was unlawful.
Article IX of the Company's Restated Articles of Incorporation provide
as follows:
"Article IX
To the fullest extent permitted by law, no director or officer
of the Corporation shall be personally liable to the
Corporation or its shareholders for damages for breach of any
duty owed to the Corporation or its shareholders. In addition,
the Corporation shall have the power, in its Bylaws or in any
resolution of its stockholders or directors, to undertake to
indemnify the officers and directors of this Corporation
against any contingency or peril as may be determined to be in
the best interests of this Corporation, and in conjunction
therewith, to procure, at this Corporation's expense, policies
of insurance."
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Persons eligible to receive grants under the Plan will have an existing
relationship with us and will have access to comprehensive information about us
to enable them to make an informed investment decision. The recipient must
express an investment intent and, in the absence of registration under the Act,
consent to the imprinting of a legend on the securities restricting their
transferability except in compliance with applicable securities laws.
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ITEM 8. EXHIBITS
5.1 Opinion of Schneider Weinberger, LLP*
10.1 TMI Holdings, Inc. 2003 Qualified Securities Plan*
10.2 TMI Holdings, Inc. 2003 Non-Qualified Securities Plan*
23.1 Consent of Independent Auditors*
23.2 Consent of Schneider Weinberger, LLP (included in the above opinion)
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* Filed herewith.
ITEM 9. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
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shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 against such liabilities (other than the payment by the
registrant in the successful defense of an action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel, the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Wellington, State of Florida, on July 1, 2003.
TMI HOLDINGS, INC.
By: /s/ Scott Siegel
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Scott Siegel, CEO and
Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
Chairman of the Board,
CEO, President and
/s/ Scott Siegel Principal Executive, Financial July 1, 2003
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Scott Siegel and Accounting Officer
/s/ Neil Dolgin Director July 1, 2003
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