UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C
Information Statement pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
|X| Preliminary Information Statement
|_| Confidential, for use of the Commission only (as permitted by Rule
14c-5(d)(2))
|_| Definitive Information Statement
Phantom Fiber Corporation
(Name of Registrant as Specified in its Charter)
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|_| Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
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(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of securities:
(5) Total fee paid:
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|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
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Phantom Fiber Corporation
144 Front Street, Suite 580
Toronto, Ontario, Canada M5J 2L7
NOTICE OF ACTION BY
WRITTEN CONSENT OF SHAREHOLDERS
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
To our Shareholders:
This Information Statement is furnished by the Board of Directors of
Phantom Fiber Corporation, a Delaware corporation (the "Company"), to holders of
record of the Company's common stock, $.001 par value per share ("Common
Stock"), at the close of business on *, 2005, pursuant to Rule 14c-2 promulgated
under the Securities Exchange Act of 1934, as amended. The purpose of this
Information Statement is to inform the Company's shareholders that on December
12, 2005, holders of a majority of the outstanding Common Stock of the Company
acted by written consent in lieu of a special meeting of shareholders to:
1. approve and authorize the Company to effect a one-for-20 reverse
split of the issued and outstanding shares of Common Stock of the
Company;
2. ratify any and all actions the Company has taken to date with
respect to the approved one-for-20 reverse split of the issued and
outstanding shares of Common Stock of the Company;
3. increase the number of shares of the Company's Common Stock subject
to the Company's 2000 Stock Option Plan after the one-for-20 reverse
stock split from 1,000,000 shares to 2,000,000 shares; and
4. authorize the issuance of 10,000,000 shares of preferred stock.
This Information Statement shall be considered the notice required under
Section 228(e) of the Delaware General Corporation Law. Corporate action by the
Company with respect to the above matters will be taken approximately 20 days
after the initial mailing of this Information Statement.
By order of the Board of Directors:
/s/ Jeffrey T. Halloran
----------------------------------------
Jeffrey T. Halloran
Chief Executive Officer and Director
Phantom Fiber Corporation
144 Front Street, Suite 580
Toronto, Ontario, Canada M5J 2L7
INFORMATION STATEMENT
Introductory Statement
Phantom Fiber Corporation is a Delaware corporation with its principal
executive offices located at 144 Front Street, Suite 580, Toronto, Ontario,
Canada M5J 2L7. The Company's telephone number is (416) 703-4007. This
Information Statement is being sent to the Company's shareholders by the Board
of Directors to notify them about action that the holders of a majority of the
Company's outstanding Common Stock have taken by written consent, in lieu of a
special meeting of the shareholders. The action was taken on December 12, 2005,
and will be effective approximately 20 days after the initial mailing of this
Information Statement.
Copies of this Information Statement are being mailed on or about *, 2005
to the holders of record on *, 2005 of the outstanding shares of the Company's
Common Stock.
General Information
The Company previously filed a Form 8-K on April 25, 2005 which reported
that the Company's Board of Directors had authorized and approved a one-for-20
reverse stock split effective at the opening of business on May 2, 2005. The
Company's shareholders ratified authorization for the one-for-20 reverse stock
split on December 12, 2005. In order to file a Certificate of Amendment to its
Amended and Restated Certificate of Incorporation and legally give effect to the
one-for-20 reverse stock split, on December 12, 2005, holders of a majority of
the outstanding Common Stock of the Company acted by written consent in lieu of
a special meeting of shareholders to approve and authorize the Company to effect
the one-for-20 reverse stock split and to ratify any and all actions the Company
has taken to date with respect to the one-for-20 reverse stock split. The
Company expects to file the prescribed Certificate of Amendment to its Amended
and Restated Certificate of Incorporation to give legal effect to the one-for-20
reverse stock split on or about *, 2005.
Effectiveness of the one-for-20 reverse stock split will reduce the number
of shares of the Company's Common Stock subject to the Company's 2000 Stock
Option Plan from 20,000,000 shares to 1,000,000 shares. On December 12, 2005,
holders of a majority of the outstanding Common Stock of the Company acted by
written consent in lieu of a special meeting of shareholders to approve and
authorize the Company to increase the number of shares of the Company's Common
Stock subject to the Company's 2000 Stock Option Plan after the one-for-20
reverse stock split is effective from 1,000,000 shares to 2,000,000 shares.
Additionally, on November 30, 2005, the Company's Board of Directors
authorized and approved, subject to shareholder approval, an amendment to
authorize the issuance of 10,000,000 shares of preferred stock. Subsequently, on
December 12, 2005, holders of a majority of the outstanding Common Stock of the
Company acted by written consent in lieu of a special meeting of shareholders to
adopt an amendment to the Company's Amended and Restated Certificate of
Incorporation to authorize the issuance of 10,000,000 shares of preferred stock.
The Company presently has one class of voting securities, Common Stock, of
which each share is entitled to one vote. As of December 15, 2005, there were
13,890,464 shares of Common Stock outstanding. The consent of shareholders
holding more then 50% of the votes entitled to be cast approved amendments to
give legal effect to the one-for-20 reverse stock split and to authorize the
issuance of 10,000,000 shares of preferred stock.
1
Description of the Company's Capital Stock
General
The Company's Amended and Restated Certificate of Incorporation authorizes
the Company to issue 400,000,000 shares of Common Stock. As of December 15,
2005, 13,890,464 shares of the Company's Common Stock were issued and
outstanding and 1,974,038 shares of Common Stock were reserved for options,
warrants and other commitments.
Holders of the Company's Common Stock: (i) have equal ratable rights to
dividends from funds legally available therefor, when, as and if declared by the
Board of Directors; (ii) are entitled to share ratably in all of the Company's
assets available for distribution to shareholders upon liquidation, dissolution
or winding up of the Company's affairs; (iii) do not have preemptive,
subscription or conversion rights, nor are there any redemption or sinking fund
provisions applicable thereto; and (iv) are entitled to one vote per share on
all matters on which shareholders may vote at all shareholder meetings. The
Common Stock does not have cumulative voting rights.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of December 15, 2005. The information
in this table provides the ownership information for: each person known to be
the beneficial owner of more than 5% of the Company's Common Stock; each of the
Company's directors; each of the Company's executive officers; and the Company's
executive officers and directors as a group.
Number of Shares of Common Percentage of
Name and Address Stock Outstanding Shares of
of Beneficial Owner Beneficially Owned (1) Common Stock (1)
- ------------------------------------------- ---------------------------- -----------------------
Jeffrey T. Halloran 4,362,050 (2) 30.6%
6 Bunhill Court
Ajax, Ontario, Canada L15 4S7
Lorraine Halloran 825,000 5.8%
144 Front Street West
Suite 580
Toronto, Ontario, Canada M5J 2L7
Herbert C. Sears 118,250 (3) *
144 Front Street West
Suite 580
Toronto, Ontario, Canada M5J 2L7
Gordon S. Fowler 19,250 (4) *
95 Lake Road Terrace
Wayland, MA 01778
J. Graham Simmonds 0 0%
330 University Avenue
Toronto, Ontario, Canada M5G 1R7
- ------------------------------------------- ---------------------------- -----------------------
All Directors and Executive Officers as a 4,499,550 31.6%
Group (4 persons)
- ------------------------------------------- ---------------------------- -----------------------
* Less than 1%
(1) Applicable percentage ownership is based on 13,890,464 shares of Common
Stock outstanding as of December 15, 2005, together with securities
exercisable or convertible into shares of Common Stock within 60 days of
December 15, 2005 for each stockholder. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities.
Shares of Common Stock that are currently exercisable or exercisable
within 60 days of December 15, 2005 are deemed to be beneficially owned by
the person holding such securities for the purpose of computing the
percentage of ownership of such person, but are not treated as outstanding
for the purpose of computing the percentage ownership of any other person.
(2) Includes 4,155,800 shares held by the Halloran Family Trust and stock
2
options to purchase 206,250 shares of Common Stock, comprised of 165,000
options owned by Mr. Halloran and 41,250 options owned by Bernadette
Halloran, with an exercise price of $0.228 per share.
(3) Represents a stock option to purchase 118,250 shares of Common Stock of
the Company with an exercise price of $0.228 per share. (4) Represents a
stock option to purchase 19,250 shares of Common Stock with an exercise
price of $0.228 per share.
Executive Compensation
The following table sets forth information concerning the annual and
long-term compensation of our Chief Executive Officer and the other named
executive officers, for services as executive officers for the last three fiscal
years.
SUMMARY COMPENSATION TABLE
Long-Term Cmpensation
-------------------------------------------
Annual Compensation Awards Payouts
------------------------------------- ------------------------------ ------------
Other Securities All
Annual Restricted Under-lying Other
Name and Compen- Stock Options/ SARs LTIP Compen-
Principal Position Year Salary ($) Bonus ($) sation ($) Award(s) ($) (#) Payouts ($) sation ($)
- ------------------------- ----------- ------------- ---------- ------------ -------------- --------------- ------------ -----------
Jeffrey T. Halloran, 2004 $179,300 -0- -0- -0- -0- -0- -0-
Chief Executive 2003 $85,600 -0- -0- -0- -0- -0- -0-
Officer, President, 2002 $85,600 -0- -0- -0- 165,000 -0- -0-
and Principal
Financial Officer
Vince Bulbrook, 2004 -0- -0- $29,050 -0- -0- -0- -0-
Former Chief 2003 -0- -0- -0- -0- -0- -0- -0-
Financial Officer 2002 -0- -0- -0- -0- -0- -0- -0-
John G. Simmonds, 2004 -0- -0- -0- -0- -0- -0- -0-
Former Chief 2003 $55,573 -0- -0- -0- -0- -0- -0-
Executive Officer 2002 -0- -0- -0- -0- -0- -0- -0-
One-for-20 Reverse Split
On April 25, 2005 the Company filed a Form 8-K with the Securities and
Exchange Commission which reported that the Company's Board of Directors had
authorized and approved a one-for-20 reverse stock split effective at the
opening of business on May 2, 2005. The Company's shareholders ratified
authorization for the one-for-20 reverse stock split on December 12, 2005. In
order to file a Certificate of Amendment to its Amended and Restated Certificate
of Incorporation and legally give effect to the one-for-20 reverse stock split,
on December 12, 2005, holders of a majority of the outstanding Common Stock of
the Company acted by written consent in lieu of a special meeting of
shareholders to approve and authorize the Company to effect the one-for-20
reverse stock split and to ratify any and all actions the Company has taken to
date with respect to the one-for-20 reverse stock split. The Company expects to
file the prescribed Certificate of Amendment to its Amended and Restated
Certificate of Incorporation to give legal effect to the one-for-20 reverse
stock split on or about *, 2005.
Pursuant to the one-for-20 reverse stock split, each 20 outstanding shares
of Common Stock (the "Old Shares") were converted into one share of Common Stock
(the "New Shares"). The reason for the reverse stock split was to increase the
per share stock price. The Company believes that if it is successful in
maintaining a higher stock price, the stock will generate greater interest among
professional investors and institutions. If the Company is successful in
generating interest among such entities, it is anticipated that the shares of
its Common Stock would have greater liquidity and a stronger investor base. No
assurance can be given, however, that the market price of the New Shares will
maintain in proportion to the reduction in the number of outstanding shares
resulting from the reverse stock split. The New Shares issued pursuant to the
reverse stock split are fully paid and non-assessable. All New Shares have the
same par value, voting rights and other rights as Old Shares. Stockholders of
the Company do not have preemptive rights to acquire additional shares of Common
Stock which may be issued.
3
The reverse stock split was effectuated by reducing the number of issued
and outstanding shares of Common Stock at the ratio of one for 20. The
authorized number of shares of Common Stock will not be impacted by filing the
Certificate of Amendment to legally give effect to the reverse stock split.
Accordingly, as a result of the reverse stock split, the Company has
approximately 386,109,536 authorized and unissued shares of Common Stock, which
shares may be issued in connection with acquisitions or subsequent financings.
There can be no assurance that the Company will be successful in making any such
acquisitions or obtaining any such financings. In addition, the reverse stock
split has potentially dilutive effects on each of the Company's shareholders.
Each of the shareholders will be diluted to the extent that any of the
authorized but unissued shares are subsequently issued.
The reverse stock split did not alter any shareholder's percentage
interest in the Company's equity, except to the extent that the reverse stock
split resulted in any of the Company's shareholders owning a fractional share.
No fractional shares were issued. Any shareholder who beneficially owned a
fractional share of the Company's Common Stock after the reverse stock split,
received one additional share of Common Stock in lieu of such fractional share.
Accordingly, the number of shareholders of record of the Company's Common Stock
was not reduced as a result of the reverse stock split. As of November 16, 2005,
the Company had 475 shareholders of record of its Common Stock. The principal
effect of the reverse stock split were that the number of shares of Common Stock
issued and outstanding were reduced from approximately 268,082,470 to
approximately 13,404,124.
In addition, as a result of the reverse stock split, all outstanding
options, warrants and other convertible or exercisable securities entitling the
holders thereof to purchase shares of the Company's Common Stock are entitled to
receive, upon exercise of their securities, one-twentieth of the number of
shares of the Company's Common Stock which such holders may purchase upon
exercise or conversion of their securities. Further, as a result of the reverse
stock split, the exercise or conversion price of all outstanding derivative
securities of the Company was increased twenty-fold.
The Company believes that the U.S. federal income tax consequences of the
reverse stock split to holders of Common Stock are as follows:
(i) Except as explained in (v) below, no income gain or loss will be
recognized by a shareholder on the surrender of the Old Shares or receipt of the
certificate representing post-split New Shares.
(ii) Except as explained in (v) below, the tax basis of the New Shares
will equal the tax basis of the Old Shares exchanged therefore.
(iii) Except as explained in (v) below, the holding period of the New
Shares will include the holding period of the Old Shares if such Old Shares were
held as capital assets.
(iv) The conversion of the Old Shares into the New Shares will produce no
taxable income or gain or loss to the Company.
(v) the federal income tax treatment of the receipt of the one additional
share in lieu of any fractional interests by a shareholder is not clear and may
result in tax liability not material in amount in view of the low value of such
fractional interest.
The Company's opinion as to the U.S. federal income tax consequences of
the reverse stock split is not binding upon the Internal Revenue Service or the
courts, and there can be no assurance that the Internal Revenue Service or the
courts will accept the positions expressed above.
4
The state and local tax consequences of the reverse stock split may vary
significantly as to each shareholder, depending upon the state in which he or
she resides. Shareholders are urged to consult their own tax advisors with
respect to the federal, state and local tax consequences of the reverse stock
split.
Except for the following, there are currently no commitments or
understandings for the issuance of the additional shares of Common Stock which
are authorized and unissued after the reverse stock split:
Subsequent to September 30, 2005, the Company entered into arrangements
with various individual accredited investors as well as negotiations with
prospective institutional accredited investors to obtain financing for
continuing operations. As of November 23, 2005, the Company received cash
infusions of $872,000 from individual accredited investors and the Company is
obligated to issue a minimum of 1,585,455 units at a price of $0.55 per unit.
Each unit is comprised of one share of Common Stock and one share purchase
warrant. Each share purchase warrant entitles the holder to purchase one
additional share of Common Stock at a price of $1.10 if exercised within three
years from closing of the private placement.
Should the Company conclude an investment arrangement with prospective
institutional accredited investors by December 12, 2005 on terms which vary from
the foregoing, it intends to make such terms available, on a retroactive basis,
to the individual accredited investors.
Amendment to the Company's 2000 Stock Option Plan
On January 5, 2000, the Board of Directors adopted the 2000 Stock Option
Plan (the "Plan") effective as of January 5, 2000 and terminating on January 5,
2010. At a Special Meeting of Stockholders on February 29, 2000, the Plan was
approved by the Company's stockholders.
On November 30, 2005, the Board of Directors approved an amendment to the
Plan to increase the number of shares of Common Stock subject to the Plan after
the one-for-20 reverse stock split from 1,000,000 shares to 2,000,000 shares. On
December 12, 2005, holders of a majority of the outstanding Common Stock of the
Company acted by written consent in lieu of a special meeting of shareholders to
approve and adopt the amendment to the Plan to increase the number of shares of
Common Stock subject to the Plan after the one-for-20 reverse stock split from
1,000,000 shares to 2,000,000 shares. As of September 30, 2005, after giving
effect to the one-for-20 reverse stock split, there were 1,000,000 options
outstanding under the Plan.
The adoption of the amendment by the Board of Directors and by the
Company's shareholders reflects a determination by the Board that ensuring the
continued availability of a sufficient number of options available for grant
under the Plan is important to the Company's ongoing and continuing efforts to
attract and retain key senior management personnel and increase the interest of
our executive officers and employees in the Company's continuing success.
The Board of Directors believes that in order to continue to retain and
attract qualified candidates for such positions who can contribute to the
Company's growth and development, it is necessary to increase the number of
shares of Common Stock issuable under the Plan after giving effect to the
one-for-20 reverse stock split from 1,000,000 shares to 2,000,000 shares.
The following summary is qualified in its entirety by reference to the
Plan, a copy of which is attached hereto as Appendix A.
Description of the Plan
The Plan is intended to help the Company and its subsidiaries or
affiliates attract and retain employees (including officers), directors,
consultants and independent contractors and to furnish additional incentives to
such persons to enhance the value of the Company over the long term by
encouraging them to acquire a proprietary interest in the Company.
Shares Subject to the Plan. Under the terms of the Plan, as amended and
after giving effect to the one-for-20 reverse stock split, the Board is
authorized to issue 2,000,000 shares of Common Stock. No single person may be
granted options in a calendar year with respect to more than 10% of the
aggregate number of shares reserved for issuance under the Plan. Shares subject
to options that expire or are cancelled unexercised shall again be available for
grant under the Plan. In the event of certain corporate events, such as a stock
split or reorganization, the Board of Directors will, to the extent necessary
and appropriate, adjust the number of shares available for grant under the Plan,
the number and kind of shares subject to outstanding options and exercise price
of outstanding options. The shares subject to the Plan may be authorized but
unissued shares or shares acquired by the Company for purposes of the Plan.
Administration of the Plan. The Plan shall be administered by a committee
of the Board of Directors (the "Committee"), consisting of two or more directors
who are non-employee directors (as defined in Rule 16b-3 pursuant to the
Securities Exchange Act of 1934) and, to the extent applicable, are "outside
directors" within the meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended. The Board of Directors, in its discretion, may act as the
Committee. The Committee has the authority to grant options and to determine,
subject to certain restrictions, the terms of the options, including whether the
option is an ISO or NQO (as described below), the exercise price per share of
Common Stock purchasable under an option, when and for how long each option may
be exercised, under what circumstances options may be settled, canceled,
forfeited, exchanged or surrendered and may impose additional terms, conditions,
restrictions and performance criteria relating to any option or its exercise.
The Committee has the authority to make adjustments in the terms and conditions
of, and the criteria and performance objectives included in, options in
recognition of unusual or non-recurring events affecting the Company or any
Subsidiary or Affiliate (as such terms are defined in the Plan) or the financial
statements of the Company or any Subsidiary or Affiliate, or in response to
changes in applicable laws, regulations or accounting principles. The Committee
(which need not be identical for each optionee) may make all other
determinations deemed necessary or advisable for the administration of the Plan.
The date on which the Committee adopts a resolution expressly granting an option
shall be considered the day on which such option is granted.
Eligibility. The Plan provides for the discretionary grant of options to
purchase shares of Common Stock to key employees (including officers),
directors, consultants and independent contractors of the Company and its
present or future subsidiary and parent entities. The granting of options is
discretionary and it is not possible to determine how many options actually will
be granted.
Option Grants. The Plan provides for the granting of stock options that
qualify as incentive stock options ("ISOs," which are options that provide the
option holder with favorable tax treatment) under Section 422 of the Internal
Revenue Code of 1986, as amended and options that do not qualify as ISOs
("Nonqualified Options" or "NQOs"). The exercise price per share payable upon
the exercise of each option granted under the Plan is to be determined by the
Committee, provided that the exercise price of an ISO may not be less than the
fair market value of the stock at the date of grant. If an ISO is granted to an
individual who owns more than 10% of the total combined voting power of all
classes of stock of the Company, the exercise price-per-share may not be less
than 110% of the fair market value on the date of grant. The exercise price may
be paid in cash, with shares of stock already owned by the individual or by
means of a "cashless exercise."
Termination of employment. In general, an option will expire when the
option recipient ceases to be an employee or director of, or an independent
contractor with, the Company or any subsidiary or parent entity (or a successor
company), except that the Committee generally will provide at the grant of an
option that the option will remain exercisable for a limited period (but not
later than the expiration date of such option) following the option recipient's
termination of employment or death.
Change of control. In the event of a change in control of the Company, any
and all options then outstanding shall become fully exercisable and vested,
whether or not theretofore vested and exercisable.
The following is a description of the principal U.S. federal income tax
consequences of options under the Plan based on present federal tax laws.
Federal tax laws may change from time to time and future changes may
significantly affect the federal income tax consequences described below. The
description below does not purport to be a complete description of the tax
consequences associated with options under the Plan applicable to any particular
recipient. Differences in each individual's financial situation may cause
federal, state and local tax consequences of options to vary. In addition, many
of the individuals eligible to receive options under the Plan are not subject to
U.S. tax, but may be subject to tax in other jurisdictions. Each recipient of an
option should consult his or her personal tax adviser about the detailed
provisions of the applicable tax laws and regulations.
6
In general, at the time an option is granted the recipient of the
option -- whether an ISO or a NQO -- will not be deemed to receive any income
and the Company will not be entitled to a federal tax deduction.
Nonqualified Options. When an option recipient exercises an NQO, he or she
will recognize ordinary compensation income equal to the excess of (a) the fair
market value on the exercise date of the shares received as a result of the
option exercise over (b) the option exercise price (whether paid in cash or paid
through a sale of shares received on exercise through a broker-assisted cashless
exercise), and the Company will be entitled to a tax deduction in that amount.
The shares acquired by the option recipient upon exercise of the option will
have a tax basis equal to the fair market value of the shares on the exercise
date. Upon any subsequent sale of those shares, the option recipient will
recognize a capital gain (or loss) in an amount equal to the difference between
the amount realized on the sale and such tax basis. Any such gain (or loss) will
be characterized as long-term capital gain (or loss) if the shares received upon
exercise have been held for more than one year; otherwise, the gain (or loss)
will be characterized as a short-term capital gain (or loss). An option
recipient's holding period for federal income tax purposes for such shares will
commence on the date following the date of exercise. Short-term capital gain is
subject to tax at the same rate as is ordinary income. The Code currently
provides that, in general, the net long-term capital gain resulting from the
sale of shares held for more than 12 months is subject to tax at a maximum rate
of 15% (5% for individuals in the 10% or 15% tax bracket). The Code currently
provides that the tax rate on net long-term capital gain will change in future
years: The 15% rate will increase to 20% in 2009 and the 5% rate will decrease
to 0% in 2008 and then increase to 10% in 2009.
If all or any part of the exercise price of an option is paid by the
option recipient with shares of Common Stock, no gain or loss will be recognized
by the option recipient on the shares surrendered in payment. The number of new
shares received on exercise of the option equal to the number of shares
surrendered will have the same tax basis and holding period, for purposes of
determining whether subsequent dispositions result in long-term or short-term
capital gain or loss and the applicable tax rates, as the basis and holding
period of the shares surrendered. The balance of the shares received (the excess
of new shares received over the number of shares surrendered) on such exercise
will be treated for federal income tax purposes (and taxed as described in the
preceding paragraph) as though issued upon the exercise of the option for an
exercise price equal to the consideration, if any, paid by the option recipient
in cash. The option recipient will have ordinary income compensation equal to
the fair market value of the balance of shares received on exercise less any
cash paid on exercise. The Company's deduction will not be affected by whether
the exercise price is paid in cash or in shares.
Incentive Stock Options. In general, an option recipient will not be
deemed to receive any income at the time an ISO is exercised if the option
recipient does not dispose of the shares within two years after the grant of the
ISO and one year after the exercise of the ISO. In such a case, the gain or loss
on a subsequent sale (the difference between the amount realized on the sale and
the exercise price) will be a long-term capital gain or loss and will be subject
to tax as described in the discussion of NQOs above. However, for purposes of
computing the "alternative minimum tax" applicable to an option recipient, the
option recipient will include in the option recipient's alternative minimum
taxable income the amount the option recipient would have included in income if
the ISO were an NQO (the amount by which the fair market value of the shares on
the date of exercise exceed the option price). Such amount may be subject to an
alternative minimum tax of 26% or 28%. Similarly, for purposes of making
alternative minimum tax calculations, the option recipient's basis in the stock
received on the exercise of an ISO will be determined as if the ISO were an NQO.
If an option recipient sells the shares acquired on exercise of an ISO
within two years after the date of grant of the ISO or within one year after the
exercise of the ISO, the disposition is a "disqualifying disposition," and the
option recipient will recognize income in the year of the disqualifying
disposition equal to the excess of the amount received for the shares over the
exercise price. Of that income, the portion equal to the excess of the fair
market value of the shares at the time the ISO was exercised over the exercise
price will be treated as compensation to the option recipient, taxable as
ordinary income, and the balance (if any) will be long- or short-term capital
gain depending on whether the shares were sold more than one year after the ISO
was exercised. The federal tax rate applicable to any long-term capital gain is
as described above. If the option recipient sells the shares in a disqualifying
disposition at a price that is below the exercise price, the loss will be a
short-term capital loss if the option recipient has held the shares for one year
or less and otherwise will be a long-term capital loss.
7
If an option recipient uses shares acquired upon the exercise of an ISO to
exercise an ISO, and the sale of those shares for cash on the same date would
have been a disqualifying disposition of such shares, the use of such shares to
exercise an ISO also would constitute a disqualifying disposition. In such case
the tax consequences described above with respect to disqualifying dispositions
would apply, except that any additional appreciation in the value of the stock
that is not taxed as compensation income will not be recognized and thus no
capital gain results on the additional appreciation as a result of the
disqualifying disposition. The basis of the shares deemed to be received that
are equal in number to the shares surrendered will be the basis of the
surrendered shares increased by any reported compensation income as a result of
the disqualifying disposition. Any additional shares actually received will have
a basis equal to the amount of cash paid, if any, to exercise the new ISO. For
purposes of determining capital gain treatment, the option recipient will have a
carryover holding period with respect to those shares of stock deemed to be
received that are equal in number to the shares used for payment, whereas the
holding period of any additional shares of stock received will begin on the date
that the new ISO is exercised. For purposes of receiving favorable ISO tax
treatment, the holding period of all shares, including those shares deemed to be
received and those actually received, will begin on the date the new ISO is
exercised.
The Company is not entitled to a deduction as a result of the grant or
exercise of an ISO. If the option recipient has compensation taxable as ordinary
income as a result of a disqualifying disposition, the Company will be entitled
to a deduction in an amount equal to the compensation income resulting from the
disqualifying disposition in the taxable year of the Company in which the
disqualifying disposition occurs.
Withholding of Taxes. Whenever a participant is required to recognize
taxable income for federal income tax purposes, the Company may be obligated to
withhold amounts for the payment of federal, state and local taxes. The Company
may take such action as it deems necessary to enable the withholding obligations
to be met.
Other Tax Matters. Tax consequences different from or in addition to those
described above may result in the event of the vesting or exercise of an option
after the termination of an option recipient's employment by reason of death. In
addition, various state laws and/or the laws of other applicable jurisdictions
may provide for tax consequences that vary significantly from those described
above.
The Company's opinion as to the U.S. federal income tax consequences of
options under the Plan is not binding upon the Internal Revenue Service or the
courts, and there can be no assurance that the Internal Revenue Service or the
courts will accept the positions expressed above.
Amendment to the Company's Amended and Restated Certificate of Incorporation
to Authorize the Issuance of 10,000,000 Shares of Preferred Stock
On November 30, 2005, the Company's Board of Directors authorized and
approved, subject to shareholder approval, an amendment to authorize the
issuance of 10,000,000 shares of preferred stock. Subsequently, on December 12,
2005, holders of a majority of the outstanding Common Stock of the Company acted
by written consent in lieu of a special meeting of shareholders to adopt an
amendment to the Company's Amended and Restated Certificate of Incorporation to
authorize the issuance of 10,000,000 shares of preferred stock. The amendment
will become effective upon the filing of a Certificate of Amendment to the
Company's Amended and Restated Certificate of Incorporation with the Delaware
Secretary of State.
The preferred stock to be authorized is commonly referred to as "blank
check" preferred stock ("Blank Check Preferred") because the Blank Check
Preferred would have such designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
thereof as shall be expressed in the resolution or resolutions providing for the
issue of such stock adopted by the Board of Directors from time to time. As
such, the Blank Check Preferred would be available for issuance without further
action by the Company's shareholders, except as may be required by applicable
law or pursuant to the requirements of the exchange or quotation system upon
which our securities are then trading or quoted.
The Board of Directors believes that the creation of Blank Check Preferred
is advisable and in the best interests of the Company and its shareholders for
several reasons. The authorization of the Blank Check Preferred would permit the
Board of Directors to issue such stock without shareholder approval and,
thereby, provide the Company with maximum flexibility in structuring
acquisitions, joint ventures, strategic alliances, capital-raising transactions
and for other corporate purposes. The Blank Check Preferred would enable the
Company to respond promptly to and take advantage of market conditions and other
favorable opportunities without incurring the delay and expense associated with
calling a special shareholders' meeting to approve a contemplated stock
issuance.
8
The authorization of the Blank Check Preferred would also afford the
Company greater flexibility in responding to unsolicited acquisition proposals
and hostile takeover bids. The issuance of Blank Check Preferred could have the
effect of making it more difficult or time consuming for a third party to
acquire a majority of the Company's outstanding voting stock or otherwise effect
a change of control. Shares of Blank Check Preferred may also be sold to third
parties that indicate that they would support the Board in opposing a hostile
takeover bid. The availability of Blank Check Preferred could have the effect of
delaying a change of control and of increasing the consideration ultimately paid
to the Company and its shareholders. The proposed Blank Check Preferred
amendment to the existing Amended and Restated Certificate of Incorporation is
not intended to be an anti-takeover measure, and the Board of Directors is not
aware of any present third party plans to gain control of the Company.
The actual effect of the issuance of any shares of Blank Check Preferred
upon the rights of holders of Common Stock cannot be stated until the Board
determines the specific rights of the holders of such Blank Check Preferred.
However, the effects might include, among other things, restricting dividends on
the Common Stock, diluting the voting power of the Common Stock, reducing the
market price of the Common Stock, or impairing the liquidation rights of the
Common Stock, without further action by the shareholders. Holders of the
Company's Common Stock will not have preemptive rights with respect to the Blank
Check Preferred.
Although the Company may consider issuing Blank Check Preferred in the
future for purposes of raising additional capital or in connection with
acquisition transactions, the Company currently has no binding agreements or
commitments with respect to the issuance of the Blank Check Preferred.
Interest of Certain Persons in Matters to Be Acted Upon
No director, executive officer, associate of any director or executive
officer, or any other person has any substantial interest, direct or indirect,
by security holdings or otherwise, resulting from actions set forth herein,
which is not shared by all other shareholders pro rata, and in accordance with
their respective interests.
No Dissenters' Rights
Shareholders do not have the statutory right to dissent and obtain an
appraisal of their shares under Delaware law in connection with the actions
being taken as described in this Information Statement.
Cost of Information Statement
The Company is making the mailing and will bear the costs associated
therewith. There will be no solicitations made. The Company will reimburse
banks, brokerage firms, other custodians, nominees and fiduciaries for
reasonable expenses incurred in sending the Information Statement to beneficial
owners of Common Stock.
Forward-Looking Statements and Information
This Information Statement includes forward-looking statements. You can
identify our forward-looking statements by the words "expects," "projects,"
"believes," "anticipates," "intends," "plans," "predicts," "estimates" and
similar expressions.
The forward-looking statements are based on management's current
expectations, estimates and projections about us. The Company cautions you that
these statements are not guarantees of future performance and involve risks,
uncertainties and assumptions that the Company cannot predict. In addition, the
Company has based many of these forward-looking statements on assumptions about
future events that may prove to be inaccurate. Accordingly, the Company's actual
outcomes and results may differ materially from what is expressed or forecast in
the forward-looking statements.
9
You should rely only on the information provided in this Information
Statement. The Company has not authorized any person to provide information
other than that provided here. The Company has not authorized anyone to provide
you with different information. You should not assume that the information in
this Information Statement is accurate as of any date other than the date on the
front of the document.
Where You Can Find More Information About the Company
The Company files annual, quarterly and current reports, proxy statements
and other information with the SEC. You can read and copy any materials the
Company files with the SEC at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You can obtain information about the
operation of the SEC's Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains a Web site that contains information the
Company files electronically with the SEC, which you can access over the
Internet at http://www.sec.gov. Copies of these materials may also be obtained
by mail from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
10
Appendix A
A-6
PHANTOM FIBER CORPORATION
(FORMERLY, THE EIEIHOME.COM INC.)
AMENDED AND RESTATED
2000 STOCK OPTION PLAN
Dated: __________, 2005
1. Purpose. The purpose of the 2000 Stock Option Plan (the "Plan") of Phantom
Fiber Corporation, a Delaware corporation (formerly, eieiHome.com Inc.)
(the "Company"), is to attract and retain employees (including officers),
directors, consultants and independent contractors of the Company, or any
Subsidiary or Affiliate which now exists or hereafter is organized or
acquired, and to furnish additional incentives to such persons to enhance
the value of the Company over the long term encouraging them to acquire a
proprietary interest in the Company.
2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below:
(a) "Affiliate" means any entity if, at the time of granting of an
Option, (i) the Company, directly, owns at least 50% of the combined
voting power of all classes of stock of such entity or at least 50%
of the ownership interest in such entity or (ii) such entity,
directly or indirectly, owns at least 50% of the combined voting
power of all classes of stock of the Company.
(b) "Beneficiary" means the person, persons, trust or trusts which have
been designated by an Optionee in his or her most recent written
beneficiary designation filed with the Company to receive the
Optionee's rights under the Plan upon the Optionee's death, or, if
there is no such designation or no such designated person survives
the Optionee, then the person, persons, trust or trusts entitled by
will or applicable law to receive such rights or, if no such person
has such right then the Optionee's executor or administrator.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control" means a change in control of the Company which
will be deemed to have occurred if:
(i) any "person" as such term is used in Section 13(d) and 14(d)
of the Exchange Act (other than an Exempt Person) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of
the Company representing 50% or more of the combined voting
power of the Company's then outstanding voting securities;
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has
entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this
Section 2(d) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote
of at least a majority of the directors then still in office
who either were directors at the beginning of the period or
whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a
majority thereof;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than (A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving or parent entity) 50% or more of the combined
voting power of the voting securities of the Company or such
surviving or
parent entity outstanding immediately after such merger or consolidation or (B)
a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no "person" (as hereinbefore defined),
other than an Exempt Person, acquired 50% or more of the combined voting power
of the Company's then outstanding securities; or
(iv) the stockholders of the Company approve of a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect).
(e) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(f) "Committee" means the committee, consisting exclusively of two or more
Non-Employee Directors (as defined in Rule 16b-3), if and as the same may
be established by the Board to administer the Plan; provided, however,
that to the extent required for the Plan to comply with the applicable
provisions of Section 162(m) of the Code, "Committee" means either such
committee or a subcommittee of that committee, as the case may be, which
shall be constituted to comply with the applicable requirements of Section
162(m) of the Code and the regulations promulgated thereunder. If the
Committee does not exist, or for any other reason determined by the Board,
the Board may take any action under the Plan that would otherwise be the
responsibility of the Committee and, in such a case, all references herein
to the Committee shall refer to the Board.
(g) "Company" means Phantom Fiber Corporation (formerly, eieiHome.com Inc.), a
corporation organized under the laws of the State of Delaware, or any
successor corporation.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and as now or hereafter construed, interpreted and applied
by regulations, rulings and cases.
(i) "Exempt Person" means (1) the Company, (2) any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, (3) any
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of Stock,
or (4) any person or group of persons who, immediately prior to the
adoption of this Plan, owned more than 50% of the combined voting power of
the Company's then outstanding voting securities.
(j) "Fair Market Value" means, with respect to Stock or other property, the
fair market value of such Stock or other property determined by such
methods or procedures as shall be established from time to time by the
Committee. Notwithstanding the foregoing, the per share Fair Market Value
of Stock as of a particular date shall mean (i) if the shares of Stock are
then listed on a national securities exchange, the closing sales price per
share of Stock on the national securities exchange on which the Stock is
principally traded, for the last preceding date on which there was a sale
of such Stock on such exchange, or (ii) if the shares of Stock are then
traded on the National Market System of the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), the reported per
share closing price of the Stock on the day prior to such date or, if
there was no such price reported for such date, on the next preceding date
for which such a price was reported, or (iii) if the shares of Stock are
then traded in an over-the-counter market other than on the NASDAQ
National Market System, the average of the closing bid and asked prices
for the shares of Stock in such over-the-counter market for the last
preceding date on which there was a sale of such Stock in such market, or
(iv) if the shares of Stock are not then listed on a national securities
exchange or traded in an over-the-counter market, such value as the
Committee, in its sole discretion, shall determine in good faith.
A-1
(k) "ISO" means any Option intended to be and designated as an incentive
stock option within the meaning of Section 422 of the Code.
(l) "NQSO" means any Option not designated as an ISO.
(m) "Option" means a right, granted to an Optionee under Section 6(b) of
the Plan, to purchase shares of Stock, subject to the terms and
conditions of this Plan. An Option may be either an ISO or an NQSO,
provided that ISOs may be granted only to employees of the Company
or a Subsidiary.
(n) "Optionee" means a person who, as an employee, director, officer,
consultant or independent contractor of the Company, a Subsidiary or
an Affiliate, has been granted an Option.
(o) "Plan" means this eieiHome.com Inc. 2000 Stock Option Plan, as
amended from time to time.
(p) "Rule 16b-3" means Rule 16b-3, as from time to time in effect,
promulgated by the Securities and Exchange Commission under Section
16 of the Exchange Act, including any successor to such Rule.
(q) "Stock" means the common stock, par value $0.001 per share, of the
Company.
(r) "Stock Option Agreement" means any written agreement, contract, or
other instrument or document evidencing an Option.
(s) "Subsidiary" means any corporation in which the Company, directly or
indirectly, owns stock possessing 50% or more of the total combined
voting power of all classes of stock of such corporation.
(t) "Ten Percent Shareholder" means a person or persons who own,
directly or indirectly, more than 10% of the total combined voting
power of all classes of stock of the Company or any of its
Subsidiaries.
3. Administration. The Plan shall be administered by the Committee. The
Committee shall have the authority, in its discretion, subject to and not
inconsistent with the express provisions of the Plan, to administer the
Plan and to exercise all the powers and authorities either specifically
granted to it under the Plan or necessary or advisable in the
administration of the Plan, including, without limitation, the authority
to grant Options; to determine the persons to whom and the time or times
at which Options shall be granted; to determine the type and number of
Options to be granted, the number of shares of Stock to which Options may
relate and the terms, conditions, restrictions and performance criteria
relating to any Options; to determine whether, to what extent, and under
what circumstances Options may be settled, canceled, forfeited, exchanged
or surrendered; to make adjustments in the terms and conditions of, and
the criteria and performance objectives included in, Options in
recognition of unusual or non-recurring events affecting the Company or
any Subsidiary or Affiliate or the financial statements of the Company or
any Subsidiary or Affiliate, or in response to changes in applicable laws,
regulations or accounting principles; to designate Affiliates; to construe
and interpret the Plan and any Options; to prescribe, amend and rescind
rules and regulations relating to the Plan; to determine the terms and
provisions of the Stock Option Agreement (which need not be identical for
each Optionee); and to make all other determinations deemed necessary or
advisable for the administration of the Plan.
The Committee may appoint a chairperson and a secretary and may make
such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Committee shall be made by a majority of its members either present in person or
participating by conference telephone at a meeting or by written consent. The
Committee may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Committee or any
person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
including the Company, and any Subsidiary, Affiliate or Optionee (or any person
claiming any rights under the Plan from or through any Optionee) and any
stockholder.
A-2
No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any Option
granted hereunder.
4. Eligibility. Options may be granted in the discretion of the Committee to
key employees as determined by the Committee (including officers),
directors and consultants of the Company and its present or future
Subsidiaries and Affiliates. In determining the persons to whom Options
shall be granted and the type of Options granted (including the number of
shares to be covered by such Options), the Committee shall take into
account such factors as the Committee shall deem relevant in connection
with accomplishing the purposes of the Plan.
5. Stock Subject to the Plan. The maximum number of shares of Stock reserved
for the grant of Options under the Plan shall be 2,000,000 shares of
Stock, subject to adjustment as provided herein. Such shares may, in whole
or in part, be authorized but unissued shares or shares that shall have
been or may be reacquired by the Company in private transactions or
otherwise. The number of shares of Stock available for issuance under the
Plan shall be reduced by the number of shares of Stock subject to
outstanding Options. If any shares subject to an Option are forfeited,
canceled, exchanged or surrendered or if an Option otherwise terminates or
expires without a distribution of shares to the Optionee, the shares of
Stock with respect to such Option shall, to the extent of any such
forfeiture, cancellation, exchange, surrender, termination or expiration,
again be available for Options under the Plan. In no event shall any
Optionee be granted Options under this Plan in any one calendar year with
respect to more than 10% of the aggregate number of shares of Stock
reserved for awards under the Plan.
In the event that the Committee shall determine, in it sole
discretion, that any dividend or other distribution (whether in the form of
cash, Stock, or other property), recapitalization, stock split, reverse split,
any reorganization, merger, consolidation, spin-off, combination, repurchase,
share exchange, license arrangement, strategic alliance or other similar
corporate transaction or event, affects the Stock such that an adjustment is
appropriate in order to prevent dilution or enlargement of the rights of any
Optionees under the Plan, then the Committee shall make such equitable changes
or adjustments as it deems necessary or appropriate to any or all of (i) the
number and kind of shares of Stock which may thereafter be issued in connection
with Options, (ii) the number and kind of shares of Stock issued or issuable in
respect of outstanding Options, and (iii) the exercise price, grant price, or
purchase price relating to any Option; provided that, with respect to ISOs, such
adjustment shall be made in accordance with Section 424(h) of the Code.
6. Specific Terms of Options.
(a) General. Options may be granted at the discretion of the Committee.
The term of each Option shall be for such period as may be
determined by the Committee. The Committee may make rules relating
to Options, and may impose on any Option or the exercise thereof, at
the date or thereafter, such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee shall
determine.
(b) Options. The Committee is authorized to grand Options to Optionees
on the following terms and conditions:
(i) Type of Option. The Stock Option Agreement evidencing the
grant of an Option under the Plan shall designate the Option
as an ISO (in the event its terms, and the individual to whom
it is granted, satisfy the requirements for ISOs under the
Code), or an NQSO.
A-3
(ii) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by the
Committee; provided that, in the case of an ISO, (i) such
exercise price shall be not less than the Fair Market Value of
a share of Stock on the date of grant of such Option or such
other exercise price as may be required by the Code, (ii) if
the Optionee is a Ten Percent Shareholder, such exercise price
shall not be less than 110% of the Fair Market Value of a
share of Stock on the date of grant of such Option and in no
event shall the exercise price for the purchase of shares of
Stock be less than par value. The exercise price for Stock
subject to an Option may be paid in cash or by an exchange of
Stock owned by the Optionee for at least six months prior to
the date of the exchange ("Mature Stock"), or a combination of
both, in an amount having a combined value equal to such
exercise price. Any shares of Mature Stock exchanged upon the
exercise of any Option shall be valued at the Fair Market
Value on the date on which such shares are exchanged. An
Optionee may also elect to pay all or a portion of the
aggregate exercise price by having shares of Stock with a Fair
Market Value on the date of exercise equal to the aggregate
exercise price withheld by the Company or sold by a
broker-dealer in accordance with applicable law.
(iii) Term and Exercisability of Options. The date on which the
Committee adopts a resolution expressly granting an Option
shall be considered the day on which such Option is granted.
Options shall be exercisable over the exercise period (which
shall not exceed ten years from the date of grant), at such
times and upon such conditions as the Committee may determine,
as reflected in the Stock Option Agreement. An Option may be
exercised to the extent of any or all full shares of Stock as
to which the Option has become exercisable, by giving written
notice of such exercise to the Company's Secretary and paying
the exercise price as described in Section 6(b)(ii).
(iv) Termination of Employment, etc. An Option may not be exercised
unless the Optionee is then in the employ or a director of, or
then maintains an independent contractor relationship with,
the Company or any Subsidiary or Affiliate (or a company or a
parent or subsidiary company of such company issuing or
assuming the Option in a transaction to which Section 424(a)
of the Code applies), and unless the Optionee has continuously
maintained any of such relationships since the date of grant
of the Option; provided that, the Stock Option Agreement may
contain provisions extending the exercisability of Options, in
the event or specified terminations, to a date not later than
the expiration date of such Option. The Committee may
establish a period during which the Beneficiaries of an
Optionee who died while an employee, director or independent
contractor of the Company or any Subsidiary or Affiliate or
during any extended period referred to in the immediately
preceding proviso may exercise those Options which were
exercisable on the date of the Optionee's death; provided that
no Option shall be exercisable after its expiration date.
(v) Nontransferability. Options shall not be transferable by an
Optionee except by will or the laws of descent and
distribution and shall be exercisable during the lifetime of
an Optionee only by such Optionee.
(vi) Other Provisions. Options may be subject to such other
conditions as the Committee may prescribe in it discretion.
7. Change in Control Provisions. In the event of a Change in Control, any and
all Options then outstanding shall become fully exercisable and vested,
whether or not theretofore vested and exercisable.
A-4
8. General Provisions.
(a) Compliance with Legal and Exchange Requirements. The Plan, the
granting and exercising of Options thereunder, and the other
obligations of the Company under the Plan and any Stock Option
Agreement, shall be subject to all applicable federal and state
laws, rules and regulations, and to such approvals by any regulatory
or governmental agency as may be required.
The Company, in its discretion, may postpone the issuance or delivery of
Stock under any Option until completion of such stock exchange listing or
registration or qualification of such Stock or other required action under any
state, federal or foreign law, rule or regulation as the Company may consider
appropriate, and may require any Optionee to make such representations and
furnish such information as it may consider appropriate in connection with the
issuance or delivery of Stock in compliance with applicable laws, rules and
regulations.
(b) No Right to Continued Employment, etc. Nothing in the Plan or in any
Option granted or Stock Option Agreement entered into pursuant to
the Plan shall confer upon any Optionee the right to continue in the
employ of, or to continue as a director of or an independent
contractor to, the Company, any Subsidiary or any Affiliate, as the
case may be, or to be entitled to any remuneration or benefits not
set forth in the Plan or such Stock Option Agreement or to interfere
with or limit in any way the right of the Company or any such
Subsidiary or Affiliate to terminate such Optionee's employment,
directorship or independent contractor relationship.
(c) Taxes. The Company or any Subsidiary or Affiliate is authorized to
withhold from any Option granted, any payment relating to an Option
under the Plan (including from a distribution of Stock), or any
other payment to an Optionee, amounts of withholding and other taxes
due in connection with any transaction involving an Option, and to
take such other action as the Committee may deem advisable to enable
the Company and an Optionee to satisfy obligations for the payment
of withholding taxes and other tax obligations relating to any
Option. This authority shall include authority to withhold or
receive Stock or other property and to make cash payments in respect
thereof in satisfaction of an Optionee's tax obligations.
(d) Amendment and Termination of the Plan. The Board may at any time and
from time to time alter, amend, suspend, or terminate the Plan in
whole or in part; provided that, no amendment which requires
stockholder approval in order for the Plan to continue to comply
with Rule 16b-3 or Sections 422 and 424 of the Code and the
regulations promulgated thereunder shall be effective unless the
same shall be approved by the requisite vote of the stockholders of
the Company entitled to vote thereon. Notwithstanding the foregoing,
no amendment shall affect adversely any of the rights of any
Optionee, without such Optionee's consent, under any Option
theretofore granted under the Plan.
(e) No Rights to Options; No Stockholder Rights. No person shall have
any claim to be granted any Option under the Plan, and there is no
obligation for uniformity of treatment of Optionees. Except as
provided specifically herein, an Optionee or transferor of an Option
shall have no rights as a stockholder with respect to any shares
covered by the Option until the date of the issuance of a stock
certificate to such Optionee for such shares.
(f) Unfunded Status of Options. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. Nothing
contained in the Plan or any Option shall give any such Optionee any
rights that are greater than those of a general creditor of the
Company.
A-5
(g) No Fractional Shares. No fractional shares of Stock shall be issued
or delivered pursuant to the Plan or any Option. The Committee shall
determine whether cash, other Options, 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.
(h) Governing Law. The Plan and all determinations made and actions
taken pursuant hereto shall be governed by the laws of the State of
Delaware without giving effect to the conflict of laws principles
thereof.
(i) Effective Date; Plan Termination.
(i) The Plan shall take effect upon its adoption by the Board (the
"Effective Date"), but the Plan (and any grants of Options made
prior to the stock holder approval mentioned herein), shall be
subject to the approval of the holder(s) of a majority of the issued
and outstanding shares of voting securities of the Company entitled
to vote, which approval must occur within twelve months of the date
the Plan is adopted by the Board. In the absence of such approval,
such Options shall be null and void.
(ii) The Board may terminate the Plan at any tine with respect to any
shares of Stock that are not subject to Options. Unless terminated
earlier by the Board, the Plan shall terminate ten years after the
Effective Date and no Options shall be granted under the Plan after
such date. Termination of the Plan under this Section 8(i) will not
affect the rights and obligations of any Optionee with respect to
Options granted prior to termination.
A-6