MULTI-LINK TELECOMMUNICATIONS, INC.
5555 TRIANGLE PARKWAY, SUITE 300
NORCROSS, GEORGIA 30092
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE __, 2006
To the Holders of Preferred Stock and Common Stock of Multi-Link
Telecommunications, Inc.:
We are pleased to invite you to attend a Special Meeting of Stockholders of
Multi-Link Telecommunications, Inc. will be held on June ___, 2006 at 2:00p.m.
local time, at 5555 Triangle Parkway, Suite 300, Norcross, Georgia 30092.
Multi-Link Telecommunications, Inc., a Colorado corporation ("Company"), on May
17, 2006, obtained written consent from stockholders holding a majority of the
outstanding shares of voting securities of the Company entitled to vote on the
following actions:
1. To approve a proposal to change the Company's state of incorporation from the
State of Colorado to the State of Delaware by merging the Company, a Colorado
corporation, into a newly formed wholly-owned Delaware subsidiary, Auriga Merger
Co. ("Merger Co.") which upon Closing will effect the following:
(a) Change the Company name to "Auriga Laboratories, Inc."
(b) Reverse split of the Company's outstanding common stock on a basis
of 1 for 15, with special treatment for certain of the Company's
stockholders to preserve round lot stockholders.
(c) Increase the authorized capital stock to 260,000,000 shares
consisting of 250,000,000 shares of common stock, par value $0.001
per share, and 10,000,000 shares of Preferred Stock, par value
$0.001 per share.
2. To approve the adoption of a Stock Option Plan.
The details of the foregoing actions and other important information are set
forth in the accompanying Information Statement. The Board of Directors of the
Company has unanimously approved the above actions together with stockholders
holding a majority of the voting power.
On the basis that the stockholders holding a majority of the outstanding shares
of capital stock entitled to vote approved the foregoing actions, no other vote
or stockholder action is required. Accordingly, your vote is not required and is
not being solicited in connection with the approval of the foregoing actions.
Although your votes will not be required, you are still cordially invited to
attend the Special Meeting of Stockholders on June___, 2006, at 2:00p.m. local
time at the address above.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
By Order of the Board of Directors,
/s/ Philip S. Pesin
-----------------------------------------
Philip S. Pesin,
Chairman and Chief Executive Officer
Norcross, Georgia
May ___, 2006
1
MULTI-LINK TELECOMMUNICATIONS, INC.
INFORMATION STATEMENT
CONCERNING CORPORATE ACTIONS AUTHORIZED BY WRITTEN
CONSENT OF STOCKHOLDERS OWNING A MAJORITY
OF SHARES OF VOTING SECURITIES ENTITLED TO VOTE THEREON
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
GENERAL INFORMATION
This Information Statement is being furnished to the stockholders of Multi-Link
Telecommunications, Inc., a Colorado corporation ("Company," "we' or "us"), to
advise them of the corporate actions described herein, which have been
authorized by the written consent of stockholders owning a majority of the
outstanding voting securities of the Company entitled to vote thereon. This
action is being taken in accordance with the requirements of the Colorado
Business Corporation Law ("CBC").
The Company's board of directors has determined that the close of business on
May 17, 2006 is the record date ("Record Date") for the stockholders entitled to
notice about the actions authorizing: (i) the reincorporation into the state of
Delaware which will include a name change to Auriga Laboratories, Inc., a
reverse split of the Company's currently outstanding common stock on a basis of
1 for 15, with special treatment for certain of the Company's stockholders to
preserve round lot stockholders and the rounding up for fractional interests as
herein provided; and an increase in the Company's authorized shares; and (ii)
the adoption of a stock option plan. The foregoing actions are referred to
herein individually as the "Action" or collectively as the "Actions".
The foregoing actions have been adopted by our Board of Directors and by three
stockholders, who own in excess of 55% of our outstanding voting securities (the
"Majority Stockholders") in accordance with the "CBC", and that will be
presented at a Special Meeting of our stockholders to be held on June ___, 2006,
as outlined in the Notice of Special Meeting of Stockholders (the "Special
Meeting") that accompanies this Information Statement.
Stockholders of the Company are entitled to one vote for each share held.
On May 17, 2006, stockholders who are the owners of record of _____ shares of
the Company's Series A Convertible Preferred Stock, which on an
as-converted-to-common-stock basis, representing approximately 55.5% of the
outstanding voting securities of the Company, executed and delivered to the
Company a written consent authorizing and approving each of the Actions.
Accordingly, all of the above Actions have been approved by holders representing
approximately 55.5% of the outstanding voting securities of the Company. As
such, no vote or further action of the stockholders of the Company is required
to approve the Actions. Although you are cordially invited to attend the Special
Meeting on June __, 2006 no voting will be necessary to approve the Actions nor
are any proxies being solicited for such Special Meeting.
On May 17, 2006, the board of directors approved each of the Actions and
authorized the Company's officers to deliver this Information Statement to the
Company's stockholders.
The executive offices of the Company are located at 5555 Triangle Parkway, Suite
300, Norcross, Georgia 30092, (678)282-1600.
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This Information Statement will first be mailed to stockholders on or about May
___, 2006 and is being furnished for informational purposes only.
INTEREST OF PERSONS IN MATTERS TO BE ACTED UPON
No officer or director or principal shareholder has a substantial or material
interest in the favorable outcome of these Actions other than as discussed
herein.
CHANGE OF CONTROL
On May 5, 2006, the Company entered into an Agreement and Plan of Merger (the
"Agreement") with Auriga Laboratories, Inc. ("Auriga") and Multi-Link
Acquisition, Inc. ("Subsidiary"). The closing of the transactions contemplated
by the Agreement (the "Closing") occurred on May 17, 2006. At the Closing,
pursuant to the terms of the Agreement, the Company acquired all of the
outstanding capital stock from the Auriga Stockholders in exchange for 1,000,042
shares of Series A Convertible Preferred Stock, par value $0. 01 per share, of
the Company ("Preferred Shares"), which will be convertible into approximately
494,977,491 shares of the Company's common stock ("Conversion Shares"). The
issuance of the Preferred Shares and, upon conversion, the shares of the
Company's common stock underlying the Preferred Shares, to the Auriga
Stockholders was exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to Section 4(2) and/or Regulation D
thereof.
Following the exchange transaction, Auriga became a wholly-owned subsidiary of
the Company.
The Company is presently authorized under its Articles of Incorporation to issue
50,000,000 shares of common stock, no par value per share, and 5,000,000 shares
of preferred stock, par value $0.01 per share. Of the 5,000,000 shares of
preferred stock authorized, 1,000,042 shares have been designated as Series A
Convertible Preferred Stock pursuant to a certificate of designations
("Certificate of Designations"), which was approved by the Company's board of
directors, and filed with and accepted by, the Secretary of State of the State
of Colorado on May 12, 2006.
Currently, the Company has 37,215,913 shares of common stock issued and
outstanding and 1,000,042 shares of Series A Convertible Preferred Stock
("Preferred Shares") issued and outstanding. Each Preferred Share will be
convertible into 494.956 shares of the Company's common stock (the "Conversion
Rate"). The Preferred Shares will immediately and automatically be converted
into shares of the Company's common stock (the "Mandatory Conversion") upon the
approval and effectiveness of the reincorporation in Delaware which includes an
increase in the number of authorized shares of the Company's common stock and
the reverse split as described herein.
The holders of Preferred Shares are entitled to vote together with the holders
of the common stock, as a single class, upon all matters submitted to holders of
common stock for a vote. Each Preferred Share carries a number of votes equal to
the number of shares of common stock issuable in the Mandatory Conversion based
on the then applicable Conversion Rate. As such, immediately following the
exchange transaction, the Auriga Stockholders owned approximately 93% of the
total combined voting power of all classes of the Company's securities entitled
to vote.
Upon Mandatory Conversion of the Preferred Shares, and subject to an adjustment
of the Conversion Rate as a result of the reverse split described herein, the
Auriga Stockholders will, in the aggregate, receive approximately 32,998,564
shares of the Company's common stock, representing approximately 93% of the
outstanding shares of the Company's common stock immediately following the
Mandatory Conversion. The existing stockholders of the Company will, following
the Mandatory Conversion and reverse split, own approximately 2,481,063 shares
of the Company's common stock, representing approximately 7% of the outstanding
shares of the Company's common stock immediately following the Mandatory
Conversion.
3
Effective as of the Closing, the existing officers of the Company resigned, and
the newly appointed directors of the Company were Philip Pesin (Auriga's Chief
Executive Officer and Chairman) and Dayne Wagoner (an Auriga Director). Mr.
Keating was the sole director of the Company prior to the Closing. The size of
the board is initially two members, but may be increased by the board of
directors to five members during the one year period following Closing.
At Closing, the Company also entered into a certain financial advisory agreement
with Keating Securities, LLC ("Keating Securities"), a registered broker-dealer,
under which Keating Securities received $340,000 from the Company for its
advisory services rendered to the Company in connection with the Merger
transaction.
On March 30, 2006, in its Current Report on Form 8-K dated March 30, 2006, the
Company reported the execution of a letter of intent to acquire Auriga. On May
5, 2006, in its Current Report on Form 8-K dated May 5, 2006, the Company
reported the execution of the Agreement and included a copy of the Agreement
therein as Exhibit 2.1. On May 18, 2006, in its Current Report on Form 8-K dated
May 18, 2006, the Company reported the closing of the transactions contemplated
by the Agreement and included copies of the Certificate of Designations (as
Exhibit 4.1) and financial advisory agreement with Keating Securities (as
Exhibit 10.1). The Company also filed, and mailed to all stockholders of record
as of May 4, 2006, a Schedule 14f-1 Information Statement on May 8, 2006.
VOTING SECURITIES
The Company has shares of its common stock and Series A Convertible Preferred
Stock issued and outstanding at the time of the stockholder action. As of the
date of this stockholder action, there were 37,215,913 shares of common stock
issued and outstanding and 1,000,042 shares of Series A Convertible Preferred
Stock issued and outstanding.
Each share of common stock is entitled to one vote on all matters submitted to
the holders of common stock for their approval. The holders of Series A
Convertible Preferred Stock are entitled to vote together with the holders of
the common stock, as a single class, upon all matters submitted to holders of
common stock for a vote. Each share of Series A Convertible Preferred Stock
currently carries 494.956 votes (based on the number of shares of common stock
issuable in the Mandatory Conversion based on the current Conversion Rate on a
pre-reverse split basis) in any matter submitted to holders of common stock for
vote. The consent of the holders of a majority of the total combined voting
power of all classes of the Company's securities entitled to vote was necessary
to authorize each of the Actions described herein.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the Company's
common stock beneficially owned on May 18, 2006 for (i) each stockholder known
to be the beneficial owner of 5% or more of the Company's outstanding common
stock, (ii) each executive officer and director, and (iii) all executive
officers and directors as a group, on an approximated pre- and post- reverse
split basis. In general, a person is deemed to be a "beneficial owner" of a
security if that person has or shares the power to vote or direct the voting of
such security, or the power to dispose or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities of
which the person has the right to acquire beneficial ownership within 60 days.
4
For purposes of the following table, each holder of the Company's Series A
Convertible Preferred Stock is deemed to own the number of shares of common
stock into which the Series A Convertible Preferred Stock may be converted on a
pre- and post- reverse split basis (currently 494.496 shares of the Company's
common stock for each share of Series A Convertible Preferred Stock on a
pre-reverse split basis), respectively. Unless otherwise indicated, each person
in the table will have sole voting and investment power with respect to the
shares shown. The following table, as of May 18, 2006, assumes a total of
532,193,404 and 35,479,627 shares of the Company's common stock outstanding, on
an as-converted and pre- and post- reverse split basis, respectively.
AMOUNT OF BENEFICIAL
OWNERSHIP
---------------------------------------------------------------
Amount Amount
NAME OF BENEFICIAL OWNER (Pre-Reverse Split) (Post-Reverse Split) Percent
- ------------------------ ---------------------------------------------------------------
Philip S. Pesin (1)
5555 Triangle Parkway, Suite 300 229,032,465 15,268,831 37.7%
Norcross, GA 30092
Dayne Wagoner
5555 Triangle Parkway, Suite 300 39,539,865 2,635,991 7.4%
Norcross, GA 30092
Craig Collard (2)
208 Roseler Court 54,687,120 3,645,808 10.3%
Cary, NC 27519
Timothy F. Curran (3)
5555 Triangle Parkway, Suite 300 48,022,020 3,201,468 9.0%
Norcross, GA 30092
KI Equity Partners I, LLC
c/o Timothy J. Keating, Manager
5251 DTC Parkway, Suite 1090 28,703,182 1,913,545 5.4%
Greenwood Village, Colorado 80111 (4)
All Executive Officers and Directors 268,572,330 17,904,822 44.2%
As a Group (2 persons) (5)
(1) Includes shares held by Sorrento Financial Group, LLC, SFP, LLC and TSFG
II, LLC, over which Mr. Pesin has voting and investment control. Includes
warrants to purchase 75,034,395 and 5,002,293 shares of Multi-Link's
common stock, on a pre-Reverse Split and post-Reverse Split basis,
respectively, at an exercise price of $0.92 per share on a post-Reverse
Split basis. These warrants expire March 19, 2016. Includes 7,503,435 and
500,229 shares of Multi-Link's common stock, on a pre-Reverse Split and
post-Reverse Split basis, respectively, held in an IRA for the benefit of
Christine Pesin, Mr. Pesin's spouse.
5
(2) Excludes 2,532,795 and 168,853 shares of Multi-Link's common stock, on a
pre-Reverse Split and post-Reverse Split basis, respectively, held by C.
Collard Irrevocable Trust over which Mr. Collard disclaims any beneficial
interest.
(3) Excludes options to purchase 2,251,035 and 150,069 shares of Multi-Link's
common stock, on a pre-Reverse Split and post-Reverse Split basis,
respectively, at an exercise price of $0.92 per share on a post-Reverse
Split basis, which options begin to vest May 29, 2007.
(4) Timothy J. Keating is the manager of KI Equity Partners I, LLC ("KI
Equity") and has sole voting and investment control of such shares.
(5) Includes shares held by Sorrento Financial Group, LLC, SFP, LLC and TSFG
II, LP, over which Mr. Pesin has voting and investment control. Includes
warrants to purchase 75,034,395 and 5,002,293 shares of Multi-Link's
common stock, on a pre-Reverse Split and post-Reverse Split basis,
respectively, at an exercise price of $0.92 per share on a post-Reverse
Split basis, which are held by Mr. Pesin. These warrants expire March 19,
2016. Includes 7,503,435 and 500,229 shares of Multi-Link's common stock,
on a pre-Reverse Split and post-Reverse Split basis, respectively, held in
an IRA for the benefit of Christine Pesin, Mr. Pesin's spouse.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers, and persons who beneficially own
more than 10% of a registered class of the Company's equity securities, to file
reports of beneficial ownership and changes in beneficial ownership of the
Company's securities with the SEC on Forms 3 (Initial Statement of Beneficial
Ownership), 4 (Statement of Changes of Beneficial Ownership of Securities) and 5
(Annual Statement of Beneficial Ownership of Securities). Directors, executive
officers and beneficial owners of more than 10% of the Company's common stock
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms that they file. Except as otherwise set forth herein, based
solely on a review of the copies of such forms furnished to the Company, or
written representations that no reports were required, the Company believes that
for the fiscal year ended September 30, 2005, beneficial owners complied with
the Section 16(a) filing requirements applicable to them in that each officer,
director and beneficial owner of 10% or more of the Company's securities filed a
Form 3 with the SEC and has had no change of ownership since such filing.
DIRECTORS AND OFFICERS
The following table sets forth the names, positions and ages of the Company's
current executive officers and directors. All directors serve until the next
annual meeting of stockholders or until their successors are elected and
qualified. Officers are appointed by the board of directors and their terms of
office are, except to the extent governed by an employment contract, at the
discretion of the board of directors.
NAME AGE POSITION
Philip S. Pesin (1) 32 Chairman, Chief Executive Officer and Chief
Financial Officer
Dayne Wagoner (1) 41 Director and Secretary
(1) These persons were appointed to their respective positions effective May 17,
2006.
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Philip S. Pesin was a founder and director of Auriga since its inception in
April 2005. He was appointed Chairman of the Board in December 2005 and became
CEO, Treasurer and Secretary on March 29, 2006. Mr. Pesin is an attorney and
certified public accountant. He is the founder of the Sorrento Financial Group,
LLC, a financial services company specializing in private equity and business
consulting. Mr. Pesin is actively involved in his community and sits on the
board of directors of the Boys & Girls Club of the Southwest. Mr. Pesin is a
member of the bar associations of California and the District of Columbia, and
holds a Master of Laws degree from The Georgetown University Law Center, a Juris
Doctor from the University of San Diego School of Law, and a Bachelor of Science
in finance from The University of Arizona.
Dayne Wagoner became a director of Auriga in December 2005. In 1995 Mr. Wagoner
founded Edge Development, Inc. and from that time to the present he has been the
CEO. Edge Development, Inc. is a leading contractor in the United States.
REINCORPORATION OF THE COMPANY IN DELAWARE
On May 17, 2006, the Company's Board of Directors and Majority Stockholders
approved a proposal to change the Company's state of incorporation from Colorado
to Delaware by means of a merger (the "Merger") of the Company with and into
Multi-Link Merger Co. ("Merger Co."), a newly formed, wholly-owned Delaware
subsidiary of the Company (the "Reorganization Proposal"). Merger Co. will be
the surviving Corporation (the "Surviving Corporation") of the Merger, an effect
of which will be a change in the law applicable to the Company's corporate
affairs from the Colorado Business Corporation Law ("CBC") to Delaware General
Corporation Law ("DGCL"), including certain differences in shareholders' rights.
See "Comparative Rights of Holders of Multi-Link - Colorado Capital Stock and
Multi-Link - Delaware Capital Stock." Immediately following the Merger the name
of Merger Co. will be changed to "Auriga Laboratories, Inc."
REVERSE SPLIT OF COMMON STOCK
As a result of the Merger, each fifteen (15) shares of issued and outstanding
common stock of the Company will be converted into one share of common stock of
the Surviving Corporation.
Each share of Series A Convertible Preferred Stock will immediately and
automatically be converted into shares of the Company's common stock (the
"Mandatory Conversion") upon the effectiveness of the Merger. Accordingly,
following the Merger and the Mandatory Conversion, the holders of the currently
outstanding 1,000,042 shares of Series A Convertible Preferred Stock will, in
the aggregate, receive approximately 32,998,564 shares of the Surviving
Corporation's common stock, representing approximately 93% of the outstanding
shares of the Surviving Corporation's common stock immediately following the
Merger and the Mandatory Conversion. The existing stockholders of the Company's
common stock will, following the Mandatory Conversion and Merger, own
approximately 2,481,063 shares of the Surviving Corporation's common stock,
representing 7% of the outstanding shares of common stock.
The Company is presently authorized under its Articles of Incorporation to issue
50,000,000 shares of common stock. However, after the reincorporation in
Delaware the Company will have authorized 250,000,000 shares of common stock.
The Company is not proposing to reduce the amount of authorized shares of common
stock. Following the reincorporation in Delaware, the reverse split and the
Mandatory
7
Conversion, there will be 35,479,627 shares of common stock outstanding. With an
authorized number of 250,000,000 shares of common stock (as described below),
the Surviving Corporation will have unissued shares that will be available for
future issuance.
Stockholders do not have any dissenter or appraisal rights in connection with
the reverse split. There will be no change in the number of stockholders as a
result of the reverse split. There is no intention to take the Company private
because of the reverse split or otherwise.
SPECIAL TREATMENT OF STOCKHOLDERS HOLDING FEWER THAN 1500 (BUT AT LEAST 100)
COMMON SHARES AND FRACTIONAL SHARE TREATMENT
The Company's board of directors approved special treatment of stockholders of
record as of May 17, 2006 holding fewer than 1,500 shares of common stock to
prevent those stockholders from holding less than 100 shares after the Merger.
The special treatment is being afforded to preserve round lot stockholders
(i.e., holders owning at least 100 shares).
Accordingly, stockholders holding less than 1,500 shares but at least 100 shares
as of May 17, 2006, and who continue to hold such shares as of the record date
of the Merger ("Eligible Holders"), will receive 100 shares of common stock
after the Merger. STOCKHOLDERS PURCHASING LESS THAN 1,500 SHARES BUT AT LEAST
100 SHARES AFTER MAY 17, 2006, AND WHO CONTINUE TO HOLD SUCH SHARES AS OF THE
RECORD DATE OF THE MERGER, SHALL NOT BE AFFORDED SPECIAL TREATEMENT.
The Merger will not affect the common stock held by stockholders holding less
than 100 shares as of the record date of the Merger. The result of this special
treatment is that an estimated _______ additional shares of common stock will be
outstanding than if the Merger identically affected all stockholders. This
represents approximately ___ % of the total number of shares of common stock
outstanding after the Merger.
No fractional shares will be issued for any fractional share interest created by
the reverse split and held by a stockholder with more than 100 shares after the
Merger; those stockholders will receive a full share of common stock for any
fractional share interests created by the reverse split.
REASONS FOR REVERSE SPLIT AND SPECIAL TREATMENT
The Company believes the recent per share price of the common stock may have an
adverse effect on the marketability of its existing shares and the amount and
percentage of transaction costs paid by individual stockholders. Based on the
Company's current capital structure, the Company's ability to raise capital by
issuing new shares may also be affected because the Company is very near its
maximum authorization (before the increase in authorized shares described
below). The reverse split is also necessary to allow for the conversion of the
Series A Convertible Preferred Stock into shares of the Company's common stock.
The Company believes that the reverse split may also be advantageous to the
Company and its stockholders, because it may provide the opportunity for higher
share prices based upon fewer shares outstanding. It is also a factor that most
brokerage houses do not permit or favor lower-priced stocks to be used as
collateral for margin accounts. Certain policies and practices of the securities
industry may tend to discourage individual brokers within those firms from
dealing in lower-priced stocks. Some of those policies and practices involve
time-consuming procedures that make the handling of lower priced stocks
economically unattractive. The brokerage commissions on the purchase or sale of
lower priced stocks may also represent a higher percentage of the price than the
brokerage commission on higher priced stocks.
8
As a general rule, potential investors who might consider making investments in
the Company may be unwilling to do so when the Company has a large number of
shares issued and outstanding with little or no stockholders' equity. In other
words, the "dilution" which new investors would suffer would discourage them
from investing, as a general rule of experience. A reduction in the total
outstanding shares may, without any assurance, make the Company's capitalization
structure more attractive.
There is no assurance that any effect of the price of the Company's stock will
result, or that the market price for the Company's common stock, immediately or
shortly after the reverse split becomes effective, will rise, or that any rise
which may occur will be sustained. Market conditions obey their own changes in
investor attitudes and external conditions. The Company is proposing the steps
it deems the best calculation to meet the market attractively, however, the
Company cannot control the market's reaction. Further, there can be no
assurances given that a higher market price, if it occurs as a result of the
reverse split, will encourage more broker-dealers or investors to become
involved in the Company's common stock.
It should also be noted that the liquidity of the Company's common stock might
be adversely affected by the reverse split given the reduced number of shares of
common stock that would be outstanding after the reverse split. The Company's
board of directors anticipates, however, that the expected higher market price
as a result of the reverse split will reduce, to some extent, the negative
effects on the liquidity and marketability of the Company's common stock
inherent in some of the policies and practices of institutional investors and
brokerage houses described above.
EFFECT OF REVERSE SPLIT
The following table sets forth the effect of the reverse split and the special
treatment being afforded to Eligible Holders to preserve round lot stockholders.
TABLE SHOWING EFFECT OF 1 FOR 15 REVERSE SPLIT
NUMBER OF SHARES HELD BY NUMBER OF SHARES HELD BY
STOCKHOLDER PRIOR TO STOCKHOLDER AFTER REVERSE
REVERSE SPLIT SPLIT
------------------------------ ------------------------------------------
Less than 100 shares Same Number as Held Prior to Reverse Split
100 shares to 1,500 Shares (1)
1,501 shares
5,000 shares
10,000 shares
25,000 shares
50,000 shares
------------------------------
(1) Assumes such holder is an Eligible Holder as described above.
Under the reverse split, the number of authorized shares of common stock will
not be reduced. This (along with the increase in authorized shares described
below) will increase significantly the ability of the Company's board of
directors to issue authorized and unissued shares of common stock without
further stockholder action. The issuance in the future of such additional
authorized shares of common stock may have the effect of diluting the earnings
per share and book value per share, as well as the stock ownership and voting
rights of the currently outstanding shares of common stock and Series A
Convertible Preferred Stock. The effective increase in the number of authorized
but unissued shares of common stock may be construed as having an anti-takeover
effect by permitting the issuance of common stock to purchasers who might oppose
a hostile takeover bid or oppose any efforts to amend or repeal certain
provisions the Company's Articles of Incorporation or bylaws.
9
Because the shares of common stock held by stockholders holding 99 or fewer
shares of common stock will not be affected by the reverse split, and because
Eligible Holders holding 1,500 or fewer shares of common stock but at least 100
shares of common stock as of May 17, 2006 and as of the record date of the
reverse split will receive 100 shares of common stock after the reverse split,
the reverse split will not increase the number of stockholders who own "odd
lots" of less than 100 shares of common stock. Brokerage commission and other
costs of transactions in odd lots are generally higher than the costs of
transactions of 100 shares or more. The Company also incurs added administrative
costs for holders who only hold a few shares of common stock including transfer
agent fees, stockholder mailing costs, etc. Further, the Company will not suffer
any reduction in current round lot holders which will assist it in meeting
certain NASDAQ and exchange listing requirements, when or if the Company
qualifies.
In addition, because the shares of common stock held by stockholders holding
less than 100 shares of common stock will not be affected by the reverse split,
and because Eligible Holders holding 1,500 or fewer shares of common stock but
at least 100 shares of common stock as of May 17, 2006 and as of the record date
of the reverse split will receive 100 shares of common stock after the reverse
split, the reverse split will not affect all stockholders uniformly and will
adversely affect the percentage ownership interest of stockholders holding more
than 100 shares of common stock, particularly those holding more than 1,500
shares of common stock. Because of the special treatment afforded these
stockholders, proportionate voting rights and other rights and preferences of
the holders of common stock who hold more than 100 common stock, particularly
those who hold more than 1500 shares, will also be adversely affected by the
reverse split. However, this special treatment will only result in an estimated
______ additional shares of common stock being outstanding than if all
stockholders were identically affected by the reverse split. This represents
approximately ____% of the total outstanding shares of common stock after the
reverse split.
STOCKHOLDERS PURCHASING LESS THAN 1,500 SHARES BUT AT LEAST 100 SHARES AFTER MAY
17, 2006, AND WHO CONTINUE TO HOLD SUCH SHARES AS OF THE RECORD DATE OF THE
REVERSE SPLIT, SHALL NOT BE AFFORDED SPECIAL TREATMENT.
INCREASE IN AUTHORIZED COMMON STOCK.
The Company is currently authorized by its Articles of Incorporation to issue
45,000,000 shares of common stock, $0.001 par value per share ("Common Stock"),
and 5,000,000 shares of preferred stock, $0.001 par value per share ("Preferred
Stock"). Of the Preferred Stock, 1,000,042 shares have been designated as Series
A Convertible Preferred Stock. Currently, there were 37,215,913 shares of common
stock issued and outstanding and 1,000,042 shares of Series A Convertible
Preferred Stock issued and outstanding. Upon effectiveness of the Merger, the
outstanding shares of Series A Convertible Preferred Stock will convert into
approximately 32,998,564 shares of the Company's common stock.
In connection with the Closing of the transaction with Auriga, the Company will
likely be required to issue shares of Common Stock, options, awards and warrants
in connection with employee benefit and incentive plans and employment
arrangements, for financing the future operations of the acquired business, for
acquiring other businesses, for forming strategic partnerships and alliances,
and for stock dividends and stock splits. No specific issuances are currently
anticipated, however, to the extent such issuances occur, they will result in
dilution to the Company's current shareholders.
Accordingly, the Company's board of directors believes it is in the best
interests of the Company and its stockholders to increase the number of
authorized shares of its Common Stock to allow for the issuance of shares of
Common Stock or other securities in connection with employee benefit and
incentive plans and arrangements, the financing of the operations of Auriga, the
acquisition of other businesses, the establishment of joint ventures, and such
other purposes as the board determines.
10
The authorized number of shares of Preferred Stock would also be increased.
The increase in the authorized number of shares of Common Stock and Preferred
Stock will permit the board of directors to issue additional shares of Common
Stock without further approval of the stockholders of the Company; and the board
of directors does not intend to seek stockholder approval prior to any issuance
of the authorized capital stock unless stockholder approval is required by
applicable law or stock market or exchange requirements. The issuance of
additional shares of Common Stock and Preferred Stock by the Company may result
in substantial dilution to the Company's existing shareholders, and such
issuances may not require stockholder approval.
Although the Company from time to time reviews various transactions that could
result in the issuance of Common Stock or Preferred Stock, the Company has not
reviewed any transaction to date that would result in an issuance of Common
Stock or Preferred Stock. However, upon the increase in authorized shares of
Common Stock and Preferred Stock being effective, the Company may begin to
review transactions that may result in an issuance of Common Stock or Preferred
Stock.
Other than limited provisions under the laws of Colorado and Delaware, the
Company does not have in place provisions which may have an anti-takeover
effect. The increase in the number of authorized shares of Common Stock and
Preferred Stock may be construed as having an anti-takeover effect by permitting
the issuance of Common Stock or Preferred Stock to purchasers who might oppose a
hostile takeover bid or oppose any efforts to amend or repeal certain provisions
the Company's Articles of Incorporation or bylaws. The increase in the
authorized Common Stock and Preferred Stock did not result from the Company's
knowledge of any specific effort to accumulate the Company's securities or to
obtain control of the Company by means of a merger, tender offer, proxy
solicitation in opposition to management or otherwise, and the Company did not
take such action to increase the authorized Common Stock and Preferred Stock to
enable it to frustrate any efforts by another party to acquire a controlling
interest or to seek Board representation.
The issuance of additional shares of Common Stock and Preferred Stock may have a
dilutive effect on earnings per share and on the equity and voting power of
existing security holders of the Company's Common Stock and Series A Convertible
Preferred Stock. It may also adversely affect the market price of the Common
Stock. However, if additional shares are issued in transactions whereby
favorable business opportunities are provided and allow the Company to pursue
its business plans, the market price may increase.
The holders of Common Stock of the Company are entitled to one vote for each
share held of record on all matters to be voted on by the shareholders of the
Company.
The holders of Common Stock are entitled to receive dividends when, as, and if
declared by the board of directors out of funds legally available therefor. The
Company has not recently paid dividends on its shares of Common Stock and does
not intend to do so in the near future. In the event of liquidation, dissolution
or winding up of the Company, the holders of the shares of Common Stock are
entitled to share ratably in all assets remaining available for distribution to
them after payment of liabilities and after provision has been made for each
class of stock, if any, having preference over the Common Stock. Holders of
shares of Common Stock have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to the Common Stock.
11
Upon the effectiveness of the Merger, the Surviving Corporation will have
250,000,000 shares of Common Stock, par value $0.001 per share and 10,000,000
shares of Preferred Stock, par value $0.001 per share.
The Reincorporation Proposal will not result in any change in the business,
management, assets or liabilities of the Company.
Pursuant to the terms of the Merger Agreement each outstanding option and
warrant to purchase one share of the Company's common stock prior to the
effectiveness of the Merger, will become an option and warrant to purchase one
share of the Surviving Corporation's Common Stock, after adjustment for the
reverse stock split.
It is anticipated that the Merger will become effective as soon as practicable
after the Special Meeting. The Merger will become effective on the date Articles
of Merger are filed with the State of Colorado.
PRINCIPAL REASONS FOR THE REINCORPORATION PROPOSAL.
Predictability, Flexibility and Responsiveness of Delaware Law to Corporate
Needs. For many years, Delaware has followed a policy of encouraging
incorporation in that state and has adopted comprehensive, modern and flexible
corporate laws, which are updated regularly to meet changing business needs. As
a result of this deliberate policy to provide a hospitable climate for corporate
development, many major public corporations have chosen Delaware for their
domicile. In addition, the Delaware courts have developed considerable expertise
in dealing with corporate issues relating to public companies. Thus, a
substantial body of case law has developed construing Delaware corporate law and
establishing legal principles and policies regarding publicly-held Delaware
corporations. We believe that, for these reasons, Delaware law will provide
greater legal predictability with respect to our corporate legal matters than we
have under Colorado law. We will, however, continue to operate our current
airline business as a Colorado corporation and a subsidiary of Merger Co..
Merger Co. will be the public company. We believe that Delaware law will provide
greater efficiency, predictability and flexibility in our public company's legal
affairs than is presently available under Colorado law.
Attractiveness of Delaware Law to Directors and Officers. We believe that
organizing our company under Delaware law will enhance our ability to attract
and retain qualified directors and officers. The corporate law of Delaware,
including its extensive body of case law, offers directors and officers of
public companies more certainty and stability. Under Delaware law, the
parameters of director and officer liability are more clearly defined and better
understood than under Colorado law. To date, we have not experienced difficulty
in retaining directors or officers, but directors of public companies are
exposed to significant potential liability. We therefore believe that providing
the benefits afforded directors by Delaware law will enable us to compete more
effectively with other public companies in the recruitment of talented and
experienced directors and officers. At the same time, we believe that Delaware
law regarding corporate fiduciary duties provides appropriate protection for our
stockholders from possible abuses by directors and officers. In addition, under
Delaware law, directors' personal liability cannot be eliminated for:
o any breach of the director's duty of loyalty to the corporation or
its stockholders,
o acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
o unlawful payment of dividends or unlawful repurchases or redemptions
of stock, or
o any transactions from which the director derived an improper
personal benefit.
12
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material United States federal income
tax consequences of the reorganization to you. This discussion is based upon
current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), current and proposed Treasury regulations, and judicial and
administrative decisions and rulings as of the date of this proxy
statement/prospectus, all of which are subject to change (possibly with
retroactive effect) and all of which are subject to differing interpretation.
This discussion does not address all aspects of taxation that may be relevant to
you in light of your personal investment or tax circumstances or to persons that
are subject to special treatment under the federal income tax laws. In
particular, this discussion deals only with shareholders that hold Company
common stock as capital assets within the meaning of the Code. In addition, this
discussion does not address the tax treatment of special classes of
shareholders, such as banks, insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, persons holding Company stock as part of
a hedging or conversion transaction or as part of a "straddle," U.S.
expatriates, persons subject to the alternative minimum tax, foreign
corporations, foreign partnerships, foreign estates or trusts and persons who
are not citizens or residents of the United States. This discussion may not be
applicable to holders who acquired Company stock pursuant to the exercise of
options or warrants or otherwise as compensation. Furthermore, this discussion
does not address any state, local or foreign tax considerations.
YOU SHOULD CONSULT YOUR OWN TAX ADVISORS ABOUT THE APPLICATION OF THE UNITED
STATES FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION AS WELL AS ANY TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN JURISDICTION.
The material federal income tax consequences of the Merger, is referred to
in this section as the "reorganization," will be as follows:
o The reorganization will constitute a tax-free transaction under
section 351 of the Code;
o No gain or loss will be recognized by Merger Co. or Multi-Link as a
result of the reorganization;
o No gain or loss will be recognized by you upon your receipt of
Merger Co. common stock solely in exchange for your Multi-Link
common stock;
o The aggregate tax basis of the shares of Merger Co. common stock
that you receive in exchange for your Multi-Link common stock in the
reorganization will be the same as the aggregate tax basis of your
Multi-Link common stock exchanged; and
o The holding period for shares of Merger Co. common stock that you
receive in the reorganization will include the holding period of
your Multi-Link common stock exchanged.
You may be required to attach a statement to your tax returns for the taxable
year in which the reorganization is completed that contains information such as
your tax basis in the Multi-Link common stock surrendered and a description of
the Merger Co. common stock received in the reorganization.
ANY DISCUSSION CONTAINED IN THIS INFORMATION STATEMENT AS TO FEDERAL, STATE OR
LOCAL TAX MATTERS IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR
THE PURPOSE OF AVOIDING U.S. FEDERAL, STATE, OR LOCAL TAX PENALTIES. THIS
DISCUSSION IS WRITTEN IN CONNECTION WITH THE MATTERS ADDRESSED HEREIN. YOU
SHOULD SEEK ADVICE BASED ON YOUR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT
TAX ADVISOR.
13
COMPARATIVE RIGHTS OF HOLDERS OF MULTI-LINK CAPITAL STOCK AND MERGER CO. CAPITAL
STOCK
The rights of Multi-Link shareholders are currently governed by the Colorado
Business Corporation Act (CBCA) and common law, Multi-Link's restated articles
of incorporation, Multi-Link's amended and restated bylaws and the Multi-Link
rights agreement. The rights of Merger Co. shareholders after the completion of
the reorganization will be governed by the Delaware General Corporation Law
(DGCL) and common law, Merger Co.'s amended and restated certificate of
incorporation and Merger Co.'s bylaws. The rights issued under the Multi-Link
rights agreement are attached to Multi-Link common stock, and will not be
applicable to shares of Merger Co. common stock following the reorganization.
The following is a summary of the material differences between the current
rights of Multi-Link shareholders and the rights they will have as shareholders
of Merger Co. following the reorganization. For detailed descriptions of the
capital stock of Merger Co. and Multi-Link see "Description of Merger Co.
Capital Stock" and "Description of Multi-Link Capital Stock" in this proxy
statement/prospectus.
MULTI-LINK (COLORADO) MERGER CO. (DELAWARE)
---------------------------------------- -----------------------------------------
AUTHORIZED SHARES The authorized capital stock of Following the filing of Merger Co.'s
Multi-Link consists of 55 million certificate of incorporation prior to
shares, consisting of 50 million shares completion of the reorganization, the
of common stock, no par value per share authorized capital stock of Merger Co.
and 5 million shares of preferred stock, will consist of 260 million shares,
no par value per share. A total of consisting of 250 million shares of
37,215,913 shares of Common Stock have common stock, par value $0.001 per share,
been issued, and 1,000,042 shares of 1,000 of which have been issued to
Series A Convertible Preferred Stock Multi-Link, and 10 million shares of
have been issued. preferred stock, par value $0.001 per
share, none of which have been designated
or authorized for issuance.
VOTING REQUIREMENTS Holders of Common Stock and the Series A Holders of common stock are entitled to
Convertible Preferred Stock are entitled one vote per share and will vote
to one vote per share and vote together together as a single class on all
as a single class on all matters to be matters to be voted upon by stockholders
voted upon by shareholders
Under the DGCL, stockholders do not have
Under the CBCA, shareholders have the the right to cumulate their votes in the
right to cumulate their votes in the election of directors unless such right
election of directors under specified is granted in the certificate of
procedures unless the articles of incorporation. Merger Co.'s amended and
incorporation or bylaws of specified restated certificate of incorporation
categories of corporations provide does not provide for cumulative voting.
otherwise. The right of shareholders to
cumulate votes has been eliminated in
Multi-Link's restated articles of
incorporation.
VOTE REQUIRED FOR Multi-Link's amended and restated Merger Co.'s bylaws provide that a vote
ELECTION OF DIRECTORS bylaws provide that the vote of a of a majority of the shares present in
majority of the shares entitled to person or represented by proxy at a
vote for directors is required in meeting and entitled to vote for
order to elect a director. directors is required in order to elect
a director.
14
CLASSIFIED BOARD OF Multi-Link's restated articles of Merger Co.'s amended and restated
DIRECTORS incorporation, as amended, do not certificate of incorporation does not
provide for a classified board of provide for a classified board of
directors. Accordingly, under the CBCA, directors. Accordingly, all directors of
all of Multi-Link's directors are Merger Co. will be elected annually.
elected annually.
NUMBER OF DIRECTORS Under the CBCA, the number of directors The DGCL permits a corporation's
must be specified in a corporation's certificate of incorporation to specify
bylaws. Multi-Link's amended and the number of directors. Under Merger
restated bylaws provide that the Board Co.'s certificate of incorporation, the
of Directors is to have between 1 and 5 board of directors of Merger Co. is to
members. The CBCA, like the DGCL, have between 2 and 13 members. Because,
provides that shareholders may amend a under the DGCL, Merger Co.'s certificate
corporation's bylaws without the of incorporation cannot be amended unless
approval of the board of directors. the board of directors of Merger Co.
Accordingly, under the CBCA, recommends the amendment (see "Amendment
shareholders of Multi-Link have the to the Articles (Certificate) of
ability to determine the size of the Incorporation"), stockholders will not
Board of Directors. have the ability to increase the size of
the board of directors of Merger Co. to
more than 13without the approval of the
board.
REMOVAL OF DIRECTORS Consistent with the CBCA, Multi-Link's Consistent with the DGCL, Merger Co.'s
amended and restated bylaws provide that bylaws provide that the company's
the company's shareholders may remove stockholders may remove directors of the
directors of the company with or without company with or without cause.
cause.
VACANCIES ON THE BOARD Under the CBCA, because Multi-Link's Under the DGCL and Merger Co.'s
OF DIRECTORS articles of incorporation, as amended, certificate of incorporation, vacancies
do not provide otherwise, any vacancies on the board of directors of Merger Co.
on the Board of Directors may be filled will be filled by the remaining
either by the remaining directors or the directors.
shareholders.
SHAREHOLDERS' POWER TO In accordance with the CBCA, Under the DGCL, special stockholder
CALL SPECIAL MEETINGS Multi-Link's bylaws provide that a meetings may be called by stockholders to
special meeting of shareholders must be the extent authorized by the company's
called by the President at the request certificate of incorporation or bylaws.
of holders of not less than 10% of the Merger Co.'s bylaws do not provide for a
outstanding shares of Multi-Link. special meeting of stockholders to be
called by stockholders, and accordingly
stockholders will not be able to call
special meetings.
15
SHAREHOLDER ACTION Multi-Link's bylaws provide that (i) any Merger Co.'s certificate of
WITHOUT A MEETING action required or permitted to be taken incorporation provides that stockholders
at a shareholders' meeting may be taken may take any action permitted at an
without a meeting if all of the annual or special meeting of
shareholders entitled to vote thereon stockholders, by written consent of
consent to such action in writing and stockholders having a majority of the
(ii) action by written consent is to be voting power.
effective as of the date the last
writing necessary to effect the action
is received by the secretary of
Multi-Link, unless all of the written
consents necessary to effect the action
specify a later date as the effective
date of the action.
NOTICE OF Consistent with the CBCA, Multi-Link's Merger Co.'s bylaws provide for the same
SHAREHOLDER bylaws require that (i) if the notice requirements as Multi-Link's
MEETINGS authorized shares of Multi-Link are to bylaws, except that (i) the set notice
be increased, at least 30 days' notice period for an increase in the authorized
shall be given to the shareholders of shares was eliminated because the DGCL
record and (ii) if a shareholder meeting does not require a set notice period;
is adjourned for more than 120 days (in (ii) the 120-day notice in the case of
which case a new record date is to be adjournments was changed to a 30-day
fixed by the board of directors of notice to be consistent with the DGCL;
Multi-Link), notice shall be given to and (iii) the 20 days notice required
record holders as of the new record for sales of substantially all of
date. Multi-Link's amended and restated Multi-Link's assets was eliminated.
bylaws also provide that if a sale,
lease, exchange or other disposition of
all or substantially all of the property
and assets of Multi-Link is to be voted
on at a meeting, at least 20 days notice
must be given. In all other cases,
shareholders must be given at least 10
days' notice, but not more than 60 days'
notice, of shareholder meetings.
NOTICE OF Multi-Link's articles of incorporation, Merger Co.'s bylaws provide that no
SHAREHOLDER as amended, and bylaws do not contain business may be brought before any
NOMINATIONS FOR any provisions regarding advance notice meeting of stockholders, including the
DIRECTORS AND of shareholder nominations of directors nomination or election of persons to the
BUSINESS TO BE or notice of business to be brought board of directors, by a stockholder
BROUGHT BEFORE before meetings of shareholders. unless the stockholder satisfies certain
MEETINGS advance notice requirements. Advance
notice of any such business must
generally be provided not less than 90
days nor more than 120 days prior to the
date of the meeting, unless public
disclosure of the date of the meeting is
first made less than 120 days prior to
the date of the meeting, in which case
notice by the stockholder must be
provided not later than the tenth day
following the date on which such public
disclosure of the date of the meeting
was made. A notice must include
specified information concerning the
business proposed to be conducted, the
stockholder making the proposal and, if
applicable, the persons nominated to be
elected as directors. Any late or
deficient nominations or proposals may
be rejected by Merger Co..
16
INDEMNIFICATION Under Multi-Link's bylaws, Multi-Link is Merger Co.'s certificate of incorporation
required to, indemnify former and provides for mandatory indemnification of
current directors, officers, and former or current officers and directors
employees of Multi-Link against expenses of Merger Co. with respect to expenses
incurred in any action brought against incurred in any action brought against
those persons as a result of their role those persons as a result of their role
with Multi-Link, to the fullest extent with Merger Co. if certain conditions are
permitted by law. Similarly, Multi-Link satisfied. Subject to certain conditions,
may, in some circumstances, advance to a Merger Co.'s certificate of incorporation
person potentially eligible for also provides for mandatory advancement
indemnification the expenses incurred in of expenses incurred by those persons in
defending such an action. Under the defending such an action. Under the DGCL,
CBCA, Multi-Link must reimburse the a person seeking indemnification is
reasonable expenses of a director who generally required to have acted in a
was wholly successful in defending an manner he or she reasonably believed to
action brought against him or her as a be in, or not opposed to, the best
result of his or her role with interests of the corporation.
Multi-Link. The CBCA generally requires
a person seeking indemnification to have
acted in good faith and in a manner he
or she reasonably believed to have been
in the best interests of Multi-Link.
AMENDMENT TO THE Pursuant to the CBCA, amendments to Under the DGCL, a proposed amendment to a
ARTICLES (CERTIFICATE) Multi-Link's articles of incorporation, corporation's certificate of
OF INCORPORATION as amended, must be submitted to a incorporation may not be submitted to a
shareholder vote if proposed either by vote of stockholders without the approval
the Board of Directors or by the holders of the board of directors. To the extent
of shares representing at least 10% of Merger Co.'s certificate of incorporation
all of the votes entitled to be cast on includes provisions that would make a
the amendment. The Board of Directors hostile takeover of Merger Co. more
need not recommend the amendment to the difficult, this aspect of the DGCL would
shareholders if the amendment is prevent those provisions from being
proposed by the shareholders or if the amended or removed without the consent of
Board of Directors determines that the board of directors of Merger Co., and
because of a conflict of interest or may therefore have anti-takeover effects.
other special circumstances it should
make no recommendation with respect to
the amendment. Among other consequences,
this aspect of the CBCA may limit the
effectiveness of any anti-takeover
provisions contained in a corporation's
articles of incorporation. Multi-Link's
articles of incorporation, as amended,
do not impose any supermajority voting
requirements upon proposed amendments to
the articles.
17
AMENDMENT TO THE BYLAWS Under Multi-Link's bylaws, the board of The bylaws of Merger Co. provide that the
directors may amend or repeal the bylaws board of directors of Merger Co. may
unless, as to any particular bylaw amend or repeal the bylaws of Merger Co.
adopted, amended or repealed by the at any meeting by a majority of the
shareholders, the shareholders have directors present at a meeting at which a
previously provided expressly that the quorum is present. Merger Co.'s
board of directors may not amend or stockholders may amend or repeal the
repeal such bylaw. Multi-Link's bylaws even though the bylaws may also be
shareholders may amend or repeal the amended or repealed by the board of
bylaws even though the bylaws may also directors.
be amended or repealed by the board of
directors.
BUSINESS COMBINATION The CBCA does not contain any business Section 203 of the DGCL provides for a
STATUTE combination provisions. three-year moratorium on certain business
combination transactions with "interested
stockholders" (generally, persons who
beneficially own 15% or more of the
corporation's outstanding voting stock).
Merger Co. has opted out of Section 203
of the DGCL in Merger Co.'s certificate
of incorporation.
DISSENTERS'
(APPRAISAL) RIGHTS Under the CBCA, shareholders are The DGCL provides appraisal rights only
entitled to exercise dissenters' rights in the case of a stockholder objecting
in the event of certain mergers, share to certain mergers or consolidations.
exchanges, sales, leases, exchanges or Thus, under the DGCL, stockholders have
other dispositions of all or no appraisal rights in a sale, lease or
substantially all of the property of the exchange of all or substantially all of
corporation. Shareholders also m Under a corporation's assets. Appraisal rights
the CBCA, shareholders are entitled to in Delaware are available to record
exercise dissenters' rights in the event holders only.
of certain mergers, share exchanges,
sales, leases, exchanges or other
dispositions of all or substantially all
of the property of the corporation. ay
dissent in the case of a reverse stock
split that reduces the number of shares
owned to a fraction of a share or to
scrip if such scrip is to be acquired
for cash or voided. Dissenters' rights
in Colorado are available to beneficial
owners as well as record holders.
Dissenters' rights are not available as
a result of the reorganization proposal.
18
EXAMINATION OF BOOKS Under the CBCA and Multi-Link's bylaws, Under the DGCL, the inspection rights of
AND RECORDS any record or beneficial shareholder of the stockholders of Merger Co. are the
Multi-Link may, upon five days' written same as under Colorado law, except:
demand, inspect certain records, (i) there is no requirement that a
including shareholder actions, minutes stockholder has been a stockholder for at
of shareholder meetings, communications least three months or is a stockholder of
with shareholders and recent financial at least 5% of all outstanding shares of
statements. In addition, upon five days' any class of shares when the demand is
written demand, any such shareholder may made, and (ii) if Merger Co. refuses to
inspect the list of shareholders and permit inspection or does not reply to
certain other corporate records, the demand within five business days
including minutes of the meetings of after the demand has been made, the
board of directors of Multi-Link, if the stockholder may apply to the Court of
shareholder either (i) has been a Chancery for an order to compel such
shareholder for at least three months or inspection.
(ii) is a shareholder of at least 5% of
all outstanding shares of any class of
shares when the demand is made, provided
that the demand is made in good faith
for a proper purpose reasonably related
to such person's interests as a
shareholder.
DISSOLUTION Under the CBCA, the board of directors Merger Co. will be subject to the same
of Multi-Link may submit a proposal of voting requirement with respect to a
voluntary dissolution of Multi-Link to dissolution of Merger Co. as is
the shareholders of Multi-Link entitled Multi-Link but only if the board of
to vote thereon. The board of directors directors of Merger Co. initially
of Multi-Link must recommend such approves the dissolution of Merger Co..
dissolution to the shareholders as part If the board of directors does not
of the dissolution proposal, unless the approve such dissolution, the stockholder
board of directors of Multi-Link vote required for approving a dissolution
determines that because of a conflict of of Merger Co. is a unanimous written
interest or other special circumstances consent of all stockholders entitled to
it should make no recommendation and vote thereon.
communicates the basis for its
determination to the shareholders.
19
SHAREHOLDER DERIVATIVE Under the CBCA, if a court finds that a The DGCL's requirements for bringing
ACTIONS derivative action was brought without derivative actions are substantially
reasonable cause, the court may require similar to those contained in the CBCA,
the plaintiff to pay the defendants' except that the DGCL does not impose (i)
reasonable expenses attributable to the the reasonable cause requirement and
defense of such action, exclusive of (ii) the security requirement imposed by
attorney's fees. In addition, Multi-Link the CBCA.
may, at any time before final judgment,
require the plaintiff to give a security
for the costs and reasonable expenses
which may be incurred by Multi-Link or
other parties named as defendants in the
defense of such action, but not
including attorney's fees, if the
shareholder instituting the action holds
less than 5% of the outstanding shares
of any class of Multi-Link, unless the
shares so held have a market value in
excess of $25,000. If the court then
finds that the action was instituted
without cause, the corporation may have
recourse to such security in the amount
determined by the court.
FRANCHISE TAX There is no franchise tax in Colorado. The DGCL requires corporations to pay
franchise tax annually.
STOCK OPTION PLAN
GENERAL
On May 17, 2006, the action to adopt the Company's 2006 Stock Incentive Plan
(the "2006 Plan") was approved by written consent of the holders representing
approximately 55% of the outstanding voting securities of the Company.
May 17, 2006, the Board of Directors of the Company approved the 2006 Plan. The
2006 Plan is attached to this Information Statement as Exhibit D.
The approval of the 2006 Plan requires the affirmative vote of a majority of the
shares of voting securities outstanding and entitled to vote. On May 17, 2006,
the action to approve the 2006 Plan was approved by written consent of holders
representing approximately 55% of the outstanding voting securities of the
Company. As such, no vote or further action of the stockholders of the Company
is required to approve the name change. You are hereby being provided with
notice of the approval of the 2006 Plan.
The Board of Directors approved the 2006 Plan to ensure that the Company has
adequate ways in which to provide stock based compensation to its directors,
officers, employees and consultants. The Board believes that the ability to
grant stock-based compensation, such as stock options, is important to the
Company's future success. The grant of stock-based compensation, such as stock
options, can motivate high levels of performance and provide an effective means
of recognizing employee and consultant contributions to the Company's success.
In addition, stock-based compensation can be valuable in recruiting and
retaining highly qualified technical and other key personnel who are in great
demand, as well as rewarding and providing incentives to the Company's current
employees and consultants.
20
SUMMARY OF THE 2006 PLAN
The principal terms and provisions of the 2006 Plan are summarized below. As a
summary, the description below is not a complete description of all of the terms
of the 2006 Plan and is qualified in its entirety by reference to the full text
of the 2006 Plan, which is appended as Exhibit d to this Information Statement.
TYPES OF AWARDS. Both incentive stock options, or ISOs, and nonqualified stock
options, or NSOs, may be granted under the 2006 Plan. ISOs receive favorable tax
treatment on exercise, and may receive favorable tax treatment on a qualifying
disposition of the underlying shares. However, ISOs must comply with certain
requirements regarding exercise price, maximum term and post termination
exercise period, and must be issued under a shareholder-approved plan. NSOs are
not subject to these requirements, nor may they receive this favorable tax
treatment upon exercise.
NUMBER OF SHARES. Subject to adjustment as described below, the number of shares
that would be available for grant of stock options under the 2006 Plan is
7,000,000 (immediately following the Merger).
ADMINISTRATION. The 2006 Plan will be administered by the Board of Directors or
a Committee or a contribution thereof as determined by the Board. The Board of
Directors has the authority to select the eligible participants to whom awards
are granted, to determine the types of awards and the number of shares covered
and to set the terms, conditions and provisions of such awards, buyout
provisions, and to accelerate the exercisability of awards. The Board will be
authorized to interpret the 2006 Plan, to establish, amend, and rescind any
rules and regulations relating to the 2006 Plan, to determine the terms of
agreements entered into with recipients under the 2006 Plan, and to make all
other determinations which may be necessary or advisable for the administration
of the 2006 Plan.
ELIGIBILITY. Options and rights to purchase may be granted under the 2006 Plan
to employees and consultants of the Company as the Board from time to time
selects. As of May 17, 2006, all employees and consultants of the Company would
have been eligible to receive awards under the 2006 Plan.
STOCK OPTION GRANTS. The exercise price per share of Common Stock purchasable
under any stock option will be determined by the Board, but cannot in any event
be less than 100% of the fair market value of the Common Stock on the date the
option is granted. The Board shall determine the term of each stock option
(subject to a maximum of 10 years) and each option will be exercisable pursuant
to a vesting schedule determined by the Board. The grants and the terms of ISOs
shall be restricted to the extent required for qualification as ISOs by the
Code. Subject to approval of the Board, options may be exercised by payment of
the exercise price in cash, shares of Common Stock, which have been held for at
least six months, or pursuant to a "cashless exercise" through a broker-dealer
under an arrangement approved by the Company. The Company may require the
grantee to pay to the Company any applicable withholding taxes that the Company
is required to withhold with respect to the grant or exercise of any award. The
withholding tax may be paid in cash or, subject to applicable law, the Board may
permit the grantee to satisfy such obligations by the withholding or delivery of
shares of Common Stock.
ADJUSTMENTS. In the event of any change affecting the shares of Common Stock by
reason of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, combination or exchange of shares or other similar corporate change,
or any distribution to shareholders other than cash dividends, the Board shall
make such substitution or adjustment in the aggregate number of shares which may
be distributed under the 2006 Plan and in the number and option price as it
deems to be appropriate in order to maintain the purpose of the original grant.
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TRANSFERABILITY. No option will be assignable or otherwise transferable by the
grantee other than by will or the laws of descent and distribution and, during
the grantee's lifetime, an option may be exercised only by the grantee.
TERMINATION OF SERVICE. If a grantee's service to the Company terminates on
account of death, disability or retirement, then the grantee's unexercised
options, if exercisable immediately prior to the grantee's death, disability or
retirement, may be exercised in whole or in part, not later than one year after
such event. If a grantee's service to the Company terminates for cause, then the
grantee's unexercised option terminates effective immediately upon such
termination. If a grantee's service to the Company terminates for any other
reason, then the grantee's unexercised options, to the extent exercisable
immediately prior to such termination, shall remain exercisable, and may be
exercised in whole or in part, for a period of three months after such
termination of employment
CHANGE OF CONTROL AND CERTAIN CORPORATE TRANSACTIONS. Generally, a "Change of
Control" shall mean (i) the consummation of a merger or consolidation of the
Company with or into another entity or any other corporate reorganization, if
more than 80% of the combined voting power (which voting power shall be
calculated by assuming the conversion of all equity securities convertible
(immediately or at some future time) into shares entitled to vote, but not
assuming the exercise of any warrant or right to subscribe to or purchase those
shares) of the continuing or surviving entity's securities outstanding
immediately after such merger, consolidation or other reorganization is owned,
directly or indirectly, by persons who were not shareholders of the Company
immediately prior to such merger, consolidation or other reorganization;
provided, however, that in making the determination of ownership by the
shareholders of the Company, immediately after the reorganization, equity
securities which persons own immediately before the reorganization as
shareholders of another party to the transaction shall be disregarded; or (ii)
the sale, transfer or other disposition of all or substantially all of the
Company's assets.
A transaction shall not constitute a Change of Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.
If a Change of Control occurs, the Board will determine, in its sole discretion,
whether to accelerate any vested or unvested portion of any option grant.
Additionally, if a Change of Control occurs, any agreement between the Company
and any other party to the Change of Control may provide for (1) the
continuation of any outstanding awards, (2) the assumption of the 2006 Plan or
any awards by the surviving corporation or any of its affiliates, (3)
cancellation of awards and substitution of other awards with substantially the
same terms or economic value as the cancelled awards, or (4) cancellation of any
vested or unvested portion of awards, subject to providing notice to the option
holder.
LOANS AND GUARANTEES. Subject to applicable law, the Board has sole discretion
to allow a grantee to defer payment to the Company of all or part of the option
price or to cause the Company to loan or guarantee a third-party loan, to the
grantee for all or part of the option price or all or part of the taxes
resulting from the exercise of an award.
AMENDMENT AND TERMINATION. The Board of Directors may amend the 2006 Plan in any
and all respects without shareholder approval, except as such shareholder
approval may be required pursuant to the listing requirements of any national
market system or securities exchange on which the Company's equity securities
are listed. No amendment shall materially adversely affect options already
granted unless agreed to by the optionees.
Unless sooner terminated by the Board of Directors, the 2006 Plan will terminate
on May 17, 2016.
22
TAX ASPECTS OF THE 2006 PLAN
FEDERAL INCOME TAX CONSEQUENCES. The following discussion summarizes the
material federal income tax consequences to the Company and the participants in
connection with the 2006 Plan under existing applicable provisions of the
Internal Revenue Code (the "Code") and the regulations adopted pursuant to such
code. The discussion is general in nature and does not address issues relating
to the income tax circumstances of any specific individual employee or holder.
The discussion is subject to possible future changes in the law. The discussion
does not address the consequences of state, local or foreign tax laws.
NONQUALIFIED STOCK OPTIONS. A recipient will not have any taxable income at the
time an NSO is granted nor will the Company be entitled to a deduction at that
time. When an NSO is exercised, the grantee will have taxable ordinary income
(whether the option price is paid in cash or by surrender of already owned
shares of Common Stock), and the Company will be entitled to a tax deduction, in
an amount equal to the excess of the fair market value of the shares to which
the option exercise pertains over the option exercise price.
INCENTIVE STOCK OPTIONS. A grantee will not have any taxable income at the time
an ISO is granted. Furthermore, a grantee will not have income taxable for
federal income tax purposes at the time the ISO is exercised. However, the
excess of the fair market value of the shares at the time of exercise over the
exercise price will be a tax preference item in the year of exercise that could
create an alternative minimum tax liability for the year of exercise. If a
grantee disposes of the shares acquired on exercise of an ISO after the later of
two years after the grant of the ISO and one year after exercise of the ISO, the
gain (i.e., the excess of the proceeds received over the option price), if any,
will be long-term capital gain eligible for favorable tax rates under the Code.
If the grantee disposes of the shares within two years of the grant of the ISO
or within one year of exercise of the ISO, the disposition is a "disqualifying
disposition," and the grantee will have taxable ordinary income in the year of
the disqualifying disposition equal to the lesser of (a) the difference between
the fair market value of the shares and the exercise price of the shares at the
time of option exercise, or (b) the difference between the sales price of the
shares and the exercise price of the shares. Any gain realized from the time of
option exercise to the time of the disqualifying disposition would be long-term
or short-term capital gain, depending on whether the shares were sold more than
one year or up to and through one year respectively, after the ISO was
exercised.
The Company is not entitled to a deduction as a result of the grant or exercise
of an ISO. If the grantee has ordinary income taxable as compensation as a
result of a disqualifying disposition, the Company will then be entitled to a
deduction in the same amount as the grantee recognizes ordinary income.
AWARDS UNDER THE 2006 PLAN
No awards under the 2006 Plan have been granted to any officer or director of
the Company.
AVAILABLE INFORMATION
Please read all the sections of this information statement carefully. The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended ("Exchange Act") and in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission. These reports, proxy statements and other information filed by the
company with the SEC may be inspected without charge at the public reference
section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC
20549. Copies of this material also may be obtained from the SEC at prescribed
rates. The SEC also maintains a website that contains reports, proxy and
information statements and other information regarding public companies that
file reports with the SEC. Copies of these materials may be obtained from the
SEC's website at http://www.sec.gov.
23
INCORPORATION OF INFORMATION BY REFERENCE
The following documents, which are on file with the Commission (Exchange Act
File No. 0-26013) are incorporated in this Information Statement by reference
and made a part hereof:
(i) Annual Report on Form 10-KSB, for the fiscal year ended September 30,
2005.
(ii) Quarterly Reports on Form 10-QSB for the quarters ended December 31, 2005
and March 31, 2006, respectively.
(iii) Current Report on Form 8-K filed May 18, 2006, reporting the closing of
the transactions contemplated by the Agreement with Auriga.
(iv) Current Report on Form 8-K filed May 5, 2006, reporting execution of the
Agreement with Auriga.
(v) Current Report on Form 8-K filed March 28, 2006, reporting the entry into
a letter of intent with Auriga.
(vi) Schedule 14f-1 Information Statement filed May 8, 2006, reporting the
proposed change in control of the Company as a result of the Merger with
Auriga.
All documents filed by the company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this information
statement and prior to the effective date hereof shall be deemed to be
incorporated by reference in this information statement and shall be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated by reference in this information statement and filed with
the Commission prior to the date of this information statement shall be deemed
to be modified or superseded for purposes of this information statement to the
extent that a statement contained herein, or in any other subsequently filed
document which is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
information statement.
The Company will provide without charge to each person to whom this information
statement is delivered, upon written or oral request of such person, a copy of
any or all of the foregoing documents incorporated herein by reference (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents). Written or telephone requests
should be directed to the Company at 5555 Triangle Parkway, Suite 300, Norcross,
Georgia 30092, and its telephone number is (678) 282-1600.
MULTI-LINK TELECOMMUNICATIONS, INC.
Norcross, Georgia
May ___, 2006
24
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this " Agreement "), dated as of May 19,
2006, by and among Multi-Link Telecommunications, Inc., a Colorado corporation
(" Multi-Link ") and Multi-Link Merger Co., a Delaware corporation and a wholly
owned subsidiary of Multi-Link (" Merger Co.").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Multi-Link and Merger Co.
have each approved and adopted this Agreement and the transactions contemplated
by this Agreement including, without limitation, the reorganization of
Multi-Link into a Delaware company, in each case after making a determination
that this Agreement and such transactions are advisable and fair to, and in the
best interests of, such corporation and its shareholders;
WHEREAS, at the Effective Time, pursuant to the transactions contemplated
by this Agreement and on the terms and subject to the conditions set forth
herein, inter alia , (i) Multi-Link, in accordance with the Colorado Business
Corporation Act (as amended from time to time, the " CBCA "), will merge with
and into Merger Co., with Merger Co. as the surviving corporation (the " Merger
"), (ii) each fifteen (15) shares of Multi-Link Common Stock will be converted
into the right to receive one share of Merger Co. Common Stock, as adjusted and
as more fully set forth herein and (iii) each share of Merger Co. Common Stock
held by Multi-Link (being the 1,000 shares issued upon the formation of Merger
Co.) will be canceled;
WHEREAS, the consummation of the Merger requires, among other things, the
approval of this Agreement by the affirmative vote of a majority of the
outstanding shares of Multi-Link Common Stock (the " Multi-Link Shareholder
Approval "); and
WHEREAS, it is the intention of the parties hereto that the Reorganization
shall be a tax-free transaction under Section 351 of the Internal Revenue Code
of 1986, as amended (the " Code "), and the rules and regulations promulgated
thereunder.
NOW, THEREFORE, in furtherance of the foregoing, the parties agree as
follows:
ARTICLE I
MERGER
Section 1.1 Merger. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the CBCA, Multi-Link shall be merged
with and into Merger Co. at the Effective Time (as defined below) of the Merger.
Following the Effective Time of the Merger, the separate corporate existence of
Multi-Link shall cease, and Merger Co. shall continue as the surviving
corporation (the "Surviving Corporation "). The effects and the consequences of
the Merger shall be as set forth in this Agreement and the CBCA.
Section 1.2 Effective Time.
(a) Subject to the provisions of this Agreement, as soon as
practicable following the satisfaction or waiver of the conditions set
forth in Section 3.1, the parties shall duly prepare, execute and file a
statement of merger (the " Articles of Merger ") complying with Section
7-111-104.5 of the CBCA with the Secretary of State of the State of
Colorado. The Merger shall become effective upon the filing of the
Articles of Merger (or at such later time reflected in such Articles of
Merger as shall be agreed to by Merger Co. and Multi-Link). The date and
time when the Merger shall become effective is hereinafter referred to as
the " Effective Time. "
25
(b) The Merger shall have the effects set forth in the CBCA,
including without limitation, Section 7-111-106 of the CBCA. Without
limiting the generality of the foregoing, and subject thereto, at the
Effective Time, (i) all the properties, rights, privileges, immunities,
powers and franchises of Multi-Link shall vest in the Surviving
Corporation, and (ii) all debts, liabilities, obligations and duties of
Multi-Link shall become the debts, liabilities, obligations and duties of
the Surviving Corporation.
Section 1.3 Organizational Documents.
(a) The Certificate of Incorporation of Merger Co. in the form set
forth in Exhibit A hereto, and the Bylaws of Merger Co. in the form set
forth in Exhibit B hereto, shall be the Certificate of Incorporation and
Bylaws, respectively, of Merger Co. until thereafter changed or amended
either (A) as provided therein or by the Delaware General Corporation Law
(as amended from time to time, the " DGCL "), in the case of such
Certificate of Incorporation, or (B) as provided therein, by the
Certificate of Incorporation or by the DGCL, in the case of such Bylaws.
(b) The Articles of Incorporation and the Bylaws of Merger Co. in
effect at the Effective Time shall become the Articles of Incorporation
and Bylaws of the Surviving Corporation until thereafter amended as
provided therein or by the CBCA; provided, however , that Article I of
such Articles of Incorporation shall provide that the name of the
Surviving Corporation shall be "Auriga Laboratories, Inc."
Section 1.4 Directors. The directors of Multi-Link immediately prior to
the Effective Time shall be the directors of the Surviving Corporation from and
after the Effective Time and shall hold office until the earlier of their
respective death, resignation or removal or their respective successors are duly
elected or appointed and qualified in the manner provided for in the Certificate
of Incorporation and Bylaws of Merger Co., or as otherwise provided by the DGCL.
Section 1.5 Officers. The officers of Multi-Link immediately prior to the
Effective Time shall be the officers of each of Merger Co. and the Surviving
Corporation from and after the Effective Time and shall hold office until the
earlier of their respective death, resignation or removal or their respective
successors are duly elected or appointed and qualified in the manner provided
for in the Certificate of Incorporation and Bylaws of Merger Co., or as
otherwise provided by the DGCL.
ARTICLE II
CONVERSION OF SECURITIES; ISSUANCE OF NEW SECURITIES; STOCK
CERTIFICATES
Section 2.1 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of the holders of shares of
Multi-Link Common Stock and Series A Convertible Preferred Stock:
26
(a) each fifteen (15) shares of Multi-Link Common Stock, no par
value per share, of Multi-Link, (" Multi-Link Common Stock "), issued and
outstanding immediately prior to the Effective Time (other than any shares
of Multi-Link Common Stock held by Merger Co., which shares shall continue
to be outstanding,) shall be converted into the right to receive one
validly issued, fully paid and nonassessable share of Common Stock, par
value $0.001 per share, of Merger Co. (" Merger Co. Common Stock ");
(b) each share of capital stock of Merger Co., including, without
limitation, Merger Co. Common Stock, that is issued, outstanding and held
by Multi-Link immediately prior to the Effective Time shall be canceled
and extinguished without any conversion thereof and no payment shall be
made with respect thereto; and
(c) each share of Multi-Link Series A Convertible Preferred Stock
issued and outstanding immediately prior to the Effective Time, shall be
converted into the right to receive 32,997 validly issued , fully paid and
nonassessable shares of Common Stock, par value $0.001 per share, of
Merger Co. Common Stock.
(d) In connection with the issuance of the Merger Co. Common Stock,
Merger Co.'s board of directors may, in its discretion, provide special
treatment to certain Multi-Link stockholders to preserve round lot holders
(i.e., holders owning at least 100 shares) after the Merger. In the event
Merger Co.'s board determines to provide such special treatment,
Multi-Link stockholders holding 1,500 or fewer shares of Common Stock but
at least 100 shares of Common Stock will receive 100 shares of Common
Stock after the Merger, and persons holding less than 100 shares of Common
Stock would not be affected. The terms and conditions of special treatment
afforded to Multi-Link stockholders to preserve round lot stockholders, if
any, including the record dates for determining which stockholders may be
eligible for such special treatment, will be established in the discretion
of Merger Co.'s board of directors.
Section 2.2 Stock Certificates. From and after the Effective Time, subject
to Section 2.1, all of the outstanding certificates which immediately prior to
the Effective Time represented shares of Multi-Link Common Stock shall be deemed
for all purposes to evidence ownership of, and to represent, shares of Merger
Co. Common Stock into which the shares of Multi-Link Common Stock formerly
represented by such certificates have been converted as provided in this
Agreement. The registered owner on the books and records of Merger Co. or its
transfer agent of any outstanding stock certificate shall, until such
certificate shall have been surrendered for transfer or otherwise accounted for
to Merger Co. or its transfer agent, have and be entitled to exercise any voting
and other rights with respect to, and to receive any dividends and other
distributions upon, the shares of Merger Co. Common Stock evidenced by such
outstanding certificates which prior to the Merger represented shares of
Multi-Link Common Stock.
Section 2.3 Stock Options and Warrants.
(a) Each option to purchase Multi-Link Common Stock (each a "
Multi-Link Option ") issued under Multi-Link's 2006 Stock Option Plan or
granted by Multi-Link outside of the Multi-Link Option Plan, Warrants that
have been granted and that are outstanding and unexercised immediately
prior to the Effective Time shall, as of such time, be assumed by Merger
Co. in such a manner that it is converted into an option to acquire, on
substantially similar terms and conditions as were applicable under the
respective Multi-Link Option Plan and the underlying option agreements and
Warrant agreements (as modified by this Section 2.4), that number of
shares of Merger Co. Common Stock equal to the number of shares of
Multi-Link Common Stock subject to such Multi-Link Option and Warrant at
an exercise price per share equal to the exercise price per share for such
Multi-Link Option immediately prior to the Effective Time. As soon as
reasonably practicable, Merger Co. shall file a registration statement
under the Securities Act of 1933, as amended (the " Securities Act ") on
Form S-8 with respect to the shares of Merger Co. Common Stock subject to
such assumed options or otherwise available under the Multi-Link Option
Plans.
27
ARTICLE III
CONDITIONS TO MERGER
Section 3.1 Conditions Precedent. The respective obligation of each party
to effect the Merger is subject to the satisfaction or waiver of each of the
following conditions:
(a) The Multi-Link Shareholder Approval shall have been obtained by
majority consent of shareholders with or without a special meeting of the
shareholders of Multi-Link.
(b) No court or governmental entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any law or order
(whether temporary, preliminary or permanent) that is in effect and has a
material adverse effect on Multi-Link or enjoins or otherwise prohibits
consummation of the transactions contemplated by this Agreement and no
judicial or administrative proceeding that seeks any such result shall
continue to be pending.
(c) All required approvals, licenses and certifications from, and
notifications and filings to, governmental entities and non-governmental
third parties shall have been obtained or made, as applicable.
ARTICLE IV
TERMINATION AND AMENDMENT
Section 4.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Multi-Link Shareholder
Approval, by the affirmative vote of two-thirds of the boards of directors of
each of Merger Co. and Multi-Link. In the event of such termination, this
Agreement shall become null and void and have no effect, without any liability
or obligation on the part of Multi-Link or Merger Co. by reason of this
Agreement.
Section 4.2 Amendment. This Agreement may be amended, modified or
supplemented at any time before or after the Multi-Link Shareholder Approval;
provided, however , that after any such approval and prior to the Effective
Time, there shall be made no amendment that (a) alters or changes the amount or
kind of shares to be received by shareholders in the Merger; (b) alters or
changes any term of the Certificate of Incorporation or Bylaws of Merger Co.
except for alterations or changes that could otherwise be adopted by the
directors of Merger Co. as applicable; or (c) alters or changes any other terms
and conditions of this Agreement if any of the alterations or changes, alone or
in the aggregate, would materially adversely affect the holders of shares of
Multi-Link Common Stock. This Agreement may not be amended except after approval
by a majority of the board of directors of Multi-Link and evidenced by an
instrument in writing signed on behalf of each of the parties.
ARTICLE V
GENERAL PROVISIONS
Section 5.1 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware applicable to contracts to
be made and performed entirely therein without giving effect to the principles
of conflicts of law thereof or of any other jurisdiction, except to the extent
that provisions of the CBCA are mandatorily applicable.
28
Section 5.2 Entire Agreement. This Agreement (including the documents and
the instruments referred to herein), together with all exhibits, schedules,
appendices, certificates, instruments and agreements delivered pursuant hereto
and thereto (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and (b) except as provided herein, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
Section 5.3 Further Assurances. From time to time, and when required by
the Surviving Corporation or by its successors and assigns, Multi-Link shall
execute and deliver, or cause to be executed and delivered, such deeds and other
instruments, and Multi-Link shall take or cause to be taken such further and
other action, as shall be appropriate or necessary in order to vest or perfect
in or to conform of record or otherwise in the Surviving Corporation the title
to and possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Multi-Link and otherwise to
carry out the purposes of this Agreement, and the officers and directors of the
Surviving Corporation are authorized fully in the name and on behalf of
Multi-Link or otherwise to take any and all such action and to execute and
deliver any and all such deeds and other instruments.
Section 5.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed and delivered shall be deemed to be an
original and all of which shall together be considered one and the same
agreement.
Section 5.5 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective permitted successors and assigns.
Section 5.6 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
[Signature Page Follows]
29
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.
MULTI-LINK TELECOMMUNICATIONS, INC.,
a Colorado corporation
By: /s/ PHILIP S. PESIN
--------------------------------
Name: Philip S. Pesin
Title: Chief Executive Officer
MULTI-LINK MERGER CO.
a Delaware corporation
By: /s/ PHILIP S. PESIN
--------------------------------
Name: Philip S. Pesin
Title: Chief Executive Officer
30
EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
MULTI-LINK MERGER CO.
ARTICLE I
NAME
The name of the corporation is Multi-Link Merger Co.
ARTICLE II
REGISTERED OFFICE
The registered office of the Corporation in the State of Delaware shall be
in the City of Wilmington, County of New Castle, and the name and address of the
Registered Agent in charge thereof shall be The Corporation Trust Company, 1209
Orange Street, Wilmington, Delaware, County of New Castle, 19801.
ARTICLE III
PURPOSE
The purpose of the Corporation shall be to engage in any lawful act or
activity for which corporations may be organized and incorporated under the
General Corporation Law of the State of Delaware (the "DGCL").
ARTICLE IV
STOCK
Section 1. Authorization. The Corporation shall be authorized to issue
260,000,000 shares of capital stock, of which 250,000,000 shares shall be shares
of Common Stock, par value $0.001 per share ("Common Stock"), and 10,000,000
shares shall be shares of Preferred Stock, par value $.001 per share ("Preferred
Stock").
Section 2. Preferred Stock Rights. Shares of Preferred Stock may be issued
from time to time in one or more series. The Board of Directors of the
Corporation (the "Board of Directors") is hereby authorized by resolution or
resolutions to fix the voting rights, if any, designations, powers, preferences
and the relative, participation, optional or other rights, if any, and the
qualifications, limitations or restrictions thereof, of any unissued series of
Preferred Stock; and to fix the number of shares constituting such series, and
to increase or decrease the number of shares of any such series (but not below
the number of shares thereof then outstanding).
Section 3. Common Stock Rights. Except as otherwise provided by law or by
the resolution or resolutions adopted by the Board of Directors designating the
rights, powers and preferences of any series of Preferred Stock, the Common
Stock shall have the exclusive right to vote for the election of directors and
for all other purposes. Each share of Common Stock shall have one vote on each
matter properly submitted to the stockholders of the Corporation for their vote,
and the holders of the Common Stock shall vote together as a single class.
31
ARTICLE V
BOARD OF DIRECTORS
Section 1. Number of Directors. Except as otherwise provided by the
resolution or resolutions adopted by the Board of Directors designating the
rights, powers and preferences of any series of Preferred Stock, the number of
directors of the Corporation shall be fixed at not less than two and not more
than 13, and may be increased or decreased from time to time, exclusively by
resolution of the Board of Directors.
Section 2. Written Ballot. Unless and except to the extent that the Bylaws
of the Corporation shall so require, the election of directors of the
Corporation need not be by written ballot.
Section 3. Removal. Except as otherwise provided by the resolution or
resolutions adopted by the Board of Directors designating the rights, powers and
preferences of any series of Preferred Stock, any director or the entire Board
of Directors may be removed from office with or without cause by the holders of
a majority of the voting power of the outstanding shares of the Corporation
entitled to vote at an election of directors.
Section 4. Vacancies. Except as otherwise provided by the resolution or
resolutions adopted by the Board of Directors designating the rights, powers and
preferences of any series of Preferred Stock or unless the Board of Directors
determines by resolution that any vacancy or newly created directorship shall be
filled by the stockholders, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause shall be filled solely by the affirmative
vote of a majority of the remaining directors then in office, even though less
than a quorum of the Board of Directors, or by the sole remaining director. Any
director so chosen shall hold office until such director's successor shall be
elected and qualified and until the next election of the class for which such
director shall have been chosen. No decrease in the number of directors shall
shorten the term of any incumbent director.
ARTICLE VI
AMENDING THE BYLAWS
In furtherance and not in limitation of the powers conferred by law, the
Board of Directors is expressly authorized and empowered to adopt, amend and
repeal the Bylaws of the Corporation at any regular or special meeting of the
Board of Directors or by written consent, subject to the power of the
stockholders of the Corporation to adopt, amend or repeal any Bylaws.
ARTICLE VII
AMENDING THE CERTIFICATE OF INCORPORATION
Subject to the provisions of Article X hereof, the Corporation reserves
the right at any time from time to time to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, and any other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted, in the manner now or hereafter prescribed by law. All
rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant to this
Certificate of Incorporation in its present form or as hereafter amended are
granted subject to the right reserved in this Article.
32
ARTICLE VIII
DIRECTOR LIABILITY; INDEMNIFICATION AND INSURANCE
Section 1. Elimination of Certain Liability of Directors. The personal
liability of the directors of the Corporation shall be eliminated to the fullest
extent permitted by law. No amendment, modification or repeal of this Article,
adoption of any provision in this Certificate of Incorporation, or change in the
law or interpretation of the law shall adversely affect any right or protection
of a director or officer of the Corporation under this Article VIII with respect
to any act or omission that occurred prior to the time of such amendment,
modification, repeal, adoption or change.
Section 2. Indemnification and Insurance. To the fullest extent permitted
by applicable law, the Corporation is authorized to provide indemnification of
(and advancement of expenses to) directors, officers and agents of the
Corporation (and any other persons to which the DGCL permits the Corporation to
provide indemnification) through Bylaw provisions, agreements with such agents
or other persons, vote of stockholders or disinterested directors or otherwise,
in excess of the indemnification and advancement otherwise permitted by Section
145 of the DGCL. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the DGCL. Any amendment, repeal or modification of the foregoing
provisions of this Section shall not adversely affect any right or protection of
any director, officer or other agent of the Corporation existing at the time of,
or increase the liability of any director of the Corporation with respect to any
acts or omissions of such director, officer or other agent occurring prior to,
such amendment, repeal or modification.
ARTICLE IX
STOCKHOLDER MEETINGS
Section 1. Written Action. Any action required or permitted to be taken by
stockholders at an annual or special meeting may be effected by a written
consent or consents by stockholders holding a majority of the voting power in
lieu of such a meeting.
Section 2. Special Meetings. Except as otherwise required by law or
provided by the resolution or resolutions adopted by the Board of Directors
designating the rights, powers and preferences of any series of Preferred Stock,
special meetings of stockholders of the Corporation may be called only by (a)
the Board of Directors pursuant to a resolution approved by a majority of the
entire Board of Directors or (b) the Chairman of the Board of Directors, and any
power of stockholders to call a special meeting is specifically denied.
Section 3. Advance Notice. Advance notice of stockholder nominations for
the election of directors and of business to be brought by stockholders before
any meeting of the stockholders of the Corporation shall be given in the manner
provided in the Bylaws.
Section 4. Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws may provide. The books of this corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the Bylaws of this corporation.
33
ARTICLE X
SEC. 203 NOT APPLICABLE
The Corporation expressly elects not to be governed by Section 203 of the
DGCL.
34
EXHIBIT C
MULTI-LINK TELECOMMUNICATIONS, INC.
2006 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this 2006 Stock Option Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants and
to promote the success of the Company's business. Options granted under the Plan
may be Incentive Stock Options or Nonstatutory Stock Options, as determined by
the Administrator at the time of grant of an option and subject to the
applicable provisions of Section 422 of the Code and the regulations and
interpretations promulgated thereunder.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or its Committee appointed
pursuant to Section 4 of the Plan.
(b) "AFFILIATE" means an entity other than a Subsidiary (as defined
below) which, together with the Company, is under common control of a third
person or entity.
(c) "APPLICABLE LAWS" means the legal requirements relating to the
administration of stock option and restricted stock purchase plans, including
under applicable U.S. state corporate laws, U.S. federal and applicable state
securities laws, other U.S. federal and state laws, the Code, any Stock Exchange
rules or regulations and the applicable laws, rules and regulations of any other
country or jurisdiction where Options are granted under the Plan, as such laws,
rules, regulations and requirements shall be in place from time to time.
(d) "BOARD" means the Board of Directors of the Company.
(e) "CAUSE" for termination of a Participant's Continuous Service
Status will exist if the Participant is terminated by the Company for any of the
following reasons: (i) Participant's failure substantially to perform his or her
duties and responsibilities to the Company or deliberate violation of a Company
policy; (ii) Participant's commission of any act of fraud, embezzlement,
dishonesty or any other willful misconduct; (iii) unauthorized use or disclosure
by Participant of any proprietary information or trade secrets of the Company or
any other party to whom the Participant owes an obligation of nondisclosure as a
result of his or her relationship with the Company; or (iv) Participant's
willful breach of any of his or her obligations under any written agreement or
covenant with the Company. The determination as to whether a Participant is
being terminated for Cause shall be made in good faith by the Company and shall
be final and binding on the Participant. The foregoing definition does not in
any way limit the Company's ability to terminate a Participant's employment or
consulting relationship at any time as provided in Section 5(d) below, and the
term "Company" will be interpreted to include any Subsidiary, Parent or
Affiliate, as appropriate.
(f) "CHANGE OF CONTROL" means (1) a sale of all or substantially all
of the Company's assets, or (2) any merger, consolidation or other business
combination transaction of the Company with or into another corporation, entity
or person, other than a transaction in which the holders of at least a majority
of the shares of voting capital stock of the Company outstanding immediately
prior to such transaction continue to hold (either by such shares remaining
outstanding or by their being converted into shares of voting capital stock of
the surviving entity) a majority of the total voting power represented by the
shares of voting capital stock of the Company (or the surviving entity)
outstanding immediately after such transaction, or (3) the direct or indirect
acquisition (including by way of a tender or exchange offer) by any person, or
persons acting as a group, of beneficial ownership or a right to acquire
beneficial ownership of shares representing a majority of the voting power of
the then outstanding shares of capital stock of the Company.
35
(g) "CODE" means the Internal Revenue Code of 1986, as amended.
(h) "COMMITTEE" means one or more committees or subcommittees of the
Board appointed by the Board to administer the Plan in accordance with Section 4
below.
(i) "COMMON STOCK" means the Common Stock of the Company.
(j) "COMPANY" means Multi-Link Telecommunications, Inc., a Delaware
corporation.
(k) "CONSULTANT" means any person, including an advisor, who is
engaged by the Company or any Parent, Subsidiary or Affiliate to render services
and is compensated for such services, and any director of the Company whether
compensated for such services or not.
(l) "CONTINUOUS SERVICE STATUS" means the absence of any
interruption or termination of service as an Employee or Consultant. Continuous
Service Status as an Employee or Consultant shall not be considered interrupted
in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of
absence approved by the Administrator, provided that such leave is for a period
of not more than ninety (90) days, unless reemployment upon the expiration of
such leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; or (iv) in the case of
transfers between locations of the Company or between the Company, its Parents,
Subsidiaries, Affiliates or their respective successors. A change in status from
an Employee to a Consultant or from a Consultant to an Employee will not
constitute an interruption of Continuous Service Status.
(m) "CORPORATE TRANSACTION" means a sale of all or substantially all
of the Company's assets, or a merger, consolidation or other capital
reorganization or business combination transaction of the Company with or into
another corporation, entity or person, or the direct or indirect acquisition
(including by way of a tender or exchange offer) by any person, or persons
acting as a group, of beneficial ownership or a right to acquire beneficial
ownership of shares representing a majority of the voting power of the then
outstanding shares of capital stock of the Company.
(n) "DIRECTOR" means a member of the Board.
(o) "EMPLOYEE" means any person employed by the Company or any
Parent, Subsidiary or Affiliate, with the status of employment determined based
upon such factors as are deemed appropriate by the Administrator in its
discretion, subject to any requirements of the Code or the Applicable Laws. The
payment by the Company of a director's fee to a Director shall not be sufficient
to constitute "employment" of such Director by the Company.
(p) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(q) "FAIR MARKET VALUE" means, as of any date, the fair market value
of the Common Stock, as determined by the Administrator in good faith on such
basis as it deems appropriate and applied consistently with respect to
Participants. Whenever possible, the determination of Fair Market Value shall be
based upon the closing price for the Shares as reported in the Wall Street
Journal for the applicable date.
36
(r) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable Option Agreement.
(t) "LISTED SECURITY" means any security of the Company that is
listed or approved for listing on a national securities exchange or designated
or approved for designation as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc.
(u) "NAMED EXECUTIVE" means any individual who, on the last day of
the Company's fiscal year, is the chief executive officer of the Company (or is
acting in such capacity) or among the four most highly compensated officers of
the Company (other than the chief executive officer). Such officer status shall
be determined pursuant to the executive compensation disclosure rules under the
Exchange Act.
(v) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable Option
Agreement.
(w) "OPTION" means a stock option granted pursuant to the Plan.
(x) "OPTION AGREEMENT" means a written document, the form(s) of
which shall be approved from time to time by the Administrator, reflecting the
terms of an Option granted under the Plan and includes any documents attached to
or incorporated into such Option Agreement, including, but not limited to, a
notice of stock option grant and a form of exercise notice.
(y) "OPTION EXCHANGE PROGRAM" means a program approved by the
Administrator whereby outstanding Options are exchanged for Options with a lower
exercise price or are amended to decrease the exercise price as a result of a
decline in the Fair Market Value of the Common Stock.
(z) "OPTIONED STOCK" means the Common Stock subject to an Option.
(aa) "OPTIONEE" means an Employee or Consultant who receives an
Option.
(bb) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code, or any successor provision.
(cc) "PARTICIPANT" means any holder of one or more Options, or the
Shares issuable or issued upon exercise of such Options, under the Plan.
(dd) "PLAN" means this 2006 Stock Option Plan.
(ee) "REPORTING PERSON" means an officer, Director, or greater than
ten percent shareholder of the Company within the meaning of Rule 16a-2 under
the Exchange Act, who is required to file reports pursuant to Rule 16a-3 under
the Exchange Act.
(ff) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange
Act, as amended from time to time, or any successor provision.
(gg) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 14 of the Plan.
37
(hh) "STOCK EXCHANGE" means any stock exchange or consolidated stock
price reporting system on which prices for the Common Stock are quoted at any
given time.
(ii) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.
(jj) "TEN PERCENT HOLDER" means a person who owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares that may be sold under the Plan
is 7,000,000 Shares of Common Stock. The Shares may be authorized, but unissued,
or reacquired Common Stock. If an award should expire or become unexercisable
for any reason without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares that were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan. In addition, any Shares of Common Stock which are retained
by the Company upon exercise of an award in order to satisfy the exercise or
purchase price for such award or any withholding taxes due with respect to such
exercise or purchase shall be treated as not issued and shall continue to be
available under the Plan. Shares issued under the Plan and later repurchased by
the Company pursuant to any repurchase right which the Company shall be
available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) GENERAL. The Plan shall be administered by the Board or a
Committee, or a combination thereof, as determined by the Board. The Plan may be
administered by different administrative bodies with respect to different
classes of Participants and, if permitted by the Applicable Laws, the Board may
authorize one or more officers to make awards under the Plan.
(b) COMMITTEE COMPOSITION. If a Committee has been appointed
pursuant to this Section 4, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time the
Board may increase the size of any Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies (however caused) and remove all members of
a Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws and, in the case of a Committee administering
the Plan in accordance with the requirements of Rule 16b-3 or Section 162(m) of
the Code, to the extent permitted or required by such provisions. The Committee
shall in all events conform to any requirements of the Applicable Laws.
(c) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2 of the Plan, provided that such determination shall be
applied consistently with respect to Participants under the Plan;
(ii) to select the Employees and Consultants to whom Options
may from time to time be granted;
(iii) to determine whether and to what extent Options are
granted;
38
(iv) to determine the number of Shares of Common Stock to be
covered by each award granted;
(v) to approve the form(s) of agreement(s) used under the
Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder, which terms and
conditions include but are not limited to the exercise or purchase price, the
time or times when awards may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, any
pro rata adjustment to vesting as a result of a Participant's transitioning from
full- to part-time service (or vice versa), and any restriction or limitation
regarding any Option, Optioned Stock or restricted stock issued upon exercise of
an Option, based in each case on such factors as the Administrator, in its sole
discretion, shall determine;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 10(c) instead of Common Stock;
(viii) to implement an Option Exchange Program on such terms
and conditions as the Administrator in its discretion deems appropriate,
provided that no amendment or adjustment to an Option that would materially and
adversely affect the rights of any Optionee shall be made without the prior
written consent of the Optionee;
(ix) to adjust the vesting of an Option held by an Employee or
Consultant as a result of a change in the terms or conditions under which such
person is providing services to the Company;
(x) to construe and interpret the terms of the Plan and awards
granted under the Plan, which constructions, interpretations and decisions shall
be final and binding on all Participants; and
(xi) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options to Participants who are foreign
nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs.
5. ELIGIBILITY.
(a) RECIPIENTS OF GRANTS. Nonstatutory Stock Options may be granted
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees, provided that Employees of Affiliates shall not be eligible to
receive Incentive Stock Options.
(b) TYPE OF OPTION. Each Option shall be designated in the Option
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
(c) ISO $100,000 LIMITATION. Notwithstanding any designation under
Section 5(b), to the extent that the aggregate Fair Market Value of Shares with
respect to which Options designated as Incentive Stock Options are exercisable
for the first time by any Optionee during any calendar year (under all plans of
the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options
shall be treated as Nonstatutory Stock Options. For purposes of this Section
5(c), Incentive Stock Options shall be taken into account in the order in which
they were granted, and the Fair Market Value of the Shares subject to an
Incentive Stock Option shall be determined as of the date of the grant of such
Option.
39
(d) NO EMPLOYMENT RIGHTS. The Plan shall not confer upon any
Participant any right with respect to continuation of an employment or
consulting relationship with the Company, nor shall it interfere in any way with
such Participant's right or the Company's right to terminate the employment or
consulting relationship at any time for any reason.
6. TERM OF PLAN. The Plan shall become effective upon its adoption by the
Board of Directors. It shall continue in effect for a term of ten (10) years
unless sooner terminated under Section 15 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated in the
Option Agreement; provided that the term shall be no more than ten years from
the date of grant thereof or such shorter term as may be provided in the Option
Agreement and provided further that, in the case of an Incentive Stock Option
granted to a person who at the time of such grant is a Ten Percent Holder, the
term of the Option shall be five years from the date of grant thereof or such
shorter term as may be provided in the Option Agreement.
8. LIMITATION ON GRANTS TO EMPLOYEES. Subject to adjustment as provided in
Section 13 below, the maximum number of Shares that may be subject to Options
granted to any one Employee under this Plan for any fiscal year of the Company
shall be 1,000,000 provided that this Section 8 shall apply only after such
time, if any, as the Common Stock becomes a Listed Security.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per Share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be such price as is determined
by the Administrator and set forth in the Option Agreement, but shall be subject
to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who at the time of grant is a Ten
Percent Holder, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant; or
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted on any date on which the Common Stock is not a
Listed Security to a person who is at the time of grant is a Ten Percent Holder,
the per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of grant if required by the Applicable Laws and, if not so
required, shall be such price as is determined by the Administrator;
(B) granted on any date on which the Common Stock is not a
Listed Security to any other eligible person, the per Share exercise price shall
be no less than 85% of the Fair Market Value per Share on the date of grant if
required by the Applicable Laws and, if not so required, shall be such price as
is determined by the Administrator; or
(C) granted on any date on which the Common Stock is a Listed
Security to any eligible person, the per share Exercise Price shall be such
price as determined by the Administrator provided that if such eligible person
is, at the time of the grant of such Option, a Named Executive of the Company,
the per share Exercise Price shall be no less than 100% of the Fair Market Value
on the date of grant if such Option is intended to qualify as performance-based
compensation under Section 162(m) of the Code.
40
(iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price other than as required above pursuant to a
merger or other corporate transaction.
(b) PERMISSIBLE CONSIDERATION. The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the method of payment,
shall be determined by the Administrator (and, in the case of an Incentive Stock
Option, shall be determined at the time of grant) and may consist entirely of
(1) cash; (2) check; (3) subject to any requirements of the Applicable Laws
(including without limitation Section 153 of the Delaware General Corporation
Law), delivery of Optionee's promissory note having such recourse, interest,
security and redemption provisions as the Administrator determines to be
appropriate after taking into account the potential accounting consequences of
permitting an Optionee to deliver a promissory note; (5) other Shares that have
a Fair Market Value on the date of surrender equal to the aggregate exercise
price of the Shares as to which the Option is exercised, provided that in the
case of Shares acquired, directly or indirectly, from the Company, such Shares
must have been owned by the Optionee for more than six months on the date of
surrender (or such other period as may be required to avoid the Company's
incurring an adverse accounting charge); (6) if, as of the date of exercise of
an Option the Company then is permitting employees to engage in a "same-day
sale" cashless brokered exercise program involving one or more brokers, through
such a program that complies with the Applicable Laws (including without
limitation the requirements of Regulation T and other applicable regulations
promulgated by the Federal Reserve Board) and that ensures prompt delivery to
the company of the amount required to pay the exercise price and any applicable
withholding taxes; or (7) any combination of the foregoing methods of payment.
In making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company and the Administrator may, in its
sole discretion, refuse to accept a particular form of consideration at the time
of any Option exercise.
10. EXERCISE OF OPTION.
(a) GENERAL.
(i) EXERCISABILITY. Any Option granted hereunder shall be
exercisable at such times and under such conditions as determined by the
Administrator, consistent with the term of the Plan and reflected in the Option
Agreement, including vesting requirements and/or performance criteria with
respect to the Company and/or the Optionee; provided however that, if required
under Applicable Laws, the Option (or Shares issued upon exercise of the Option)
shall comply with the requirements of Section 260.140.41(f) and (k) of the Rules
of the California Corporations Commissioner.
(ii) LEAVE OF ABSENCE. The Administrator shall have the
discretion to determine whether and to what extent the vesting of Options shall
be tolled during any unpaid leave of absence; provided, however, that in the
absence of such determination, vesting of Options shall be tolled during any
such unpaid leave (unless otherwise required by the Applicable Laws). In the
event of military leave, vesting shall toll during any unpaid portion of such
leave, provided that, upon a Participant's returning from military leave (under
conditions that would entitle him or her to protection upon such return under
the Uniform Services Employment and Reemployment Rights Act), he or she shall be
given vesting credit with respect to Options to the same extent as would have
applied had the Participant continued to provide services to the Company
throughout the leave on the same terms as he or she was providing services
immediately prior to such leave.
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(iii) MINIMUM EXERCISE REQUIREMENTS. An Option may not be
exercised for a fraction of a Share. The Administrator may require that an
Option be exercised as to a minimum number of Shares, provided that such
requirement shall not prevent an Optionee from exercising the full number of
Shares as to which the Option is then exercisable.
(iv) PROCEDURES FOR AND RESULTS OF EXERCISE. An Option shall
be deemed exercised when written notice of such exercise has been given to the
Company in accordance with the terms of the Option by the person entitled to
exercise the Option and the Company has received full payment for the Shares
with respect to which the Option is exercised. Full payment may, as authorized
by the Administrator, consist of any consideration and method of payment
allowable under Section 9(b) of the Plan, provided that the Administrator may,
in its sole discretion, refuse to accept any form of consideration at the time
of any Option exercise.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares that thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(v) RIGHTS AS SHAREHOLDER. Until the issuance of the Shares
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 14 of the Plan.
(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. Except as
otherwise set forth in this Section 10(b), the Administrator shall establish and
set forth in the applicable Option Agreement the terms and conditions upon which
an Option shall remain exercisable, if at all, following termination of an
Optionee's Continuous Service Status, which provisions may be waived or modified
by the Administrator at any time. Unless the Administrator otherwise provides in
the Option Agreement, to the extent that the Optionee is not vested in Optioned
Stock at the date of termination of his or her Continuous Service Status, or if
the Optionee (or other person entitled to exercise the Option) does not exercise
the Option to the extent so entitled within the time specified in the Option
Agreement or below (as applicable), the Option shall terminate and the Optioned
Stock underlying the unexercised portion of the Option shall revert to the Plan.
In no event may any Option be exercised after the expiration of the Option term
as set forth in the Option Agreement (and subject to Section 7).
The following provisions (1) shall apply to the extent an Option
Agreement does not specify the terms and conditions upon which an Option shall
terminate upon termination of an Optionee's Continuous Service Status, and (2)
establish the minimum post-termination exercise periods that may be set forth in
an Option Agreement:
(i) TERMINATION OTHER THAN UPON DISABILITY OR DEATH OR FOR
CAUSE. In the event of termination of Optionee's Continuous Service Status other
than under the circumstances set forth in subsections (ii) through (iv) below,
such Optionee may exercise an Option for 30 days following such termination to
the extent the Optionee was vested in the Optioned Stock as of the date of such
termination. No termination shall be deemed to occur and this Section 10(b)(i)
shall not apply if (i) the Optionee is a Consultant who becomes an Employee, or
(ii) the Optionee is an Employee who becomes a Consultant.
(ii) DISABILITY OF OPTIONEE. In the event of termination of an
Optionee's Continuous Service Status as a result of his or her disability
(including a disability within the meaning of Section 22(e)(3) of the Code),
such Optionee may exercise an Option at any time within six months following
such termination to the extent the Optionee was vested in the Optioned Stock as
of the date of such termination.
42
(iii) DEATH OF OPTIONEE. In the event of the death of an
Optionee during the period of Continuous Service Status since the date of grant
of the Option, or within thirty days following termination of Optionee's
Continuous Service Status, the Option may be exercised by Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance at any time within twelve months following the date of death, but
only to the extent the Optionee was vested in the Optioned Stock as of the date
of death or, if earlier, the date the Optionee's Continuous Service Status
terminated.
(iv) TERMINATION FOR CAUSE. In the event of termination of an
Optionee's Continuous Service Status for Cause, any Option (including any
exercisable portion thereof) held by such Optionee shall immediately terminate
in its entirety upon first notification to the Optionee of termination of the
Optionee's Continuous Service Status. If an Optionee's employment or consulting
relationship with the Company is suspended pending an investigation of whether
the Optionee shall be terminated for Cause, all the Optionee's rights under any
Option likewise shall be suspended during the investigation period and the
Optionee shall have no right to exercise any Option. This Section 10(b)(iv)
shall apply with equal effect to vested Shares acquired upon exercise of an
Option granted prior to the date, if any, upon which the Common Stock becomes a
Listed Security to a person other than an officer, Director or Consultant, in
that the Company shall have the right to repurchase such Shares from the
Participant upon the following terms: (A) the repurchase is made within 90 days
of termination of the Participant's Continuous Service Status for Cause at the
Fair Market Value of the Shares as of the date of termination, (B) consideration
for the repurchase consists of cash or cancellation of purchase money
indebtedness, and (C) the repurchase right terminates upon the effective date of
the Company's initial public offering of its Common Stock. With respect to
vested Shares issued upon exercise of an Option granted to any officer, Director
or Consultant, the Company's right to repurchase such Shares upon termination of
the Participant's Continuous Service Status for Cause shall be made at the
Participant's original cost for the Shares and shall be effected pursuant to
such terms and conditions, and at such time, as the Administrator shall
determine. Nothing in this Section 10(b)(iv) shall in any way limit the
Company's right to purchase unvested Shares issued upon exercise of an Option as
set forth in the applicable Option Agreement.
(c) BUYOUT PROVISIONS. The Administrator may at any time offer to
buy out for a payment in cash or Shares an Option previously granted under the
Plan based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. TAXES.
(a) As a condition of the grant, vesting or exercise of an Option
granted under the Plan, the Participant (or in the case of the Participant's
death, the person exercising the Option) shall make such arrangements as the
Administrator may require for the satisfaction of any applicable federal, state,
local or foreign withholding tax obligations that may arise in connection with
such grant, vesting or exercise of the Option or the issuance of Shares. The
Company shall not be required to issue any Shares under the Plan until such
obligations are satisfied. If the Administrator allows the withholding or
surrender of Shares to satisfy a Participant's tax withholding obligations under
this Section 11 (whether pursuant to Section 11(c), (d) or (e), or otherwise),
the Administrator shall not allow Shares to be withheld in an amount that
exceeds the minimum statutory withholding rates for federal and state tax
purposes, including payroll taxes.
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(b) In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to satisfy
such tax obligations from the next payroll payment otherwise payable after the
date of an exercise of the Option.
(c) This Section 11(c) shall apply only after the date, if any, upon
which the Common Stock becomes a Listed Security. In the case of Participant
other than an Employee (or in the case of an Employee where the next payroll
payment is not sufficient to satisfy such tax obligations, with respect to any
remaining tax obligations), in the absence of any other arrangement and to the
extent permitted under the Applicable Laws, the Participant shall be deemed to
have elected to have the Company withhold from the Shares to be issued upon
exercise of the Option that number of Shares having a Fair Market Value
determined as of the applicable Tax Date (as defined below) equal to the amount
required to be withheld. For purposes of this Section 11, the Fair Market Value
of the Shares to be withheld shall be determined on the date that the amount of
tax to be withheld is to be determined under the Applicable Laws (the "Tax
Date").
(d) If permitted by the Administrator, in its discretion, a
Participant may satisfy his or her tax withholding obligations upon exercise of
an Option by surrendering to the Company Shares that have a Fair Market Value
determined as of the applicable Tax Date equal to the amount required to be
withheld. In the case of shares previously acquired from the Company that are
surrendered under this Section 11(d), such Shares must have been owned by the
Participant for more than six (6) months on the date of surrender (or such other
period of time as is required for the Company to avoid adverse accounting
charges).
(e) Any election or deemed election by a Participant to have Shares
withheld to satisfy tax withholding obligations under Section 11(c) or (d) above
shall be irrevocable as to the particular Shares as to which the election is
made and shall be subject to the consent or disapproval of the Administrator.
Any election by a Participant under Section 11(d) above must be made on or prior
to the applicable Tax Date.
(f) In the event an election to have Shares withheld is made by a
Participant and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Participant shall receive
the full number of Shares with respect to which the Option is exercised but such
Participant shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
12. NON-TRANSFERABILITY OF OPTIONS.
(a) GENERAL. Except as set forth in this Section 12, Options may not
be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent or distribution. The
designation of a beneficiary by an Optionee will not constitute a transfer. An
Option may be exercised, during the lifetime of the holder of an Option, only by
such holder or a transferee permitted by this Section 12.
(b) LIMITED TRANSFERABILITY RIGHTS. Notwithstanding anything else in
this Section 12, the Administrator may in its discretion grant Nonstatutory
Stock Options that may be transferred by instrument to an inter vivos or
testamentary trust in which the Options are to be passed to beneficiaries upon
the death of the trustor (settlor) or by gift or pursuant to domestic relations
orders to "Immediate Family Members" (as defined below) of the Optionee.
"Immediate Family" means any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law
(including adoptive relationships), a trust in which these persons have more
than fifty percent of the beneficial interest, a foundation in which these
persons (or the Optionee) control the management of assets, and any other entity
in which these persons (or the Optionee) own more than fifty percent of the
voting interests.
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13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN OTHER
TRANSACTIONS.
(a) CHANGES IN CAPITALIZATION. Subject to any action required under
Applicable Laws by the shareholders of the Company, the number of Shares of
Common Stock covered by each outstanding Option, the numbers of Shares set forth
in Sections 3(a) and 8 above, and the number of Shares of Common Stock that have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or that have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per Share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued Shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination,
recapitalization or reclassification of the Common Stock, or any other increase
or decrease in the number of issued Shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Administrator, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of Shares of Common Stock subject to an
Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the dissolution or
liquidation of the Company, each Option will terminate immediately prior to the
consummation of such action, unless otherwise determined by the Administrator.
(c) CORPORATE TRANSACTION. In the event of a Corporate Transaction
(including without limitation a Change of Control), each outstanding Option
shall be assumed or an equivalent option or right shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation
(the "Successor Corporation"), unless the Successor Corporation does not agree
to assume the award or to substitute an equivalent option or right, in which
case such Option shall terminate upon the consummation of the transaction.
For purposes of this Section 13(c), an Option shall be considered
assumed, without limitation, if, at the time of issuance of the stock or other
consideration upon a Corporate Transaction or a Change of Control, as the case
may be, each holder of an Option would be entitled to receive upon exercise of
the award the same number and kind of shares of stock or the same amount of
property, cash or securities as such holder would have been entitled to receive
upon the occurrence of the transaction if the holder had been, immediately prior
to such transaction, the holder of the number of Shares of Common Stock covered
by the award at such time (after giving effect to any adjustments in the number
of Shares covered by the Option as provided for in this Section 13); provided
that if such consideration received in the transaction is not solely common
stock of the Successor Corporation, the Administrator may, with the consent of
the Successor Corporation, provide for the consideration to be received upon
exercise of the award to be solely common stock of the Successor Corporation
equal to the Fair Market Value of the per Share consideration received by
holders of Common Stock in the transaction.
(d) CERTAIN DISTRIBUTIONS. In the event of any distribution to the
Company's shareholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
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14. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator,
provided that in the case of any Incentive Stock Option, the grant date shall be
the later of the date on which the Administrator makes the determination
granting such Incentive Stock Option or the date of commencement of the
Optionee's employment relationship with the Company. Notice of the determination
shall be given to each Employee or Consultant to whom an Option is so granted
within a reasonable time after the date of such grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AUTHORITY TO AMEND OR TERMINATE. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation (other than an adjustment pursuant to Section 13
above) shall be made that would materially and adversely affect the rights of
any Optionee under any outstanding grant, without his or her consent. In
addition, to the extent necessary and desirable to comply with the Applicable
Laws, the Company shall obtain shareholder approval of any Plan amendment in
such a manner and to such a degree as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. Except as to amendments
which the Administrator has the authority under the Plan to make unilaterally,
no amendment or termination of the Plan shall materially and adversely affect
Options already granted, unless mutually agreed otherwise between the Optionee
and the Administrator, which agreement must be in writing and signed by the
Optionee or holder and the Company.
16. CONDITIONS UPON ISSUANCE OF SHARES. Notwithstanding any other
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the Applicable Laws, with such compliance determined
by the Company in consultation with its legal counsel. As a condition to the
exercise of an Option, the Company may require the person exercising the award
to represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required by law. Shares issued upon exercise of Options
granted prior to the date on which the Common Stock becomes a Listed Security
shall be subject to a right of first refusal in favor of the Company pursuant to
which the Participant will be required to offer Shares to the Company before
selling or transferring them to any third party on such terms and subject to
such conditions as is reflected in the applicable Option Agreement.
17. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. AGREEMENTS. Options shall be evidenced by Option Agreements in such
form(s) as the Administrator shall from time to time approve.
19. SHAREHOLDER APPROVAL. If required by the Applicable Laws, continuance
of the Plan shall be subject to approval by the shareholders of the Company
within twelve (12) months before or after the date the Plan is adopted. Such
shareholder approval shall be obtained in the manner and to the degree required
under the Applicable Laws.
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20. INFORMATION AND DOCUMENTS TO OPTIONEES AND PURCHASERS. Prior to the
date, if any, upon which the Common Stock becomes a Listed Security and if
required by the Applicable Laws, the Company shall provide financial statements
at least annually to each Optionee and to each individual who acquired Shares
pursuant to the Plan, during the period such Optionee or purchaser has one or
more Options outstanding, and in the case of an individual who acquired Shares
pursuant to the Plan, during the period such individual owns such Shares. The
Company shall not be required to provide such information if the issuance of
Options under the Plan is limited to key employees whose duties in connection
with the Company assure their access to equivalent information.
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