UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14C OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] Filed by the Registrant [ ] Filed by a Party other than the Registrant
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[X] Preliminary Information Statement
[ ] Definitive Information Statement Only
[ ] Confidential, for Use of the Commission (as permitted by Rule 14c)
RED GIANT ENTERTAINMENT, INC.
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(Name of Registrant as Specified In Its Charter)
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RED GIANT ENTERTAINMENT, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
HELD BY MAJORITY WRITTEN CONSENT
TO ALL STOCKHOLDERS OF RED GIANT ENTERTAINMENT, INC.:
NOTICE IS HEREBY GIVEN to you as a stockholder of record of Red Giant
Entertainment, Inc., a Nevada corporation, that a Majority Written Consent in
Lieu of an Annual Meeting of Stockholders (the "Written Consent") has been
executed and will be effective 20 calendar days from the date of mailing this
Information Statement to you. The Written Consent authorizes the following
corporate actions:
1) To approve the re-election of five members of the Board of Directors
(the "Board"), each to hold office until the election and
qualification of his or her successor, or until his or her earlier
death, removal or resignation;
2) To approve and ratify the selection of Messineo & Co., CPAs, LLC as
our independent auditors for the fiscal year ending August 31, 2014;
3) To approve the filing of a Certificate of Amendment to our Articles of
Incorporation to increase the number of authorized shares of our
common stock, par value $0.0001 per share (our "Common Stock") from
900,000,000 to 3,000,000,000;
4) To approve adoption of our 2013 Stock Option Plan adopted by the Board
on December 24, 2013 (the "2013 Stock Option Plan");
5) To cast an advisory vote approving the compensation of our named
executive officers; and
6) To cast an advisory vote on the frequency of future advisory votes to
approve the compensation of our named executive officers to be every
three years.
The required consent of at least a majority of the votes allocated to our voting
shares was given for each of the actions listed above.
The Board believes it would not be in the best interests of our company and our
stockholders to incur the costs of holding an annual meeting or of soliciting
proxies or consents from additional stockholders in connection with these
actions. Based on the foregoing, the Board has determined not to call an Annual
Meeting of Stockholders, and none will be held this year. A copy of our Annual
Report on Form 10-K filed with the Securities and Exchange Commission (the
"SEC") on December 4, 2013 for the fiscal year ended August 31, 2013 (our
"Annual Report"), accompanies this Notice.
The Board has fixed the close of business on December 24, 2013 as the record
date (the "Record Date") for the determination of stockholders who are entitled
to receive this Information Statement, which is expected to be first mailed on
or about January 3, 2014. Stockholders are not entitled to dissenter's rights of
appraisal with respect to any of the matters being authorized under the Nevada
Revised Statutes, our Articles of Incorporation or our Bylaws with respect to
any matters being authorized.
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
INFORMATION STATEMENT
RED GIANT ENTERTAINMENT, INC.
614 E. HWY 50, SUITE 235
CLERMONT, FLORIDA 34711
This information statement is being furnished on or about January 3, 2014 by the
Board of Directors (the "Board") of Red Giant Entertainment, Inc., a Nevada
corporation ("we," "us," and "our" generally refers to Red Giant Entertainment,
Inc., and our wholly owned subsidiaries) to the holders of record of our issued
and outstanding common stock, par value $0.0001, ("Common Stock" or "Voting
Shares") as of the close of business on December 24, 2013 (the "Record Date"),
pursuant to Rule 14c-2 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). On December 24, 2013, the Board deemed it in our
best interests to take the actions listed below and pursuant to Nevada Revised
Statutes Section 78.390 approved the filing of a Certificate of Amendment to our
Articles of Incorporation to increase the number of authorized shares of our
common stock, par value $0.0001 per share (our "Common Stock") from 900,000,000
to 3,000,000,000 (the "Amendment"):
1) To approve the re-election of five members of the Board of Directors
(the "Board"), each to hold office until the election and
qualification of his or her successor, or until his or her earlier
death, removal or resignation;
2) To approve and ratify the selection of Messineo & Co., CPAs, LLC as
our independent auditors for the fiscal year ending August 31, 2014;
3) To approve the filing of the Amendment;
4) To approve adoption of our 2013 Stock Option Plan adopted by the Board
on December 24, 2013 (the "2013 Stock Option Plan");
5) To cast an advisory vote approving the compensation of our named
executive officers; and
6) To cast an advisory vote on the frequency of future advisory votes to
approve the compensation of our named executive officers to be every
three years.
We are also providing notice to our stockholders that certain of our
stockholders took action as described below by Majority Written Consent in Lieu
of an Annual Meeting of Stockholders, a copy of which is attached hereto as
Exhibit A (the "Written Consent"). The purpose of this Information Statement is
to inform holders of Voting Shares that the Board considers the following
actions to be in the best interests of us and our stockholders and that a
majority of the votes allocated to the Voting Shares has taken the following
actions by the Written Consent to be effective 20 calendar days from the date of
mailing this Information Statement to you:
As of the Record Date, there were 490,234,199 shares of Common Stock
outstanding, with one vote per share.
Under Section 78.320 of the Nevada Revised Statutes, the written consent of
stockholders holding a majority of the voting power allocated to our Voting
Shares may be substituted for an annual meeting of the stockholders. Based on
the foregoing and in order to eliminate the costs involved in holding an annual
meeting, the Board has determined not to call an Annual Meeting of Stockholders
and none will be held this year. A copy of our Annual Report on Form 10-K filed
on December 4, 2013 for the fiscal year ended August 31, 2013, including audited
consolidated financial statements (our "Annual Report"), accompanies this
Information Statement.
We will only deliver one copy of this Information Statement and our Annual
Report to multiple security holders sharing an address unless we have received
contrary instructions from one or more of the security holders. Upon written or
oral request, we will promptly deliver a separate copy of this Information
Statement and our Annual Report and any future Annual Reports and Information
Statements to any security holder at a shared address to which a single copy of
this Information Statement and our Annual Report was delivered, or deliver a
single copy of this Information Statement, our Annual Report, and any future
Annual Reports and Information Statements to any security holder or holders
sharing an address to which multiple copies are now delivered. You should direct
any such requests to the following address: 614 E. Hwy 50, Suite 235, Clermont,
Florida 34711; telephone number: (866) 926-6427.
INFORMATION ON CONSENTING STOCKHOLDERS
Pursuant to our Amended and Restated Bylaws (our "Bylaws") and the Nevada
Revised Statutes, a vote by the holders of at least a majority of the votes
allocated to the Voting Shares is required to effect the action described
herein. As of the Record Date, there were 490,234,199 Voting Shares issued and
outstanding with one vote each, of which 245,117,100 votes were required to pass
any stockholder resolutions. The consenting stockholders, who consisted of our
officers and directors (the "Consenting Stockholders"), are collectively the
record owners of Voting Shares outstanding as of December 24, 2013 with
311,340,600 votes, which represented 63.5% of the votes allocated to the issued
and outstanding Voting Shares as of that date. Pursuant to the Nevada Revised
Statutes, the Consenting Stockholders voted in favor of the actions described
herein by the Written Consent. There are no cumulative voting rights. No
consideration was paid for the consent. The Consenting Stockholders'
affiliations with us and beneficial holdings are set forth below under "Security
Ownership of Certain Beneficial Owners and Management."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, the number of shares of
Common Stock owned of record and beneficially by (i) each of our named executive
officers and directors; (ii) each person who owns beneficially more than 5% of
each class of our outstanding equity securities; and (iii) all directors and
officers as a group. Beneficial ownership is determined in accordance with the
rules of the SEC and generally includes voting or investment power with respect
to securities. Shares of common stock are deemed to be outstanding and to be
beneficially owned by the person listed below for the purpose of computing the
percentage ownership of the person, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person, if that
person has the right to acquire beneficial ownership of such shares within 60
calendar days of the date of this Information Statement.
Unless otherwise indicated below, the address of each beneficial owner is c/o
Red Giant Entertainment, Inc., 614 Hwy. 50, Suite 235, Clermont, Florida 34711.
Unless otherwise indicated below, we believe that each of the persons listed in
the table (subject to applicable community property laws) has the sole power to
vote and to dispose of the shares listed opposite the stockholder's name. All
calculations are based on 490,234,199 shares of common stock outstanding as of
the Record Date.
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Number of Shares Percent of
Name of Beneficial Owner of Common Stock Class
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Benny R. Powell, Chief Executive Officer, President,
Chief Financial Officer, Secretary, Director 146,801,600 (1) 29.95%
David Campiti, Chief Operations Officer, Director 43,300,000 9.46%
Chris Crosby, Chief Technology Officer, Director 34,640,000 7.57%
Isen Robbins, Chief Intellectual Property Officer,
Director 43,300,000 9.46%
Aimee Schoof, Chief Business Development Officer,
Director 43,300,000 9.46%
All executive officers (including named executive officers)
and directors as a group (five persons) 311,340,600 63.51%
Iconic Holdings, LLC
7200 Wisconsin Ave., Suite 260
Bethesda, Maryland 20814 53,579,568 (2) 9.99%
WHC Capital, LLC
303 Merrick Road, Suite 504
Lynbrook, NY 11563 54,409,950 (3) 9.99%
Asher Enterprises, Inc.
1 Linden Place, Suite 207
Great Neck, NY 11021 34,674,330 (4) 6.61%
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1. Includes 35,000,000 shares pledged as security to WHC to secure the
Debenture. While Mr. Powell shares investment power over such shares, he
retains voting rights in such shares unless we default on the 12% Secured
Convertible Debenture (the "Debenture").
2. Includes 46,099,820 shares of common stock issuable upon conversion at
Iconic's option of $125,000 in principal under the Iconic Note. The Iconic
Note is convertible into common stock at 60% of the lowest trading price
during the ten consecutive trading days prior to the date of conversion,
subject to a maximum beneficial ownership of 9.99% (the calculation in this
Registration Statement is based on a purchase price equal to $0.0027 per
share (60% of $0.0045, the lowest price for the ten trading days prior to
December 24, 2013 and represents the maximum beneficial ownership of
9.99%). The calculation presented herein does not include (i) interest
convertible at the rate set forth above; or (ii) shares we may sell to
Iconic under the Securities Purchase Agreement upon meeting certain
conditions.
3. Consists of shares issuable upon conversion of the Debenture at WHC's
option of up to $232,400 in principal and any interest under the Debenture
convertible into common stock at 60% of the lowest trading price during the
ten consecutive trading days prior to the date of conversion, subject to a
maximum beneficial ownership of 9.99% (the calculation in this Registration
Statement is based on a purchase price equal to $0.0027 per share (60% of
$0.0045, the lowest price for the ten trading days prior to December 24,
2013 and represents the maximum beneficial ownership of 9.99%. The
calculation presented herein does not include interest convertible at the
rate set forth above.
4. Consists of shares of common stock issuable upon conversion at Asher's
option of up to $90,500 in principal and any interest under the Debenture
convertible into common stock at 58% of the lowest trading price during the
ten consecutive trading days prior to the date of conversion, subject to a
maximum beneficial ownership of 9.99% (the calculation in this Registration
Statement is based on a purchase price equal to $0.0026 per share (58% of
$0.0045, the lowest price for the ten trading days prior to December 24,
2013) and represents the maximum beneficial ownership of 9.99%). The
calculation presented herein does not include interest convertible at the
rate set forth above.
3
ITEM 1 - ELECTION OF DIRECTORS
GENERAL
Pursuant to our Articles of Incorporation, the holders of our Voting Shares may
elect our directors. All nominees have advised us that they are able and willing
to serve as directors until the 2014 Annual Meeting or until their respective
successors are elected and qualified. No arrangement or understanding exists
between any nominee and any other person or persons pursuant to which any
nominee was or is to be selected as a director, an officer, or a nominee.
There are no family relationships among our directors and officers. All
directors are elected to hold office until the next annual meeting of
stockholders following election and until their successors are duly elected and
qualified.
The Board has no standing committees and acts as its own nominating,
compensation and internal audit committee as it believes that the functions of
such committees can be adequately performed by the Board. All members of the
Board participate in the consideration of director nominees and of executive
officer and director compensation. We have no qualified financial expert at this
time because we have not been able to identify or retain a qualified candidate.
The Board does not have a policy on whether the roles of Chief Executive Officer
and Chairman of the Board should be separate and, if they are to be separate,
whether the Chairman of the Board should be selected from the non-employee
directors or be an employee. The Board believes that we and our stockholders
benefit when the Board is free to determine the most appropriate leadership
structure in light of the experience, skills and availability of directors and
the Chief Executive Officer as well as other circumstances. We currently have no
independent directors. We apply the definition of "independent director"
provided under the Listing Rules of The NASDAQ Stock Market LLC ("NASDAQ").
Under NASDAQ rules, the Board has considered all relevant facts and
circumstances regarding our directors and has affirmatively determined that none
of the directors serving on the Board are independent of us under NASDAQ rules,
as each director also serves as an officer of us. The Board is also responsible
for oversight of our risk management practices, while management is responsible
for the day-to-day risk management processes.
The Board has not formally established any criteria for Board membership.
Candidates for director nominees are reviewed in the context of the current
composition of the Board, our operating requirements, and the long-term
interests of our stockholders. In conducting this assessment, the Board
considers skills, knowledge, diversity, experience, and such other factors as it
deems appropriate given the current needs of the Board and us, to maintain a
balance of knowledge, experience and capability.
The Board does not have a formal process for stockholders to send communications
to the Board, including recommendations of director candidates. The names of all
of our directors, all of whom are also our executive officers, are available in
this Information Statement. Given the infrequency of stockholder communications
to the Board, and given that the majority of the Voting Shares is held by our
directors, the Board does not believe a formal process is necessary. The Board
will consider, from time to time, whether adoption of a formal process for such
stockholder communications has become necessary or appropriate. Director
nominations and other communications may be submitted by a stockholder by
sending such communications to any member of Board care of us at 614 E. Hwy 50,
Suite 235, Clermont, Florida 34711, marked to the attention of an individual
director's name or to the Chairman of the Board.
4
The Board reviews the qualities of the Board members as a group, including the
diversity of the Board's career experiences, viewpoints, company affiliations,
expertise with respect to the various facets of our business operations and
business experiences. The Board has not adopted a formal policy and did not
employ any particular benchmarks with respect to these qualities, but was
mindful of achieving an appropriate balance of these qualities with respect to
the Board as a whole. Moreover, the Board considered each nominee's overall
service to us during the previous term, each nominee's personal integrity and
willingness to apply sound and independent business judgment with respect to our
matters, as well as the individual experience of each director noted within
their biographies below.
DIRECTORS
The following table sets forth the names, ages and current positions of the
directors elected by the Written Consent:
Name Age Position(s)
---- --- -----------
Benny R. Powell 40 Chief Executive Officer, President, Chief Financial
Officer, Secretary, Director
David Campiti 55 Chief Operating Officer, Director
Chris Crosby 36 Chief Technology Officer, Director
Isen Robbins 45 Chief Intellectual Property Officer, Director
Aimee Schoof 42 Chief Business Development Officer, Director
MEETINGS OF THE BOARD
The Board held ten meetings by teleconference from March through August 2013.
All directors attended 100% of such meetings of the Board. Although the Board
has not adopted a formal policy, all directors are expected to attend each
annual meeting of stockholders.
DIRECTORS AND EXECUTIVE OFFICERS
BENNY R. POWELL, CHIEF EXECUTIVE OFFICER, PRESIDENT, CHIEF FINANCIAL OFFICER,
SECRETARY, AND DIRECTOR. Mr. Powell has served as our Chief Executive Officer,
President, Chief Financial Officer, and Secretary, and as a member of the Board,
since June 11, 2012. Mr. Powell was the founder of Red Giant Entertainment,
Inc., a Florida corporation (acquired by us in June 2012) and served as its
Chief Executive Officer from formation in January 2011. He also founded and has
served as Chief Executive Officer of Active Media Publishing, LLC ("Active
Media") from May 2003 to present. From November 2002 to June 2007, Mr. Powell
also served as CEO for Total Solutions Marketing, LLC, a full service marketing
company. From January 1995 to February 1999, Mr. Powell worked as a writer at
Marvel Comics Group. Mr. Powell is a co-owner of several of properties,
including without limitation Duel Identity(TM), Katrina(TM), Wayward
Sons(TM)(TM)and Wayward Sons: Legends(TM).
DAVID CAMPITI, CHIEF OPERATIONS OFFICER AND DIRECTOR. Mr. Campiti has served as
our Chief Operations Officer and a member of the Board since March 5, 2013. He
has also served as CEO and Global Talent Supervisor for Glass House Graphics, a
sole proprietorship professional services firm dba Studio Sakka Graphics &
Animation, Art & Comics Store, and The Academy of Comic Book Arts that provides
development and organizational services as well as illustrators, writers,
painters and designers, since 1993. Mr. Campiti oversees two Glass House
Graphics offices in Brazil; one in Manila, Philippines; one in New Delhi, India;
two locations in Indonesia, and one in Europe--coordinating creative services
from a roster of more than 120 talents worldwide to produce animation, art, and
digital graphics for scores of clients.
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Mr. Campiti has over 30 years of experience in the comic book industry,
including writing for DC Comics, and helped launch Amazing Comics, Wonder Color
Comics, Pied Piper Press, Eternity Comics, New Sirius Productions (both Sirius
Comics and Prelude Graphics), and other companies. Mr. Campiti is a co-owner of
several properties featured on our website, including without limitation Banzai
Girl(TM), Exposure(TM), Jade Warriors(TM), Pandora's Blog(TM), The Shadow
Children(TM), and Journey to Magika(TM), which he also produced as an animated
film. Journey to Magika previewed at Tribeca Film Festival and is due for
release in 2014.
CHRIS CROSBY, CHIEF TECHNOLOGY OFFICER AND DIRECTOR. Mr. Crosby has served as
our Chief Technology Officer and a member of the Board since March 1, 2013. He
has also co-founded Keenspot Entertainment ("Keenspot"), our strategic partner,
in March 2000 and Blatant Comics, an independent comic book publisher, in July
1997. Mr. Crosby has served as CEO of Keenspot and as Vice President and
Editor-in-Chief of Blatant Comics since such companies' respective founding
dates. Mr. Crosby has over 20 years experience in the comic book industry, and
in 1994 he became one of the first creators to step into the new world of online
comics. In 1999, he launched one of the first daily online-exclusive comic
strips, Superosity(TM). Mr. Crosby is the creator or co-creator of several
properties featured on our website and owned by Keenspot and its affiliates,
including without limitation Crow Scare(TM), The First Daughter(TM),
Godmode(TM), Last Blood(TM), Sore Thumbs(TM), and Wicked Powered(TM).
ISEN ROBBINS, CHIEF INTELLECTUAL PROPERTY OFFICER AND DIRECTOR. Mr. Robbins has
served as our Chief Intellectual Property Officer and a member of the Board
since March 5, 2013. Mr. Robbins also co-founded Intrinsic Value Films
("Intrinsic") in 1998 and has served as a Co-CEO of Intrinsic since that time.
He has produced more than 30 feature films, including seven that premiered at
the Sundance Film Festival, four at the Tribeca Film Festival, three at SXSW,
and one at each of the Toronto, Venice, New Directors/ New Films, and Berlin
Film Festivals. Intrinsic's films have been distributed worldwide and have won
many awards and been honored with numerous accolades, including winning the
Sundance Special Grand Jury prize, and being nominated for two Gotham and four
Independent Spirit awards.
Mr. Robbins has received a producer credit on the following films: Blue Caprice
(Isaiah Washington, Tim Blake Nelson, Joey Lauren Adams), Run (William Moseley,
Kelsey Chow, Adrian Pasdar, Eric Roberts), Alphabet Killer (Eliza Dushku, Cary
Elwes, Timothy Hutton), XX/XY (Mark Ruffalo, Kathlean Robertson), Skeptic (Zoe
Saldana, Tom Arnold, Timothy Daly), Anything but Love (Andrew McCarthy, Eartha
Kitt), Hebrew Hammer (Judy Greer, Adam Goldberg, Andy Dick, Mario Van Peebles),
Brother to Brother (Anthony Mackie, Daniel Sunjata, Aunjanue Ellis) and M.I.A
(Danny Glover, Ron Perlman, Linda Hamilton and David Strathairn).
AIMEE SCHOOF, CHIEF BUSINESS DEVELOPMENT OFFICER AND DIRECTOR. Ms. Schoof has
served as our Chief Business Development Officer and a member of the Board since
March 5, 2013. Ms. Schoof also co-founded Intrinsic in 1998 and has served as a
Co-CEO of Intrinsic since that time. She has produced more than 30 feature
films, including seven that premiered at the Sundance Film Festival, four at the
Tribeca Film Festival, three at SXSW, and one at each of the Toronto, Venice,
New Directors/ New Films, and Berlin Film Festivals. Intrinsic's films have been
distributed worldwide and have won many awards and been honored with numerous
accolades, including winning the Sundance Special Grand Jury prize, and being
nominated for two Gotham and four Independent Spirit awards.
6
Ms. Schoof has received a producer credit on the following films: Blue Caprice
(Isiaiah Washington, Tim Blake Nelson, Joey Lauren Adams), Run (William Moseley,
Kelsey Chow, Adrian Pasdar, Eric Roberts) Alphabet Killer (Eliza Dushku, Cary
Elwes, Timothy Hutton), XX/XY (Mark Ruffalo, Kathlean Robertson), Skeptic (Zoe
Saldana, Tom Arnold, Timothy Daly), Anything but Love (Andrew McCarthy, Eartha
Kitt), Hebrew Hammer (Judy Greer, Adam Goldberg, Andy Dick, Mario Van Peebles),
Brother to Brother (Anthony Mackie, Daniel Sunjata, Aunjanue Ellis) and M.I.A
(Danny Glover, Ron Perlman, Linda Hamilton and David Strathairn).
Ms. Schoof founded a nonprofit called AmaYoga in 2010 which creates yoga
programs in homeless shelters and transitional housing around Los Angeles,
California. Aimee has also mentored film students through The Film and Radio
Recording Connection Mentoring program since 2009.
EXECUTIVE COMPENSATION
Set forth below is a summary of compensation for our officers for all services
rendered in all capacities to us. There have been no annuity, pension or
retirement benefits ever paid to our officers, directors or employees.
With the exception of reimbursement of expenses incurred by our principal
executive officer during the scope of his employment or service as a director,
and unless expressly stated otherwise in a footnote below, our executive
officers did not receive any other compensation.
SUMMARY COMPENSATION TABLE
Fiscal
Year
ended Stock All Other
Name and Principal Position August 31 Salary ($) Awards ($) Compensation ($) Total ($)
--------------------------- --------- ---------- ---------- ---------------- ---------
Benny R. Powell, Chief Executive 2013 $48,781 -0- -0- (1) $48,781
Officer, President, Chief Financial 2012 -0- -0- -0- -0-
Officer, Secretary, Director
David Campiti, Chief Operations
Officer, Director (2) 2013 -0- (3) -0- (4) -0- (5) -0- (4)
Chris Crosby, Chief Technology
Officer, Director (5) 2013 -0- (3,6) -0- (7) -0- -0- (7)
Isen Robbins, Chief Intellectual
Property Officer, Director (2) 2013 -0- (3) -0- (4) -0- -0- (4)
Aimee Schoof, Chief Business
Development Officer, Director (2) 2013 -0- (3) -0- (4) -0- -0- (4)
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1. We have also transacted business with our officers and their other
businesses as set forth under "Management--Related Transactions."
2. Appointed as an officer and director on March 5, 2013.
3. We have entered into independent contractor agreements with each of Ms.
Schoof and Messrs. Campiti, Crosby and Robbins, each dated October 25,
2013, under which each such officer will be entitled to $18,000 per year in
salary for services provided.
4. Each of Mr. Campiti, Mr. Isen and Ms. Schoof received 43,300,000 shares of
our common stock directly from Mr. Powell for services to be rendered as a
director.
5. Appointed as an officer and director on March 1, 2013.
6. As of December 2013, Mr. Crosby shall also receive $1,500 per month for web
editing services provided to us.
7. Mr. Crosby received 34,140,000 shares of our common stock directly from Mr.
Powell for services to be rendered as a director.
7
INDEPENDENT CONTRACTOR AGREEMENTS
On October 25, 2013, we entered into an Independent Contractor Agreement with
each of our officers other than Benny R. Powell. Under such Independent
Contractor Agreements, we have agreed to pay each of Ms. Schoof and Messrs.
Campiti, Crosby and Isen $18,000 per year in monthly increments of $1,500. The
Independent Contractor Agreements have an initial term of one year and renews
automatically for subsequent one year terms unless terminated. The Independent
Contractor Agreements provide that our officers may perform services for other
companies.
We have no written agreement with Benny R. Powell, but we have paid $48,781 in
salary compensation to Mr. Powell for services provided in the fiscal year ended
August 31, 2013. We contemplate paying Benny R. Powell a monthly salary of
$5,000 per month in the future.
We reserve the right to engage our officers and directors, or their affiliates,
to perform services to us and compensate them for such services, other than as
required to be performed under any employment or independent contractor
agreement with them, or as generally required of persons in their offices, at
rates no greater than we expect to pay an unrelated third party with comparable
experience and quality.
Furthermore, none of our officers or directors is required to spend all of their
time and resources on us and each are involved in other companies. See our
officers' and directors' biographies above.
OTHER COMPENSATION
We do not have any retirement, pension, profit-sharing, stock options or
insurance programs for the benefit of our employees other than the 2013 Stock
Option Plan described below under "Item 4--Adoption of 2013 Stock Option Plan."
As of the date of this Information Statement, we have not granted any stock
options.
DIRECTOR COMPENSATION
Our directors are not compensated for their services, but are entitled for
reimbursement of expenses incurred in attending Board meetings.
TRANSACTIONS WITH RELATED PERSONS
We have not entered into any material transactions with any director, executive
officer, promoter, security holder who is a beneficial owner of 5% or more of
our common stock, or any immediate family member of such persons other than as
set forth below. In the future, we intend to enter into agreements with our
officers and directors and their affiliates to obtain co-ownership or other
rights to properties that our officers and their affiliates have allowed us to
showcase on our website and will disclose any material agreements at the time we
enter into any such agreements as required under the Exchange Act.
8
PRINTING AGREEMENT WITH ACTIVE MEDIA
On March 13, 2013, we entered into a Printing Agreement with Active Media, an
entity controlled by our Chief Executive Officer, President, Chief Financial
Officer, Secretary, and a member of the Board, Benny R. Powell. This Printing
Agreement reduces to writing the oral understanding between us and Active Media
under which Active Media agreed to provide printing services to us at near cost
prices on a non-exclusive basis. We paid an aggregate of $115,665.28 to Active
Media in the fiscal year ended August 31, 2013.
EXCLUSIVE WEB PUBLISHING CONTRACT WITH KEENSPOT
We have published properties online through websites hosted by Keenspot under an
Exclusive Web Publishing Contract dated June 30, 2010 between Benny R. Powell
and Keenspot, a general partnership co-founded by Chris Crosby, our Chief
Technology Officer and a member of the Board, co-founded, in which Mr. Crosby
serves as Chief Executive Officer. Under this Agreement, Keenspot sells
advertising on websites featuring our properties at an agreed upon cost per
thousand verified impressions (CPM) to our Keenspot sites whereby advertisers
pay based on the number of times the target audience is exposed to the
advertisement. The particular CPM rate varies based upon bids by advertisers and
other customary factors. In exchange for providing advertising, hosting, IT, and
sales management services, Keenspot receives a 50% commission on advertising
revenue. In the fiscal years ended August 31, 2013 and 2012, Keenspot received
$6,785 and $9,975, respectively from this agreement.
STOCK EXCHANGE AGREEMENT WITH COMICGENESIS, LLC ("COMICGENESIS")
In March 2013, we entered into a Stock Exchange Agreement with ComicGenesis, a
limited liability company owned at that time by Chris Crosby, our Chief
Technology Officer and member of the Board, under which we acquired 5,000,000
shares of ComicGenesis from Mr. Crosby in exchange for 500,000 shares of our
common stock from shares held by our President, Benny R. Powell. ComicGenesis
was not valued, as it was essentially an inactive entity.
Shares exchanged for ComicGenesis were valued at a fair market value of $45,000,
the fair market value of our stock at the date of exchange. The shares exchanged
were contributed by Mr. Powell and the related indebtedness was forgiven to us
as a contribution of capital. The related investment in ComicGenesis is
eliminated in consolidation.
OTHER ARRANGEMENTS WITH OFFICERS
During the fiscal year ending August 31, 2013, Benny R. Powell, our President
and Chief Executive Officer, has advanced assets in the amount of $39,187 to us,
which includes transfer of 3 million shares of common stock, personally held, to
an unrelated vendor for securing services. Those services were valued at
$36,000, per the agreement and the fair value of the stock at the date of the
exchange. As of August 31, 2013 and 2012, we were indebted to Mr. Powell in the
amount of $39,187 and $0, respectively.
Our officers provide office and storage space to us at no charge through their
other ventures.
We also from time to time have retained Glass House Graphics, a sole
proprietorship owned by David Campiti, our Chief Operating Officer and a member
of the Board, to provide creative services for us. We paid an aggregate of
$2,035 to Glass House Graphics in the fiscal year ended August 31, 2013.
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As of December 2013, we have retained Chris Crosby, one of our officers and
directors, to also serve as our web editor for our webcomics. Mr. Crosby will be
compensated $1,500 per month for his web editing services, which we believe to
be substantially less than what we would pay for an independent third party to
provide such services.
We have not adopted formal written policies and procedures specifically for
related party transactions. The Board is responsible to approve all related
party transactions.
ITEM 2 - APPOINTMENT OF AUDITORS
The Board has approved the re-appointment of Messineo & Co., CPAs, LLC, as our
independent auditors for our fiscal year ending August 31, 2013. Messineo & Co.,
CPAs, LLC has served as our independent auditors since May 10, 2013.
CHANGES IN CERTIFYING ACCOUNTANT
On April 3, 2013, we were informed that our registered independent public
accountant prior to such date, MartinelliMick PLLC, of Spokane, Washington,
("MMPLLC") had resigned. MMPLLC's reports on the financial statements for the
fiscal year ended August 31, 2012 and on the financial statements for the fiscal
year ended December 31, 2011 contained no adverse opinion or disclaimer of
opinion and was not qualified or modified as to audit scope or accounting,
except that each of such reports contained an explanatory paragraph stating that
there was substantial doubt about our ability to continue as a going concern.
Through the period covered by the financial audit for the fiscal year ended
August 31, 2012 and including the review of financial statements of the
quarterly periods through November 30, 2012, there have been no disagreements
with MMPLLC on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of MMPLLC would have caused them to make reference
thereto in their report on the financial statements, except for unresolved
issues relating to audit disclosures and the auditors requesting additional
information to support the representations previously given to them by us.
Through the interim period April 3, 2013 (the date of resignation of MMPLLC),
there have been no disagreements with MMPLLC on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of MMPLLC,
would have caused them to make reference thereto in their report on the
financial statements, except for unresolved issues relating to audit disclosures
and the auditors requesting additional information to support the
representations previously given to them by us.
We believe that any unresolved issues and the subsequently requested information
to support the prior representations, if supplied prior to MMPLLC's resignation,
would not have resulted in any material change in our financial statements and
financial position and our results of operations and cash flow for each of the
periods that MMPLLC performed auditing services. We have authorized MMPLLC to
respond fully to the inquiries of the successor accountant. During the fiscal
years ended August 31, 2012 and December 31, 2011 and the interim period through
April 3, 2013, there have been no reportable events as set forth in Item
304(a)(1)(iv) of Regulation S-K.
We provided a copy of the foregoing disclosures to MMPLLC and requested that
MMPLLC furnish us with a letter addressed to the Securities & Exchange
Commission stating whether or not MMPLLC agrees with the statements in this
Report. A copy of the letter of MMPLLC is attached as Exhibit 16.1 to our
Current Report on Form 8-K filed on August 28, 2013.
10
Following approval by the Board of Directors on April 4, 2013, on April 5, 2013,
we engaged Drake, Klein, Messineo, CPAs PA ("DKM") of Clearwater, Florida, as
our new registered independent public accountant. During the fiscal years ended
August 31, 2012 and December 31, 2011 and prior to April 5, 2013 (the date of
the new engagement), we did not consult with DKM regarding (i) the application
of accounting principles to a specified transaction, (ii) the type of audit
opinion that might be rendered on our financial statements by DKM, in either
case where written or oral advice provided by DKM would be an important factor
considered by us in reaching a decision as to any accounting, auditing or
financial reporting issues or (iii) any other matter that was the subject of a
disagreement between is and our former auditor or was a reportable event (as
described in Items 304(a)(1)(iv) or Item 304(a)(1)(v) of Regulation S-K,
respectively).
On May 10, 2013, we dismissed the registered independent public accountant,
Drake Klein Messineo, CPAs, PA, of Clearwater Florida ("DKM") after being
informed that the engagement partner of DKM had terminated his employment with
DKM and begun practicing under registration of Messineo & Co, CPAs, LLC. DKM has
not issued any reports on our financial statements. Our Board of Directors
participated in and approved the decision to change independent accountants.
Through the period covered by the financial review of financial statements of
the quarterly period February 28, 2013 there have been no disagreements with DKM
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of DKM would have caused them to make reference thereto in
their report on the financial statements. Through the interim period May 10,
2013 (the date of dismissal of the former accountant), there have been no
disagreements with DKM on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of DKM would have caused them
to make reference thereto in their report on the financial statements.
We have authorized DKM to respond fully to the inquiries of the successor
accountant. During the interim period through May 10, 2013, there have been no
reportable events with us as set forth in Item 304(a)(1)(iv) of Regulation S-K.
We have provided a copy of the foregoing disclosures to DKM and requested that
DKM furnish a letter addressed to the Securities & Exchange Commission stating
whether or not it agrees with the statements in this Report. A copy of such
letter is filed as Exhibit 16.1 to our Current Report on Form 8-K filed on May
10, 2013.
On May 10, 2013, we engaged Messineo & Co, CPAs LLC ("M&Co") of Clearwater,
Florida, as our new registered independent public accountant. During the fiscal
years ended August 31, 2012 and December 31, 2011 and prior to May 10, 2013 (the
date of the new engagement), we did not consult with M&Co regarding (i) the
application of accounting principles to a specified transaction, (ii) the type
of audit opinion that might be rendered on our financial statements by M&Co, in
either case where written or oral advice provided by M&Co would be an important
factor considered by us in reaching a decision as to any accounting, auditing or
financial reporting issues or (iii) any other matter that was the subject of a
disagreement between us and our former auditor or was a reportable event (as
described in Items 304(a)(1)(iv) or Item 304(a)(1)(v) of Regulation S-K,
respectively).
AUDIT FEES
M&Co. was paid aggregate fees of approximately $12,000 for the fiscal year ended
August 31, 2013, DKM was paid aggregate fees of approximately $2,000 for the
fiscal year ended August 31, 2013, and MMPLLC was paid aggregate fees of
11
approximately $24,000 and $18,400, respectively, for the fiscal years ended
August 31, 2012 and 2013, for professional services rendered for the audit of
our annual financial statements and for the reviews of the financial statements
included in our quarterly reports on Form 10-Q during such fiscal years.
AUDIT RELATED FEES
Neither of our independent registered public accounting firms was paid
additional fees for the fiscal years ended August 31, 2013 and August 31, 2012
for assurance and related services reasonably related to the performance of the
audit or review of our financial statements.
TAX FEES
Neither of our independent registered public accounting firms was paid
additional fees for the fiscal years ended August 31, 2013 and August 31, 2012
for professional services rendered for tax compliance, tax advice, and tax
planning during this fiscal year.
ALL OTHER FEES
Neither of our independent registered public accounting firms was paid any other
fees for professional services during the fiscal years ended August 31, 2013 and
August 31, 2012.
ITEM 3 - AMENDMENT OF OUR ARTICLES OF INCORPORATION
On December 24, 2013, the Board approved by unanimous written consent the form
of Amendment attached hereto as Exhibit B, subject to stockholder approval,
amending our Articles of Incorporation to increase the authorized number of
shares of Common Stock from 900,000,000 to 3,000,000,000. Approval for the
Amendment was obtained through the Written Consent.
EFFECT OF THE AMENDMENT
The Amendment increases the authorized number of shares of Common Stock. This
increase could have a number of effects on our stockholders depending upon the
exact nature and circumstances of any actual issuances of authorized but
unissued shares. The increase could have an anti-takeover effect, in that
additional shares could be issued (within the limits imposed by applicable law)
in one or more transactions that could make a change in control or takeover of
us more difficult.
PURPOSE OF THE AMENDMENT
The Amendment to increase the authorized number of shares of Common Stock is
being made, in part, to enable us to satisfy (i) the reserved but unissued
requirements of our currently outstanding convertible notes; (ii) our
obligations under a Securities Purchase Agreement (the "Iconic SPA") with Iconic
Holdings, LLC ("Iconic") under which we may sell up to $5,000,000 in our common
stock to Iconic; and (iii) our obligations under the 2013 Stock Option Plan. The
Amendment will also provide us with more flexibility and opportunities to
conduct equity financings and acquisitions, and to satisfy reserved but unissued
requirements of warrants, options and convertible notes that may be issued in
future financing activities.
It is necessary to satisfy the reserve requirements of our currently outstanding
convertible notes to issue authorized shares of Common Stock upon the exercise
of conversion on such securities and under the Iconic SPA to issue authorized
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shares of Common Stock upon the sale of Common Stock to Iconic. We believe that
having such additional authorized shares available for issuance in the future
will give us greater flexibility and may allow such shares to be issued without
the expense and delay of a special stockholders' meeting or obtaining written
consents to amend the articles of incorporation to increase authorized capital
at such later date. Although such issuance of additional shares with respect to
future financings and acquisitions would dilute existing stockholders, we
believe that such transactions would ultimately increase stockholder value. The
increase in authorized Common Stock will not have any immediate effect on the
rights of existing stockholders.
ITEM 4 - ADOPTION OF 2013 STOCK OPTION PLAN
As of December 24, 2013, the Board adopted the 2013 Stock Option Plan.
SUMMARY OF THE 2013 STOCK OPTION PLAN
The following is a summary of the material features of the 2013 Stock Option
Plan and is qualified in its entirety by reference to the full text of the 2013
Stock Option Plan, which is attached hereto as Exhibit C. Capitalized terms used
in this summary and not otherwise defined shall have the meaning set forth in
the 2013 Stock Option Plan.
PURPOSES OF THE 2013 STOCK OPTION PLAN
The purpose of the 2013 Stock Option Plan is to further our growth and financial
success by providing additional incentives to selected employees, directors and
consultants of us and our Affiliates (referred to collectively as "Eligible
Persons") by providing incentives for Eligible Persons to exert maximum efforts
for the success of us and our Affiliates. As of the date of this Information
Statement, we and our Affiliates have one employee who is also a director and
four consultants who are also directors.
ADMINISTRATION
The 2013 Stock Option Plan is administered by the Board unless delegated to a
committee of not fewer than three disinterested administrators, of which at
least two are members of the Board (either the Board or such committee, as
applicable, referred to as the "Committee"). The Committee has the authority to
determine the specific terms and conditions of all awards granted under the 2013
Stock Option Plan, including, without limitation, the number of shares subject
to each award, the price to be paid for the shares, and the recipients of awards
("Participants"), and the applicable vesting criteria. The Committee has
discretion to make all other determinations necessary or advisable for the
administration of the 2013 Stock Option Plan.
SHARES SUBJECT TO THE PLAN
We are required to reserve 50,000,000 shares of Common Stock for awards under
the 2013 Stock Option Plan. The shares may be unissued shares or reacquired
shares, bought on the market or otherwise. To the extent any stock options
expire or terminate without having been exercised in full, the shares underlying
such stock options shall revert to and again become available for issuance under
the 2013 Stock Option Plan. The last trade of our Common Stock on the OTCQB on
December 23, 2013 occurred at a price of $0.0054.
13
ELIGIBILITY
Options intended to qualify as "incentive stock options" as defined under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") may be
granted only to employees of us or our Affiliates and in accordance with
regulations promulgated under the Code for incentive stock options. All other
stock options may be granted to Eligible Persons except where such grants would
not comply with applicable securities laws.
Options shall be designated as either incentive stock options or non-statutory
stock options (i.e., options not intended to qualify as incentive stock options)
and shall have a term of not more than ten years from the grant date. To the
extent that the aggregate fair market value of Common Stock (determined at grant
date) with respect to which incentive stock options are exercisable for the
first time by any Participant during any calendar year (under all plans of us
and our Affiliates) exceeds $100,000, the options or portions thereof that
exceed such limit (according to the order of grant) shall be treated as
non-statutory stock options.
The exercise price of incentive stock options shall not be less than 100% (and
in the case of incentive stock options granted to 10% or greater stockholders of
us or our Affiliates, not less than 110%) of the fair market value of the Common
Stock on the grant date.
The exercise price may be paid, at the discretion of the Board, at either the
time of grant or the time of exercise of the Option (i) in cash or by check at
the time of exercise; (ii) by the delivery to us of other Common Stock not
acquired from us or otherwise held by the Participant for more than six months;
(iii) by an interest-bearing promissory note; or (iv) in any other form of legal
consideration acceptable to the Board.
Options shall vest as the Committee may deem appropriate, and the vesting
provisions of individual options may vary. Generally, options are expected to
vest immediately upon issuance.
CAPITALIZATION ADJUSTMENTS; DISSOLUTION OR LIQUIDATION; ASSETS SALE, MERGER,
CONSOLIDATION OR REVERSE MERGER
The Committee shall adjust the number of shares of Common Stock subject to the
2013 Stock Option Plan, the maximum limits on the number of shares of Common
Stock subject to award to any person, and each award outstanding in the case of
any subdivision, consolidation, stock dividend, exchange of shares, or other
such changes in our capital structure.
All stock options shall terminate immediately prior to any event of our
dissolution or liquidation.
In the case of any merger or consolidation, each outstanding option shall
pertain to and apply to the securities to which a holder of shares of Common
Stock equal to the shares subject to the option would have been entitled by
reason of such merger or consolidation.
AMENDMENT, TERMINATION OR SUSPENSION OF THE 2013 STOCK OPTION PLAN AND OPTION
AWARDS
The Committee may terminate, suspend, or amend the 2013 Stock Option Plan at any
time, subject to applicable law. If necessary to comply with any applicable law
any such amendment will be subject to stockholder approval. We will obtain
stockholder consent prior to amending the 2013 Stock Option Plan to (i) increase
the number of shares subject to the 2013 Stock Option Plan; (ii) decrease the
price at which options thereunder may be granted; (iii) materially increase
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benefits to Participants; or (iv) change the class of Eligible Persons.
Provided, however, that no action may impair the rights of any Participant under
any Stock Award, without his or her written consent.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain tax consequences of certain
transactions under the 2013 Stock Option Plan. This summary is not intended to
be complete and does not describe state or local tax consequences.
Under the Code, we will generally be entitled to a deduction for federal income
tax purposes at the same time and in the same amount as the ordinary income that
Participants recognize pursuant to awards (subject to the Participant's overall
compensation being reasonable, and to the discussion below with respect to Code
Section 162(m)). For Participants, the expected tax consequences of awards are
as follows:
NON-STATUTORY STOCK OPTIONS
A Participant will not recognize income at the time a non-statutory stock option
is granted. At the time a non-statutory stock option is exercised, the
Participant will recognize ordinary income in an amount equal to the excess of
(i) the fair market value of the shares of Common Stock issued to the
Participant on the exercise date over (ii) the exercise price paid for the
shares. At the time of sale of shares acquired pursuant to the exercise of a
non-statutory stock option, the appreciation (or depreciation) in value of the
shares after the date of exercise will be treated either as short-term or
long-term capital gain (or loss) depending on how long the shares have been
held.
INCENTIVE STOCK OPTIONS
A Participant will not recognize income upon the grant of an incentive stock
option. There are generally no tax consequences to the Participant upon exercise
of an incentive stock option (except the amount by which the fair market value
of the shares at the time of exercise exceeds the option exercise price is a tax
preference item possibly giving rise to an alternative minimum tax). If the
shares of Common Stock are not disposed of within two years from the date the
incentive stock option was granted or within one year after the incentive stock
option was exercised, any gain realized upon the subsequent disposition of the
shares will be characterized as long-term capital gain and any loss will be
characterized as long-term capital loss. If both of these holding period
requirements are not met, then a "disqualifying disposition" occurs and (i) the
Participant recognizes gain in the amount by which the fair market value of the
shares at the time of exercise exceeded the exercise price for the incentive
stock option and (ii) any remaining amount realized on disposition (except for
certain "wash" sales, gifts or sales to related persons) will be characterized
as capital gain or loss.
SPECIAL TAX PROVISIONS
Under certain circumstances, the accelerated vesting, cash-out or accelerated
lapse of restrictions on awards in connection with a change in control of us
might be deemed an "excess parachute payment" for purposes of the golden
parachute tax provisions of Code Section 280G, and the Participant may be
subject to a 20% excise tax and we may be denied a tax deduction. Furthermore,
we may not be able to deduct the aggregate compensation in excess of $1,000,000
attributable to awards that are not "performance-based" within the meaning of
Code Section 162(m) in certain circumstances.
15
GENERAL TAX LAW CONSIDERATIONS
The preceding paragraphs are intended to be merely a summary of certain
important tax law consequences concerning a grant of options under the 2013
Stock Option Plan and the disposition of shares issued thereunder in existence
as of the date of this proxy statement. Special rules may apply to our officers,
directors or greater than ten percent stockholders. Participants in the 2013
Stock Option Plan should review the current tax treatment with their individual
tax advisors at the time of grant, exercise or any other transaction relating to
an award or the underlying shares.
NEW PLAN BENEFITS
No options are currently outstanding. All options under the 2013 Stock Option
Plan will be granted at the discretion of the Board and, therefore, are not yet
determinable.
ITEM 5 - ADVISORY VOTE ON EXECUTIVE COMPENSATION
As part of the Written Consent, our stockholders cast an advisory vote on the
compensation of our named executive officers disclosed under "Executive
Compensation" in Item 1 - Election of Directors," commonly referred to as the
"say-on-pay" vote, as required under Section 14A of the Exchange Act. While this
vote is non-binding, we value the opinions of stockholders and will consider the
outcome of this vote when making future compensation decisions.
The Board believes that the objectives of our executive compensation program are
appropriate for a company of our size and stage of development and that our
compensation policies and practices help meet those objectives. This advisory
vote is not intended to be limited or specific to any particular element of
compensation, but rather cover the overall compensation of our named executive
officers and the compensation policies and practices described in this proxy
statement.
ITEM 6 - ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES
ON EXECUTIVE COMPENSATION
As part of the Written Consent, our stockholders voted to recommend, in a
non-binding vote, whether the advisory stockholder vote on the compensation of
our named executive officers should occur every one, two or three years, as
required under Section 14A of the Exchange Act. While this vote is non-binding,
we value the opinions of stockholders and will consider the outcome of the vote
when considering the frequency of future advisory stockholder votes on executive
compensation.
We believe, and our stockholders so voted, that a three-year frequency for the
advisory stockholder vote on executive compensation is most consistent with the
objectives of our executive compensation programs. We believe the best way for
stockholders to evaluate our performance is over a three-year period because our
executive compensation programs are designed to motivate and reward long-term
performance. A three-year time period will provide stockholders with a long-term
view of whether our executive compensation programs are achieving their
objectives.
We continuously evaluate our executive compensation programs and make prudent
changes when necessary to ensure alignment with stockholder interests.
Stockholders can provide us their views on executive compensation matters during
the interval between stockholder advisory votes. We welcome stockholder input on
16
our executive compensation matters, and stockholders are able to reach out
directly to the Board to express their views on executive compensation.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that our officers and directors and
persons who own more than 10% of our common stock, file reports of ownership and
changes in ownership with the SEC. Based solely on our review of the SEC's EDGAR
database, copies of such forms received by us, or written representations from
certain reporting persons, we believe that during the fiscal year ended August
31, 2013, the following delinquencies have occurred:
No. of
No. Transactions Known
of Late Not Filed on Failures
Name and Affiliation Reports Timely Basis to File
-------------------- ------- ------------ -------
Benny R. Powell, Chief Executive Officer,
President, Chief Financial Officer,
Secretary, Director 4 27 None
David Campiti, Chief Operations Officer,
Director 1 0 None
Chris Crosby, Chief Technology Officer,
Director 3 1 None
Isen Robbins, Chief Intellectual Property
Officer, Director 1 0 None
Aimee Schoof, Chief Business Development
Officer, Director 1 0 None
STOCKHOLDER PROPOSALS
Our Annual Meeting of Stockholders for the fiscal year ended August 31, 2015
(the "2015 Annual Meeting"), if held, is expected to be held on or about January
16, 2015, and stockholders having proposals that they desire to present at our
2015 Annual Meeting of Stockholders should, if they desire that such proposals
be included in our proxy statement and proxy relating to such meeting, submit
such proposals in time to be received by us not later than September 19, 2014.
To be included, all submissions must comply with the requirements of Rule 14a-8
promulgated under the Exchange Act, and the Board directs the close attention of
interested stockholders to that rule. Proposals should be mailed to Benny R.
Powell, President and CEO, Red Giant Entertainment, Inc., 614 E. Hwy 50, Suite
235, Clermont, Florida 34711.
Dated: December 24, 2013
By Order of the Board of Directors
/s/ Benny Powell
-----------------------------------
Benny R. Powell
President and CEO
17
EXHIBIT A
MAJORITY WRITTEN CONSENT
IN LIEU OF AN ANNUAL MEETING OF STOCKHOLDERS
RED GIANT ENTERTAINMENT, INC.,
A NEVADA CORPORATION
IN LIEU OF ANNUAL MEETING
The undersigned stockholders, constituting the majority stockholders of Red
Giant Entertainment, Inc., a Nevada corporation (the "Corporation"), acting
pursuant to the authority of Section 78.320 of the Nevada Revised Statutes and
the Bylaws of the Corporation, and with the understanding that the execution of
this consent is in lieu of holding an annual stockholders' meeting, do hereby
adopt the following resolutions:
APPROVAL OF MINUTES
RESOLVED, that the minutes of the prior meetings and written consents of
the stockholders of this Corporation, there being no objections, corrections, or
modifications thereto offered, are hereby approved and adopted.
ELECTION OF DIRECTORS
WHEREAS, there are five authorized seats of the Board of Directors of the
Corporation (the "Board"); and
WHEREAS, the majority stockholders deem it to be in the best interests of
the Corporation to elect the following individuals to the Board, all of whom
have been nominated by the Board:
Benny R. Powell
David Campiti
Chris Crosby
Isen Robbins
Aimee Schoof
NOW, THEREFORE, IT IS HEREBY RESOLVED, that the following individuals are
hereby elected to serve as members of the Board until the next Annual Meeting of
Stockholders and until their successors shall be elected and shall qualify:
Benny R. Powell
David Campiti
Chris Crosby
Isen Robbins
Aimee Schoof
RATIFICATION OF AUDITOR
WHEREAS, the Board has approved the re-appointment of Messineo & Co., CPAs,
LLC ("M&Co.") as the Corporation's independent auditors for the fiscal year
ending August 31, 2014;
A-1
WHEREAS, M&Co. has served as the Corporation's independent auditors since
April 5, 2013; and
WHEREAS, the majority stockholders deem it in the best interests of the
Corporation to approve and ratify the Board's appointment of M&Co. as the
Corporation's independent auditors for the fiscal year ending August 31, 2014.
NOW, THEREFORE, IT IS HEREBY RESOLVED, that the majority stockholders of
the Corporation hereby approve and ratify the appointment of M&Co. as the
Corporation's independent auditors for the fiscal year ending August 31, 2014,
to make an audit of the books and accounts of the Corporation for such fiscal
year and to make a report as of the last day of such fiscal year, at a
remuneration to be fixed by the Board; the scope of such audit to be fixed and
determined by the Board of Directors.
INCREASE IN AUTHORIZED STOCK
WHEREAS, the majority stockholders have been presented with a proposed
Certificate of Amendment to the Articles of Incorporation of Red Giant
Entertainment, Inc. (the "Certificate") in substantially the form attached
hereto as Exhibit 1;
WHEREAS, the Certificate increases the authorized shares of our Common
Stock, par value $0.0001 per share (our "Common Stock") to 3,000,000,000 shares
of Common Stock; and
WHEREAS, the majority stockholders deem it to be in the best interest of
the Corporation to approve the filing of the Certificate with the Nevada
Secretary of State.
NOW, THEREFORE, IT IS HEREBY RESOLVED, that the majority stockholders of
the Corporation hereby approve the filing of the Certificate with the Nevada
Secretary of State.
RESOLVED FURTHER, that the officers and directors of the Corporation, and
each of them, are authorized to perform any actions and execute any and all
documents required to carry out this resolution.
APPROVAL OF 2013 STOCK OPTION PLAN
WHEREAS, effective December 24, 2013, the Board of Directors adopted the
Corporation's 2013 Stock Option Plan, a copy of which is attached hereto as
Exhibit 2 (the "Plan") to secure and retain the services of the employees,
directors, and consultants of the Corporation and its affiliates;
WHEREAS, the majority stockholders have deemed it to be in the best
interests of the Corporation to approve the Plan for its employees, directors,
and consultants; and
WHEREAS, the undersigned stockholders have designed, directed the drafting
of, reviewed, and approved, the Plan.
NOW, THEREFORE, IT IS HEREBY RESOLVED, that, the Plan is approved and
authorized by the Corporation effective as of December 24, 2013.
A-2
EXECUTIVE COMPENSATION
WHEREAS, the majority stockholders have reviewed the compensation paid to
the Corporation's officers, as disclosed pursuant to Item 402 of Regulation S-K
(the "Executive Compensation") and desire to cast an advisory vote approving the
Executive Compensation.
NOW, THEREFORE, IT IS HEREBY RESOLVED, the majority stockholders hereby
cast an advisory vote approving the Executive Compensation.
FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
WHEREAS, the majority stockholders have considered whether an advisory
stockholder vote on the compensation of our named executive officers should
occur every one, two or three years.
NOW, THEREFORE, IT IS HEREBY RESOLVED, the majority stockholders hereby
cast an advisory vote that an advisory vote on the compensation of our named
executive officers should occur every three years.
RATIFICATION OF ACTIONS
RESOLVED, that all actions taken by the officer and directors of the
Corporation since the last meeting of the stockholders be, and they hereby are,
ratified, approved and confirmed in all respects; except those acts which are
violations of law, public policy or the fiduciary duty existing between said
persons and the Corporation.
[Signature Page Follows]
A-3
IN WITNESS WHEREOF, the undersigned stockholders, constituting the majority
stockholders of the Corporation, has executed this Majority Written Consent as
of December 24, 2013.
Number of Voting Percent of
Stockholders Shares Held Voting Shares
------------ ----------- -------------
/s/ Benny Powell
-----------------------------
Benny R. Powell 146,801,600 29.95%
/s/ David Campiti
-----------------------------
David Campiti 43,300,000 9.46%
/s/ Chris Crosby
-----------------------------
Chris Crosby 34,640,000 7.57%
/s/ Isen Robbins
-----------------------------
Isen Robbins 43,300,000 9.46%
/s/ Aimee Schoof
-----------------------------
Aimee Schoof 43,300,000 9.46%
TOTAL: 311,340,600 63.51%
A-4
EXHIBIT B
FORM OF CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
ROSS MILLER
Secretary of State
206 North Carson Street, Suite 1
Carson City, Nevada 89701-4520
(775) 684-5708
Website: www.nvsos.gov
Filed in the office of
Certificate of Amendment /s/ Ross Miller
(PURSUANT TO NRS 78.385 AND 78.390) ROSS MILLER
Secretary of State
State of Nevada
ABOVE SPACE IS FOR OFFICE USE ONLY
Certificate of Amendment to Articles of Incorporation
For Nevada Profit Corporations
(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)
1. Name of Corporation:
Red Giant Entertainment, Inc.
2. The articles have been amended as follows (provide article numbers, if
available):
Article 4, Section 4.1 is hereby deleted and replaced with the following:
The aggregate number of shares that the Corporation shall have authority to
issue is THREE BILLION ONE HUNDRED MILLION (3,100,000,000) shares, consisting of
(i) THREE BILLION (3,000,000,000) shares of Common Stock, par value $0.0001 per
share (the "Common Stock"); and ONE HUNDRED MILLION (100,000,000) shares of
preferred stock, par value $0.0001 per share (the "preferred stock").
3. The vote by which the stockholders holding shares in the corporation
entitling them to exercise at least a majority of the voting power, or such
greater proportion of the voting power as may be required in the case of a vote
by classes or series, or as may be required by the provisions of the articles of
incorporation have voted in favor of the amendment is: 311,340,600
4. Effective date of filing (optional): Date: Time:
(must be no later than 90 days after the certificate is filed)
5. Signature (Required)
------------------------------
Officer of Officer
* If any proposed amendment would alter or change any preferences or any
relative or other right given to any class or series of outstanding shares, then
the amendment must be approved by the vote. In addition to the affirmative vote
otherwise required of the holders of shares representing a majority of the
voting power of each class or series affected by the amendment regardless of
limitations or restrictions on the voting power thereof.
IMPORTANT: Failure to include any of the above information and submit the proper
fees may cause this filing to be rejected.
This form must be accompanied by appropriate fees.
EXHIBIT C
RED GIANT ENTERTAINMENT, INC.
2013 STOCK OPTION PLAN
1. Purpose
This Stock Option Plan (the "Plan") is intended to further the growth and
financial success of Red Giant Entertainment, Inc., a Nevada corporation (the
"Company") by providing additional incentives to selected employees, directors,
and consultants to the Company or parent corporation or subsidiary corporation
of the Company as those terms are defined in Sections 424(e) and 424(f) of the
Internal Revenue Code of 1986, as amended (the "Code") (such parent corporations
and subsidiary corporations hereinafter collectively referred to as
"Affiliates") so that such employees and consultants may acquire or increase
their proprietary interest in the Company. Stock options granted under the Plan
(hereinafter "Options") may be either "Incentive Stock Options," as defined in
Section 422A of the Code and any regulations promulgated under said Section, or
"Nonstatutory Options" at the discretion of the Board of Directors of the
Company (the "Board") and as reflected in the respective written stock option
agreements granted pursuant hereto.
2. Administration
The Plan shall be administered by the Board of Directors of the Company;
provided however, that the Board may delegate such administration to a committee
of not fewer than three members (the "Committee"), at least two of whom are
members of the Board and all of whom are disinterested administrators, as
contemplated by Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended ("Rule 16b-3"); and provided further, that the foregoing
requirement for disinterested administrators shall not apply prior to the date
of the first registration of any of the securities of the Company under the
Securities Act of 1933, as amended.
Subject to the provisions of the Plan, the Board and/or the Committee shall have
authority to (a) grant, in its discretion, Incentive Stock Options in accordance
with Section 422A of the Code or Nonstatutory Options; (b) determine in good
faith the fair market value of the stock covered by an Option; (c) determine
which eligible persons shall be granted Options and the number of shares to be
covered thereby and the term thereof; (d) construe and interpret the Plan; (e)
promulgate, amend and rescind rules and regulations relating to its
administration, and correct defects, omissions, and inconsistencies in the Plan
or any Option; (f) consistent with the Plan and with the consent of the
optionee, as appropriate, amend any outstanding Option or amend the exercise
date or dates thereof; (g) determine the duration and purpose of leaves of
absence which may be granted to optionholders without constituting termination
of their employment for the purpose of the Plan; and (h) make all other
determinations necessary or advisable for the Plan's administration. The
interpretation and construction by the Board of any provisions of the Plan or of
any Option it shall be conclusive and final. No member of the Board or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option.
1
3. Eligibility
The persons who shall be eligible to receive Options shall be employees,
directors, or consultants of the Company or any of its Affiliates ("Optionees").
The term consultant shall mean any person who is engaged by the Company to
render services and is compensated for such services, and any director of the
Company whether or not compensated for such services; provided that, if the
Company registers any of its securities pursuant to the Securities Act of 1933,
as amended (the "Act"), the term consultant shall thereafter not include
directors who are not compensated for their services or are paid only a director
fee by the Company.
(a) Incentive Stock Options. Incentive Stock Options may only be issued to
employees of the Company or its Affiliates. Incentive Stock Options may be
granted to officers, whether or not they are directors, but a director shall not
be granted an Incentive Stock Option unless such director is also an employee of
the Company. Payment of a director fee shall not be sufficient to constitute
employment by the Company. Any grant of option to an officer or director of the
Company subsequent to the first registration of any of the securities of the
Company under the Act shall comply with the requirements of Rule 16b-3. An
optionee may hold more than one Option.
The Company shall not grant an Incentive Stock Option under the Plan to any
employee if such grant would result in such employee holding the right to
exercise for the first time in any one calendar year, under all options granted
to such employee under the Plan or any other stock option plan maintained by the
Company or any Affiliate, with respect to shares of stock having an aggregate
fair market value, determined as of the date of the Option is granted, in excess
of $100,000. Should it be determined that an Incentive Stock Option granted
under the Plan exceeds such maximum for any reason other than a failure in good
faith to value the stock subject to such option, the excess portion of such
option shall be considered a Nonstatutory Option. If, for any reason, an entire
option does not qualify as an Incentive Stock Option by reason of exceeding such
maximum, such option shall be considered a Nonstatutory Option.
(b) Nonstatutory Option. The provisions of the foregoing Section 3(a) shall
not apply to any option designated as a "Nonstatutory Stock Option Agreement" or
which sets forth the intention of the parties that the option be a Nonstatutory
Option.
4. Stock
The stock subject to Options shall be the shares of the Company's authorized but
unissued or reacquired Common Stock (the "Stock").
(a) Number of Shares. Subject to adjustment as provided in Section 5(h) of
this Plan, the total number of shares of Stock which may be purchased through
exercise of Options granted under this Plan shall not exceed 50,000,000 shares.
If any Option shall for any reason terminate or expire, any shares allocated
2
thereto but remaining unpurchased upon such expiration or termination shall
again be available for the grant of Options with respect thereto under this Plan
as though no Option had been granted with respect to such shares.
(b) Reservation of Shares. The Company shall reserve and keep available at
all times during the term of the Plan such number of shares as shall be
sufficient to satisfy the requirements of the Plan. If, after reasonable
efforts, which efforts shall not include the registration of the Plan or Options
under the Act, the Company is unable to obtain authority from any applicable
regulatory body, which authorization is deemed necessary by legal counsel for
the Company for the lawful issuance of shares hereunder, the Company shall be
relieved of any liability with respect to its failure to issue and sell the
shares for which such requisite authority was so deemed necessary unless and
until such authority is obtained.
5. Terms and Conditions of Options
Options granted hereunder shall be evidenced by agreements between the Company
and the respective Optionees, in such form and substance as the Board or
Committee shall from time to time approve. Such agreements need not be
identical, and in each case may include such provisions as the Board or
Committee may determine, but all such agreements shall be subject to and limited
by the following terms and conditions:
(a) Number of Shares: Each Option shall state the number of shares to which
it pertains.
(b) Option Price: Each Option shall state the Option Price, which shall be
determined as follows:
(i) Any Option granted to a person who at the time the Option is
granted owns (or is deemed to own pursuant to Section 424(d) of the Code) stock
possessing more than 10% of the total combined voting power of value of all
classes of stock of the Company, or of any Affiliate, ("10% Holder") shall have
an Option Price of no less than 110% of the fair market value of the common
stock as of the date of grant;
(ii) Incentive Stock Options granted to a person who at the time the
Option is granted is not a 10% Holder shall have an Option price of no less than
100% of the fair market value of the common stock as of the date of grant; and
(iii) Nonstatutory Options granted to a person who at the time the
Option is granted is not a 10% Holder shall have an Option Price determined by
the Board as of the date of grant.
For the purposes of this Section 5(b), the fair market value shall be as
determined by the Board, in good faith, which determination shall be conclusive
and binding; provided however, that if there is a public market for such stock,
the fair market value per share shall be the average of the bid and asked prices
on the date of grant of the Option, or if listed on a stock exchange, the
closing price on such exchange on such date of grant.
3
(c) Medium and Time of Payment: To the extent permissible by applicable
law, the Option price shall be paid, at the discretion of the Board, at either
the time of grant or the time of exercise of the Option (i) in cash or by check,
(ii) by delivery of other common stock of the Company, provided such tendered
stock was not acquired directly or indirectly from the Company, or, if acquired
from the Company, has been held by the Optionee for more than six months, (iii)
by the Optionee's promissory note in a form satisfactory to the Company and
bearing interest at a rate determined by the Board, in its sole discretion, but
in no event less than the then applicable federal rate per annum, or (iv) such
other form of legal consideration permitted by State law as may be acceptable to
the Board.
(d) Term and Exercise of Options: Any Option granted to a 10% Holder shall
become exercisable over a period of no longer than five years. Any Option
otherwise granted to an Employee of the Company shall become exercisable over a
period of no longer than ten years. No less than 20% of the shares covered by
any Option granted shall become exercisable annually and no Option shall be
exercisable, in whole or in part, prior to one year from the date it is granted
unless the Board shall specifically determine otherwise, as provided herein. In
no event shall any Option be exercisable after the expiration of ten years from
the date it is granted. Unless otherwise specified by the Board or the Committee
in the resolution authorizing such option, the date of grant of an Option shall
be deemed to be the date upon which the Board or the Committee authorizes the
granting of such Option.
Each Option shall be exercisable to the nearest whole share, in installments or
otherwise, as the respective option agreements may provide. During the lifetime
of an Optionee, the Option shall be exercisable only by the Optionee and shall
not be assignable or transferable by the Optionee, and no other person shall
acquire any rights therein. To the extent not exercised, installments (if more
than one) shall accumulate, but shall be exercisable, in whole or in part, only
during the period for exercise as stated in the option agreement, whether or not
other installments are then exercisable.
(e) Termination of Status as Employee, Director, or Consultant: If
Optionee's status as an employee, director, or consultant shall terminate for
any reason, then the Optionee (or if the Optionee shall die after such
termination, but prior to exercise, Optionee's personal representative or the
person entitled to succeed to the Option) shall have the right to exercise any
vested Options, in whole or in part, at any time after such termination during
the remaining term of the Option; provided, however, that the Board may specify
a shorter period for exercise following termination as the Board deems
reasonable and appropriate, but not shorter than six months in the event
Optionee's termination was caused by permanent disability within the meaning of
Section 22(e)(3) of the Code. The Option may be exercised only with respect to
installments that the Optionee could have exercised at the date of termination
of employment. Nothing contained herein or in any Option granted pursuant hereto
shall be construed to affect or restrict in any way the right of the Company to
terminate the employment of an Optionee with or without cause.
(f) Death of Optionee: If an Optionee dies while employed or engaged as a
director or consultant by the Company or an Affiliate, the portion of such
Optionee's Option or Options which were exercisable at the date of death may be
exercised, in whole or in part, by the estate of the decedent or by a person
4
succeeding to the right to exercise such Option or Options, at any time within
the remaining term of the Option, but only to the extent, that Optionee could
have exercised the Option as of the date of Optionee's death; provided, in any
case, that the Option may be so exercised only to the extent that the Option has
not previously been exercised by Optionee.
(g) Nontransferability of Option: No Option shall be transferable by the
Optionee, except by will or by the laws of descent and distribution.
(h) Recapitalization: Subject to any required action by the stockholders,
the number of shares of common stock covered by each outstanding Option, and the
price per share thereof set forth in each such Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of common
stock of the Company resulting from a subdivision or consolidation of shares or
the payment of a stock dividend, or any other increase or decrease in the number
of such shares affected without receipt of consideration by the Company.
Subject to any required action by the stockholders, if the Company shall be the
surviving entity in any merger or consolidation, each outstanding Option
thereafter shall pertain to and apply to the securities to which a holder of
shares of common stock equal to the shares subject to the Option would have been
entitled by reason of such merger or consolidation. A dissolution or liquidation
of the Company or a merger or consolidation in which the Company is not the
surviving entity shall cause each outstanding Option to terminate on the
effective date of such dissolution, liquidation, merger or consolidation. In
such event, if the entity which shall be the surviving entity does not tender to
Optionee an offer, for which it has no obligation to do so, to substitute for
any unexercised Option a stock option or capital stock of such surviving entity,
as applicable, which on an equitable basis shall provide the Optionee with
substantially the same economic benefit as such unexercised Option, then the
Board may grant to such Optionee, but shall not be obligated to do so, the right
for a period commencing 30 days prior to and ending immediately prior to such
dissolution, liquidation, merger or consolidation or during the remaining term
of the Option, whichever is the lesser, to exercise any unexpired Option or
Options, without regard to the installment provisions of Section 5(d) of this
Plan; provided, that any such right granted shall be granted to all Optionees
not receiving an offer to substitute on a consistent basis, and provided
further, that any such exercise shall be subject to the consummation of such
dissolution, liquidation, merger or consolidation.
To the extent that the foregoing adjustments relate to stock or securities of
the Company, such adjustments shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. Except as expressly
provided in this Section 5(h), the Optionee shall have no rights by reason of
any subdivision or consolidation of shares of stock or any class or the payment
of any stock dividend or any other increase or decrease in the number of shares
of stock of any class, and the number or price of shares of common stock subject
to any Option shall not be affected by, and no adjustment shall be made by
reason of, any dissolution, liquidation, merger or consolidation, or any issue
by the Company of shares of stock of any class or securities convertible into
shares of stock of any class.
5
The grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Company to make any adjustments, reclassifications,
reorganizations or changes in its capital or business structure or to merge,
consolidate, dissolve, or liquidate or to sell or transfer all or any part of
its business or assets.
(i) Rights as a Stockholder: An Optionee shall have no rights as a
stockholder with respect to any shares covered by an Option until the date of
the issuance of a stock certificate to Optionee for such shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which the
record date is prior to the date such stock certificate is issued, except as
expressly provided in Section 5(h) hereof.
(j) Modification, Acceleration, Extension, and Renewal of Options: Subject
to the terms and conditions and within the limitations of the Plan, the Board
may modify an Option, or once an Option is exercisable, accelerate the rate at
which it may be exercised, and may extend or renew outstanding Options granted
under the Plan or accept the surrender of outstanding Options (to the extent not
theretofore exercised) and authorize the granting of new Options in substitution
for such Options, provided such action is permissible under Section 422A of the
Code and state law.
Notwithstanding the foregoing provisions of this Section 5(j), however, no
modification of an Option shall, without the consent of the Optionee, alter to
the Optionee's detriment or impair any rights or obligations under any Option
theretofore granted under the Plan.
(k) Investment Intent: Unless and until the issuance and sale of the shares
subject to the Plan are registered under the Act, each Option under the Plan
shall provide that the purchases of stock thereunder shall be for investment
purposes and not with a view to, or for resale in connection with, any
distribution thereof. Further, unless the issuance and sale of the stock have
been registered under the Act, each Option shall provide that no shares shall be
purchased upon the exercise of such Option unless and until (i) any then
applicable requirements of state and federal laws and regulatory agencies shall
have been fully complied with to the satisfaction of the Company and its
counsel, and (ii) if requested to do so by the Company, the person exercising
the Option shall (i) give written assurances as to knowledge and experience of
such person (or a representative employed by such person) in financial and
business matters and the ability of such person (or representative) to evaluate
the merits and risks of exercising the Option, and (ii) execute and deliver to
the Company a letter of investment intent, all in such form and substance as the
Company may require. If shares are issued upon exercise of an Option without
registration under the Act, subsequent registration of such shares shall relieve
the purchaser thereof of any investment restrictions or representations made
upon the exercise of such Options.
(l) Exercise Before Exercise Date: At the discretion of the Board, the
Option may, but need not, include a provision whereby the Optionee may elect to
exercise all or any portion of the Option prior to the stated exercise date of
the Option or any installment thereof. Any shares so purchased prior to the
stated exercise date shall be subject to repurchase by the Company upon
termination of Optionee's employment as contemplated by Sections 5(e), 5(f) and
6
5(g) hereof prior to the exercise date stated in the Option and such other
restrictions and conditions as the Board or Committee may deem advisable.
(m) Other Provisions: The Option agreements authorized under this Plan
shall contain such other provisions, including, without limitation, restrictions
upon the exercise of the Options, as the Board or the Committee shall deem
advisable. Shares shall not be issued pursuant to the exercise of an Option, if
the exercise of such Option or the issuance of shares thereunder would violate,
in the opinion of legal counsel for the Company, the provisions of any
applicable law or the rules or regulations of any applicable governmental or
administrative agency or body, such as the Act, the Securities Exchange Act of
1934, the rules promulgated under the foregoing or the rules and regulations of
any exchange upon which the shares of the Company are listed.
6. Availability of Information
During the term of the Plan and any additional period during which an Option
granted pursuant to the Plan shall be exercisable, the Company shall make
available, not later than 120 days following the close of each of its fiscal
years, such financial and other information regarding the Company as is required
by the bylaws of the Company and applicable law to be furnished in an annual
report to the stockholders of the Company.
7. Effectiveness of Plan; Expiration
Subject to approval by the stockholders of the Company, this Plan shall be
deemed effective as of the date it is adopted by the Board. The Plan shall
expire on December 23, 2023 but such expiration shall not affect the validity of
outstanding Options.
8. Amendment and Termination of the Plan
The Board may, insofar as permitted by law, from time to time, with respect to
any shares at the time not subject to Options, suspend or terminate the Plan or
revise or amend it in any respect whatsoever, except that without the approval
of the stockholders of the Company, no such revision or amendment shall (i)
increase the number of shares subject to the Plan, (ii) decrease the price at
which Options may be granted, (iii) materially increase the benefits to
Optionees, or (iv) change the class of persons eligible to receive Options under
this Plan; provided, however, no such action shall alter or impair the rights
and obligations under any Option outstanding as of the date thereof without the
written consent of the Optionee thereunder. No Option may be granted while the
Plan is suspended or after it is terminated, but the rights and obligations
under any Option granted while the Plan is in effect shall not be impaired by
suspension or termination of the Plan.
9. Indemnification of Board
In addition to such other rights or indemnifications as they may have as
directors or otherwise, and to the extent allowed by applicable law, the members
of the Board and the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any claim, action, suit or
7
proceeding, or in connection with any appeal thereof, to which they or any of
them may be a party by reason of any action taken, or failure to act, under or
in connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such claim, action, suit or proceeding, except
in any case in relation to matters as to which it shall be adjudged in such
claim, action, suit or proceeding that such Board member is liable for
negligence or misconduct in the performance of his or her duties; provided that
within 60 days after institution of any such action, suit or Board proceeding
the member involved shall offer the Company, in writing, the opportunity, at its
own expense, to handle and defend the same.
10. Application of Funds
The proceeds received by the Company from the sale of common stock pursuant to
the exercise of Options will be used for general corporate purposes.
11. No Obligation to Exercise Option
The granting of an Option shall impose no obligation upon the Optionee to
exercise such Option.
12. Notices
All notice, requests, demand, and other communications pursuant this Plan shall
be in writing and shall be deemed to have been duly given on the date of service
if served personally on the party to whom notice is to be given, or on the third
day following the mailing thereof to the party to whom notice is to be given, by
first class mail, registered or certified, postage prepaid.
13. Financial Statements
Optionees under this Plan have the right to receive, upon request, annual
financial statements regarding the Company during the period the options are
outstanding.
The foregoing Plan was duly adopted and approved by the Board of Directors on
December 24, 2013 and approved by the stockholders of the Company on December
24, 2013, to be effective on the 21st day after the mailing to the stockholders
of the definitive information statement on Schedule 14C regarding adoption of
the Plan by the stockholders.
/s/ Benny R. Powell
----------------------------------
Benny R. Powell, Secretary
8
RED GIANT ENTERTAINMENT, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is made and entered into as of this ____ day of
______________, ____, by and between Red Giant Entertainment, Inc., a Nevada
corporation ("Company"), and ________________________________ (referred to
herein as the "Optionee"), with reference to the following recitals of facts:
WHEREAS, the Board has authorized the granting to Optionee of a
nonstatutory stock option ("Option") to purchase shares of common stock of the
Company (the "Shares") upon the terms and conditions hereinafter stated; and
WHEREAS, the Board and stockholders of the Company have heretofore adopted
a 2013 Stock Option Plan (the "Plan"), pursuant to which this Option is being
granted;
WHEREAS, it is the intention of the parties that this Option be a
Nonstatutory Stock Option;
NOW, THEREFORE, in consideration of the covenants herein set forth, the
parties hereto agree as follows:
1. Shares; Price. The Company hereby grants to Optionee the right to
purchase, upon and subject to the terms and conditions herein stated,
___________ Shares for cash (or other consideration acceptable to the Board of
Directors of the Company, in their sole and absolute discretion) at the price of
$____ per Share, such price being determined in accordance with the Plan.
2. Term of Option; Continuation of Employment. This Option shall expire,
and all rights hereunder to purchase the Shares shall terminate, [five/ten]
years from the date hereof. This Option shall earlier terminate as set forth in
Sections 5 and 6 hereof. Nothing contained herein shall be construed to
interfere in any way with the right of the Company to terminate the employment
or engagement, as applicable, of Optionee or to increase or decrease the
compensation of Optionee from the rate in existence at the date hereof.
3. Vesting of Option. Subject to the provisions of Sections 5 and 6 hereof,
this Option shall vest and become exercisable during the term of Optionee's
employment or engagement in whole or in part beginning on the date of this
Agreement.
4. Exercise. In order to exercise this Option with respect to all or any
part of the Shares for which this Option is at the time exercisable, Optionee
must take the following actions:
(a) Execute and deliver to the Company a written notice of exercise stating
the number of Shares being purchased (in whole shares only) and such other
information set forth on the form of Notice of Exercise attached hereto as
Appendix A; and
1
(b) Pay the aggregate Exercise Price for the purchased shares in one or
more of the following forms:
(i) Cash or check made payable to the Company; or
(ii) A promissory note payable to the Company, but only to the extent
authorized by the Company.
Should the Common Stock be registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") at the time the Option is
exercised, then the Exercise Price may also be paid as follows:
(iii) In shares of Common Stock held by Optionee for the requisite period
necessary to avoid a charge to the Company's earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise Date; or
(iv) To the extent the Option is exercised for vested Shares, through a
special sale and remittance procedure pursuant to which Optionee shall
concurrently provide irrevocable instructions (a) to a Company-approved
brokerage firm to effect the immediate sale of the purchased shares and remit to
the Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate Exercise Price payable for the purchased
shares plus all applicable Federal, State and local income and employment taxes
required to be withheld by the Company by reason of such exercise; and (b) to
the Company to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale (a "cashless exercise
transaction").
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Option in a cashless exercise transaction shall be deemed to have been acquired
at the time this Option was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon exercise
of this Option in a cashless exercise transaction shall be deemed to have
commenced on the date this Option was issued.
(v) Notwithstanding any provisions herein to the contrary, if the Fair
Market Value of one share of the Company's Common Stock is greater than the
Exercise Price (at the date of calculation as set forth below), in lieu of
exercising this Option by payment of cash, the Optionee may elect to receive
shares equal to the value (as determined below) of this Option (or the portion
thereof being canceled) by surrender of this Option at the principal office of
the Company together with the properly endorsed Notice of Exercise in which
event the Company shall issue to the Optionee a number of shares of Common Stock
computed using the following formula:
X = Y (A-B)
A
2
Where X = the number of shares of Common Stock to be issued to the Optionee
Y = the number of shares of Common Stock purchasable under the Option
or, if only a portion of the Option is being exercised, the portion of
the Option being canceled (at the date of such calculation)
A = the Fair Market Value of one share of the Company's Common Stock (at
the date of such calculation)
B = Exercise Price (as adjusted to the date of such calculation)
(c) Execute and deliver to the Company such written representations as may
be requested by the Company in order for it to comply with the applicable
requirements of Federal and State securities laws.
(d) Make appropriate arrangements with the Company (or Parent or Subsidiary
employing or retaining Optionee) for the satisfaction of all Federal, State and
local income and employment tax withholding requirements applicable to the
Option exercise, if any.
(e) If requested, execute and deliver to the Company a written statement as
provided for in Section 11 hereof.
5. Termination of Employment or Engagement. If Optionee shall cease to
serve as an employee, director, or consultant of the Company for any reason,
whether voluntarily or involuntarily, Optionee shall have the right, during the
remaining term of the Option, to exercise in whole or in part this Option to the
extent, but only to the extent, that this Option was exercisable as of the last
day of employment or engagement, as applicable, and had not previously been
exercised; provided, however, that the Board may specify a shorter period for
exercise following termination as the Board deems reasonable and appropriate,
but not shorter than six months in the event Optionee's termination was caused
by permanent disability within the meaning of Section 22(e)(3) of the Code. The
Option may be exercised only with respect to installments that the Optionee
could have exercised at the date of termination of employment or engagement.
Notwithstanding anything herein to the contrary, all rights under this Option
shall expire in any event on the date specified in Section 2 hereof.
6. Death of Optionee. If the Optionee shall die while an employee,
director, or consultant of the Company, Optionee's personal representative or
the person entitled to Optionee's rights hereunder may at any time during the
remaining term of this Option, exercise this Option and purchase Shares to the
extent, but only to the extent, that Optionee could have exercised this Option
as of the date of Optionee's death; provided, in any case, that this Option may
be so exercised only to the extent that this Option has not previously been
exercised by Optionee.
3
7. No Rights as Stockholder. Optionee shall have no rights as a stockholder
with respect to the Shares covered by any installment of this Option until the
date of the issuance of a stock certificate to Optionee, and no adjustment will
be made for dividends or other rights for which the record date is prior to the
date such stock certificate or certificates are issued except as provided in
Section 8 hereof.
8. Recapitalization. Subject to any required action by the stockholders of
the Company, the number of Shares covered by this Option, and the price per
Share thereof, shall be proportionately adjusted for any increase or decrease in
the number of issued Shares resulting from a subdivision or consolidation of
shares or the payment of a stock dividend, or any other increase or decrease in
the number of such shares affected without receipt of consideration by the
Company; provided however that the conversion of any convertible securities of
the Company shall not be deemed having been "effected without receipt of
consideration by the Company."
In the event of a proposed dissolution or liquidation of the Company, a merger
or consolidation in which the Company is not the surviving entity, or a sale of
all or substantially all of the assets of the Company, this Option shall
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board. The Board may, at its sole and absolute
discretion and without obligation, declare that this Option shall terminate as
of a date fixed by the Board and grant Optionee the right for a period
commencing 30 days prior to and ending immediately prior to such date, or during
the remaining term of this Option, whichever occurs sooner, to exercise this
Option as to all or any part of the Shares, without regard to the installment
provision of Section 3; provided, however, that such exercise shall be subject
to the consummation of such dissolution, liquidation, merger, consolidation or
sale.
Subject to any required action by the stockholders of the Company, if the
Company shall be the surviving entity in any merger or consolidation, this
Option thereafter shall pertain to and apply to the securities to which a holder
of Shares equal to the Shares subject to this Option would have been entitled by
reason of such merger or consolidation, and the vesting provisions of Section 3
shall continue to apply.
To the extent that the foregoing adjustments relate to shares or securities of
the Company, such adjustments shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. Except as hereinbefore
expressly provided, Optionee shall have no rights by reason of any subdivision
or consolidation of share of stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of
any class, and the number and price of shares subject to this Option shall not
be affected by, and no adjustments shall be made by reason of, any dissolution,
liquidation, merger or consolidation, or any issue by the Company of shares of
stock of any class or securities convertible into shares of stock of any class.
The grant of this Option shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes in
its capital or business structure or to merge, consolidate, dissolve or
liquidate or to sell or transfer all or any part of its business or assets.
4
9. Taxation upon Exercise of Option. Optionee understands that, upon
exercise of this Option, Optionee may recognize income, for federal and state
income tax purposes, in an amount equal to the amount by which the fair market
value of the Shares, determined as of the date of exercise, exceeds the exercise
price. The acceptance of the Shares by Optionee shall constitute an agreement by
Optionee to report such income in accordance with then applicable law and to
cooperate with Company in establishing the amount of such income and
corresponding deduction to the Company for its income tax purposes. Withholding
for federal or state income and employment tax purposes will be made, if and as
required by law, from Optionee's then current compensation, or, if such current
compensation is insufficient to satisfy withholding tax liability, the Company
may require Optionee to make cash payment to cover such liability as a condition
of the exercise of this Option.
10. Modification, Extension and Renewal of Options. The Board may modify,
extend or renew this Option or accept the surrender thereof (to the extent not
theretofore exercised) and authorize the granting of a new option in
substitution therefore (to the extent not theretofore exercised), subject at all
times to the Plan. Notwithstanding the foregoing provisions of this Section 10,
no modification shall, without the consent of the Optionee, alter to the
Optionee's detriment or impair any rights of Optionee hereunder.
11. Investment Intent; Restrictions on Transfer. Optionee represents and
agrees that if Optionee exercises this Option in whole or in part, Optionee will
in each case acquire the Shares upon such exercise for the purpose of investment
and not with a view to, or for resale in connection with, any distribution
thereof; and that upon such exercise of this Option in whole or in part,
Optionee (or any person or persons entitled to exercise this Option under the
provisions of Sections 5 and 6 hereof) shall furnish to the Company a written
statement to such effect, satisfactory to the Company in form and substance. The
Company, at its option, may include a legend on each certificate representing
Shares issued pursuant to any exercise of this Option, stating in effect that
such Shares have not been registered under the Securities Act of 1933, as
amended (the "Act"), and that the transferability thereof is restricted. If the
Shares represented by this Option are registered under the Act, either before or
after the exercise of this Option in whole or in part, the Optionee shall be
relieved of the foregoing investment representation and agreement and shall not
be required to furnish the Company with the foregoing written statement.
Optionee further represents that Optionee has had access to the financial
statements or books and records of the Company, has had the opportunity to ask
questions of the Company concerning its business, operations and financial
condition, and to obtain additional information reasonably necessary to verify
the accuracy of such information, and further represents that Optionee has
either such experience and knowledge in investment, financial and business
matters or has investments similar to the stock of the Company such that
Optionee is capable of evaluating the merits and risks thereof and has the
capacity to protect his or her own interest in connection therewith.
12. Notices. Any notice required to be given pursuant to this Option or the
Plan shall be in writing and shall be deemed to be delivered upon receipt or, in
the case of notices by the Company, five days after deposit in the U.S. mail,
5
postage prepaid, addressed to Optionee at the address last provided to the
Company by Optionee for his or her employee records.
13. Agreement Subject to Plan; Applicable Law. This Agreement is made
pursuant to the Plan and shall be interpreted to comply therewith. A copy of
such Plan is available to Optionee, at no charge, at the principal office of the
Company. Any provision of this Agreement inconsistent with the Plan shall be
considered void and replaced with the applicable provision of the Plan. This
Agreement has been granted, executed and delivered in the State of California,
and the interpretation and enforcement shall be governed by the laws thereof and
subject to the exclusive jurisdiction of the courts therein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Red Giant Entertainment, Inc.,
a Nevada corporation
--------------------------------
BY: Benny R. Powell
ITS: President
--------------------------------
, Optionee
6
Appendix A
NOTICE OF EXERCISE
Red Giant Entertainment, Inc.
614 E. Hwy 50 #235
Clermont, FL 34711
(1) [ ] The undersigned hereby elects to purchase ________ shares of the
Common Stock of Red Giant Entertainment, Inc., a Nevada corporation (the
"Company") pursuant to the terms of the attached Option and tenders herewith
payment of the exercise price in full, together with all applicable transfer
taxes, if any.
[ ] The undersigned hereby elects to purchase ________ shares of the Common
Stock of the Company pursuant to the terms of the net exercise provisions set
forth in Section 4(b)(iv) of the attached Option, and shall tender payment of
all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
------------------------
(Name)
------------------------
------------------------
(Address)
(3) The undersigned represents that (i) the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares; (ii) the undersigned is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision regarding its investment in the
Company; (iii) the undersigned is experienced in making investments of this type
and has such knowledge and background in financial and business matters that the
undersigned is capable of evaluating the merits and risks of this investment and
protecting the undersigned's own interests; (iv) the undersigned understands
that the shares of Common Stock issuable upon exercise of this Option have not
been registered under the Securities Act of 1933, as amended (the "Act"), by
reason of a specific exemption from the registration provisions of the Act,
which exemption depends upon, among other things, the bona fide nature of the
investment intent as expressed herein, and, because such securities have not
been registered under the Act, they must be held indefinitely unless
subsequently registered under the Act or an exemption from such registration is
available; (v) the undersigned is aware that the aforesaid shares of Common
Stock may not be sold pursuant to Rule 144 adopted under the Act unless certain
conditions are met and until the undersigned has held the shares for the number
of years prescribed by Rule 144, that among the conditions for use of the Rule
is the availability of current information to the public about the Company and
the Company has not made such information available and has no present plans to
7
do so; and (vi) the undersigned agrees not to make any disposition of all or any
part of the aforesaid shares of Common Stock unless and until there is then in
effect a registration statement under the Act covering such proposed disposition
and such disposition is made in accordance with said registration statement, or
the undersigned has provided the Company with an opinion of counsel satisfactory
to the Company, stating that such registration is not required.
----------------------------------- -----------------------------------
(Date) (Signature)
-----------------------------------
(Print name)
8
RED GIANT ENTERTAINMENT, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT is made and entered into as of this
____ day of ______________, ____, by and between Red Giant Entertainment, Inc.,
a Nevada corporation ("Company"), and _____________________________ (referred to
herein as the "Optionee"), with reference to the following recitals of facts:
WHEREAS, the Board has authorized the granting to Optionee of an incentive
stock option ("Option") to purchase shares of common stock of the Company (the
"Shares") upon the terms and conditions hereinafter stated; and
WHEREAS, the Board and stockholders of the Company have heretofore adopted
a 2013 Stock Option Plan (the "Plan"), pursuant to which this Option is being
granted;
WHEREAS, it is the intention of the parties that this Option be an
Incentive Stock Option (a "Qualified Stock Option");
NOW, THEREFORE, in consideration of the covenants herein set forth, the
parties hereto agree as follows:
1. Shares; Price. The Company hereby grants to Optionee the right to
purchase, upon and subject to the terms and conditions herein stated, _______
Shares for cash (or other consideration acceptable to the Board of Directors of
the Company, in their sole and absolute discretion) at the price of $____ per
Share, such price being not less than the fair market value per share of the
Shares covered by these Options as of the date hereof and as determined by the
Board of Directors of the Company.
2. Term of Option; Continuation of Employment. This Option shall expire,
and all rights hereunder to purchase the Shares shall terminate, [five/ten]
years from the date hereof. This Option shall earlier terminate as set forth in
Sections 5 and 6 hereof. Nothing contained herein shall be construed to
interfere in any way with the right of the Company to terminate the employment
or engagement, as applicable, of Optionee or to increase or decrease the
compensation of Optionee from the rate in existence at the date hereof.
3. Vesting of Option. Subject to the provisions of Sections 5 and 6 hereof,
this Option shall vest and become exercisable during the term of Optionee's
employment or engagement in whole or in part beginning on the date of this
Agreement.
4. Exercise. In order to exercise this Option with respect to all or any
part of the Shares for which this Option is at the time exercisable, Optionee
must take the following actions:
(a) Execute and deliver to the Company a written notice of exercise stating
the number of Shares being purchased (in whole shares only) and such other
information set forth on the form of Notice of Exercise attached hereto as
Appendix A; and
1
(b) Pay the aggregate Exercise Price for the purchased shares in one or
more of the following forms:
(i) Cash or check made payable to the Company; or
(ii) A promissory note payable to the Company, but only to the extent
authorized by the Company.
Should the Common Stock be registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") at the time the Option is
exercised, then the Exercise Price may also be paid as follows:
(iii) In shares of Common Stock held by Optionee for the requisite
period necessary to avoid a charge to the Company's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date; or
(iv) To the extent the Option is exercised for vested Shares, through
a special sale and remittance procedure pursuant to which Optionee shall
concurrently provide irrevocable instructions (a) to a Company-approved
brokerage firm to effect the immediate sale of the purchased shares and remit to
the Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate Exercise Price payable for the purchased
shares plus all applicable Federal, State and local income and employment taxes
required to be withheld by the Company by reason of such exercise; and (b) to
the Company to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale (a "cashless exercise
transaction").
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Option in a cashless exercise transaction shall be deemed to have been acquired
at the time this Option was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon exercise
of this Option in a cashless exercise transaction shall be deemed to have
commenced on the date this Option was issued.
(v) Notwithstanding any provisions herein to the contrary, if the Fair
Market Value of one share of the Company's Common Stock is greater than the
Exercise Price (at the date of calculation as set forth below), in lieu of
exercising this Option by payment of cash, the Optionee may elect to receive
shares equal to the value (as determined below) of this Option (or the portion
thereof being canceled) by surrender of this Option at the principal office of
the Company together with the properly endorsed Notice of Exercise in which
event the Company shall issue to the Optionee a number of shares of Common Stock
computed using the following formula:
X = Y (A-B)
A
2
Where X = the number of shares of Common Stock to be issued to the Optionee
Y = the number of shares of Common Stock purchasable
under the Option or, if only a portion of the Option
is being exercised, the portion of the Option being
canceled (at the date of such calculation)
A = the Fair Market Value of one share of the Company's
Common Stock (at the date of such calculation)
B = Exercise Price (as adjusted to the date of such calculation)
(f) Execute and deliver to the Company such written representations as may
be requested by the Company in order for it to comply with the applicable
requirements of Federal and State securities laws.
(g) Make appropriate arrangements with the Company (or Parent or Subsidiary
employing or retaining Optionee) for the satisfaction of all Federal, State and
local income and employment tax withholding requirements applicable to the
Option exercise, if any.
(h) If requested, execute and deliver to the Company a written statement as
provided for in Section 11 hereof.
5. Termination of Employment or Engagement. If Optionee shall cease to
serve as an employee of the Company for any reason, whether voluntarily or
involuntarily, Optionee shall have the right, during the remaining term of the
Option, to exercise in whole or in part this Option to the extent, but only to
the extent, that this Option was exercisable as of the last day of employment,
and had not previously been exercised; provided, however, that the Board may
specify a shorter period for exercise following termination as the Board deems
reasonable and appropriate, but not shorter than six months in the event
Optionee's termination was caused by permanent disability within the meaning of
Section 22(e)(3) of the Code. The Option may be exercised only with respect to
installments that the Optionee could have exercised at the date of termination
of employment.
Notwithstanding anything herein to the contrary, all rights under this Option
shall expire in any event on the date specified in Section 2 hereof.
6. Death of Optionee. If the Optionee shall die while an employee of the
Company, Optionee's personal representative or the person entitled to Optionee's
rights hereunder may at any time during the remaining term of this Option,
exercise this Option and purchase Shares to the extent, but only to the extent,
that Optionee could have exercised this Option as of the date of Optionee's
death; provided, in any case, that this Option may be so exercised only to the
extent that this option has not previously been exercised by Optionee.
7. No Rights as Stockholder. Optionee shall have no rights as a stockholder
with respect to the Shares covered by any installment of this Option until the
date of the issuance of a stock certificate to Optionee, and no adjustment will
be made for dividends or other rights for which the record date is prior to the
date such stock certificate or certificates are issued except as provided in
Section 8 hereof.
3
8. Recapitalization. Subject to any required action by the stockholders of
the Company, the number of Shares covered by this Option, and the price per
Share thereof, shall be proportionately adjusted for any increase or decrease in
the number of issued Shares resulting from a subdivision or consolidation of
shares or the payment of a stock dividend, or any other increase or decrease in
the number of such shares affected without receipt of consideration by the
Company; provided however that the conversion of any convertible securities of
the Company shall not be deemed having been "effected without receipt of
consideration by the Company."
In the event of a proposed dissolution or liquidation of the Company, a merger
or consolidation in which the Company is not the surviving entity, or a sale of
all or substantially all of the assets of the Company, this Option shall
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board. The Board may, at its sole and absolute
discretion and without obligation, declare that this Option shall terminate as
of a date fixed by the Board and grant Optionee the right for a period
commencing 30 days prior to and ending immediately prior to such date, or during
the remaining term of this Option, whichever occurs sooner, to exercise this
Option as to all or any part of the Shares, without regard to the installment
provision of Section 3; provided, however, that such exercise shall be subject
to the consummation of such dissolution, liquidation, merger, consolidation or
sale.
Subject to any required action by the stockholders of the Company, if the
Company shall be the surviving entity in any merger or consolidation, this
Option thereafter shall pertain to and apply to the securities to which a holder
of Shares equal to the Shares subject to this Option would have been entitled by
reason of such merger or consolidation, and the vesting provisions of Section 3
shall continue to apply.
To the extent that the foregoing adjustments relate to shares or securities of
the Company, such adjustments shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. Except as hereinbefore
expressly provided, Optionee shall have no rights by reason of any subdivision
or consolidation of share of stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of
any class, and the number and price of shares subject to this Option shall not
be affected by, and no adjustments shall be made by reason of, any dissolution,
liquidation, merger or consolidation, or any issue by the Company of shares of
stock of any class or securities convertible into shares of stock of any class.
The grant of this Option shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes in
its capital or business structure or to merge, consolidate, dissolve or
liquidate or to sell or transfer all or any part of its business or assets.
9. Taxation upon Exercise of Option. Optionee understands that, upon
exercise of this Option, Optionee may recognize income, for federal and state
income tax purposes, in an amount equal to the amount by which the fair market
value of the Shares, determined as of the date of exercise, exceeds the exercise
price. The acceptance of the Shares by Optionee shall constitute an agreement by
Optionee to report such income in accordance with then applicable law and to
cooperate with Company in establishing the amount of such income and
corresponding deduction to the Company for its income tax purposes. Withholding
4
for federal or state income and employment tax purposes will be made, if and as
required by law, from Optionee's then current compensation, or, if such current
compensation is insufficient to satisfy withholding tax liability, the Company
may require Optionee to make cash payment to cover such liability as a condition
of the exercise of this Option.
10. Modification, Extension and Renewal of Options. The Board may modify,
extend or renew this Option or accept the surrender thereof (to the extent not
theretofore exercised) and authorize the granting of a new option in
substitution therefore (to the extent not theretofore exercised), subject at all
times to the Plan. Notwithstanding the foregoing provisions of this Section 10,
no modification shall, without the consent of the Optionee, alter to the
Optionee's detriment or impair any rights of Optionee hereunder.
11. Investment Intent; Restrictions on Transfer. Optionee represents and
agrees that if Optionee exercises this Option in whole or in part, Optionee will
in each case acquire the Shares upon such exercise for the purpose of investment
and not with a view to, or for resale in connection with, any distribution
thereof; and that upon such exercise of this Option in whole or in part,
Optionee (or any person or persons entitled to exercise this Option under the
provisions of Sections 5 and 6 hereof) shall furnish to the Company a written
statement to such effect, satisfactory to the Company in form and substance. The
Company, at its option, may include a legend on each certificate representing
Shares issued pursuant to any exercise of this Option, stating in effect that
such Shares have not been registered under the Securities Act of 1933, as
amended (the "Act"), and that the transferability thereof is restricted. If the
Shares represented by this Option are registered under the Act, either before or
after the exercise of this Option in whole or in part, the Optionee shall be
relieved of the foregoing investment representation and agreement and shall not
be required to furnish the Company with the foregoing written statement.
Optionee further represents that optionee has had access to the financial
statements or books and records of the Company, has had the opportunity to ask
questions of the Company concerning its business, operations and financial
condition, and to obtain additional information reasonably necessary to verify
the accuracy of such information, and further represents that Optionee (either
such experience and knowledge in investment, financial and business matters in
investments similar to the stock of the Company that Optionee is capable of
evaluating the merits and risks thereof and has the capacity to protect his or
her own interest in connection therewith.
12. Notices. Any notice required to be given pursuant to this Option or the
Plan shall be in writing and shall be deemed to be delivered upon receipt or, in
the case of notices by the Company, five days after deposit in the U.S. mail,
postage prepaid, addressed to Optionee at the address last provided to the
Company by Optionee for his or her employee records.
13. Agreement Subject to Plan; Applicable Law. This Agreement is made
pursuant to the Plan and shall be interpreted to comply therewith. A copy of
such Plan is available to Optionee, at no charge, at the principal office of the
Company. Any provision of this Agreement inconsistent with the Plan shall be
considered void and replaced with the applicable provision of the Plan. This
Agreement has been granted, executed and delivered in the State of California,
and the interpretation and enforcement shall be governed by the laws thereof and
subject to the exclusive jurisdiction of the courts therein.
5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
RED GIANT ENTERTAINMENT, INC.,
a Nevada corporation
--------------------------------
BY: Benny R. Powell
ITS: President
--------------------------------
, Optionee
6
Appendix A
NOTICE OF EXERCISE
Red Giant Entertainment, Inc.
614 E. Hwy 50 #235
Clermont, FL 34711
(1) [ ] The undersigned hereby elects to purchase ________ shares of the
Common Stock of Red Giant Entertainment, Inc., a Nevada corporation (the
"Company") pursuant to the terms of the attached Option and tenders herewith
payment of the exercise price in full, together with all applicable transfer
taxes, if any.
[ ] The undersigned hereby elects to purchase ________ shares of the Common
Stock of the Company pursuant to the terms of the net exercise provisions set
forth in Section 4(b)(iv) of the attached Option, and shall tender payment of
all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
------------------------
(Name)
------------------------
------------------------
(Address)
(3) The undersigned represents that (i) the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares; (ii) the undersigned is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision regarding its investment in the
Company; (iii) the undersigned is experienced in making investments of this type
and has such knowledge and background in financial and business matters that the
undersigned is capable of evaluating the merits and risks of this investment and
protecting the undersigned's own interests; (iv) the undersigned understands
that the shares of Common Stock issuable upon exercise of this Option have not
been registered under the Securities Act of 1933, as amended (the "Act"), by
reason of a specific exemption from the registration provisions of the Act,
which exemption depends upon, among other things, the bona fide nature of the
investment intent as expressed herein, and, because such securities have not
been registered under the Act, they must be held indefinitely unless
subsequently registered under the Act or an exemption from such registration is
available; (v) the undersigned is aware that the aforesaid shares of Common
Stock may not be sold pursuant to Rule 144 adopted under the Act unless certain
conditions are met and until the undersigned has held the shares for the number
of years prescribed by Rule 144, that among the conditions for use of the Rule
is the availability of current information to the public about the Company and
the Company has not made such information available and has no present plans to
7
do so; and (vi) the undersigned agrees not to make any disposition of all or any
part of the aforesaid shares of Common Stock unless and until there is then in
effect a registration statement under the Act covering such proposed disposition
and such disposition is made in accordance with said registration statement, or
the undersigned has provided the Company with an opinion of counsel satisfactory
to the Company, stating that such registration is not required.
----------------------------------- -----------------------------------
(Date) (Signature)
-----------------------------------
(Print name)
8