SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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|_| Preliminary Proxy Statement
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|_| Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
GlobeTel Communications Corp.
(Name of Registrant as Specified In Its Charter)
------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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GLOBETEL COMMUNICATIONS CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 11, 2005
To the Stockholders of GlobeTel Communications Corp.:
NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders (the "Annual
Meeting") of GlobeTel Communications Corp., a Delaware corporation (the
"Company"), will be held at Wyndham Hotel, 1870 Griffin Road, Dania Beach,
Florida 33004, on Thursday, August 11, 2005 at 6:00 p.m., E.S.T., for the
following purposes:
1. To elect 6 individuals to serve as members of the Company's Board of
Directors to hold office until the Company's annual meeting of
stockholders to be held in 2006 and until their successors are duly
elected and qualified;
2. To ratify the appointment of Dohan and Company, CPAs, PA as independent
auditors of the Company for the fiscal year ending December 31, 2004;
3. To increase the number of authorized common shares from 100 million to 150
million;
4. To ratify the 2004 Employee Stock Option; and
5. To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
All stockholders are cordially invited to attend; however, only
stockholders of record at the close of business on June 17, 2005, are entitled
to notice of and to vote at the Annual Meeting or any adjournments thereof.
The Board of Directors recommends that you vote FOR the Board's nominees
to serve as directors and FOR Proposals 2, 3, and 4.
By Order of the Board of Directors
Timothy M. Huff
Chief Executive Officer and Director
July 8, 2005
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED RETURN
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. STOCKHOLDERS
WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY
AND VOTE THEIR SHARES IN PERSON.
GLOBETEL COMMUNICATIONS CORP.
9050 Pines Blvd., Suite 110
Pembroke Pines, Florida 33024
------------------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
AUGUST 11, 2005
------------------------------------
INTRODUCTION
The accompanying proxy is solicited by the Board of Directors of
GlobeTel Communications Corp. (the "Company," "we", "us" and similar terms) to
be voted at the Annual Meeting of Stockholders to be held at the Wyndham Hotel,
1870 Griffin Road, Dania Beach, Florida 33004 on Thursday, August 11, 2005 at
6:00 p.m., E.S.T. (the "Annual Meeting"), and any adjournments thereof. When
such proxy is properly executed and returned, the shares it represents will be
voted at the meeting as directed. If no specifications are indicated, the shares
will be voted in accordance with the recommendation of the Board with respect to
each matter submitted to the Company's stockholders for approval. Abstentions
and broker non-votes will not be voted, but will be counted for determining the
presence of a quorum.
The cost of preparing and mailing the enclosed proxy materials, which
is estimated to be approximately $25,000, will be borne by the Company. The
Company may use the services of its officers and employees (who will receive no
additional compensation) to solicit proxies. In addition to the use of the
mails, proxies may be solicited by telephone, mailgram, facsimile, telegraph,
cable, email and personal interview. The Company intends to request banks and
brokers holding shares of the Company's common stock to forward copies of the
proxy materials to those persons for whom they hold shares and to request
authority for the execution of proxies. The Company will reimburse banks and
brokers for their out-of-pocket expenses. The Company may also retain the
services of a solicitation firm to aid in the solicitation of proxies. If it
does so, the Company will pay the fees and expenses of such firm.
A list of stockholders entitled to vote at the Annual Meeting will be
available for examination by any stockholder for a proper purpose during normal
business hours at the offices of the Company for a period of at least ten days
preceding the Annual Meeting.
VOTING AT THE ANNUAL MEETING
The shares entitled to vote at the Annual Meeting consist of shares of
the Company's common stock (the "Common Stock"), with each share entitling the
holder to one vote. At the close of business on June 17, 2005, the record date
for the Annual Meeting, there were issued and outstanding 74,438,519 shares of
the Company's common stock. This Proxy Statement and the accompanying form of
proxy are first being sent to the stockholders on or about July 12, 2005.
Each proxy that is properly signed and received prior to the Annual
Meeting will, unless revoked, be voted in accordance with the instructions on
such proxy. If no instruction is indicated, the shares will be voted FOR the
election of the nominees for director listed in this proxy statement; FOR
ratification of the appointment of Dohan and Company, CPAs, PA; FOR the increase
of authorized shares to 150 million; FOR the Employee Stock Option and Award
Plan; and FOR the approval of such other business that may properly come before
the Annual Meeting or any postponement or adjournment thereof. A stockholder who
has given a proxy may revoke such proxy at any time before it is voted at the
Annual Meeting by delivering a written notice of revocation or duly executed
proxy bearing a later date to the Secretary of the Company or by attending the
meeting and voting in person.
A quorum of stockholders is necessary to take action at the Annual
Meeting. A majority of the outstanding shares of the Company's common stock,
represented in person or by proxy, will constitute a quorum. Votes cast by proxy
or in person at the Annual Meeting will be tabulated by the inspector of
election appointed for the Annual Meeting. The inspector of election will
determine whether or not a quorum is present at the Annual Meeting. The
inspector of election will treat abstentions as shares of common stock that are
present and entitled to vote for purposes of determining the presence of a
quorum.
The six (6) nominees for director shall be elected as directors of the
Company if they receive the affirmative vote of a majority of the shareholders
of common stock present in person or represented by proxy at the Annual Meeting.
The vote required for ratification of Dohan and Company, CPAs, PA as our
independent auditors for the fiscal year ending December 31, 2005, is the
affirmative vote of a majority of the shares of common stock present in
person or represented by proxy at the Annual Meeting. The vote required for the
amendment of the Articles of Incorporation to increase the number of authorized
shares is the affirmative vote of a majority of the shares of common stock
present in person or represented by proxy at the Annual Meeting. The vote
required to ratify the 2004 Employee Stock Option Plan is the affirmative vote
of a majority of the shares of common stock present in person or represented by
proxy at the Annual Meeting. For purposes of determining stockholder approval of
such proposals, abstentions will be treated as shares of common stock voted
against adoption of such proposals.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding the beneficial ownership of shares of common stock as of June 28,
2005, by (i) each person known by the Company to be the owner of more than 5% of
the outstanding shares of Common Stock, (ii) each of the Company's directors,
(iii) each of the Company's executive officers, and (iv) all executive officers
and directors as a group. Unless otherwise indicated, each person has sole
investment and voting power with respect to all shares shown as beneficially
owned.
Unless otherwise indicated, the address of each beneficial owner is
9050 Pines Blvd, Suite 110, Pembroke Pines, Florida 33024.
Common Shares Beneficially Owned
Name of Beneficial Owner Number Percentage
Przemyslaw L. Kostro, Chairman 646,077 0.8%
Timothy M. Huff, CEO and Director 4,012,389 4.9%
Mitchell A. Siegel, Sr. VP and Director 2,311,429 2.8%
Thomas Y. Jimenez, CFO 1,791,269 2.2%
Leigh Coleman, President and Director 918,336 1.1%
Kyle McMahan, Director 31,985 *
Laina Raveendran Green, Director 22,075 *
All executive officers and directors of the
Company as a group (seven persons,
excluding nominees) 9,733,560 11.9%
Proposal 1
ELECTION OF DIRECTORS
NOMINEES AND DIRECTORS
Six directors will be elected at the Annual Meeting. The nominees for
director, if elected, will serve until the annual meeting of stockholders to be
held in 2006 and until his successor is duly elected and qualified. Our Bylaws
currently authorize a Board consisting of not less than one or more than
thirteen persons, and our Board currently provides for seven directors. These
provisions, together with provisions of our articles of incorporation and
by-laws, allow the Board to fill vacancies or increase its size, and may deter
or hinder a shareholder from removing incumbent directors and filling such
vacancies with its own nominees in order to gain control of the Board.
All nominees have consented to being named herein and have indicated
their intention to serve as directors of the Company, if elected. Unless
authority to do so is withheld, the persons named as proxies will vote the
shares represented by such proxies for the election of the named nominees. In
case any of the nominees become unavailable for election to the Board of
Directors, which is not anticipated, the persons named as proxies shall have
full discretion and authority to vote or refrain from voting for any other
nominees in accordance with their judgment. Vacancies on the Board may be filled
by the remaining director or directors, even though less than a quorum, for the
unexpired term of such vacant position. Michael Molen, currently a director, has
elected not to be re-nominated to serve another year as a director. Mr. Molen
has no dispute with the Company that led to his decision not to seek
renomination The Board of Directors shall nominate someone to fill this vacancy
during the year. The Board of Directors and the Nominating Committee require
more time than is available prior to the filing of this proxy statement to
locate a qualified candidate. Mr. Molen will be pursuing other business
opportunities and will support the Board in its search for a qualified
independent director. He will continue to work with the Company's Sanswire
Networks LLC subsidiary to develop world-wide opportunities.
The following persons have been nominated for election to the Board of
Directors:
Name Age Current Position
Przemyslaw L. Kostro 42 Chairman
Timothy M. Huff 38 Chief Executive
Officer & Director
Laina Raveendran Greene 41 Director
Leigh A. Coleman 55 President & Director
Mitchell A. Siegel 57 Senior Vice President
& Director
Kyle McMahan 46 Director
Business Experience
Przemyslaw L. Kostro was first elected to the Board of Directors in
November 2001. From November 2001 to April 2002, Mr. Kostro also served as the
chief executive officer of the Company before relinquishing the position to the
current chief executive officer. Over the past five years, Mr. Kostro has been
engaged in international business, and has been providing professional and
consulting services to several public and private entities. He also currently
serves as chairman of Wafao S.A., a Polish company and director of Caterham
Financial Management, a Malaysian company. Since November 2003, Mr. Kostro has
also been serving as a director of Consolidated Global Investments, Ltd.
(formerly known as Advantage Telecommunications, Ltd.), a publicly-held
Australian company and 71% owned subsidiary of the Company as of June 30, 2004.
Timothy M. Huff has served as chief executive officer and as a member of
the Board of Directors since 2002. From 1999 through 2001 Mr. Huff served as
president of Vista Net LLC, a VOIP carrier. Mr. Huff has over eighteen years
experience in international telecom business that included working with Sprint
and MCI International, where he was involved in the construction of MCI's first
international gateways. Since November 2003, Mr. Huff has also been serving as a
director of Consolidated Global Investments, Ltd. (formerly known as Advantage
Telecommunications, Ltd.), a publicly-held Australian company and 71% owned
subsidiary of the Company as of June 30, 2004.
Leigh Coleman has served as president of the Company since November
2003. Mr. Coleman also serves as Managing Director of Global Asia Pacific Pty
Ltd., an Australian company located in Melbourne Australia and has held that
position since July 2003. He was Managing Director of Tennyson Networks Limited,
a manufacturer of Smart Office Exchange, from 2001 to 2003 and served as Asian
Pacific director for Nobel Systems, an Atlanta-based call center and customer
contact company. From 1998 through 2000, Mr. Coleman was CEO of a private
company, Fusion International Software, a software consulting company. From 1989
to 1993, Mr. Coleman was CEO of Verisol USA, Inc., a subsidiary of the
international firm, Blydenstein Willink, NV, where he also served as Executive
Director. Since November 2003, Mr. Coleman has also been serving as CEO and a
director of Consolidated Global Investments, Ltd. (formerly known as Advantage
Telecommunications, Ltd.), a publicly-held Australian company, and is 71% owned
by GlobeTel as of June 30, 2004. Mr. Coleman holds a Masters in Business
Administration degree, and has lectured on Strategic Management at Curtin
University in Australia.
Laina Raveendran Greene joined the Board in February 2005. She started
her career in the telecommunications and Internet industry in 1986, and has
since worked for the International Telecommunications Union (ITU) in Geneva,
Switzerland, INTELSAT in Washington DC, and with Singapore Telecommunication Ltd
in Singapore. In 1996 she started a telecommunications consultancy firm serving
clients such as Telecom Italia, Cisco Systems, ITU, Asia Pacific Network
Information Centre, IDRC, etc. In 1998, she started another company GetIT
Multimedia offering e-learning and e-communications solutions for high tech
clients such as Cisco Systems, IDC, Nokia, and other such companies. Apart from
her consultancy and business solutions experience, she has served as Secretary
General of the Asia Pacific Internet Association, served as the Singapore
representative to the Pacific Economic Cooperation Council, taught a masters of
law program on International Telecommunications at the National University of
Singapore, Faculty of Law and currently serves advisory board on
infocommunications related organizations such as being on the International
Advisory Board of the Asia Pacific Development Information Program (APDIP), a
United Nations Development Program (UNDP) initiative. She is a graduate of law
from the National University of Singapore, Faculty of Law, has a Master of Law
from Harvard University Law School and did graduate studies at the Graduate
Institute of International Studies in Geneva, Switzerland.
Mitchell A. Siegel serves as Senior Vice President and has served as a
member of the Board of Directors since May 2002. From 1996 through May 2002, he
served as a consultant to the Company and was instrumental in defining the
Company's role as a licensed telecommunications company. Mr. Siegel graduated
from American University, holding a Bachelors Degree in Business Administration
and has completed Masters Degree courses in finance at C.C.N.Y - Bernard Baruch
School of Finance.
Kyle McMahan has served on our Board of Directors for one year. From
1989 to 2003, Mr. McMahan served as chief executive officer of Southern Mortgage
Reporting, Inc., a credit reporting agency. From April 2001 through September
2003 he served as chairman of INFO 1 Co., Inc., a company that organized,
planned and financed the startup of new businesses in the credit reporting
industry. Mr. McMahan has served as a board member of The Mortgage Bankers
Association of Georgia and The National Credit Reporting Association.
Information Concerning the Board of Directors
During the year ended December 31, 2004, the Company's Board of
Directors held four (4) meetings. Each member of the Board participated in each
action of the Board. Two of the members of the Company's Board of Directors
qualify as being "independent." These two members are Laina Green and Kyle
McMahon. Ms. Green did not participate in any board meetings in 2004 as she was
appointed to the Board in February 2005.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company did not have a formal audit committee during year ended
December 31, 2004. The Board of Directors, acting as an audit committee, met two
(2) times during year ended December 31, 2004 to review the professional
services provided by the Company's independent auditors, the independence of its
auditors from management, the Company's annual financial statements and its
system of internal accounting controls. The audit committee also reviews other
matters with respect to our accounting, auditing and financial reporting
practices and procedures as it may find appropriate or may be brought to its
attention. Messrs. Kostro, Huff, Siegel, McMahan and Coleman qualify as
"financial experts" as defined by the SEC.
In 2005, the Board created an audit committee consisting of the Boards
two independent directors and adopted a formal charter.
The Company did not have a formal compensation committee during fiscal year
ended December 31, 2004. The Board of Directors, acting as a compensation
committee, met two (2) times during the year ended December 31, 2004 to discuss
and deliberate on issues surrounding the terms and conditions of executive
officer compensation, including base salaries, bonuses, award of stock options
and reimbursement of certain business related costs and expenses. The Company
has not adopted a formal compensation committee charter.
The Company does not have a nominating committee. The Board of
Directors, acting as a nominating committee, met four (4) times during year
ended December 31, 2004, to recommend candidates who will be nominated as
management's slate of directors at the annual meeting of stockholders. The
Company has not adopted a formal nominating committee charter.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3, 4, and 5, and amendments
thereto, and reports, furnished to the Company for the fiscal year ended
December 31, 2004, by certain of the Company's directors, officers, or
stockholders beneficially owning more than 10% of any class of equity securities
of the Company, there were no failures to file any necessary forms under Section
16(a) of the Securities Exchange Act of 1934 during the most recent fiscal year.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to all
compensation paid or earned for services rendered to the Company during the last
fiscal year by our chief executive officer and each executive officer whose
aggregate annual compensation exceeded $100,000 and who were executive officers
of the Company at December 31, 2004 (all of the individuals named in the
following table are collectively defined as the "Named Executive Officers"). The
Company does not have a pension plan or a long-term incentive plan, has not
issued any restricted stock awards and has not granted any stock appreciation
rights as of this date. The Company has granted stock options. See "Option
Grants and Holdings" and "Employee Benefit Plan."
Summary Compensation Table
Securites
Restricted Underlying LTIP All
Other Annual Stock Awards Options/SARs Payouts Other Comp.
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) ($) (#) ($) ($)
---------------------------------------------------------------------------------------------------------------------------------
Przemyslaw L. Kostro Chairman 2004 0 0 443,750 (c) 0 0 0 0
Przemyslaw L. Kostro Chairman 2003 0 0 0 0 0 0 0
Przemyslaw L. Kostro Chairman 2002 0 0 0 0 0 0 0
Timothy M. Huff, CEO 2004 200,000 (a) 200,000 (b) 18,750 (c) 1,418,394 (d) 0
Timothy M. Huff, CEO 2003 175,000 (a) 0 0 0 0 0 0
Timothy M. Huff, CEO 2002 150,000 (a) 0 0 0 0 0 0
Leigh A. Coleman President
Since June 2004 2004 70,780 (a) 125,000 (b) 50,031 (c) 472,798 (d) 0 0 0
Mitchell A. Siegel, COO 2004 175,000 (a) 175,000 (b) 18,750 (c) 945,596 (d) 0 0 0
Mitchell A. Siegel, COO 2003 150,000 (a) 0 0 0 0 0 0
Mitchell A. Siegel, COO 2002 125,000 (a) 0 0 0 0 0 0
Thomas Y. Jimenez, CFO 2004 175,000 (a) 175,000 (b) 14,063 (c) 709,197 (d) 0 0 0
Thomas Y. Jimenez, CFO 2003 150,000 (a) 0 0 0 0 0 0
Thomas Y. Jimenez, CFO 2002 125,000 (a) 0 0 0 0 0 0
Lawrence E. Lynch
Sr. VP Since August 2004 2004 37,500 (a) 37,500 (b) 0 0 0 0 0
Joseph Seroussi, CTO
Since November 2004 2004 25,000 (a) 31,250 (b) 0 472,798 (d) 0 0 0
Michael Molen, Director
Since April 2004 2004 0 (c) 0 18,750 (d) 0 0 0 0
Kyle McMahan, Director
Since May 2004 2004 0 (c) 0 18,750 (d) 0 0 0 0
(a) Effective January 1, 2002, GlobeTel entered into a three-year employment
agreements with its key management. For the year 2002, the agreements provided
for annual compensation of $150,000 for its Chief Executive Officer (CEO),
$125,000 each for its Chief Financial Officer (CFO) and Chief Operating Officer
(COO) and $75,000 each for its Chief Administrative Officer (CAO) and VP of
Network Operations. Further, there remained an employment contract with its
former President, as described below, which called for a salary of $100,000 per
annum through 2003.
In 2003, the base compensation increased to $175,000 for its CEO, $150,000 each
for its CFO and COO, $90,000 each for its CAO and VP of Network Operations.
In 2004, the base compensation increases to $200,000 for its CEO, $175,000 each
for its CFO and COO, $120,000 for the Controller (formerly the CAO) and $110,000
for its VP of Network Operations. Also, GlobeTel hired a new President at an
annual compensation of $125,000 in June 2004, a Senior Vice President (Sr. VP)
at an annual compensation of $100,000 in August 2004, and a Chief Technology
Officer (CTO) at an annual compensation of $125,000 in November 2004.
Accrued but unpaid base compensation of $82,500 for the CEO, $57,500 for the CFO
and $58,333 for the COO (a total of $198,333) were owed as of December 31, 2004.
These amounts were paid in January 2005.
(b) In addition to the base compensation, the employment agreements provide for
payment of bonuses that at a minimum equal the executives' base compensation,
unless otherwise agreed to by the executives. As of December 31, 2003 and 2002,
the executives all agreed not to receive bonuses they are entitled to pursuant
to the employment agreements. For 2004, the executives did receive the bonuses
as entitled to under the agreements. The President received a bonus equal to his
gross annual base compensation, the Sr. VP received a bonus equal to his amount
of gross compensation received during 2004, and the CTO received a bonus equal
to his amount of gross compensation received during 2004. All executive bonuses
for 2004 were included in the 2004 Stock Options Plan (see Note 22 to financial
statements) and paid with stock options.
(c) The Company's Directors received stipends of $6,250 per quarter, beginning
the second quarter of 2004, for a total of $18,750 per director for 2004. The
CFO, who functioned as treasurer reporting to the Board, received stipends equal
to 75% of the directors' stipends, or $4,688 per quarter, beginning the second
quarter of 2004, for a total of $14,063. All Directors' stipends were paid with
stock options (see Note 22 to financial statements).
In addition, the Chairman received additional stock compensation of $425,000,
for services rendered providing assistance in expanding our business and
services world-wide and in obtaining funding for us.
(d) Pursuant to an Officers' Stock Option Grant plan approved by the Board (see
Note 22 to financial statements), certain officers are entitled to receive stock
options in amounts which, after the exercise of such options, would effect
ownership of various percentages of the total shares then issued and
outstanding. The following officers received options for restricted shares in
the following percentages: CEO - 3%, COO - 2%, CFO - 1.5%, Director and former
President - 1.0%, current President - 1%, and CTO - 1%.
* In September 2003, the Board of Directors authorized the issuance of stock
options totaling 47,751,200 shares to the officers of the Company in return for
the forgiveness of $683,168 in accrued salaries and $33,100 in other accrued
expenses through December 31, 2002. The stock options were exercisable at the
lower of $.015 per share or 50% of the closing market price. In December 2003,
the board of directors authorized the issuance of stock options totaling
16,333,333 shares to the officers of the Company in return for the forgiveness
of $245,000 in accrued salaries through December 31, 2003. The stock options
were exercisable at the lower of $.015 per share or 50% of the closing market
price. On January 8, 2004, the officers exercised their rights to convert the
stock options into common stock at $.015 and as a result, the Company issued
64,084,533 shares of common stock in January 2004, in accordance with the stock
option agreements.
(1) The salary for Mr. Huff and Mr. Jimenez includes stock grants paid in lieu
of cash. Mr. Huff received 7,500,000 shares in return for the forgiveness of
$112,500 in accrued salaries and Mr. Jimenez received 1,166,667 shares in return
for the forgiveness of $17,500 in accrued salaries.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table provides certain summary information concerning
stock options held as of December 31, 2004, by Named Executive Officers. The
value of unexercised in-the-money options at December 31, 2004, is based on the
value of our common shares on December 31, 2004 ($1.665 per split adjusted
share).
Number of Securities Underlying Value of Unexercised in-the-money
Name Unexercised Options at December 31, 2004 Options at December 31, 2004
------- --------------------------------------------- ------------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Timothy M. Huff 2,412,898 0 $2,388,769.02 0
Mitchell A. Siegel 1,680,989 0 $1,664,179.11 0
Thomas Y. Jimenez 1,325,557 0 $1,312,301.43 0
Leigh Coleman 912,043 0 $902,922.57 0
OPTION GRANTS IN LAST
FISCAL YEAR
The following table sets forth information regarding the grant of stock
options to the Named Executive Officers during the year ended December 31, 2004.
# of Securities % of Total Options
Underlying Granted to Employees
Name Options Last Fiscal Year Exercise Price Expiration Date
------------------ ---------- ------------------ --------------- ---------- ----
Timothy M. Huff 2,412,898 28.12% $.675 12/31/2007
Mitchell A. Siegel 1,680,989 19.59% $.675 12/31/2007
Thomas Y. Jimenez 1,325,557 15.45% $.675 12/31/2007
Leigh Coleman 912,043 10.63% $.675 12/31/2007
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table provides information as of December 31, 2004 about
the Company's common stock that may be issued upon the exercise of options
granted to employees or members of the Board of Directors under all of the
Company's existing equity compensation plans.
--------------------------------------------------------------------------------------------------------------------
Number of securities Weighted-average exercise Number of securities
to be issued upon price of outstanding remaining available
exercise of options for future issuance
Plan Category outstanding options under equity
---------------------------------------------------------------------------------------------------------------
Equity compensation plans approved by None - None
security holders
---------------------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by security holders 8,579,819 $.675 20,481,212*
---------------------------------------------------------------------------------------------------------------
Total None
---------------------------------------------------------------------------------------------------------------
* The plan was adopted and ratified by the Board of Directors in 2004.
Subsequent to the adoption of the plan it was amended to increase the number of
authorized shares to 33,333,333 (as adjusted for the Company's 1 for 15 reverse
split effected May 23, 2005). You are being asked to ratify this plan as
amended.
EXECUTIVE EMPLOYMENT AGREEMENTS AND CONSULTING AGREEMENTS
Effective January 1, 2002, the Company entered into three-year
employment agreements with its key management. For the year 2002, the agreements
provide for annual compensation of $150,000 for its Chief Executive Officer
(CEO), $125,000 each for its Chief Financial Officer (CFO) and Chief Operating
Officer (COO) and $75,000 each for its Chief Administrative Officer (CAO) and
Vice President of Network Operations. In addition to the base compensation, the
employment agreements provide for payment of bonuses that at a minimum equal the
executives' base compensation. As of December 31, 2002, the executives all
agreed not to receive bonuses they were entitled to as per their respective
employment agreement. In 2003, the base compensation increased to $175,000 for
its CEO, $150,000 each for its CFO and COO, $90,000 each for its CAO and VP of
Network Operations. In 2004, the base compensation increases to $200,000 for its
CEO, $175,000 each for its CFO and COO, $120,000 for its CAO and $110,000 for
its Vice President of Network Operations. Bonuses for each year will also be
equal to the base salaries as a minimum, unless otherwise agreed to by the
executives.
From October 1, 1996 through December 31, 2003, the Company had an
employment agreement with its President, Jerrold Hinton, wherein the Company
agreed to pay compensation of $100,000 annually. In September 2003, Dr. Hinton
resigned effective December 31, 2003 but remained as a member of the board of
directors of the Company.
Pursuant to the above employment agreements, the Company recorded
accrued officers' salaries totaling $519,168 as of December 31, 2002.
In September 2003, the officers agreed to forego their accrued salaries
in exchange for stock options at $.015 per share or 50% of the market price as
of the exercise date. The officers subsequently exercised their stock options in
January 2004.
As of December 31, 2003, the Company recorded accrued officers' salaries
totaling $245,000, which the officers again agreed to forego their accrued
salaries in exchange for stock options at $.015 per share or 50% of the market
price as of the exercise date. The officers subsequently exercised their stock
options in January 2004.
As of December 31, 2004, the Company recorded accrued officers'
salaries totaling $198,333, which were subsequently paid in January 2005
DIRECTOR COMPENSATION
Directors are reimbursed for their reasonable expenses for attending
Board and Board committee meetings.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 2003, the Company received a $500,000 loan from Charterhouse
Consultancy Services, a Malaysian company and holder of shares of the
Company'stock. This loan payable, as well a previous loan of $311,960 was
unsecured, non-interest bearing and have no formal repayment terms. In addition,
the Company had an outstanding account payable to Charterhouse for $135,000 in
connection with consulting services provided in 2002. During 2004, all of the
amounts owing to Charterhouse were paid in full with the issuance of $500,000 of
Series B preferred stock. The $3,040 difference between the total amounts
payable and amount representing the preferred stock issued was expensed in 2004.
RELATED PARTY PAYABLES
As of December 31, 2004 and 2003, related party payables were $117,500
and $57,500, respectively. The balances represent short-term, non-interest
bearing loans by officers of the Company, due on demand.
Approval of Proposal 1
The six nominees for director that receive the affirmative vote of a
majority of the votes cast in person or by proxy at the Annual Meeting shall be
elected as directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE DIRECTOR NOMINEES.
COMPENSATION COMMITTEE REPORT
The report of the Compensation Committee of the Board with respect to
compensation for the fiscal year ended December 31, 2004 is as follows:
COMPENSATION PHILOSOPHY
The overall policy of the Compensation Committee is to provide the
Company's executive officers and other key employees with competitive
compensation opportunities based upon their contribution to the financial
success of the Company and their personal performance. It is the Compensation
Committee's objective to have a substantial portion of each executive officer's
compensation contingent upon the Company's performance as well as upon the
officer's own level of performance.
COMPONENTS OF COMPENSATION
The principal components of executive officer compensation are
generally as follows:
o BASE SALARY. With respect to the Company's executive officers, their base
salary is fixed in accordance with the terms of their respective employment
agreements. See "Employment Agreements".
o STOCK OPTIONS AND GRANTS. Stock option grants and other stock-based awards,
which are designed to further align the interests of each executive officer with
those of the shareholders and to provide each officer with a significant
incentive to manage the Company from the perspective of an owner with an equity
stake in the Company's business.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162 (m) of the Internal Revenue Code of 1986, as amended,
generally provides that publicly held companies may not deduct compensation paid
to certain of their top executive officers to the extent such compensation
exceeds $1 million per officer in any year. However, pursuant to regulations
issued by the Treasury Department, certain limited exemptions to Section 162(m)
apply with respect to "qualified performance-based compensation." The Company is
currently monitoring the applicability of Section 162(m) to its ongoing
compensation arrangements. The Company does not expect that amounts of
compensation paid to its executive officers will fail to be deductible by reason
of Section 162 (m).
Board Of Directors
Sitting as Compensation Committee
AUDIT COMMITTEE REPORT
The Board of Directors, acting as the Audit Committee oversees the
Company's financial reporting process. Management has the primary responsibility
for the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Audit
Committee reviewed the financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments and the
clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Audit Committee under generally accepted auditing standards. In
addition, the Audit Committee discussed with the independent accountants matters
required to be discussed by Statement of Auditing Standards No. 61
(Communication with Audit Committees).
The Audit Committee discussed with Company's independent auditors the
overall scope and plans for their respective audit. The Audit Committee meets
with the independent auditors to discuss the results of their examinations,
their evaluations of the Company's internal controls and the overall quality of
the Company's financial reporting.
The Company's independent accountants also provided to the Audit
Committee the written disclosure and the letter required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees),
and the Audit Committee discussed with the independent accountants the
accountants' independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board, and the Board has approved, that the audited
financial statements be included in the Annual Report on Form 10-KSB for the
year ended December 31, 2004, for filing with the Securities and Exchange
Commission. The Audit Committee and the Board have also recommended, subject to
shareholder approval, the selection of the Company's independent auditors.
Board of Directors
Sitting as an Audit Committee
Proposal 2
PROPOSAL TO RATIFY THE APPOINTMENT OF
DOHAN AND COMPANY, CPAS, PA AS INDEPENDENT AUDITORS OF THE COMPANY
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2005
At the Annual Meeting, stockholders will be requested to ratify the
Board of Directors' engagement of Dohan and Company, CPAs, PA for the fiscal
year ending December 31, 2005.
Fees to Auditors
Audit Fees: The aggregate fees, including expenses, billed by Dohan and
Company, CPAs, PA in connection with the audit of the Company's consolidated
financial statements for the most recent fiscal year and for the review of the
Company's financial information included in its Report on Form 10-KSB and its
quarterly reports on Form 10-KSB during the year ended December 31, 2004 and
year ended December 31, 2003 was $75,530 and $67,322, respectively.
Audit Related Fees: The aggregate fees, including expenses, billed by
Dohan and Company, CPAs, PA for services reasonably related to the audit for the
year ended December 31, 2004, and year ended December 31, 2003, were
approximately $75,530 and $60,000, respectively.
All Other Fees: The aggregate fees, including expenses, billed for all
other services rendered to the Company by Dohan and Company, CPAs, PA during
year ended December 31, 2004 and year ended December 31, 2003 were approximately
$0 and $7,322, respectively. These non-audit fees relate to corporate compliance
and SEC compliance services performed for the Company.
General
It is not expected that representatives of Dohan and Company, CPAs, PA
will be present at the Annual Meeting. Although the Board of Directors of the
Company is submitting the appointment of Dohan and Company, CPAs, PA for
shareholder ratification it reserves the right to change the selection of Dohan
and Company, CPAs, PA as auditors, at any time during the fiscal year, if it
deems such change to be in the best interest of the Company, even after
shareholder ratification. If the appointment is not ratified, our Board will
consider whether it should select other independent auditors.
Approval of Proposal 2
The approval of Proposal 2 by the stockholders requires that the votes
cast favoring Proposal 2 exceed the votes cast opposing Proposal 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
DOHAN AND COMPANY, CPAS, PA AS INDEPENDENT AUDITORS OF THE COMPANY
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2005
Proposal 3
AMEND THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED COMMON SHARES FROM 100,000,000 TO 150,000,000
In 2004 and 2005 we continued to acquire companies as part of our
strategy to broaden our portfolio of product offerings, to augment our
technological capabilities and to expand our geographic markets and distribution
channels. As part of this strategy, we may acquire additional companies for
these and other business reasons. From time to time, we pay for acquisitions
with Globetel stock. The Board believes that the proposed increase in the number
of authorized shares is desirable to maintain the company's flexibility in
choosing how to pay for acquisitions and other corporate actions such as equity
offerings to raise capital and adoption of additional benefit plans. The Board
will determine the terms of any such issuance of additional shares.
If this proposal is approved, all or any of the authorized shares may
be issued without further shareowner action (unless such approval is required by
applicable law or regulatory authorities) and without first offering those
shares to the shareowners for subscription. The issuance of shares otherwise
than on a pro-rata basis to all shareowners would reduce the proportionate
interest in the company of each shareowner.
We have not proposed the increase in the authorized number of shares
with the intention of using the additional shares for anti-takeover purposes,
although we could theoretically use the additional shares to make more difficult
or to discourage an attempt to acquire control of the company.
If this proposal is approved, the fourth article of the Certificate of
Incorporation of GLOBETEL COMMUNICATIONS CORP. will be amended to read:
"FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is one hundred sixty
million (160,000,000) of which one hundred fifty million
(150,000,000) shares shall be designated "Common Stock",
$.00001 par value per share and of which ten million
(10,000,000) shall be designated "Preferred Stock", par value
$.001."
Approval of Proposal 3
The approval of Proposal 3 by the stockholders requires that the votes
cast favoring Proposal 3 exceed the votes cast opposing Proposal 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR AN AMENDMENT TO THE ARTICLES OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED COMMON SHARES TO ONE HUNDRED
FIFTY MILLION
Proposal 4
TO RATIFY THE 2004 EMPLOYEE STOCK OPTION PLAN
On May 13, 2004 the Board of Directors adopted the 2004 Employee Stock
Option Plan. The plan provides for issuance of qualified and non-qualifed
options to employees, officers and directors.
ADMINISTRATION AND AWARDS. The Plan will be administered by the
Compensation Committee (the "Committee") of the Board, the members of which are
independent within the meaning of applicable rules. The Plan provides for the
Committee to make grants each year equal in value to such amount as the Board
may determine from time to time. The grants may be in the form of stock options,
stock, or restricted stock, or a combination of such forms of compensation, as
determined each year by the Committee. Directors who are elected or appointed
during a year shall receive a grant having a value equal to a pro-rata portion
of that year's grant dollar value. The Plan allows for the issuance of both
Qualified and Non-Qualifed options. Options in excess of a value of $100,000 are
treated as Non-Qualifed Options under the Plan.
STOCK. The Committee may grant a portion or all of the annual grant
under the Plan in the form of shares of Common Stock.
EXERCISE. No option is exercisable after the expiration of seven (7)
years from the date the option was granted, though the Committee may opt for a
shorter term. If an employee is terminated for a reason other than cause, death
or disability, their Options shall expire 3 months from the date of their
termination, if such option was exercisable at the time of termination. In the
case of death or disability, options exercisable at the time of termination
shall remain exercisable for up to one year or their orignal date of
termination; whichever is sooner. In the event that an employee is terminated
for cause, their options shall expire at the commencement of business on the day
of their termination.
SHARES AUTHORIZED. The Plan has authorized 33,333,333 shares of which
approximately 24.8 millon remain available for issuance.
The 2004 Employee Stock Option Plan is attached hereto.
Approval of Proposal 4
The approval of Proposal 4 by the stockholders requires that the votes
cast favoring Proposal 4 exceed the votes cast opposing Proposal 4.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
2004 EMPLOYEE STOCK OPTION PLAN
INTEREST OF CERTAIN PERSONS IN OPPOSITION
TO MATTERS TO BE ACTED UPON
Management is not aware of any substantial interest, direct or
indirect, by securities holdings or otherwise of any officer, director, nominee
for director, or associate of the foregoing persons in any matter to be acted
on, as described herein.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the annual meeting of stockholders to be held
in 2006 must be received by the Company no later than November 30, 2005, in
order to have them included in the proxy statement and form of proxy relating to
that meeting.
OTHER MATTERS
Management is not aware of any other matters to be presented for action
at the Meeting. However, if any other matter is properly presented, it is the
intention of the persons named in the enclosed form of proxy to vote in
accordance with their best judgment on such matters.
ACCOMPANYING REPORTS
The Company's Annual Report on Form 10-KSB (without exhibits), for the
year ended December 31, 2004 and the Company's Quarterly Report on Form 10-QSB
(without exhibits), including unaudited consolidated financial statements as at
and for the three months ended March 31, 2005, accompany this proxy statement.
The exhibits are available without charge to stockholders upon request to Chief
Financial Officer, GlobeTel Communications Corp., 9050 Pines Road, Suite 110,
Pembroke Pines, Florida 33024.
Timothy M. Huff
Chief Executive Officer and Director
GLOBETEL COMMUNICATIONS CORP.
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 11, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ASSOCIATED AUTOMOTIVE GROUP INCORPORATED
The undersigned hereby appoints Thomas Y. Jimenez as proxy with power
of substitution and hereby authorizes him to represent and to vote, as
designated below, all of the shares of common stock of the Company held of
record by the undersigned on June 17, 2005, at the Annual Meeting of
Stockholders to be held at the Wyndham Hotel, 1870 Griffin Road, Dania Beach,
Florida 33004, on Thursday, August 11, 2005 at 6:00 p.m., EST., and at all
adjournments thereof, with all powers the undersigned would possess if
personally present. In his or her discretion, the Proxy is authorized to vote
upon such other business as may properly come before the meeting.
1. Election of Directors
Nominees: Przemyslaw L. Kostro; Timothy M. Huff; Laina Raveendran Green;
Leigh A. Coleman; Mitchell A. Siegel; Kyle McMahan
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY [ ] FOR all nominees,except as
noted below:
Nominee exception(s)
2. Proposal to ratify the Company's appointment of Dohan and Company, CPAs,
PA as independent auditors of the Company for the fiscal year ending
December 31, 2005.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to increase the number of authorized common shares from
100,000,000 (One Hundred Million) to 150,000,000 (One Hundred Fifty
Million).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to approve the 2004 Employee Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" PROPOSALS 1, 2, 3 AND 4.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH.
DATED: _________________________________
(Signature)
---------------------------------
(Signature if jointly held)
---------------------------------
(Printed name(s))
Please sign exactly as name appears herein. When shares are held by Joint
Tenants, both should sign, and for signing as attorney, as executor, as
administrator, trustee or guardian, please give full title as such. If held by a
corporation, please sign in the full corporate name by the president or other
authorized officer. If held by a partnership, please sign in the partnership
name by an authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
IN THE ENCLOSED ENVELOPE. THANK YOU.
Appendix 1
2004 Employee Stock Option
GLOBETEL COMMUNICATIONS CORP.
2004 EMPLOYEE STOCK OPTION PLAN
AS AMENDED
GLOBETEL COMMUNICATIONS CORP.
2004 EMPLOYEE STOCK OPTION PLAN
1. Adoption and Purpose
GLOBETEL COMMUNICATIONS CORP., a Delaware corporation (the "Company"),
adopted its 2004 Employment Stock Option Plan ("Plan") effective May 13,
2004. The purpose of the Plan is to foster and promote the financial
success of the Company and increase stockholder value by strengthening the
Company's ability to attract and retain qualified Employees and
Consultants by furnishing suitable recognition of their efforts which
contributed to the success of the Company and to align their interests to
the long-term interest of the Company stockholders. The Plan is intended
to provide "incentive stock options" within the meaning of that terms
under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), as well as non-qualified stock options. Any proceeds of cash or
property received by the Company for the sale of GLOBETEL COMMUNICATIONS
CORP. common stock, $.00001 par value (the "Common Stock") pursuant to
Options granted under this Plan will be used for general corporate
purposes.
2. Administration
2.2 The Plan shall be administered by a committee (the "Compensation
Committee") appointed by the Board of Directors of the Company (the
"Board") and composed of at least two Board members. The
Compensation Committee shall meet the plan administrator
requirements described under Rule 16b-3(c)(2) promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"), or any
similar rule which may subsequently be in effect. Any vacancy on the
Compensation Committee shall be filled by the Board.
2.3 Subject to the express provisions of the Plan, the Compensation
Committee shall have the sole and complete authority to (i)
determine key employees and others to whom awards hereunder shall be
granted, (ii) make awards in such form and amounts as it shall
determine, (iii) impose such limitations and conditions upon such
awards as it shall deem appropriate, (iv) interpret the Plan,
prescribe, amend and rescind rules and regulations relating to it,
(v) determine the terms and provisions of the respective
participants' agreement (which need not be identical), and (vi) make
such other determinations as it deems necessary or advisable for the
administration of the Plan. The decisions of the Compensation
Committee on matters within their jurisdictions under the Plan shall
be conclusive and binding on the Company and all other persons. No
member of the Board or the Compensation Committee shall be liable
for any action taken or determined made in good faith.
2.4 All expenses associated with the Plan shall be paid by the Company
or its Subsidiaries.
3. Definitions
3.2 "Cause" when used in connection with the termination of a
Participant's employment with the Company, shall mean the
termination of the Participant's employment by the Company by reason
of (i) the conviction of the Participant of a crime involving moral
turpitude by a court of competent jurisdiction as to which no
further appeal can be taken: (ii) the proven commission by the
Participant of any act of fraud upon the Company, (iii) the willful
and proven misappropriation of any funds or property of the Company
by the Participant; (iv) the willful, continued and unreasonable
failure by the Participant in any direct, material conflict of
interest with the Company without compliance with the Company's
conflict of interest policy, if any, then in effect; (vi) the
knowing engagement by the Participant, without the written approval
of the Board of Directors of the Company, in any activity which
competes with the business of the Company or which would result in
material injury to the company; or (vii) the knowing engagement in
any activity which would constitute a material violation of the
provisions of the Company's insider trading policy or business
ethics policy, if any, then in effect.
3.3 "Change in Control" shall mean the occurrence of any of the
following events.
(i) any Person becomes, after the effective date of this Plan, the
"beneficial owner" (as defined in Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of securities of
the Company representing 50% or more of the combined voting
power of the Company's then outstanding securities, unless the
Board (as constituted immediately prior to such Change In
Control) determines in its sole absolute discretion that no
Change in Control has occurred.
(ii) individuals who constitute the Board on the effective date of
the Plan cease, for any reason, to constitute at least a
majority of the Board of Directors, provided, however, that
any person becoming a director subsequent to the effective
date of the Plan who was nominated for election by at least 66
2/3% of the Board as constituted on the effective date of the
Plan (other than the nomination of an individual whose initial
assumption of office is in connection with an actual or
threatened election contest, relating to the election of the
Board of Directors, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) shall be,
for purposes of this Plan, considered a member of the Board as
constituted on the effective date of the Plan; or
(iii) the Board of Directors determines in its sole and absolute
discretion that there has been a Change in Control of the
Company.
3.4 "Consultants" shall mean any person who is engaged by the Company or
any parent or Subsidiary of the Company to render consulting
services and is compensated for such consulting services.
3.5 "Employee" shall mean any person employed on an hourly or salaried
basis by the Company or any parent to Subsidiary of the Company that
now exists or hereafter is organized or acquires the Company.
3.6 The "Fair Market Value" of a share of Common Stock on any date shall
be (i) the closing sales price on the immediately preceding business
day of a share of Common Stock as reported on the principal
securities exchange on which shares of Common Stock are listed or
admitted to trading, or (ii) if not so reported, the average of the
closing bid and asked prices for a share of Common Stock on the
immediately preceding business day as quoted on the National
Association of Securities Dealers Automated Quotation System
("Nasdaq"), or (iii) if not quoted by the National Quotation
Bureau's "Pink Sheets" or the National Association of Securities
Dealers' OTC Bulletin Board System. If the price of a share of
Common Stock shall not be so reported, the Fair Market Value of a
share of Common Stock shall be determined by the Compensation
Committee in its absolute discretion. In no event shall the Fair
Market Value of any shares of Common Stock be less than its par
value.
3.7 "Incentive Stock Option" shall mean an option which is an "incentive
stock option" within the meaning of Section 422 of the Code and
which is identified as an Incentive Stock Option in the agreement by
which it is evidenced.
3.7 "Non-Qualified Stock Option" shall mean an Option which is not an
Incentive Stock Option and which is identified as a Non-Qualified
Stock Option in the agreement by which it is evidenced.
3.8 "Option" shall mean an Option to purchase shares of Common Stock of
the Company granted pursuant to this Plan. Each Option shall be
identified either as an Incentive Stock Option or a Non-Qualified
Stock Option in the agreement by which it is evidenced.
3.9 "Restricted Stock Award" shall mean a grant of common shares of the
Company that have not been registered pursuant to the Securities Act
and for which no additional consideration from the Participant is
required.
3.10 "Stock Award" shall mean a grant of common shares ofhte Company that
have been registered pursuant to the Securities Act and for which no
additional consideration for the Participant is required
3.11 "Subsidiary" shall mean a corporation (other than the Company) in
which the Company directly or indirectly controls 50% or more of the
combined voting power of all stock of that corporation.
4. Eligibility
The Compensation Committee may grant Options to purchase Common Stock
under this Plan to Employees of the Company, or its Subsidiaries, as well
as to Consultants. Employees of the Company, as well as the Consultants
who are granted Options pursuant to this Plan shall be referred to as
"Participants". The Compensation Committee shall determine, within the
provisions of the Plan, those persons to whom, and the times at which,
Options shall be granted. In making such determinations, the Compensation
Committee may take into account the nature of the services rendered by
such person, his or her present and potential contributions to the
Company's success, and such other factors as the Compensation Committee,
in its discretion shall deem relevant. Grants may be made to the same
individual on more than one occasion.
5. Granting of Options
5.1 Powers of the Compensation Committee. The Compensation Committee
shall determine, in accordance with the provisions of the Plan, the
duration of each Option, the exercise price of each Option, the time
or times within which (during the term of the Option) all or
portions of each Option may be exercised, and whether cash, Common
Stock, or other property may be accepted in full or partial payment
upon exercise of an Option.
5.2 Number of Options. As soon as practicable after the date an
individual is determined to be eligible under Section 4 hereof, the
Compensation Committee may, in its discretion, grant to such person
a number of Options determined by the Compensation Committee.
6. Common Stock
Each Option granted under the Plan shall be convertible into one share of
Common Stock, unless adjusted in accordance with the provisions of Section
8 hereof. Options or Restricted Stock Awards may be granted for a number
of shares not to exceed, in the aggregate, 33,333,333 shares of Common
Stock, subject to adjustment pursuant to Section 8 hereof. For purposes of
calculating the maximum number of shares of Common stock that may be
issued under the Plan, (i) all the shares issued (including the shares, if
any, withheld for tax withholding requirements) shall be counted when cash
is used as full payment for shares issued upon the exercise of an Option,
and (ii) shares tendered by a Participant as payment for shares issued
upon exercise of an Option shall be available for issuance under the Plan.
Upon the exercise of an Option, the Company may deliver either authorized
but unissued shares, treasury shares, or any combination thereof. In the
event that any Option granted under the Plan expires unexercised, or is
surrendered by a participant for cancellation, or is terminated or ceases
to be exercisable for any other reason without having been fully
exercised, the Common Stock subject to such Option shall again become
available for new Options to be granted under the Plan to any eligible
person (including the holder of such former Option) at an exercise price
determined in accordance with Section 7.2 hereof, which price may then be
greater or less than the exercise price of such former Option. No
fractional shares of Common Stock shall be issued, and the Compensation
Committee shall determine the manner in which fractional share value shall
be treated.
7. Required Terms and Conditions of Options
7.1 Award of Options. The Compensation Committee may, from time to time
and subject to the provisions of the Plan and such other terms and
conditions as the Compensation Committee may prescribe, grant to any
Participant in the Plan one or more Incentive Stock Options or
Non-Qualified Stock Options to purchase for cash or shares the
number of shares of Common Stock allotted by the Compensation
Committee. However, subject to the provisions of Sections 7.4 and
7.5, Incentive Stock Options may be granted only to Employees. The
date an Option is granted shall mean the date selected by the
Compensation Committee as of which the Compensation Committee allots
a specific number of shares to a Participant pursuant to the Plan.
7.2 Exercise Price. The exercise price of any Non-Qualified Stock Option
granted under the Plan shall be such price as the Compensation
Committee shall determine on the date on which such Non-Qualified
Stock Option is granted; provided, however, that such stock price
may not be less than 50% of the Fair Market Value of a share of
Common stock on the date the Option is granted. Except as provided
in Section 7.4 hereof, the exercise price of any Incentive Stock
Option granted under the Plan shall be not less than 50% of the Fair
Market Value of a share of Common Stock on the date on which such
Incentive Stock Option is granted. However, after January 1, 2005,
the exercise price of any Incentive Stock Option granted under the
Plan shall not be less than 100% of the Fairm Market Value of a
share of Common Stock on the date on which such Incentive Stock
Option is granted.
7.3 Term and Exercise. Each Option shall be exercisable on such date or
dates, during such period and for such number of shares of Common
Stock as shall be determined by the Compensation Committee on the
day on which such Option is granted and as set forth in the
agreement evidencing the Option; provided, however, that (A) no
Option shall be exercisable after the expiration of seven (7) years
from the date such Option was granted; and (B) no Incentive Stock
Option granted to a 10% shareholder as set forth in Section 7.4
hereof shall be exercisable after the expiration of five (5) years
from the date such Incentive Stock Option was granted; and,
provided, further, that each Option shall be subject to earlier
termination, expiration or cancellation as provided in the Plan.
Each Option shall be exercisable in whole or in part with respect to
whole shares of Common Stock. The partial exercise of an Option
shall not cause the expiration, termination or cancellation of the
remaining portion thereof. On the partial exercise of an Option, the
agreement evidencing such Option shall be returned to the
Participant exercising such Option together with the delivery of the
certificates described in Section 7.7 hereof.
7.4 Reserved
7.5 Maximum Amount of Option Grant. To the extent that the aggregate
Fair Market Value (determined on the date the Option is granted) of
Common Stock subject to Incentive Stock Options exercisable for the
first time by a Participant during any calendar year exceeds
$100,000.00, such Option shall be treated as Non-Qualified Stock
Options.
7.6 Method of Exercise. An Option shall be exercised by delivering
notice to the Company's principal office, to the attention of its
Secretary, no fewer than five business days in advance of the
effective date of the proposed exercise. Such notice shall be
accompanied by the agreement evidencing the Option, shall specify
the number of shares of Common Stock with respect to which the
Option is being exercised and the effective date of the proposed
exercise, and shall be signed by the Participant. The Participant
may withdraw such notice at any time prior to the close of business
on the business day immediately preceding the effective date of the
proposed exercise, in which case such agreement shall be returned to
the Participant. Payment for shares of Common Stock purchased upon
the exercise of an Option shall be made on the effective date of
such exercise either (i) in cash, by certified check, bank cashier's
check or wire transfer or (ii) subject to the approval of the
Compensation Committee, in shares of Common Stock owned by the
Participant and valued at their Fair Market Value on the effective
date of such exercise, or partly in shares of Common Stock with the
balance in cash, by certified check, bank cashier's check or wire
transfer. Any payment in shares of Common Stock shall be effected by
the delivery of such shares to the Secretary of the Company, duly
endorsed in blank or accompanied by stock powers duly executed in
blank, together with any other documents and evidences as the
Secretary of the Company shall require from time to time. Payment in
stock may also be exercised through the use of a Cashless Exercise
if provided for in the option agreement. Such Cashless Exercise
shall allow the Holder to exercise the option by using shares to
which the holder is entitled under the option.
7.7 Delivery of Stock Certificates. Certificates for shares of
Common Stock purchased on the exercise of an Option or
Restricted Stock Award shall be issued in the name of the
Participant and delivered to the Participant as soon as
practicable following the effective date on which the Option
is exercised or the Award granted; provided, however, that
such delivery shall be effected for all purposes when the
stock transfer agent of the Company shall have deposited such
certificates in the United States mail, addressed to the
Participant.
8. Adjustments
8.1 The aggregate number or type of shares of Common Stock with respect
to which Options may be granted hereunder, the number or type of
shares of Common Stock subject to each outstanding Option, and the
exercise price per share for each such Option may all be
appropriately adjusted, as the Compensation Committee may determine,
for any increase or decrease in the number of shares of issued
Common Stock resulting from a subdivision or consolidation of shares
whether through reorganization, recapitalization, consolidation,
payment of a shared dividend, or other similar increase or decrease.
8.2 Subject to any required action by the stockholders, if the Company
shall be a party to a transaction involving a sale of substantially
all its assets, a merger, or a consolidation, any Option granted
hereunder shall pertain to and apply to the securities to which a
holder of Common Stock would be entitled to receive as a result of
such transaction; provided, however, that all unexercised Options
under the Plan may be Cancelled by the Company as of the effective
date of any such transaction by giving notice to the holders of such
Options of its intention to do so, and by permitting the exercise of
such Options during the 30-day period immediately after the date
such notice is given.
8.3 In the case of dissolution of the Company, every Option outstanding
hereunder shall terminate; provided, however, that each Option
holder shall have 30 days' prior written notice of such event,
during which time he shall have a right to exercise his partly or
wholly unexercised Options.
8.4 On the basis of information known to the Company, the Compensation
Committee shall make all determinations under this Section 8,
including whether a transaction involves a sale of substantially all
the Company's assets; and all such determinations shall be
conclusive and binding on the Company and all other persons.
8.5 Upon the occurrence of a Change in Control, the Compensation
Committee (as constituted immediately prior to the Change in
Control) shall determine, in its absolute discretion, whether each
Option granted under the Plan and outstanding at such time shall
become fully and immediately exercisable and shall remain
exercisable until its expiration, termination or cancellation
pursuant to the terms of the Plan or whether each such Option shall
continue to vest according to its terms.
9. Option Agreements
Each award of Options shall be evidenced by a written agreement, executed
by the Participant and the Company, which shall contain such restrictions,
terms and conditions as the Compensation Committee may require in
accordance with the provisions of this Plan. Option agreements need not be
identical. The certificates evidencing the shares of Common Stock acquired
upon exercise of an Option may bear a legend referring to the terms and
conditions contained in the respective Option agreement and the Plan, and
the Company may place a stop transfer order with its transfer agent
against the transfer of such shares. If requested to do so by the
Compensation Committee at the time of exercise of an Option, each
Participant shall execute a certificate indicating that he is purchasing
the Common Stock under such Option for investment and not with any present
intention to sell the same.
10. Legal and Other Requirements
10.1 The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of 1933, as amended, of any shares of
Common Stock to be issued hereunder or to effect similar compliance
under any state laws. Notwithstanding anything herein to the
contrary, the Company shall not be obligated to cause to be issued
or delivered any certificates evidencing shares of Common Stock
pursuant to the Plan unless and until the Company is advised by its
counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental
authority and the requirements of any securities exchange on which
shares of Common Stock are traded. The Compensation Committee may
require, as a condition of the issuance and delivery of certificates
evidencing shares of Common Stock pursuant to the terms hereof, that
the recipient of such shares make such covenants, agreements and
representations, and that such certificates bear such legends, as
the Compensation Committee, in its sole discretion, deems necessary
or desirable. The exercise of any Option grated hereunder shall only
be effective at such time as counsel to the Company shall have
determined that the issuance and delivery of shares of Common Stock
pursuant to such exercise is in compliance with all applicable laws,
regulations of governmental authorities and the requirements of any
securities exchange on which shares of Common Stock are traded. The
Company may, in its sole discretion, defer the effectiveness of any
exercise of an Option granted hereunder in order to allow the
issuance of shares of Common Stock pursuant thereto to be made
pursuant to registration or an exemption from registration or other
methods for compliance available under federal or state securities
laws. The Company shall inform the Participants in writing of its
decision to defer the effectiveness of the exercise of an Option has
been deferred, the Participant may, by written notice, withdraw such
exercise and obtain the refund of any amount paid with respect
thereto.
10.2 With respect to persons subject to Section 16 of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), transactions
under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act.
To the extent any provisions of the Plan or action by the
Compensation Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the
Compensation Committee. Moreover, in the event the Plan does not
include a provision required by Rule 16b-3 to be stated therein,
such provision (other than one relating to eligibility requirements,
or the price and amount of Options) shall be deem automatically to
be incorporated by reference into the Plan insofar as Participants
subject to Section 16 are concerned. The Compensation Committee may
at any time impose any limitations upon the exercise, delivery and
payment of any Option which in the Compensation Committee's
discretion, are necessary in order to comply with Section 16(b) and
the rules and regulations thereunder.
10.3 A Participant shall have no rights as a stockholder with respect to
any shares covered by an Option, or exercised by him, until the date
of delivery of a stock certificate to him for such shares. No
adjustment, other than pursuant to Section 8 hereof, shall be made
for dividends or other rights for which the record date is prior to
the date such stock certificate is delivered.
11. Non-transferability
Options: During the lifetime of a Participant, any Option granted to him
shall be exercisable only by him or by his guardian or legal
representative. No Option shall be assignable or transferable, except by
will, by the laws of descent and distribution, or pursuant to certain
domestic relations orders. The granting of an Option shall impose no
obligation upon the holder thereof to exercise such Option or right.
Restricted Stock Awards: Shares of stock granted pursuant to a Restricted
Stock Award shall only be transferred pursuant to registration under the
Securities Act or pursuant to an exemption therefrom. The Company may
impose additional restrictions upon transfer at the time of the Award.
12. No Contract of Employment
The adoption of this Plan or the grant of any Option shall not be
construed as giving a Participant the right to continue employment with
the Company or any Subsidiary of the Company. Furthermore, the Company or
any Subsidiary of the Company may at any time dismiss a Participant from
employment, free from any liability or claim under the Plan, unless
otherwise expressed provided in the Plan or any Option agreement.
13. Effect of Termination of Employment
13.1 If the employment or consulting, service or similar relationship of
a Participant with the Company shall terminate for any reason other
than Cause, "permanent and total disability" (within the meaning of
Section 22(e)(3) of the Code) or the death of the Participant (1)
Options granted to such Participant, to extent that they were
exercisable at the time of such termination, shall remain
exercisable until the expiration of three months after such
termination, on which date they shall expires, and (b) Options
granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at the
close of business on the date of such termination; provided,
however, that no Option shall be exercisable after the expiration of
its terms.
13.2 If the employment or consulting, service or similar relationship of
a Participant with the Company shall terminate on account of the
"permanent and total disability" (within the meaning of Section
22(e)(3) of the Code) or the death of the Participant (a) Options
granted to such Participant, to the extent that they were
exercisable at the time of termination, shall remain exercisable
until the expiration of one year after such termination, on which
date they shall expires, and (b) Options granted to such
Participant, to the extent that they were not exercisable at the
time of such termination, shall expire at the close of business on
the date of such termination; provided, however, that no Option
shall be exercisable after the expiration of its term.
13.3 In the event of the termination of a Participant's employment or
other relationship with the Company for Cause, all outstanding
Options granted to such Participant shall expire at the commencement
of business the date of such termination.
14. Indemnification of Compensation Committee
In addition to such other rights of indemnification as they may have as
members of the Board or the Compensation Committee, the members of the
Compensation Committee shall be indemnified by the Company against the
reasonable expenses, including attorney's fees actually and necessarily
incurred in connection with the defense of any action, suite or proceeding
(or in connection with any appeal therein), to which they or any of them
may be party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted hereunder, 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 action, suite or
proceeding, except in relation to matters as to which it shall be adjudged
in such action, suit or proceeding that such Compensation Committee member
is liable for gross negligence or misconduct in the performance of his
duties, provided that within 60 days after institution of any such action,
suite or proceeding a Compensation Committee member shall in writing offer
the Company the opportunity, at its own expense, to handle and defend the
same.
15. Withhold Taxes
Whenever the Company proposes or is required to issue or transfer shares
of Common Stock under the Plan, the Company shall have the right to
require the Participant to remit to the Company an amount sufficient to
satisfy any federal, state and/or local withholding tax requirements prior
to the delivery of any certificate or certificates for such shares.
Alternatively, the Company may issue or transfer such shares of Common
Stock net the number of shares sufficient to satisfy the withholding tax
requirements. For withholding tax purposes, the shares of Common Stock
will be valued on the date the withholding obligation is incurred.
16. Newly Eligible Participants
Except as otherwise provided herein, the Compensation Committee shall be
entitled to make such rules, regulations, determinations and awards as it
deems appropriate in respect of any person who become eligible to
participate in the Plan.
17. Termination and Amendment of Plan
The Board of Directors may at any time suspend or discontinue the Plan or
revise or amend it in any respect whatsoever, provided, however, that
without approval of the holders of a majority of the outstanding shares of
Common Stock present in person or by proxy at an annual or special meeting
of stockholders, no revision or amendments shall (i) increase the number
of shares of Common Stock that may be issued under the Plan, except as
provided in Section 8 hereof, (ii) materially increase the benefits
accruing to individuals holding Options granted pursuant to the Plan, or
(iii) materially modify the requirements as to eligibility for
participation in the Plan.
18. Gender and Number
Except when otherwise indicated by the context, words in the masculine
gender when used in the Plan shall include the feminine gender and vice
versa, and the singular shall include the plural and the plural shall
include the singular.
19. Governing Law
The Plan, and all agreements hereunder, shall be construed in accordance
with and governed by the laws of the State of Delaware.
20. Effective Date of Plan
The effective date of the Plan is May 13, 2004. The Plan, each amendment
to the Plan, and each Option granted under the Plan is conditional on and
shall be of no force or effect until approval of the Plan and each
amendment of the Plan by the holders of a majority of the shares of Common
Stock of the Company.